For the past year and a half, my husband and I have been saving up to buy a four wheeler. When discussing ‘saving’ goals recently with my Econ students, I told them my goal just to get the conversation started. Most of them smiled when I revealed what I'm saving for. Several of them nodded their head in agreement with my goal because they really want one too. A few seemed a little perplexed because in my “teacher” clothes I’m sure I don’t seem like the four-wheeling type. Then someone mentioned how expensive four-wheelers can be. I agreed. And the questions started rolling: What color do you want? Did you have one when you were little? Are you going to take it out on the mountain? Do you want a Honda? What specs are you looking for? As quickly as they fired off their questions, I spat out my answers. They could tell I had given this lots of thought and just how badly I want one… then someone posed the ultimate question: “Well if you want one that bad, why don’t you just go get one?”
That question was a catalyst for a new discussion: What does it mean to be able to afford something?
The answer to this question can be quite uncomfortable… Because the real answer is this: being able to afford something means that you can pay cash for it (possible exception: your home). Countercultural, right?? We are so used to the idea of the word afford meaning ‘I can make the monthly payment’ that we’ve forgotten what afford truly means.
Afford…
A few weeks ago we went to the Honda dealership to look at four-wheelers (we’ve also searched the used market extensively). We walked in feeling good about ourselves; we had saved up quite a bit of money in our ‘four wheeler fund’. So, this was a pile of cash beyond the other things we save for - and we were happy that we had worked hard to reach our goal.
We told the salesman exactly what we were looking for - a used four-wheeler that we had seen on their website. He quickly informed us that the website folks hadn’t updated the site recently and they no longer had that particular one in stock. Feeling a little bummed, we continued to look anyway. We found a few 2017 models that we really liked, but one with the specs that we were after was simply out of our price range. Naturally, the salesman asked about financing multiple times while showing us around the floor. We turned down the offers for financing - something that in the past we may not have done with such a steady conviction - thanked him for his time, and left feeling defeated. We had saved, but not enough. Afford...pretty uncomfortable word in that moment.
I'll be straight up. We can make a monthly payment on a four wheeler. There's room in our budget - plenty of room. If we would just sign on the dotted line, we could have left there that day with any four wheeler on the floor, and making the payment would be no problem. But we've undergone a paradigm shift that changed our way of looking at the word afford and our view of financing things. Was it hard to leave that day without a four wheeler when we have waited for so long and been good little savers? Absolutely! But we didn't have the cash for it and have NO desire to go back to making payments!
We are so accustomed to the idea of making payments on everything from a couch to a college education that none of it bothers us anymore. I didn’t use to be super bothered by it either. I was raised to make good decisions and my parents managed the money they had better than most, but no one ever said directly to me - if you are constantly making payments, you will never be able to build any wealth. As a matter of fact, someone else is building his/her wealth with our money thanks to our willingness to finance everything under the sun.
Typical situation - family paying on 2 vehicles per month, house payment, student loan payment, medical bills payment, credit card payment, a toy of some sort (boat, four wheeler/side-by-side/motorcycle, Sea-Doo, etc.), and so on..... payment, payment, payment.
A few years ago, someone started challenging the way I thought about money and the decisions that I made with it. Even though some of it was pretty uncomfortable - sometimes I even got offended - I’m now VERY grateful that I was challenged. So, some questions to mull over…
Do we save like we should or do we just put everything on a payment plan? Are we patient when it comes to making larger purchases or does instant gratification win most of the time? When it comes to our finances, do we only think in terms of the short-term and not the long-term? Why are we so willing to give lots of our money away to lenders in the form of interest payments? How would life change if we all started to think differently about money, saving, and the word afford?
And when you do get serious and scrimp and save up for that item (whether it costs $100 or $10,000) reaching that goal will be the best feeling ever… that feeling that screams
I don’t answer to my money (or lack thereof), my money answers to me!
For real, one of the best feelings EVER!
*Note: Both your income and net worth should play into your decision when purchasing more expensive items, but that's for another post!