This week’s Friday Financial Foul Up will feature a guest post by Kelly Whalen. Kelly Whalen is a freelance writer, blogger, and mostly stay-at-home mom to 4 kids. She writes about family and finances at www.thecentsiblelife.com and can often be found on twitter (@centsiblelife), or drinking coffee. Kelly’s writing has been featured on Wisebread, Bargaineering, and Get Rich Slowly. She is also a staff writer at Moolanomy. Enjoy her story and her foul up of a vehicle purchase without the future in mind.
In 2003 my husband and I had 2 children, and 1 car. We had previously been a 2 car family, but our 2nd car, a clunker, had died, so we decided to make do with one car while we paid off the loan on our newer vehicle.
After a year of living this way we had increased our income enough to handle a 2nd car payment, and were fed up with sharing a car in an area that was inaccessible to everything. Being the family planner, I did research and shopped around, but then I made a huge mistake that still impacts our family today.
We were looking to buy a 2nd car for our family of 4. We narrowed it down to several vehicles, but I had my heart set on buying a wagon. I set my sights on a VW wagon, I liked the design, I liked the look of the car, and I thought it was just enough room for our family of 4. I also really didn’t want to drive a minivan, I was holding onto my “cool mom” image, I guess. Too cool to drive a minivan.
We purchased our wagon on a whim, when I found it online at a local “no hassle” dealership. We had a small down payment.
A month later I was pregnant with our 3rd child, and the need for a bigger car quickly became a reality.
Where I Fouled Up
By not planning ahead for the possibility of more children, and buying the car without paying off our other vehicle first we ended up having 2 large car payments at the same time.
When our 3rd child was born we had to upgrade to a minivan, and because we waited until after she was born, we did it under duress, and ended up leasing a minivan with terrible terms, and getting such a poor trade-in deal for our sedan that we had to roll money into our lease to pay back the car loan.
Now we drive the same car, but a newer model, which we purchased in 2007, and we’re still paying off.
Approx cost of USED 2002 minivan + interest for 5 years= $27,000
Cost of USED 1999 wagon and interest ($14,000) + 2 year lease on NEW 2004 minivan ($10,000) + cost of NEW 2007 wagon and interest ($27,000) = $51,000
What I Learned
Planning for the possibilities: Planning for a possible 3rd child would have been the smart thing to do. By not planning ahead, and basing a rather large purchase on my wants, rather than my needs or possible future needs of our family, I cost us thousands of dollars.
Delay big purchases: When that wagon (my beloved wagon, “Blue”) broke down this year it was time to say goodbye. We wised up enough to realize that we shouldn’t run out and get another car, since another payment would make our budget beyond tight. Now we are sticking to our goal of paying off our car before we purchase another vehicle.
Perspective on the past can be motivating: If we had purchased a van in 2003, it would be paid for, and we would have significantly higher monthly cash flow and could be saving that money in a car fund. Remembering past mistakes can be frustrating, but let them motivate you to do better in the future.
Plan ahead, but know that plans change: Now I try to plan ahead for everything financially. If we hit a bump in the road it’s easier to handle with some cash in the bank, and less debt over our heads. We have a plan to get out of debt, but it assumes everything stays the same, which it won’t.
Do you like this series? Check Out The Previous Foul Ups:
Foul Up #4 – Stephanie (Poorer Than You) – Signed My Life Away at Age 17
Foul Up #3 – Deliver Away Debt – How I Wasted Over $10K and 11 Months
Foul Up #2 – Brian (MyNextBuck) – Quick Fixes to Weight Loss
Foul Up #1 – Brian (MyNextBuck) – How I Didn’t Earn $3000 in Free Money