I’ll never forget the day my dad sat me down when I was 16 years old… I was desperate to buy a car, and equally desperate to spend every last dime I had saved to purchase it. To me, the math was remarkably simple: more money = nicer vehicle = cool cat. According to my dad, the equation had a few more variables. His lesson in depreciating assets and delayed gratification went something like this:
“You have $10,000 saved up. Good for you. You’ve made a choice to buy a vehicle… you can’t afford to buy new, so you’ll have to look at used ones. And even if you can afford to buy a new vehicle one day, don’t. It’s one of the quickest ways to lose money… repeat after me… depreciating asset. It’ll substantially decrease in value the moment you drive it off the lot. Let someone else lose that hard-earned money. So you’re buying used — you now have two more choices. First you have to ask yourself this: What’s it worth to you? You can use all the money you have worked to save, and spend it on a car. In seven years from now, you’ll have two things: a car worth nothing, plus an empty savings account. Or, you can spend $5,000 on a vehicle, and leave the other $5,000 in your savings account. In seven years from now, you’ll have two things: a car worth nothing, plus almost $10,000 in your savings account. What’s it worth to you? If it’s just to get you between point A and point B, then the choice is easy. But if your worth is tied up in the wrong thing, then you’re likely going to make a bad decision. May I suggest you make the smart one.”
Of course interest rates are noticeably different than they were in 1990 when my dad and I had this discussion. Back then, your money had the potential to almost double in seven or eight years, depending on the compounding and type of investment fund. But in theory, the lesson remains the same. Before you buy anything, always ask yourself this: “What’s it worth to you?” I have yet to purchase a brand new vehicle, and can safely say I never will. It’s not worth it to me, simply because our vehicles house three small, slovenly children and are often mistaken for transitory nuisance grounds (both the vehicles and the children). If you opened our van door on any given day, you’d likely have two distinct thoughts: (1) These people have scant regard for personal property and (2) If thoroughly cleaned, we may stumble across the remains of Jimmy Hoffa. And hey, I don’t judge people who do buy new — rather, I’m quite grateful for your constitution. I thoroughly enjoy hopping into your brand new car with you… that smell is intoxicating. I’m not made of wood, am I? After all, smart cats still like to hang out with the cool cats.
Here forthwith, is the best financial advice you’ve ever received. Part One
- Beer at the liquor store is cheaper than buying it at the hotel.
- Take out life insurance at an early age.
- You want something? Save for it. Have good credit but don’t overextend.
- To quote my mother when I got married: “It he wants to share your bed, he can share his bank account,” which is useful when you are the one staying home raising the kids. That, and every woman needs a credit card in her own name.
- Don’t spend more than you make. I’m still learning that one.
- Don’t worry about the money. Do your best at a job you enjoy and the money will follow.
- Stay in the black!
- If you can’t afford something, then don’t buy it!
- Save some money for a rainy day.
- If you can’t pay for it with cash, then ask yourself if you really need it.
More “Life’s Secrets” from the Grainews website: What’s the most embarrassing thing you’ve ever done?
My dad and I went to pick up an older gentleman at harvest time and I said, “Wow. How old is this guy?” My dad said, “He’s pushing 70, why?” I said, “It’s cool that he still wants to come out and combine with us!” and my dad said, “He still has a mortgage so he has to come out and combine for us. Even if he wants to, he doesn’t have a choice. Don’t ever let that happen to you.” This has stayed with me all these years, clear as day.
Janita Van de Velde grew up on a farm near Mariapolis, Man. She holds a bachelor of science degree in agricultural economics from the University of Manitoba, and has worked for a financial institution since graduating. She lives in Regina, Sask., with her husband Roddy and their children Jack, Isla and James. Her first novel, Postcards Never Written, was the recipient of the Saskatchewan Reader’s Choice Award and also listed by CBC as one of the top funny books in 2009. She donates a portion of proceeds from the sale of her book to World Vision to help those less fortunate. For more information, or to order her book, visit her website at www.janita.ca.