{For more on going debt-free, see my post, Out of Debt: 5 steps}
This is going to be one of those long posts that I really try to avoid, because, who, after all, has the attention span or time to read a 2,000 word blog post?
But, I have a lot to say, so thanks for understanding the long wind.
Also, if you are going to comment on this post (which I would love for you to do), please read the post in it’s entirety, so you’re clear on what I’m trying to say. ‘preciate it.
We bought a car
Our Chevy Venture mini-van, as you know, with it’s 230K+ miles on it, has seen better days. After spending nearly $3K (transmission, alternator, fuel filter, new tires) in recent months in hopes of bringing new life to it (& hoping that it would buy us 1 or 2 more years of operation), we decided, though the car still runs (I use that term loosely), we need to cut our losses & move on.
The trouble was, how?
As I explained in last post (& thank you for your input & advice, I really appreciate all that you shared), we are committed to getting out of debt, but we only had $5K in cash to buy a car. It would take us at least 6 months, really more like a year or two, in order to save an amount that would be anywhere near an amount that could buy us a car that would meet our family’s needs.
A minivan, baby!
For our family of 6, we need a mini-van.
Not only that, we need a mini-van that seats 8, because we plan on expanding our family, & we’re not about to buy a mini-van that we’d outgrow in a few years. That extra seat makes all the difference, but the problem is, only two brands currently make 8 seater mini-vans: Toyota (Sienna) & Honda (Odyssey).
These brands are known & proven to extremely reliable, durable, & long lasting. But, like Apple products, they can run significantly higher than the competition. Even a used Toyota or Honda has a much higher price point than it’s counterparts.
So, unless we wanted to get a very used Toyota or Honda (10-15 years old with 150K or more miles), there’s nothing in the 5K range.
Also, finding a used Honda or pre-2010 Toyota with 8 seats is challenging, since not all Hondas & pre-2010 Siennas have 8 seats, in fact, in our experience, most of them are 7 seaters.
The cost of repairs
Then there’s the issue of repairs, because it is inevitable that a used car, with high mileage, is going to need to be repaired. Problem is, there’s no way of knowing when & what will need to eventually be fixed, & what those costs will be. That uncertainty alone, carries a certain amount of stress & anxiety.
Yes, it’s crucial to have a good mechanic if you have a used car.
However, simply because you have a “good” mechanic does not take away the price factor of repairs. I don’t expect any mechanic, friend or not, to do the work for free, or even at a discount. I believe in paying others a honest wage for work well done. Repairs cost money, there’s no way around that fact, unless of course you are a mechanic yourself or good with cars (which Joseph & I are decidedly not).
And as we’ve discovered, the cost of repairs can be crippling.
Our decision
With all this in mind & after a lot of discussion & prayer, Joseph & I looked at our current & projected future finances, & decided that we ought to look for a car that suited our needs. We would put down some cash, & finance the remaining balance. We feel strongly that the extra money upfront for a slightly newer car, will save us money in the long term.
What we were looking for: an 8 seater Honda Odyssey or Toyota Sienna, 5-7 years old, less than 100K miles, under $15K.
Even in a city as big as San Antonio, this was not as easy as it sounds. Most of what we could find were 7 seaters, had too much or too little mileage, &/or was out of our price range.
After spending hours researching online & making dozens of calls, we chose two dealerships to visit. (Ahh, the beauty of the internet.)
By mid-afternoon Saturday, we found our vehicle: a like-new, dark blue 2007 Honda Odyssey, 92K miles, for $12K.
Because it was originally purchased through the dealership & maintained & serviced there, they were able to give us meticulous record of the vehicle’s maintenance record, which further solidified our confidence in this purchase.
Financing
Because we revisited our finances, & realized we didn’t take into account Joseph’s future income increases, our yearly tax refund, & an AF program that will help repay some of our student loans, we realized we could finance this car, include it in our debt snowball & only be about 6 months behind where we originally planned to be.
So even though it will take us 2 years to pay off this car, it will only push back our debt elimination plan by about 6 months. If we pay it off in 2 years, our total interest will be a little over $700.
Is it worth $700 to have a reliable, safe vehicle now (when we desperately need it), a vehicle that we don’t have to worry about putting thousands of dollars of repairs into, that will enable us to travel long distances, that will be dependable for me & give me peace of mind when Joseph is deployed, & that will most likely be good for another 150K miles?
Yes.
Case in point.
We have a family reunion this summer. All of Joseph’s brothers & their families will be there. We thought we wouldn’t be to make it because no way could we afford the $3K it would cost for our family to fly. But now that we have a reliable vehicle, we can make the 1,900 mile trip there & back for $550-700 (depending on gas prices).
That right there, is worth it.
Not following Dave Ramsey’s plan
I think I should mention that we are not following Dave Ramsey’s plan. For a number of reasons.
I have read The Total Money Makeover & his first book, Financial Peace. I don’t think his books are particularly well written (sorry, that was quite a snobby thing to say), but he’s got personality, he has a strong voice, & he does preach (with evangelical zeal) some things are important & true: get out of debt, live within your means, etc. All of those things are essential for financial self-reliance.
I’ve listened to his radio program. I have not taken his course, but I feel confident in saying, I do know his basic rules–get out of debt, use cash, cut up all your credit cards & never use them again, don’t ever finance a car, pay for your house in cash or only get a 15 year mortgage, have a 3-6 months savings, save for your child’s education, save for retirement.
Pretty basic stuff, but the thing is, I don’t think he’s right about everything. Or rather, I don’t think everything he says is right for everyone.
While I think he’s helped a lot of folks mired in debt, get into a much better place financially, I don’t think this means that everyone should do everything he says, & maybe it’s just me, but Dave sort of acts like “you’re a moron if you don’t do what I say.”
I think it’s important to realize he’s an excellent businessman, an entertainer, & he’s making millions because of it.
Yes, he does teach some good principles.
But, often I don’t think he’s qualified to give advice (which many times is cookie-cutter, for obvious reasons) for a lot of the financial issues that people call into his radio show for. Also, as a side note, it makes me a bit uncomfortable, if not wary, any time people mix what they are selling for profit, with Jesus.
Credit cards & fear
I agree with many of the points that Kevin, who blogs at the No Debt Plan, brings up in this post.
Like Kevin, I don’t like that one of Dave’s tools is fear, particularly as it relates to credit cards. We live in a technological world, one in which the use of credit cards & credit play a major role. Credit & credit cards aren’t going away. And for 99% of the population, a good credit score is something they will need.
For example, about 6 years ago, when we sold our first house, despite 7 or 8 years of excellent credit, in efforts to follow Dave’s plan, I got rid of my credit cards. I cut them up.
A year later, when Joseph & I were in the process of buying our second home, to my horror, I discovered that my credit score was zero (because I had closed my accounts & had no activity for over a year) & that I could not be on the loan, & as it follows, the title of the home.
The cash-only system
I have tried (& failed) numerous times to use a cash/envelope system.
I use mint.com to track all of our expenditures & using a credit or debit card (rather than recording cash transactions) is so much easier, because all of the transactions are automatically posted. I know, I know all of the reasons why using bills helps to save money, but truth be told, how much money can it save you if it’s not something you can realistically, in the long term put into place?
I think people need to know how to use credit cards without going crazy.
As Kevin points out, if you are an individual who cannot control your spending when you use credit cards, then do Dave’s approach & only use cash. But there are plenty of people who do own a credit card & are able to not only be debt-free, but are also in very good shape financially.
As one commentor on Kevin’s says, “Dave’s program is like AA for overspenders anonymous.”
John McDougall & Dave Ramsey: two peas in pod
John McDougall uses the same approach as Dave does, but for diet.
He advocates no oils (ever), & a very lowfat diet (10% or under). John McDougall was my intro to veganism, so for that, I am thankful. But over the years, I’ve realized, “hey! It’s okay to have more fat in my diet.” I’m not overweight, I don’t have heart disease. In fact, in my childbearing years, it doesn’t hurt to have a diet that is higher in calories &/or fat, because my biology dictates that I need plenty of stores to make babies.
Don’t get me wrong. John McDougall, & Dave Ramsey are both helping people better their lives.
John’s helping folks reverse diabetes & get off their meds, lose weight, & achieve a greater state of health. Dave’s helping people get into a much better place financially. But both of these guys use extreme measures to help, for the most part, folks who have lost control of their diet or their money.
Are there people who consume oil who are healthy? Yes. Are there financially fit people who own credits cards? Yes. I think it’s important to realize that one size does not fit all.
Why we are in debt
Joseph & I are not in debt because of frivolous spending.
We aren’t in debt because of our choice in clothes, expensive vacations, getting my nails done, going out to eat every night. Prior to law school, we were completely debt-free & had a very pretty penny in savings.
During our 9 years of marriage, Goodwill (or Desert Industries when we lived in Utah), craigslist, ebay, & Costco have been our retailers of choice.
For a great majority of our purchases, we use coupons, sales, &/or buy used. I cook most of our meals from scratch. Our kids wear hand-me downs. We don’t own smart phones & have never subscribed to cable. Joseph & I talk about all our expenditures, we budget.
In a word, we are frugal (without, hopefully, being miserly), or at least that is our goal.
So why are we in debt?
It’s simple. We’re in debt because we chose for Joseph to attend law school, & then he was unemployed for 14 months thereafter. Those years of only a part-time income (mine), the added expenses of caring for 4 kids, student loans for law school, & then over a year of unemployment took it’s toll on us.
It’s about the principles
I’m not saying you should or shouldn’t use credit cards.
Whatever tool you use to pay for things, I think doesn’t matter as much as these tried & true principles:
*spend less than you earn, have a savings, stick to a budget*
I guess those 3 principles aren’t enough to sell books, courses, & to build an empire, so financial preachers like Robert Kiyosaki, Suze Oreman, & Dave Ramsey add some embellishments & call it “the way,” which as evidenced, does sell.*
As a Mormon, my faith teaches me pretty much everything I need to know about finances & is summed up nicely, here.
Between those principles & perhaps a knowledgeable financial adviser &/or an accountant, I don’t think I need to search the world high & low for any more financial wisdom.
In regards to debt, the LDS church teaches:
“Avoid debt, with the exception of buying a modest home or paying for education or other vital needs. If you are in debt, pay it off as quickly as possible.” (Italics added) (from lds.org)
Joseph & I felt strongly, that a reliable vehicle at this point in our lives, is in fact, a vital need.
I hope I am not offending those who chose to follow Dave Ramsey’s plan. Good on you, if you do.
But I feel it important to explain my position & reasoning behind the choices we’re making.
Thanks for reading (you’re pretty awesome that way),
& I’d love to hear any thoughts you have!
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