Friday, March 29, 2013

Are You Car Rich and Cash Poor

Twelve millions Americans are unemployed. Florida has 327,528 foreclosures, California has 159,866 Illinois has 137,773; Georgia has 61,058 and Ohio 83,331.  According to Wards Auto Group, 14,785,936 autos were sold in the United States in 2012. According to the Wall Street Journal 612,953 cards were sold in February 2013, 106,601 SUVs, 250,631 cross-overs and 579,296 light-duty trucks totaling 1,549,481 vehicles sold in February alone. According to Huffington Post 46% of American die with no money.  These statistics show that Americans are still not saving and are continuing to go further into debt.

Are you afraid of having your car repossessed or admitting to yourself and others that you are having difficulty making your car payment? Are you making sacrifices just to make your car payment? Do you have a savings account or retirement account? Are you upside down on your car?  If so, you are car rich and cash poor.  It is not worth it.

Many Americans continue to buy expensive cars with monthly payments of $400 or more only to struggle to pay them a few months later.  Due to this, they are unable to plan for unexpected expenses and are unable to survive a financial crisis. Many live paycheck to paycheck and have little to no savings.  With the many economic crises it is important to spend less than you earn and consider downsizing your lifestyle to ensure you have money left over each month after you pay all of your bills and basic necessities.

I bought a new 4 door Hyundai Accent basic model for approximately $17,500 last August because my 14 year old car got totaled. It came with a 10 year or 100,000 mile warranty.  I get 31 miles per gallon.  It gets me from point A to point B and my payment is $288 per month with a 2.99% interest rate.  This is a comfortable payment that can be made without stress.  The car dealer told me many of his customers delayed purchasing a home and instead spent money buying a luxury car. This makes no sense to me. Cars depreciate as soon as you buy them.  Homes however have more value and can be an asset.  If you get into financial trouble and have equity in your home you can sell it and make a profit.  You cannot do the same with a car.

During an economic crisis it is best to have cash on hand in case you lose your job, get sick, lose medical coverage or have reduced income or benefits.  Here are 8 ways to stop being car rich and cash poor.

  1. Create a budget. Track your spending daily, weekly or monthly and see what areas you can reduce spending.
  2. Lower your payment. Refinance your monthly payment; purchase a cheaper car or a used car with no payment.
  3. Taxes.  You can only deduct expenses on your car for business purposes or if you purchase an energy-efficient car. 
  4. Interest. In some instances the interest on a car loan may be higher than a mortgage or other loan so it is best to pay the balance off as soon as possible. The ideal is to pay a car loan off in 3 years.
  5. Backup fund. Create an emergency fund to cover all of your monthly bills and expenses for 9-12 months.
  6. Income streams. Find additional ways to generate income such as a part-time job, selling new or unused items on eBay or Craigslist, investing in a franchise, starting a part-time or home-based business, have yard sales, bake sales, deliver newspapers – find something to do.  The ideal scenario is to work for yourself but until you build up enough cash reserve you may have to start out working for someone else.
  7. Invest. Invest in commodities such as pharmaceuticals, green companies, medical research companies, grocery stores, electronics stores, car manufacturers, information technology companies, corn, soy, wheat, coffee, orange juice, oil, cattle, sugar, cocoa, cotton, rice, rubber, barley, wool, oats, hogs, canola, adzuki beans, and minerals such as aluminum, copper, gold, silver, nickel, natural gas, platinum and zinc.
  8. Real estate. Invest in real estate. This requires good credit or bad credit and lot of cash.

No comments: