Wednesday, September 9, 2015


About 3 years ago I was talking to one of my younger co-workers who'd saved over $14,000 to buy a new vehicle.  I was impressed that someone so young had been dedicated enough to save his money until he'd accumulated such a big amount.  He was only 18, still lived at home, had no bills to pay, so it was easier for him to save.  Still it's quite an impressive accomplishment.  

Anyway, he was telling me about shopping for a good used vehicle which he intended to pay cash for.  Nothing wrong with that, saves a lot on finance charges.  However, at the time, there were several car dealerships running advertisements for new cars in his price range with payments less than $200 per month.  I knew of at least two bond funds paying monthly dividends in which a $14,000 investment would give you a monthly dividend of $200.  So I advised him to invest his money, buy a new vehicle and finance it with payments below $200 and let his investment pay the payments.  At the end of the loan on his car, he would still have a fairly new car and his $14,000, which would continue to generate $200 per month in dividends.  He decided instead to purchase a used 4 wheel drive truck for $12,500.  

If he'd followed my advice, his car would be nearly paid off and he'd still have a great deal of money, even after the market drop.  More importantly, the funds I recommended would still be paying over $200 per month in dividends.  Instead, he's spent a small fortune on gas for the truck, had to make several expensive repairs and the vehicle has dramatically dropped in value.  

So if you're planning on buying a new car or a newer car, why not drive the old car a little longer and make your car payments to yourself for 3 or 4 years.  As you accumulate money, put it to work to help earn more money until you reach around $14,000 or $15,000 and invest in a monthly dividend fund where you'll earn around $200 a month.  Buy an inexpensive new vehicle and let your investment pay for your car.

No comments: