Typical mistakes young people make with money - Cars
I was talking with a young acquaintance - friend of a friend - who was thinking of changing his car.
Now, to be fair, this young man had recently recovered from a year of medical treatment for his cancer and he's now back in good health.
So naturally, he's probably thinking of "rewarding" himself by getting a spanking new car that's way above his budget!
Honestly, I DO understand very much how he would feel, wanting to get a powerful new car is a great feeling for most guys! Right right?
But I probed a bit more and the financials doesn't make sense. He hasn't had any increase in salary but he is employed in a stable, semi-government organisation that is profit-generating, so no worries there vis-a-vis job security. In fact, his employer covered all his medical bills which is great for him.
So after some brainwashing hehe he did settle on booking a smaller car while he thinks a bit more about it.
My advice to him was to think strategically. Don't go rushing into buying your dream car now. Plan for it a few years down the road - buy a decent, cheaper car now that has good resale value and when the time comes, he would have enough equity in that to do a trade-in for a more expensive car but reduce the loan amount.
So instead of the car right now, plan for car 1, 2 and 3 - after all, by the time car 3 comes along, his career may have blossomed and he could very well go for something that he never even considered to be attainable!
That being said, we (as in my friend and I) encouraged him to think about buying a starter property first instead of changing his car which is fully paid down anyway. He's renting right now and for an extra few hundred on top of his current rent, he could be owning something outright.
Food for thought...
Now, to be fair, this young man had recently recovered from a year of medical treatment for his cancer and he's now back in good health.
So naturally, he's probably thinking of "rewarding" himself by getting a spanking new car that's way above his budget!
Honestly, I DO understand very much how he would feel, wanting to get a powerful new car is a great feeling for most guys! Right right?
But I probed a bit more and the financials doesn't make sense. He hasn't had any increase in salary but he is employed in a stable, semi-government organisation that is profit-generating, so no worries there vis-a-vis job security. In fact, his employer covered all his medical bills which is great for him.
So after some brainwashing hehe he did settle on booking a smaller car while he thinks a bit more about it.
My advice to him was to think strategically. Don't go rushing into buying your dream car now. Plan for it a few years down the road - buy a decent, cheaper car now that has good resale value and when the time comes, he would have enough equity in that to do a trade-in for a more expensive car but reduce the loan amount.
So instead of the car right now, plan for car 1, 2 and 3 - after all, by the time car 3 comes along, his career may have blossomed and he could very well go for something that he never even considered to be attainable!
That being said, we (as in my friend and I) encouraged him to think about buying a starter property first instead of changing his car which is fully paid down anyway. He's renting right now and for an extra few hundred on top of his current rent, he could be owning something outright.
Food for thought...
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