Tag Archives: debt

Automobiles, Financial Freedom

Outrageous Loan Terms for Porsche that even the Rich can’t Justify

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Want to finance an exotic car? No sweat. It will only cost you $157,944.33.

That amount is based on a Porsche that costs $144,750 with loan terms of 144 months, with a 3.3% interest rate, and $14,475 down payment.

Yes, you read that right. Financing for 144 months is the equivalent of 12 years! Just ridiculous.

Especially, considering that a car depreciates in value the minute you take it off the lot.

For example, a $100k BMW 6 Series after five years will likely only be worth $40,000 in resale value. Therefore, over that time period you have paid over $70k. You would still owe approximately the same amount as the current resale value and it would be worth even less in a few more years.

What made me look into this was listening to talk on a radio show I heard about being able to finance a $100k Porsche over 8 years. I was like that can’t be real. Oh, but it is. The people on the radio said that people were doing it and taking out these loans. I was like that’s insane. You can buy houses in different countries all over the world or in certain parts of the United States for that.

If you are so set on having an exotic vehicle, then I think the best course of action is paying cash in the form of a cashier’s check. If you have to finance a $100k car, then that sounds like a red flag that you can’t afford it. Instead of spending $100k on a car, why not invest it? Over a period of 12 years with a 7% ROI you could have $272,641 in your 401(k). Even without investing another dime, you could be a millionaire in about 20 years. Is that car worth a million dollars? I don’t think so.

Who are these people that want to finance a $100k car? The only one I have ever seen was on a Canadian television show called Til Debt Do Us Part hosted by finance writer Gail Vaz-Oxlade. In one episode, a married couple had accumulated a significant amount of debt, but what made this episode stand out was the fact that the wife wanted a very fancy car and was thinking of financing over $100k to get it. Mind you, the couple had kids and debt, so where was this money coming from?

Here is a sample of how the show went on to explain to viewers how people are spending and where the money comes from: credit. If you want to order Gail Vaz-Oxlade or other financial books, then look to the side or go to the top of my blog page and click the Amazon banner link.

Who are these companies that are likely to finance these amounts? BMW Financial, Audi Financial, Porsche Financial, and the like. See the screen shot.

And not only do these companies allow you to finance, but expect a down payment on cars with six-figure price tags.

I have had my car for more than a decade. Actually, it has been 15 years. My car has been very reliable. Once I paid it off I decided I did not want another car note.  That was almost 10 years ago. Here is a snapshot below of my last payment. It may become my screensaver.

I have been able to do so much without having that payment hanging over my head. I decided to start paying off my credit card debt, invest more, get Lasik, join a gym, and get another degree. Basically, I invested in myself. I do not regret not purchasing a new car for one second.

Here is my take on it. Why stretch yourself financially, for a car you desire? Ask yourself if you would still be willing to do that, if the most popular car in the world among the money elite was a Honda? Financially savvy folks know that a fancy set of wheels is pricey in more ways than one.

I was told that a rapper was discussing online about owning a Bugatti or some other luxury vehicle that has three radiators. If one goes down, it costs $90k to replace. Gulp! That’s a hard pill or repair bill to swallow.

I heard an NBA player say that he knew people that would buy Bentley’s, but then would stop driving them because they were not meant for everyday driving. The wear and tear was ridiculous.  Owners were shelling out tens of thousands of dollars on maintenance. Don’t believe me. I read an article by Forbes about unreliable luxury cars.  Apparently, I am not the only one who has noticed that every luxury car that glitters isn’t gold, but merely sold to those willing to fork over their hard earned cash.

That means you basically are driving a house on wheels for the amount you paid. Then after all that, still have to worry about thousands of dollars in repairs. And since this isn’t your run of the mill car, you have to go to specific repair shops. Usually, this means repeated trips to the dealership. Who has time for that?

Luxury cars seem not only to come with a high price tag, but also lots of headaches. I say this: if you can afford the monthly payments, maintenance, and can hire a mechanic or chauffeur to repair or take your car in for service at a moment’s notice, then you can get the car. If not, you’re better off sticking to something you can take to Jiffy Lube.

Banking, Interviews

Q&A with Lisa Servon, Author of The Unbanking of America: How the New Middle Class Survives

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Lisa Servon is the author of The Unbanking of America: How the New Middle Class Survives, an engrossing exposé—why Americans are leaving our fractured banking system, and how alternatives are swooping in to get those being left behind. I had a chance to ask her a few questions about her book . . .

Tell us a little bit about how this book happened. When did you get the idea to write it? How did you start writing on issues of poverty?

While teaching gender development and finances, a speaker came in from a payday lending firm. He started a credit union in the south Bronx of New York. He compelled me to try and understand why people are using alternative financial services. This motivated me forward toward the question and was the genesis of the book. I knew I had to get as close to this as possible by going to work for a payday lender. It was the only way to answer the question.

I read that you are a professor at the University of Pennsylvania (UPenn). What made you decide to go from teaching to writing?

In academia, publishing is really important. It is the primary way to judge whatever it is you are doing and that you are doing your job. Mostly writing in the past was for academic journals, but unfortunately, people that have the power to make the change don’t read them. In order to make the broader public more aware of the issues, we have to go mainstream like writing for The New Yorker. The trade press has more publicity and this can help you be more successful.

How were you able to learn to write an exposé? What keeps you motivated? What advice could you give to other authors? How did you get published?

Learn another way of writing such as creative writing. Your trained in the university to write a particular way. At The New School, I took classes in creative writing and did a summer’s writing colony, which keeps me in step.

Write shorter things first, such as 100 words and progress from there. At one point, I was writing stories of 300-750 words and then got five or six offers of great feedback. Key pieces were already written. Shorter pieces helped sell the book. Another academic book is not interesting.

I got an agent by being introduced to one while speaking at a conference. Then wrote a book proposal. A colleague also gave me introductions to people. I met editors and presses, and both people were interested.

In the book, you give us your experience as a teller. How did you start working as a check casher in New York?

A payday lender came to a class to talk. The topic was very controversial.  I had a gut feeling there was more to this than meets the eye. Even though, alternative banking services were receiving harsh statements in the news, this guy seemed pretty happy. The backside of the story is that people called complaining. I discussed what I was doing and why with the owner of the payday lending store and got the job.

In the book, you’re a loan help operator for a hotline. How did this happen? How did you start working for a predatory loan help hotline? How would people find out about laws on payday lending?

It was a way to help me see what happens to people after they got the loan and can’t pay it back. Payday lending has different laws in different states. We would let people know if it was illegal to borrow funds online. If so, we always encouraged them to pay back what they owed in principal. You could also do an online search of what state laws there are for payday lenders.

What are the main takeaways you would want people to have after reading this book?

1) When people decide what to do with their money; don’t judge them.

2) Understanding. As there are a number of people experiencing financial difficulty.

3) People do have choices.

What are you working on right now?

I’m still speaking about the book. Also working on Move Your Money. It lays out the options people have and doing more research on banks.

What are you reading? What’s on your nightstand?

I’m reading Jesmyn Ward and the autobiography of Bruce Springsteen.

Any nuggets of wisdom for aspiring writers?

Write all you can. Practice. Writing is like a muscle. The more you work it, then the more you get better at it.

Where can people find you? Are you on social media? Do you have a website?

You can find me on Twitter @LisaServon, on my website, and contact me via email at UPenn.

To learn more about Lisa and her book visit LisaServon.com. You can also read book reviews of The Unbanking of America: How the New Middle Class Survives and purchase a copy here.

Financial Freedom

Getting out of debt one step at a time

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“There’s no problems, only solutions.” – John Lennon

Kudos!

You have committed to get out of debt once and for all.

It takes guts to recognize that there is a problem.

In psychology, you identify a problem and then come up with a strategy to solve it because, as Lennon so eloquently put it, in life there are no problems, only solutions.

Now, let’s get down to brass tacks.

Every journey begins with a first step.

“An investment in knowledge pays the best interest.” – Benjamin Franklin

I have read hundreds of books on finance and debt. It has been over 10 years, but I still learn new tips and information to this day.

Here are my suggestions of how to start getting out of debt.

Organize. Gather every piece of mail you can find or any documents that pertain to your income. You need to know where every penny is going. Locate bank statements, pay stubs, tax returns, and promissory notes.

Know the terms. You should know the who, what, when, where, and how of your money. Do not think, know. One of the best ways to do this is to pull a copy of your credit report with one the three credit reporting agencies – Experian, Equifax, and TransUnion.

Write it down. List all the people and places you owe. You should include the name, date opened, amount owed, and interest rate.

Set a goal. I have read in numerous books and articles that said if you want to get out of debt, then you have to commit to a debt repayment plan of two to five years. Anything more than that could mean you may have to consider bankruptcy.

Avoid bankruptcy at all costs. Even though it is supposed to be removed from your credit report after 10 years, I have heard tales of lenders still bringing this up in conversation while someone was applying for a loan more than two decades later. This says to me that bankruptcy is a dark cloud that follows you around for the rest of your life.

Read about money. The more you know, then the better decisions you can make. Go to your local library and check out books on finance. You will not regret it. You can start here at my blog. I have yet to hear anybody say I wish I didn’t learn about the stock market.

Start today. Start a cash cushion of just $50. If you start, then you are taking a single step.

Cash on hand. Work your way up to $500. This will get you motivated to continue saving and provide a small cash reserve for minor life hiccups such as a flat tire or insurance deductible.

The point is just to start.

Credit Cards, Financial Freedom

Do you hear that VISA? It’s me, Greenbacks Magnet

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I like my Visa. Always have. But it does not outshine cash.

Let’s face it, Visa is everyone whether you want it to be or not. Visa is accepted at the gas station, grocery store, airports, restaurants, and shopping malls.

Even vending machines take credit cards now. I once read that if you have to put groceries and gas on plastic, then you’re in trouble.

A book I read called Maxed Out, discusses the dangers of heavy dependence on credit.

You want to get on the right side of Mr. Interest, whereas, you earn it instead of pay it.

Here’s how you do it.

Read the fine print. Make sure to read your credit card statement. Know what interest rates you are paying and pay attention to the fees.

Pay off in three years. Credit card statements now show payment information of what happens when you pay only the minimum or what to pay to pay off your account in 3 years. If you stop using your card, you can pay it off in this time and be out of debt.

Plan to repay debt. I have read over 100 finance books and many state the same messages. One in particular is to make a plan to pay off all debt if possible in 3 to 5 years. Excluding the mortgage.

Setting goals. Write down a realistic plan to get rid of credit card debt. You need the amounts owed and interest rates.  The goal has to be measurable such as 3, 4, or 5 years.

Stop digging. You will have to stop using plastic. It’s the only way.

Save for emergencies. Have a rainy day fund to help kick the credit card habit. If you can save 1-month worth of expenses, you can start to kick the habit as you can pay for what you want with cash.

Delayed gratification. Plan your expenses. If you want to go to a concert next year, then start planning well in advance and save the money to pay for it with cash. No credit equals no debt.

Right side of Mr. Interest. Once you pay off the credit card debt, you can focus on investing the money you were paying in finance charges and start earning interest of your own instead of paying it.

Simply put, you can go from paying interest to earning it on the money you invest. This 8-step plan will help you get there.