Keep your car forever (well a long time)

  1. In 2005 I bought a 2003 Maxima for $16k. In 2008 I traded the car after putting a good chunk of money into maintenance (and overpaying considerably) for about $6k.
    That car ended up making it until the winter of 2015 with over 190k miles on it before being salvaged. So nearly 7 additional years. I took immaculate care of this vehicle and quite honestly surprised it lasted that long. When I owned it the A/T transmission was shifting hard from 1st to 2nd gear. I attached these images to show you the before and after. The dealer listed it at about $10k and I felt like I got ripped off…The car was sold just shy of 80k miles. Loss: $10k
  2. In 2008 I bought an Altima for about $23k and traded it in 2014 for $9k. I put over $2k into fancier rims and an upgraded sound system. Complete with twin JL subwoofers in the trunk, replacement speakers in the panels, new wiring, sound deadening, two amplifiers. Plus financing on the note which I held for 5 years. So let’s just say… Loss $16k

  3. In 2014 I bought another Altima for $24,500. I financed it for a lot less and this is at 0%. Little worry about maintenance costs for a few years other than the normal preventative stuff. If I were to trade the car in today I’d get about $16k for it.  So my loss would be $8k

Let’s run the numbers. Assuming I saved that money and put toward retirement at a 10% annual RoR. The original $10k after 8 years would be worth $21k and the $16k would be worth $19k. So that’s $40k I could have applied toward my student loans or invested in retirement. Take it a step further. $40k for another 20 years… $269,100. Even with rises in housing costs I think in 2036 that would still be a big chunk of a house payment. Take it a step further 30 years. $697,976.09. By holding onto a used car early on in life and not getting the trade-in bug you can pretty much lock in retirement savings. These cars are not super expensive, or so it seems on the surface. However unless you’re really aggressive on funding retirement, pay off the car once and keep it for a long time.

Otherwise you’ll be one of those people fixated on impressing neighbors with what’s in your driveway or at a stoplight vs being prepared for your economic future. It’s all priorities. The numbers really make me wonder WTF was I thinking… 🙂

Retirement Account & The Next 10 Years

One of the benefits offered by my company is a certain percentage of my gross salary is vested toward retirement. This is separate from the 3% company match. This year that number was about $1100. This boosts my 401k balance to over $12k.

I’m shifting more and more toward a retirement mindset and less from becoming debt free as I get closer to paying Navient off.

These are my loose plans and I honestly have no clue what the future holds for my career / earnings potential, living / relationship. numbers I came up with on my current salary, which for arguments sake say it’s close to the national average.

2017: $1000/mo -> +$12k -> $24,000
2018: $1200/mo -> +$14.4k -> $38,400
2019: $1500/mo (maxing out 401k) -> $56,400 (car will be paid off)
2020: $2000/mo -> $80,400
2021: $2000/mo – > $104,400
2022: $2000/mo -> $128,400
2023: $2000/mo -> 152,400 (the year I turn 40)
2024: $2000/mo -> $176,400
2025: $2000/mo -> $200,400
2026: $2000/mo -> $224,400 (age 43)

Using the 2020 numbers as an example with a future value of money calculator…

$80,400, adding $2,000 per month at age 37 @ 10% interest and continuing for 14 years. That makes me a millionaire and able to retire by age 51 assuming my income stays what it is and my cost of living doesn’t suddenly spike. If I take that $1,051,771 and don’t add anything to it, in 10 more years at 10% I’ll have $2,847,188 at 61. Is $2k a month a lot of money? To me in 2016 dollars on my current income yes. In 4 years assuming I get a 4% raise each year? Maybe not.

I don’t know what the future holds, but I do know this. If you want to have money when you’re older you need to start young. Maybe that means not buying the Mercedes or BMW but a more modest car instead. Or renting for a while and not sinking a ton of money into a house. I’m really seeing the light on how the poor stay poor and the rich get richer.

Last but not least, here’s another big kicker. There are people making $100k+/yr now who could easily speed this whole process up considerably and still have a decent life.

It’s late as I write this, but I just hope someone thinks about this before making a huge purchase that makes then a total slave to a job, bank or other financing company.

Month 46 – Navient $11,124, NMAC $11,734, 401k $11,014, Roth $3,314

month48navient

Student Loan Progress Month 46 – Navient $11,124

Car Loan Progress:

altima02062016

401k update:

401k02062016

401k balance update Feb 15, 2016

Betterment:
bettermentupdate02062016

Brokerage Roth IRA:

brokeragerothira02062016

Brokerage account. my apple stock is down whoa. Glad I’m diversified.

Got my tax refund back. It was a good chunk of cash. Split the money up about 50% between two debts, my student loan and credit card payment that has been lingering. Credit card should be paid off again come my next paycheck. Between last month and this month I’ve paid about $1721 down on my balance.

I officially owe *less* on my student loan than my car. It’s a good feeling. Now I’m basically starting a race. Race to the finish line. Can I pay off the student loan before 12/31/2016? I think so, god willing. I could stop my 401k contributions and def hit the mark but not giving up my match.

Betterment charges a higher fee if I don’t deposit a min of $100/mo to my Roth so just doing the minimum for now. Not pulling out of the market in a panic, not going 100% into bonds. I do think it will get worse before it gets better. I am optimistic it will bounce back though. Quantitative Easing on student loan debts is a topic that has come up in political debates. I’m against bailouts and for people accepting the consequences of their own actions.

 

Layoffs & Early Retirement

More layoffs at my company. There were at least 15 people I have worked with personally in the last 3 months who were let go. Makes me think loyalty to a company is dead. While you’re there you try to be a linchpin and indispensable. However if your work doesn’t result in a promotion or even a decent raise it may be time to look elsewhere.

The idea of having a safe secure job is dead. Skills are everything. We are moving toward a society when a full time employer with great benefits is going the way of the dinosaur. People running their own businesses can allocate more money toward their retirement, in some cases are free to make their own schedules and will often work more hours than a typical 9 to 5 er. There are of course risks, some crash and burn miserably.

As I get closer to being debt free I think about more and more about the concept of f’you money. I see people driving brand new Porsche, Mercedes-Benz and Lexus cars. They buy fancy homes and put expensive items inside those homes. Then they work 60-80 hours a week to pay for these things.

Jacob Lund Fisker author of Early Retirement Extreme sums up this situation fairly well.

In real life, the prisoners of Plato’s Cave are those who are prisoners or slaves to their wages and their culture.  A wage slave is a wage earner who is entirely dependent on their wages.  While the wage slave is free to leave the current job, he is not free to leave the job market altogether and he can likely not imagine the possibility of doing so.  He is still entirely focused on the wall.

The wall shows other people not as who they are, but as what they own.  There goes a man in his new sports car, what is not seen is that the car is bought on credit and the man is stressed because he is having trouble making the payments.

Wage slaves have jobs where they can go and spend their most productive hours writing high powered memos so they can be more productive, while other people spend their time ignoring memos so they can be more productive too… … This endless working and playing is called “making a living”, yet people are so busy “making a living” that they have no time for living.  A wage slave is a person who is not only economically bound by mortgages, loans, and other obligations, but is also mentally bound by an inability to perceive that there are other options available. Like the prisoners in Plato’s cave.  Their chains are not physicals; the chains are mental, which in some sense makes them worse because it turns the prisoners into their own prison wardens.

Is spending the most productive years of your life chained to the job market to collect a lot of rarely used stuff that gathers dust in the closet or takes up space in junkyards a wise choice?  Were you really born just to die, leaving a large pile of discarded consumer goods? I realize that not wanting a house full of things makes me look weird and even “unpatriotic”.  After all, more is better and who does not want to be better?   But perhaps conformity is not the only way to live.  In fact, by taking the other end of the bargain, saving as much as other people are spending on wants, it is possible to retire and live on invested savings after just 5 years of full time work.  Rather than increasing the amount of work to acquire more stuff, reducing this superficial need reduces the amount of necessary work.  It is possible to reduce the amount of work all the way down to zero: financial independence.  Indeed, playing the shadow game for five years provides a permanent way out of the cave!  Alternatively it is also possible to return to the cave for a few months every year to earn money for the next adventure out of the cave.

I see people with fancy titles big homes and hair turning white in their 30s.  That and looking stressed out all the time. Is it really worth it?
Is all this stuff we buy to impress people we don’t really like worth it?
Have we not learned from the overconsumption of the Baby Boomers & Generation X?  Is lifestyle inflation something we’re just come to accept as the baseline?

I don’t want to be a slave to money or things that will just lose value over time. Not every one gets it, but a few do. It’s a movement, and it’s growing. 🙂

One More Podcast

I listen to a bunch of podcasts on money depending on my mood. Or not at all.

One I didn’t include here is Scott Alan Turner’s – Financial Rock Star – No not because he also live in Dallas, but because he’s very straightforward, informational and entertaining. 🙂 The interview posted today Episode 42 –  Broke, Busted, and Disgusted – The Student Loan Crisis with Adam Carroll was very much relatable. I also liked 41- How the Rich Get Richer and The Broke Stay Broke and 21 – 27: The Deadily Sins of Financial Freedom. Each episode is short enough for me to listen to a few back to back while I clean my house or go for a walk.

I emailed Scott about a month ago and he was kind enough to reply. I know I produce content here on my blog but it still amazes me that others care and reply to me individually. Podcasts help me realize I’m not writing or merely talking to myself… 🙂

What are your favorite go-tos on the subject of money for that added motivation?