I talked to my parents on the phone back when we were in the middle of looking for a new-to-us van. They asked what was new with us and I caught them up on a few little things. “Oh, and there’s our van drama.” I know they read Six Figures Under, so I didn’t have to go into detail.
I also was pretty sure I knew their take on the issue, so my dad’s next question didn’t surprise me.
“Have you heard of being ‘penny wise and pound foolish’?”
Yes, I was well aware of the phrase and the mentality of being cautious with small decisions but careless with the big ones. Or where being cheap in the short run ends up costing you more money in the long run.
I knew exactly what he was referring to, so I didn’t need any explanation. He thought that instead of spending a couple of thousand dollars on another van that was full of potential problems, we should buy a more expensive vehicle that would last us longer and had a warranty. Essentially my parents didn’t see why we didn’t want to just go get a car loan like everyone else.
My dad doesn’t mettle in our business and is careful to give advice sparingly. In fact it seems like he usually drops little crumbs of opinion or insight and waits for us to ask for his advice before he shares it. I don’t know if it’s a psychological tactic or just his subtle style, but it works well for his personality. In fact, my siblings and I are probably more likely to listen to his advice than if he were constantly spewing advice and opinions. In this instance, while I appreciate the advice and reminder, we’re taking the risk of ending up foolish.
I know some of you have thought the same thing, so I want to share why we’re being “cheap” right now when it comes to cars.
Here are 3 reasons we aren’t spending very much on our vehicles:
We’ve never had a car loan
We’ve never had a car loan before. We have only ever paid cash.
In fact, besides these law school student loans, we haven’t had any debt. We use credit cards but pay them in full every month. Now– in the final stretch of our big student loan debt payoff– is not the time we want to start racking up other debt.
No guarantees
There’s no guarantee that a more expensive car will cost less to repair. I would rather spend $2,000 on a van that ends up having freak electrical problems that render it useless, than have spent $5,000 or $10,000 and have the same issue.
I am aware that new cars and many certified pre-owned (or other used cars) come with warranties. You also pay a lot more for these cars. Comparing apples with apples, we’d rather have a cheaper used car without a warranty than a more expensive used car without a warranty.
It may be completely flawed logic, but it’s where I’m at right now.
Our goal
Right now our number one goal is to pay off our student loans. This is the big reason. All other financial pursuits are subject to this main objective. The goal we set back in 2013 was to have them paid off by the end of 2016. That leaves us just a year! As you can see from the sidebar on your left, we still have $49K to pay off, which is no small task. A few thousand dollars more or less toward a van could make or break the goal.
We weren’t trying to buy a vehicle for the long haul right now. We would love for this van to last through paying off our debt and then saving for a down payment on a house. If it lasts longer, that’s great!
Final Thoughts
I should also mention that we do stop putting money into vehicles that aren’t worth fixing. Hopefully our understanding of sunk costs will prevent us from wasting money by fixing something that’s not worth fixing.
While we are fine forgoing luxuries in our vehicles, we have some safety standards that we don’t budge on. For example, we won’t buy a car that doesn’t have a clean title.
While on the outside it may look like we are “pound foolish” by buying a cheap used vehicle, it fits in perfectly with our goals and priorities. Like I’ve mentioned before, I don’t expect you to do what we do. We all have our own goals and priorities to answer to. For us right now, buying a cheap used van to replace the one we drove into the ground (and the lemon we got after that) works for us. The next time this decision comes around, we may be in a different place with different goals. For now, we are comfortable with it and happy about doing it.
How about you?
- What financial choices have you made that may look foolish to others because their priorities are different?
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Highly descriptive article, I loved that a
lot. Will there bee a part 2?
Great article. I think our choice of housing could look pretty foolish, we are not in the ‘nicest’ of neighbourhoods and specifically choose the area for its low rent prices. The interior of our flat it not the nicest or most spacious but it is our home for now and thats what matters. We are more focused on saving to buy a house, than spending a fortune on a rental home.
You are wise to make the decision you did. It takes time & energy but I have never had a car loan & only once did I buy a car from a dealer. I’ve been fortunate to find individuals who were selling for various reasons: going in the military, change in marital status, new baby, etc. Years ago a guy sold me his truck for $25 because his wife told him if it wasn’t gone by sundown she would be. Haha I bought a rear window for it & drove it across the country!
Ha ha! A truck for $25– that’s awesome!
I’ve been told many times that it’d be better for me to get a job rather than work to keep our daily expenses low. What people don’t get is that with the jobs available (mostly minimum wage) where we live we’d lose money each month because of the cost of childcare and transportation to work. We stay here because cost of living is low and my husband alone makes 5 times the median income for the area. If we moved to where the jobs are available for me our housing costs for a similar house would increase 500 to 600% which would be more than what I could earn post taxes. We are able to make more progress on our combined $151,000 in student loan debt with the way we choose to live.
You definitely have a better idea of what works for your family. Too often people minimize the value of being frugal (I have a post on that coming up soon).
My husband and I complement each other well on this. He usually sees the big picture, whereas I I generally focus on the details. Without him I might be pound foolish, but without me he would spend the proverbial nickel and dime on everything!
Cars are a huge investment! Sadly before starting law school I wrecked my car and we were forced to buy a new one and chose to lease a second to get Lewis through Law School. I will be so glad to see that money pit lease leave my life once and for all. I agree with the penny wise pound foolish mentality, I’ve been a victim of it myself, like with my last computer, or the last camera I bought. good luck on your $49,000 left over! I can’t wait until that’s me! $191,000 to go.
If it weren’t for my husband, I would be penny wise and pound foolish when it comes to electronics too. 🙂
Our financial advisor couldn’t understand why we would put money away each month towards our next vehicle when the interest rates to buy a new one are lower than the interest we could make on that monthly money. We don’t want debt, period and he didn’t get it.
Way to stick with what’s important to you Christina!
We’re sort of on the other end of the spectrum. We both drive older cars, our clothes are nothing flash, we live pretty simply, and I’m pretty sure most people think we’re poor. We’re fine with that. We have no debt, we have money in the bank and food in the pantry, and we don’t want for anything, primarily because we aren’t big consumers. But we love to travel; we take the kids overseas at least once a year. A lot of people give us a hard time about it. I think they think we’re poor and wasting our money. Sometimes they criticise the places we go; we took the kids to Cambodia a few years ago and everyone kept telling us how dangerous it was. (It wasn’t. Cambodia’s a great place for kids.) Or, they’re a different type of traveller than we are and like to tell us to go to such-and-such resort because “they have a great program for kids so you and your husband can drop them off in the morning and not see them again until dinner.” Or, they say we should leave the kids with Grandma and Grandpa and just go as a couple, because isn’t it hard travelling with kids and wouldn’t you enjoy it a lot more if it was just the two of you? It’s a family holiday; we spend the time together as a family; our kids are great little travellers; and because we don’t just go to rich Western countries, they have a terrific understanding of poverty and different religions and different cultures. There are trips they don’t remember but we still made great memories with them, we’ve got some terrific photos, and I like to think those trips are buried in there somewhere. (We joke that our son will marry a Cambodian woman when he grows up, because all the Cambodian women fussed over him when he was 2, and so there’s a memory in his lizard-brain that Cambodian women know how to treat him right.) Sure, we could stay home and save the money, or invest it; but money’s just a tool to get what you need and want; our needs are met and taking the kids overseas is what we want.
I LOVE that you took your family to Cambodia! That’s awesome! And so funny that people think you’re poor because you live frugally and don’t flaunt your money. 🙂
I think you did absolutely the right thing for yourself, but I also think it depends on when you are facing the need for a larger purchase. We used to cram our then three children into the back of a paid-for 1992 Accord and lived as a one-car family that way while we were in law school. Then our Accord really started to die, we found out I was expecting, and we knew that it wasn’t worth fixing for us. We were still living on law school loans then, and had no extra income or savings to put toward a used car, plus there was the stress of trying to find the right vehicle and of course, finishing law school and finding a job :). I really wanted a certified van that would not cause us too much stress, and we paid extra for it because of this in the form of a warranty and interest, but to me, it was about peace of mind, especially with four children I had to drive around. People pay insurance every month for the “just-in-case” scenarios of life – to me, the interest and warranty fee (about $40/month) are like insurance against major engine problems. We don’t have any other debt beyond the auto loan and our student loans, so I wouldn’t recommend going this route for every need in life, but for us, given that we had just one car, it had to be a good one. I hope that we can live as a one-car family until we pay off all of our debt and then quickly save for a second car so that we are never in this situation again, but I don’t regret for a second taking out a loan.
I can totally see your perspective too Jenni! Thanks for sharing!
I commend you for you decision of going against the norm. Other people won’t understand why you make some of the financial decisions you make and that’s perfectly ok. My husband and I just got done paying off $260,000 between his student loans and paying off our business (he’s in the medical field and his schooling alone cost over $200,000. Ridiculous but it is what it is.). But we felt strongly that we were supposed to make sacrifices to pay it off and Heavenly Father provided more than we ever thought possible and we made our final payment 8 days shy of 2 years from start to finish and we cash flowed the entire thing. We had patients asking us why we were driving old cars and why we hadn’t bought a house yet and we told them we had a mission to be debt free and you wouldn’t believe how some of them were so verbally condescending and thought we were dumb and should be living how all doctors supposedly live. But who is the one who has a $45,000 truck and can barely pay their copay because “they have no money because of their $700 truck payment” and who is the one who has no debt in the world and is going to be able to pay cash for a truck with just a few months savings?
Don’t listen to the naysayers. If you know it’s right, then it’s right.
I really appreciate you sharing your experience paying off debt! We also have debt from medical school (300,000, yikes!). We’re in our last year of residency and plan to pay off the debt as quickly as possible, hopefully 2 to 3 years. Even now in residency we’ve been paying what we can toward the debt. Most of our friends who are in residency don’t see the point, they say it’s just a drop in the bucket. Yes, we can only pay a small amount each month, that doesn’t even cover the interest, but at least it’s something! And I’m glad that we are in the habit now of making loan payments.
Marisa, I just wanted to encourage you to keep up what you’re doing! I wish I had thought like you awhile back. My husband finished his residency (in pediatrics) over 9 years ago and we still owe 160K to his med school. And unfortunately, repaying that debt has taken a back seat (other than the minimum monthly payment, of course!) because we have a 9 year old and a 6 year old, so our money is focused on other things like: paying off the last of our consumer debt, a 3-month bare bones expenses emergency fund, college savings for each kiddo, etc… Boy do I wish we had been introduced to Dave Ramsey way back then. After 5 years of marriage, we only had MORE consumer debt and zero savings. And we didn’t buy anything extravagant, we just let life nickel and dime us, and let money slip thru our fingers. Had we been focused on a financial goal back then, I can betcha we wouldn’t still owe 160K right now…keep up the good work!!! 😛
That’s awesome that you’re already starting to tackle the loans Marisa! You’ll definitely be in a better position because of it. Like you said, the habit of making payments and being aware of your finances is HUGE! 🙂
That’s awesome that you paid all that off Sarah! 🙂 Way to go!! My husband has had also had clients note that he doesn’t drive a “lawyer’s car.” 🙂
Priorities are such an important part of finances, and with a getting out of debt plan I think everyone should sit down and make a priorities list. My list would go:1) family, 2) church, 3) debt reduction, 4) savings for future goals, and 5) adventure/enjoying the world. With this priority list Ive made many choices that don’t fit for everyone but fit nicely into my list just like you we tithe which I think many people question. When we run out of money for the bottom of the list it doesn’t mean we don’t have adventures or enjoy the world, it just means we do that for free. Some of the amazing fun free things we do are hiking, doing volunteer ski patrol to get a resort pass, or travel for a cause like a teaching trip I’m taking to South America to implement science and technology teaching in rural class rooms (the trip is paid for by someone else and although I’m working it’s going to be spectacular!).
Judging by your van purchase I think we have a similar priority lists. I don’t think most people think of vehicles as a way to enjoy the world but they really are a luxury to make your own schedule/travel especially if you buy new and tailor your purchase to all of your wants, instead of focusing on your needs. Good for you to defining your own priorities list without folding to outside pressure!
Also, on a side note your family (both in-laws and your parents) sound awesome. Gentle advice, support, and guidance are necessary for any journey. Even though your dad disagrees with you it’s nice that he voiced his opinion in an attempt to help, and that he is respectful of your final decision.
I love your adventuresome-ness Judi! Volunteer ski patrol sounds awesome and that’s very cool that you’re going to South America to help in rural schools too! And yes, I do have great parents and in-laws. 🙂
Our families know that we are not taking on any more debt right now. But when we were having vehicle issues, I don’t think they understood why we’d rather try to fix what we have when we could buy a newer vehicle with a “low” car payment. But I have seen the light of not having a car payment and I don’t want to go back!
Not having a car payment is really nice! 🙂
This is why we love you, Stephanie! You stand firm on your ground and don’t let peer pressure change you. I’m sure it would be much easier and less headache-y for you to succumb and buy a newer van with a payment, but this is what sets you apart from others, and this is why you amaze me and inspire me. I appreciate you sharing your mindset as that helped me understand your decision a lot better…not that you ever owe anyone an explanation. I also want to point out to your other readers that if they were in your shoes (choosing to make all the sacrifices that come with living in a basement with 4 young children UNTIL your debt is gone and also possibly until your house down payment is saved), forking over a few more thousand/obtaining a loan would be a MASSIVE deal. Just sayin’
Thanks Liz 🙂