Message to Graduates
June 11, 2011, Submitted by: Ken Tweet
Being graduation season, be it from High School or College, and having been through that stage of life myself, here is a little friendly advice…
Even though at this stage of life you probably don’t have a-lot of money and ‘things’, and no doubt you want things because other people around you have them (peer pressure and all), whatever you do – fight the urge to go into debt, especially at this early stage.
Almost everyone needs a vehicle (unless you live in the city where you can use public transportation), but resist the urge to buy a new one! Really. Seriously, the less you can pay while tolerating the fact that it won’t be as nice as your friend’s car, the better.
If you live frugally now, you will quickly surpass your friends when it comes to your net worth. In fact, the fun part is keeping it to yourself as your value grows and their debt only increases.
More importantly, resist the credit card impulsion! These things will bleed the life right out of you unless you have a high degree of will power. It is so easy for just about anyone to rationalize spending money or using their credit card – that’s just how the brain works if it really wants something. Instead, avoid impulse decisions. As they say… ‘sleep on it’. It works!
Looking back on my own life, and education, I realize that the ‘schools’ do not teach self discipline when it comes to finances. Since ‘the system’ needs debt to survive, the institutions support that notion. Not often do you hear recommendations to be frugal.
Knowing what I know now, I know that ‘debt’ is the monster. Only very well disciplined and financially positioned people can use debt to their advantage (it is possible), however most people cannot, and are not in the position to do so.
If you can stay out of debt, at least for the most part, you will be far more successful and happier than most people around you! That’s a fact.
So that’s the simple message and recommendation. Do everything you can to stay out of debt.
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Yet another reason to ……….homeschool.
You can always go to Europe where the unemployment rate for University graduates between the ages of 20 and 35 hovers between 25 to 50%. More are underemployed such as working as retail assistants in shops.
Check that advice about buying a used car. Lease a certified pre-owned or cheap new car with a strong warranty. With upkeep on a used car you are going to end up spending the same amount of money per month and have a unreliable ride.
This is after 7 years of trying to buy used cars and get them back into good shape using my own two hands. The average person takes terrible care of their car thus most used cars are in terrible condition. If you want to do things the right way (and we like to be prepared with reliable transportation) you are going to end up spending the same amount per month as on a CPO.
Just a list of things that go wrong and the ammount of money a shop would want to fix them.
1. Shocks (nobody replaces these and they destroy the handling) $700 for all 4
2. Bushings (same deal as the shocks) $800 to $1500 for all suspension mounts
3. Motor, transmission and differential mounts (if applicable) $600
4. Brake Rotors (guaranteed at least one axle needs these) $400
5. Standard EFI tune up (plugs, wires, filters, engine cleaning, belts and fluid changes) $800
6. New Pre Catalitic Converter (Mostly a CA problem, higher mileage vehicles tend to have these on the verge of failure and thus difficult to register) $600-$1200
7. Tires (most used cars come with terrible or worn tires. Try a set of expensive tires they are like nice clothes you wont go back afterward) $700
8. Leaks (normal on cars with over 100k miles, will destroy rubber and other items after prolonged contact) $200 to $1000
Then there are all the little misc things that break, sometimes its annoying like a power seat, sometimes its dangerous like a rear window defroster. Unless you find the diamond in the rough, used cars are a terrible deal.
I have owned many used cars throughout my life, and have learned a few things. One is that typically the best tradeoff between saving money from not buying new versus some of the mechanical issues that you describe that could be wrong with a used car… is to by a car that is only a few years old. This way you save many thousands of dollars that a new car loses when driving it off the lot, and the car is still new enough to be in very good shape.
I have also purchased older vehicles, and unless you are up for the challenge of repairs (some people enjoy it, and are quite capable of doing many of the repairs themselves – granted that most are not able), you need to be very good when shopping around to identify potential problems before you purchase.
I have never been inclined to lease, because I don’t want to be bound by any contract. I want to own my possessions outright. But that’s just my own opinion.