Reasons To NOT Buy That New Car You’ve Been Eyeballing

Maybe you recently got a bonus at work. Maybe your current vehicle broke down. Maybe you’ve got a savings account that is burning a hole in your pocket. Whatever the reason, you’re thinking about purchasing that fancy new car that you’ve seen slicking around town and is at the dealership with a red for sale sign on it’s windshield. Well, we’re here to tell that no matter how nice of a vehicle it may be, purchasing an expensive, brand new vehicle is not a good financial decision. We know, you want the car. But we want what’s best for your net worth. You should too!

It Is Not An Investment

Investments are assets that should have a decent chance of positive returns. Automobiles, on the other hand, will almost definitely not earn you money. Not only will you lose value on the car itself, you’ll have to spend a small fortune on insurance, gas, and maintenance. There are few transactions throughout the last 100 years where an individual sold a car for more than they paid for it (think classics, collector automobiles).

At Its Basis, A Car Is Merely A Tool

Vehicles are one of many methods of transportation. They are designed, sold, and driven with the purpose of moving people from one place to another. Sure, they’re a bit more intricate than hammers and screw drivers, but they only truly have one purpose. And you shouldn’t overspend if you don’t have to.

You Can Find A Comparable Used Car For Much Cheaper

And you’ll probably be just as happy with it. There are even some theories that people keep used cars for the same period of time that they would’ve kept a new one. You might buy a new car and keep it for five years or you might buy a 2 year old car and keep it till it’s 7 years old. You get the same utility, though- 5 years of use. Think about it, if we assume you buy a vehicle every 5 years, do you want the cheaper or the more expensive version? Well, do you want the new model or the used model? It’s basically the same question.

You May Not Even Need It

As we mentioned above, there are many methods of transportation. Think about your personal situation. Do you need a car or do you want a car? Many of us now live in urban cities where our jobs, food, entertainment, and shopping are all within a walkable range. The market is also shifting towards remote employees, making the need to get around much less demanding than it has been in the past. Even if you do have a commute, city busses, subways, ridesharing, and other public transportation could possibly save you thousands of dollars compared to that new car.

Lastly, And Perhaps More Importantly, You Can Put Your Money To Better Use

There are countless investments that could set your finances us for success that in the long run will bring you more satisfaction than a new vehicle. Put more into your 401(k). Put it towards a down payment for a house. Earn interest though peer to peer lending. Invest it in a crowdsourcing platform. Even moving the money to a low yield, albeit super safe, savings account will probably be better for your net worth than spending your money on a new vehicle.

What Does “Employer 401(k) Match” Even Mean?

First of all, congratulations! If you’ve just started a new job that offers a 401(k)-matching program, you’ve taken a big step on your journey to building wealth and likely a move in the right direction for your career too! You’re probably pretty keen on how your new job helps your career but the 401(k) aspects may seem a bit more hazy – not to worry! We’ll cover what this means and why it is important to your financial future.

A 401(k) is an investment vehicle with meant to help employees save for retirement (and it’s tax-deferred, so the more you contribute, the less you’ll pay in taxes this year – instead you’ll pay taxes when you withdraw the money in retirement). As employers and the economy at large shift away from pension plans, 401(k)s have exponentially grown in popularity. While there may be a few disadvantages (keep in mind, there are disadvantages to everything if you look hard enough), 401(k)s are widely accepted as a win for the individual controlling their own 40retirement fate.

Put simply, you yourself can elect to have your employer automatically deduct a percentage of your pay checks and invest in the 401(k). For instance, you might tell your employer to put 10% of your gross income from each and every one of your paychecks into the 401(k) plan.

Pay Close Attention To Matches Offered

As an investment into their employees’ futures and as a part of their total benefit package, many companies will match a percentage of an individual’s contribution to their 401(k) plan. Here’s an example:
Penny works for 321 Ventures and earns a $50,000 salary each year. She chooses to contribute 10% of her pre-tax income to the 401(k) plan.

Her employer’s rules state that they will match 50% of her contributions with a maximum employer contribution of $4,000 per year. This is the employer’s safety net. Because they don’t want to spend too much, the place a cap on matches. Most employers do this.

In Penny’s example, she will contribute $5,000 of her own money. Her employer will contribute 50% of her contribution, so $2,500. At the end of the year, her 401(k) balance will be $7,500 (pending gains or losses from the investments within her portfolio).

Let’s look at Marshall now, who has the same position as Penny at 321 Ventures and earns the same $50,000 salary. However, Marshall instead contributes 20% of his income to the 401(k) plan. Way to go Marshall!
Marshall’s investment will be $10,000 of his money plus the maximum employer match of $4,000. Marshall saved $14,000 this year to his plan! Because 50% of Marshall’s investment is over the $4,000 employer cap, the employer match will be the $4,000.

Every Employer Sets Its Own Rules

Please note that each employer sets their own thresholds. The example above of 50% with a $5,000 cap is a common set-up, though your employer may have different rules. Consult your company’s HR department or carefully read your employment contract if you are unsure of the employer match being offered for your job.

401(k) employer matches are so great because it is basically free money. It is a benefit that is technically a factor in your total employment package, but nonetheless it is money that you otherwise wouldn’t have. If it is possible for your personal financial situation, the best decision is always to contribute enough to at least get the employer cap. Otherwise, it is money left on the table.

Life Insurance is Essential if You’re Most People

If you’re like the average person across the county, there’s a chance your savings account wouldn’t hold out if unexpected situations occurred – like a death in the family. If you or your partner were to pass away, would your family have to cover the financial burden?

In 2017, 57 percent of Americans had under $1,000 in their savings account. Although that’s an improvement compared to 2016, when about 69 percent had less than $1,000 of savings, more and more Americans – 39 percent to be exact – have nothing in their savings.

So if you were to pass tomorrow, do you have enough of a financial cushion set aside for funeral expenses and continuous costs, so your family could carry on with life?

If your answer is no, you’re among the over half of the country that should look at life insurance options.

But not every person believes life insurance is essential. With the world life expectancy rate roughly at 71 years as of 2015, the risk of premature death is quite low. However, this also means that if you were to die at a young age unexpectedly, your family may still have many years down the road. Especially if your family is young and healthy, it is highly likely they will live for many years to come.

Without life insurance, your family could bear the weight financially if you were to die unexpectedly.

If you have a mortgage, student loans, credit card debt or any other debt to your name, that doesn’t die if you suddenly do. It remains, and someone has to pick up the tab. Help your surviving partner and family members to continue with the life you helped them build by setting up a life insurance plan that covers outstanding expenses.

Your life insurance policy can also be utilized to pay current bills as well. Vehicle payments or other payments that still carry on if you pass—your life insurance can help with that.

Are you a business owner or do you have a business partner? Depending on the policy you choose, life insurance can also be used to protect the business if you or your partner were to die. Death wouldn’t close the doors on your business in this case.

Life insurance isn’t just essential for young business people or families; it’s also important to look at if you’re considering retirement. Do you have family member that is dependent on your retirement income? A couple in which both people have retired is often on a fixed income, so if one was to pass, a life insurance policy can help ensure the spouse won’t bear additional financial stress.

If you are planning for yourself and your family’s future, life insurance should be a part of that plan. Depending on the policy you choose, life insurance allows you to cover multiple needs.

But don’t jump into just any life insurance plan. Research your options to decide which is the best fit for you.

There are two types of insurance policies commonly used today: term insurance or whole (permanent) insurance. Term insurance usually has the cheapest premiums that locks your premium in for a particular term (roughly 10 to 30 years). Whole (permanent) insurance can last for as long as you live depending on funding and tends to be a little more expensive, but it does have its perks.

So talk to a professional about the different life insurance options available to determine which best suits you and your family. You’re never too young or too old to purchase life insurance when it means your family’s financial security.

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