In a previous post I wrote about how I manage debt and how I believe that making payments on a car loan is the absolute worst financial move I could make. I also talked a little about how I use a credit card to manage my monthly cash flows and the advantages that I receive from it.
Along these lines, I must convey a story about my brother that just recently happened. This is not fiction and is the honest truth. First off, let me say that my brother is the exact financial opposite of myself. He is out for one thing and one thing only – to spend all, and more, of the money he makes!
On With the story.
My brother recently decided that his 2001 Chevy truck was costing him too much money in fuel and maintenance costs – not to mention the $400/month payments he was making on his loan that he is upside down on (he owes more than the truck is worth). So, he decided that it was in his best interest to sell the truck.
I said “Good Idea”!
He then proceeded to sell the truck and even went a couple of weeks without a vehicle. I thought that maybe he had changed and that he was going to purchase an older, more reliable vehicle that he could afford. He even mentioned to me that he found a grandmother with a 1991 Ford Tempo that had very few miles on it and she would sell it for around $1500.
I said “that would be a great idea”!
At this point I really thought that he had changed and I started to feel proud of myself. I thought that my explanation to him about how he couldn’t get a mortgage for a house that he desperately wanted if he had to make lofty monthly car payments had finally hit home.
The Call Came
I received a phone call from my brother and I could tell that he was very excited on the other end.
Me: “So did you buy the car”?
Him: “Even better, I got a 2005 Chrysler 300 for $3000 less than market price”!
Me: “That’s great, so you can sell it and make about $3000 toward a down payment for a house”.
Him:“Well, I just talked to the loans guy at the Credit Union and he said that since I just started a new job I wouldn’t be able to get a mortgage for a couple of years anyway, so I might as well drive a sweet car”. He didn’t even ask the loans officer how he could improve his credit score in order to qualify for a better rate on his loan. In fact he doesn’t even know what his credit score is!
If you live in the United States and you don’t know what your credit score is, you can find out for free from Experian.
Me: “Sigh…Well if that is more important to you than buying a house (sarcasm here)”.
My soul fell directly to my boots as I realized that my “talk” had not sunk in and he had certainly not changed. He has continued to run on the Car Loan Treadmill and I’m saddened to say that he will likely never get off of it.
I have had several conversations explaining to him the basics of personal finance to no avail. He continuously declares that he wants to save money, have an emergency fund and buy a house, but he refuses to follow even the most basic rule of spending less than you earn.
Moral of the Story
If you spend more than you earn and owe more than you own (negative net worth), you will not be wealthy.