So I have a friend… He is very intelligent and works as a software engineer. In the last 12 months he relocated to Seattle from Dallas to accept a job with a similar salary to the one here but much higher expenses.
- Rent – Dallas it was around $1200/mo for a nice 2 bedroom place. Seattle in a neighborhood he considers a huge downgrade, the rent is $2400/mo. He wants to upgrade to a $3k/mo apartment.
- Salary – I don’t know the exact number, I’m guessing it’s around $80k/year.
- Insurance – He has multiple accidents on his record. His Hyundai coupe was financed for around $35k and he had negative equity on the car that he traded in and needed some major repair work on before. He had an umbrella policy but recently his provide dropped him because they deemed him too high risk.
- Total debt – His number was around $80k and a big chunk of that is medical debt, credit card debt and I’m sure some of his rent that he put on the card to get points. My friend is a good person but also likes to live a fancy lifestyle. In April he sounded serious about getting the total amount down. He considered bankruptcy at one point before some other friends put together a financial budget for him. Say $80k at 20%/yr. Not factoring in principal payments that is $16k in interest.
- Retirement – He’s taken out 401k loans / stopped contributing to pay off debts. I’m going to go out on a limb and say that in his late 20s, there is close to $0 in retirement.
- Auto debt – So his Genesis coupe needed new shocks, he couldn’t get the factory ones for his car. Those would probably run around $800 with parts and labor included. He needed to get some expensive racing ones that wound be a total installed cost of about $2k. Due to his poor credit / high interest rate, negative equity and extremely high mileage, he was upside down about $6k on his car. He took it in for service and discovered his transmission was cracked. Cracked means it’s only a matter of time before there is some type of catastrophic failure. With the accidents and 72k on the powertrain I’m pretty sure a warranty would not cover it… The trim pieces have also been flying off the car probably because of the automatic car washes he was taking it to at least once a week… So what does he do?
He leased a car with a base price of $55k, a 5.0L Hyundai Genesis v8 sedan. Sure the thing is a beast but his payment is $900. Over 36 months he pays $32,400. That is factoring in $8k he got for the trade-in, tax and maintenance. Suddenly the $541 / $32,460 after 60 months for a car I get to keep doesn’t seem nearly as bad. I want to slap my head sometimes. My friends don’t know about this blog, nor do they ask for my feedback on anything related to money. I’m not perfect but I have a few accomplishments under my belt.
Looks can be deceiving…