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Don’t Make That Commitment

by Jaime Thompson on November 12, 2010

What are you doing next week? You probably have a general idea. How about in 5 years? You might have some goals and dreams, but life happens and sometimes it can be hard to predict. So why would you want to commit $470* a month to pay for a car over the next 5 years? Is your income going to be the same? Will you be in the same job or even line of work? How about a marriage or divorce? Baby or two or three?

Been there, done that. Long story short, we needed another car immediately (note I didn’t say new). Against my car purchasing history and philosophy, we ended up buying, or I should say financing, a brand new car. Only 2.9% interest, I mean you can’t borrow money much cheaper, right? Well the DINKS (duel income no kids) that we were, committed $376 a month to pay for that car for the next five years. One week after driving it off the lot we found out we were expecting our first baby. Nine months later with a healthy happy baby boy, we have one income and 3 hungry mouths to feed and oh yeah, that $376/month commitment. It is a struggle at times, but we keep chugging away and paying the $376/month. Along the way we welcome healthy happy baby boy number two. Then the economy takes a nose dive and our one income turns into half an income as my husband’s company temporarily reduces his hours. Two months later that temporary reduction becomes a massive company layoff and our half income is reduced to none. But that $376 commitment, still there. Hmmm….this was not in the plan, but then again, life happens. So how does the story end? Well, we were fortunate enough that the unemployment stint was extremely short. And please remember I am a finance nerd so we do have an emergency fund tucked away for “life”. We paid off the car earlier than the loan terms and won’t ever look at 2.9% interest as a great deal again. We find ourselves in the market for another “newer” car in the next few months and fortunately this time have the cash on hand to make that purchase so we don’t have to commit tomorrow’s income to buy something today.

*the average new car payment in the U.S.

(photo by harry_nl)

  • http://www.currentfinances.com Don Current

    My story is similar to yours Jaime. Life happened to us as well (http://currentfinances.com/about). Fortunately we were already debt free minus the home and had that big ‘ol emergency fund in place. Our story would be totally different if we had the car payment, and the credit card debt, and the student loan when my “secure” job ended. Instead, I’m striking out on my own and creating a different story. Debt freedom rocks! We don’t need no stinkin’ payments!

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