Budgeting and Predicting the future
Budgeting is such an important part of money management. That’s part of the reason I talk about it so much. Today’s lesson is about predicting the future. To correctly and safely budget, you’ll need to be a bit clairvoyant. Before making any changes to your budget, you need to look into the future and see how the changes will affect you down the road. I’m going to share one my own experiences to clarify.
In 2005, I had a new job, I was making good money, and about half my credit card debt was paid off. Financially I was feeling great, if perhaps a little too full of myself. GM had commercials all over the place about their employee pricing - you could buy any new GM product for the same price a GM employee would pay. So, I went to test drive a Yukon Denali. MSRP on this beast was just a shade under $50,000, and I simply hated the way it looked inside and drove, so I never even found out the employee price. However, the experience got me in “new car mode”, so I went to plan B. My dream SUV, the Lincoln Navigator, was only about $5,000 more than the Denali I drove. To make a long story short, I fell in love with the Navigator, and got an incredible deal on it. I also sold my Mustang, which I was heavily upside-down on, and leased the Navigator for 36 months.
I knew going into the purchase that my payment was going up, my insurance would jump, and I would spend about twice as much on gas ( lower mileage coupled with premium gas ). At the time I was ok with it - after all, I was making money, and besides, I deserved it, right?
Looking back, I wish I could’ve looked into the future. Had I thought more about the instability in gas prices, I would have thought twice. $3.20 and up per gallon, with a 26 gallon tank is tough to swallow, especially when said vehicle averages about 14 mpg.
Overall the gas prices aren’t killing me. I’m credit card debt free these days, and in an even better financial position than when I made the purchase. However, I can’t help but think how much better off I’d be with a smaller car payment and lower gasoline bill. The moral of the story? Always look into the future to make sure your financial decisions make sense down the road.
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Matt said,
Wrote on July 16, 2007 @ 5:11 am
Once the new car bug bit me it was tough to convince myself to buy a used car. I too settled on an SUV when in reality I would have been better off with a smaller car. I’ve been very happy with my purchase though and have the ability to look into the future I think I would have made the exact same choice.
Unfortunately I’m starting to get the new car itch again… credit cards first then maybe a new car.
Penny Saved said,
Wrote on July 18, 2007 @ 3:16 pm
Do your best to resist a bit longer, and get those credit cards paid off. You’ll be much happier, trust me.
tehnyit said,
Wrote on July 19, 2007 @ 7:22 am
I don’t know what it is with cars and guys, but they seem to be attracted like honey to the bees.
Sometimes, I walk pass a car dealership on the way during my lunch time walk, and I always pop in for a quick look at at nice Peugeot 407 (fully optioned). I could only really just smell the leather interior and move on. I know that I just don’t need it and buying it would just increase our debt position.