The Struggling Student Rants—Shop & Save into the Future

How the Pre-Rich Do It (Part II)

The Struggling Student Rants—Shop & Save into the Future

I’ve been trying to drill the importance of sticking to a proper budget into my head.  I’ll stay on track for weeks, and then wham, I’ll see a deal and convince myself this is just too good to ignore.  I’ll even walk away, go home, carry on with my day, and then have nightmares about said missed opportunity.  What I can’t get into my thick skull is that it’s not an opportunity at all.  If I spend X amount of dollars, I am not saving any money, I am spending it.  That’s why I don’t carry credit with me—at all—unless it’s planned and paid for in advance.  That being said, there are good deals out there, you just have to know the item you need so you can formulate a plan on how to save for it.  I’m not talking about clipping coupons to save .75 cents on your yogurt.  When you’re saving and spending smart on large-ticket items, that’s when you truly see how, until now, you’ve been flushing your money down the toilet.

Buy a Quality Used Vehicle Rather than a New One

There’s no question you’ll save money when you buy a used car instead of a new one.  All you need to do to confirm this is compare said models on an Autotrader.ca listing vs. a dealership website.  We’ve all heard by a friend or family member that a car depreciates (by an astronomical amount), the second you drive it off the lot.  But is there any truth to that, or is it just another urban legend?  I have yet to buy a car, drive it off the lot, then turn around, and sell it that same day.  However, there is truth to the large depreciation factor; you just have to do the math for your own, brand new, shiny toy.  Once you sign the papers and finance the vehicle, at the tune of 84 low monthly payments, you may head home with your shiny new baby grinning from ear to ear.  But what you may think are butterflies in your stomach from the new car smell and the leather seats may just be your gut instinct trying to knock some sense into you.  You already know, deep down, that you signed yourself up for two vehicles–only you’re heading home with one.

It turns out that most new cars can and do depreciate up to 50% during their first years of ownership; I’m saying this from work experience.  I spent years as a total loss vehicle adjuster and can’t remember how many times I witnessed the actual cash value settlement only covering half the vehicle loan.  The vehicle owners would only then realize their folly and curse the day they were blinded by the shiny extras they had to upgrade to.  The voice inside their heads, whispering ‘you only live once’ and ‘I work hard, I deserve this’ suddenly turns into ‘Why didn’t someone slap that pen outta my hand before I signed on the dotted line?”  I’m not saying no one deserves a brand-new vehicle, but it’s not a matter of being deserving. It’s a matter of persistence, patience, hard work, and priorities.  You should, technically, have the money in full to pay for this baby, and don’t forget all the maintenance requirements.  If you want a Kardashian, you better be able to maintain one.  Not all cars depreciate at the same rate, so it’s hard to put a concrete number on this.  However, if you’re curious, you can compare the depreciation for vehicles you’re considering through various online tools, such as Edmunds True Cost to Own tool, or VMR Canada.  When I did this last September, I had a mild stroke – we owed more on our vehicle than what it was worth.  So, I got my poo together and paid that sucker off.  If you’ve never lived the no car payment life, you have no idea what you’re missing.  You can take that to the bank!

Now that you’re convinced on buying used, rather than new, you should also be aware of a small detail.  If you plan to finance a used vehicle, most lenders charge a higher interest rate on used cars than they do on new ones.  If you think you’re saving money by financing a used car, think again.  How do you think the dealerships make a profit?  You’re damned if you do, and damned if you don’t.  Your best bet is to save up the cash first and then buy a used vehicle either at a dealership or through a private sale.  Remember, cash is king, and I can guarantee you no one will see it coming, as long as you can keep a poker face.  Walk into that dealership like Marlon Brando and make them an offer they can’t refuse.  Don’t be scared to haggle their sticker price.  It’s your money we’re talking about and you’re in the driver’s seat, literally and figuratively.

Before you make that offer, make sure you casually leave your business card with them or a way to contact you—this is key.  If they do refuse your offer, this is where the poker face comes into play.  Don’t freak out or get disappointed.  More importantly, don’t blindly accept the spiel that this is a clearance floor model and the price advertised is the lowest they can go.  Simply smile politely and walk away.  If you’re feeling ballsy, you can even nonchalantly say, “Frankly, my dear, I don’t give a damn.”  You will get a phone call within two weeks by the salesperson.  It turns out, they value you and your business, so they did find some corners they could cut.  When will you be able to drop by and pick up your new (to you) baby?  You likely just saved yourself hundreds in interest, a minimum of two years’ worth of car payments on your back, and, likely one to two thousand dollars off their rock-bottom price.  Just make sure they throw in a pair of fuzzy dice for that rear-view mirror.

Seasonal Shopping

It’s a bit too late to prepare for Thanksgiving, which is literally hours away.  If you haven’t already, in all honesty, it’s probably best for your wallet at this point — the price of turkeys this weekend will be through the roof.  When you’re preparing for seasonal occasions, the smart thing to do is buy the items you’ll need right after the event, or six months prior.  These occasions and holidays pop up once a year; they shouldn’t take you by surprise.  Christmas rolls around every 25th of December – crazy, huh?  If you know you need a Christmas tree, because the cat destroyed yours last year, the best time to start looking is December 27th, not now.  I hear friends and family talk about how they start buying their Christmas presents in July and I roll my eyes at that moment.  Secretly, I’m just jealous of how prepared they are and how much money they’re saving compared to me frantically running around angrily sorting through all the over-priced leftovers in the shopping aisles and sales racks.

If you’re looking to replace the grill you worked into the ground this summer, you should start shopping now, when prices are rock bottom.  The same goes for lawn mowers, patio furniture, and kayaking equipment.  These, and other pricey outdoor items, go on sale between September through November, when demand is low and stores need to make room for new inventory.  I did do one smart thing this summer, however, I’ll grant me that.  In July, while it was 30°C, I knew that winter was coming.  So, I bought a $300 parka for 90 bucks!  Who’s laughing now?

Patience, grasshopper

When we blow our budget, not only does it harm us financially, but it affects our psyche.  In the Journal of Aging and Health, Drentea and Reynolds note, “debtors report greater symptoms of depression, anxiety, and anger in large part because they are worried about being able to pay off what they owe” (2012, pp.  688-689).  On the other hand, when we have a solid plan and we stick to it, that roadmap can lead us to our goals.  That doesn’t mean you can’t scratch the shopping itch – just don’t do it with a cheese grater.  If a purchase is a need, not a want, and you’ve properly planned for it, there are ways to save your hard-earned cash for the things that matter: you and yours.

References
Drentea, P., & Reynolds, J.  (2012). “Neither a Borrower Nor a Lender Be: The Relative Importance of Debt and SES for Mental Health Among Older Adults.”  Journal Of Aging And Health, 24(4), 688-689.  doi: 10.1177/0898264311431304
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