Tuesday, May 4, 2010

New Vehicle, Goals and Compound Awesomeness or Failure

We can cross another one off the list. We got a few year old midsized Japanese SUV. It is several years old but with just over 60K on the odometer it should serve us well for years to come. We now have a big, heavy vehicle with a lot of cargo room which is pretty awesome. It is real strait except a bit of crunch on the front bumper. Best of all we paid CASH. Well actually we paid with a check but you get the idea.

That was our big push for the year so now we can get going on moving from an OK money place to a good money place. Now we are going to push hard at paying off my student loan (the interest rate is low enough that it hasn't been a huge concern) and be entirely debt free. After that we can start saving for a down payment on a house.

I realized something over the last few days. When it comes to money decisions tend to compound upon themselves. I am not talking in a formal sense of either earning or paying compound interest though that happens also. For some reason or another it just seems to work out that good brings better and bad brings worse.

For example lets look at a good money situation. Jim lives below his means. Since he lives below his means it is easy to slowly accumulate various preps and still save money. Jim eventually puts away a nice emergency fund. Since Jim has money he can plan in advance to shop good deals in the off season and buy in bulk. Now those things like sudden car repairs aren't an issue. He can usually just do it out of the normal surplus but if need be takes the money from the emergency fund then puts it back promptly. Since Jim is getting good deals on stuff and buying in bulk he is saving even more money. When his job slows down he is able to have the emergency fund supplement unemployment and thus be OK. Jim is able to buy a nice little piece of land with some of this money he is saving. Things just keep getting better.

Bob lives right up to the very limit of his means. Since he spends almost every dime that comes in it is very difficult to do more than pick up a couple cans of food or a box of shells for his deer rifle now and then. Bob is so worried about how to pay for a gallon of milk on the 29th of the month that buying things in advance of genuine need is almost a laughable concept. When Bob sees a good deal he is rarely able to take advantage of it due to lack of funds anyway. The closest thing to a savings plan Bob has is the change jar on the dresser. When the car breaks he has to make payments to the shop or put it on a credit card which makes his tight paycheck to paycheck lifestyle even tighter. When work slows down things become downright ugly. Unemployment doesn't come close to paying the bills and the change jar was good for about a tank of gas. Bob sells a couple things he really likes as well as getting behind on some bills and running up debt till normal checks start coming again. Things just kept getting worse for Bob. Every little thing that happens puts him another step backwards. In the best of times he is just treading water. Bob gets stuff on credit because there is no way he could pay cash. Those purchases are a mortgage on his future work so now he is left with even less money and the same needs.

You might be thinking that Bob's story hits a bit close to home. I urge you to not despair or give up or fall into the "everyone lives like this" trap. Personally I drank the Dave Ramsey cool aid . It may not work for everyone but it seems to be working well for us. Feel free to get a big plastic cup of the stuff or not.

Are you compounding awesomeness or failure?

1 comment:

Tattoo Jim said...

Words of Wisdom to live by !! Now if only we can get our .gov to live by them...

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