TITLE: If Only My Mom or Someone Had Tod Me?, #22
By gene hudgens
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Obtaining a good formal education, like caring for our health, is an absolute necessity as we make plans for a successful future. This, in its self, is a wise investment.
Without a good education we should not expect our most precious dreams to come true. We must continually plan and prepare to make any dream come true. Every year life seems to get more complex and technical. Without a sound education it is difficult to compete in our completive world.
Learning to conserve time and save money are important issues. To be effective we must attempt to learn how to accomplish these tasks as a child and teen. We must stop and think and realize that there are only 24 hours in a day. If we waste an hour it is gone for ever. Watching TV in the evening is enjoyable, but the hours are gone forever and the needed hours of sleep and rest may be lost for ever and the homework may not have been accomplished, thus there is stress in school as well as a degree of learning that is lost for ever.
Learn to save money as a teen. It isn’t necessary to do without everything just to have dollars in a saving account, but sacrificing and not buying everything you want is a worthwhile learning experience. Do you ever think about how many people seem to have all those great things like a nice house, nice car, and go each year on a vacation when other people in seemingly situations have nothing? It takes planning and saving…and sacrifices.
When we borrow any money for any reason we will be required to pay interest. Have you ever stopped and really thought about this ’greatest word’ in finance and marketing. It is doubtful if any of us will ever want to completely avoid borrowing money and paying interest from time to time, especially when purchasing a house.
However, each of us needs to carefully think about the many smaller loan contracts we make. Too many of us just act and over-react and do things without first thinking about the big picture. We jump and take the quick easy-route.
When we see the tempting ads offering all of the unneeded, but nice-to-have items at the clothing, sport, and computer stores, we too often let our immediate selfish desires over-rule common sense. We are tempted when we quickly read the offers of no payments required for three months, buy two of any item and get a 25% discount, or we offer jour own internal financing.
Advertising is very big business and is designed to psychologically brain-wash the consumer, especially the inexperienced buyers such as teens and young adults. Too few of us really understand just how much money we pay in interest fees on any type of loan.
Carefully follow a little example that I want to share. It’s likely that each of us will have a need or an opportunity to buy a car, when we do not have cash and are required to take out a car-loan. Think about this. If we borrow $8000 for a used car (often much more) and finance it for four years at 12% (APR) Annual Percent Rate and pay $210.69 for 48 months…we pay back a total of $10,113. That means we paid $2,113 interest fees. That is certainly more than 12%. It is close to twenty percent in interest fees. Most of us never look at details like this.
“Money makes money”. Companies that work with our money make a lot of money…even insurance companies. Have you ever noticed who has the money to build the huge office buildings and skyscrapers? Where do you think they get the money? Can it be from “interest” borrowers pay? You can bet your boots!
Example to learn from: It is expected that each year our income will increase. Books have been written showing how we consumers can save money (not waste money) and over the years have a nice nest-egg. If we had bought the $8000 car described above and drove it for six years…and each month was able to put $100 dollars in a jar or a bank…we would have $7200 in the jar and an old car that sixth year. Let’s say we can get $800 trade-in on the old car. We would have $8000 towards another car.
If we push aside the desire for a new or very expensive car, we can pay CASH for an $8000 car…or put a down payment of $8000 on a $12,000 car. If we sacrifice one more time and drive our newer car for six years, while paying as much as we can to pay off the $4000 as quickly as possible…and this time putting $200 a month in the jar (which adds up to $14,400 cash in the jar)…we are now debt free for future auto purchases. We can from then on pay cash for our cars. We can now use the money saved (by not paying car loan interest) to take our dream vacation.
Wise people use the same sacrifice principle when buying a house. I have a friend that bought his first house the year he and his wife graduated from college. They both worked and concentrated on using this house and future houses as the corner-stone for their future financial security. He was in the military and moved about every three years for a new assignment. They were careful when buying the house, attempting to insure that the house was in an area that was easier to keep rented. They carefully chose a realtor that would keep it in good repair and rented. They repeated this process for his 28 years in the military.
Soon after retiring from the military the first house bought (30 year loan) was paid for.
About every three years another house was paid for. He carefully sold these houses when the market was most suitable and reinvested the money in safe stocks. During his military career he and his family enjoyed economical vacations and life style, but after retirement they both continued to work, but now they enjoyed exclusive vacations seeing the world.
Another military friend and his wife (both friends enjoy a stable marriage and both work together on a common plan or goal) agreed to a different savings plan. The amount of each pay raise he received in the military was put into a savings account. They continued to live off of the amount of money he received as a second lieutenant and the money she made working full or part-time. They maintained this plan or routine for 25 years. Working together, with a strict plan for their future, they discarded the temptations to waste money and not save during the younger years, so that they could have an easier life in the older years. This plan worked for them too.
There are so many ideas and plans. There is a plan for everyone. Each of us will likely be afforded the opportunity to choose the route we will take in our life, but for sure…we all must have discipline; develop a plan for our future and stick to it…even when it can more immediate fun to drop our plan…our goal…and have fun wasting our money.
© Gene Hudgens
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