I found that fascinating considering Eddie (oops!) drives a brand new BMW and lives with his family of four in a modest Southern California neighborhood.
Of course, life is all about choices.
Eddie may be upset that he can’t afford to take the wife and kids to Hawaii or Yellowstone, but that’s his opportunity cost of tootling around town in a brand new luxury car — so he gets no sympathy from me.
Needless to say, guys like you-know-who are always looking to stretch their income. Frankly, we all are to some degree. Here are four of the biggest ways:
Buy a used car
There are plenty of luxury car owners who struggle to pay their bills.
Experian found that the average monthly car payment last year was $576. Now, according to this handy paycheck calculator, a family of four living in California with an annual household income of $60,000 receives $4616 per month after withholding state and Federal taxes. So two car payments would consume 25% of the household’s monthly income, leaving roughly $3400 for the rent or mortgage, plus the groceries, utilities and other bills — not to mention discretionary spending, and retirement savings.
Good luck with that.
Nobody understood the financial benefits of used cars better than my dad, who brought home a very modest salary when I was growing up. He saw the folly of driving a new Mercedes to the grocery store each week only to be left with just enough cash in his wallet to buy store-label pork & beans for dinner — which is why he always did his due diligence and only bought affordable, well-maintained, used cars that he kept for many years.
Eat at home
Speaking of pork & beans … Dining out is expensive. My household spends an average of five times more money per meal when dining out compared to eating at home.
Eating breakfast at home, brown bagging your lunches whenever possible, and reducing restaurant trips can free up lots of spare income, folks. And if you want to stretch your food budget even more, don’t toss those leftovers! My family saves $1700 annually by eating them at least once per week.
Refinance your home loan
I’ve refinanced my home loan six times since 1997, dropping my monthly mortgage payment each time. The last time I refinanced I was interested in ensuring I had the lowest payments possible, so I not only refinanced to a lower interest rate, but I also extended the loan term from 15 to 30 years.
What are the results of all that refinance activity?
Well, my initial mortgage payment in 1997 was roughly $1450. Today it’s $480. That’s almost $1000 in additional monthly income.
Downsize to a smaller house
Let’s face it, a lot of people out there end up buying more house than they realistically need or can afford, putting undue strain on the pocketbook. For those times when refinancing isn’t a viable option, you can always consider downsizing to a smaller home.
True, that may seem a bit drastic. But if you’ve already cut your expenses to the bone and you still find it difficult to make ends meet, then drastic times call for drastic measures.
Besides, people downsize all the time. In fact, last night the Honeybee and I were watching an episode of House Hunters where this middle-aged couple was looking to trade their very large old house for a smaller “green” home.
“I like these two. They’re practical!” I said to the Honeybee.
“Really? In what way?” she asked.
“Well, now that their kids are off to college,” I said, “they’re selling their big old house so they can downsize into something more appropriate. It’s a win-win; they exchange their old over-sized home for a brand new smaller house — and they get to pocket the difference too!”
Soon after, I began choking on the cupcake I was eating when the narrator announced that the couple was in the market for a 3500 square-foot McMansion. With solar panels, of course.
“So much for being green,” the Honeybee snickered — although I wasn’t sure if she was laughing at me or the couple on the screen.
“Or practical,” I answered, before regaining my composure and mumbling, “I wonder if they know Eddie.”
And with that, I grabbed myself another cupcake.
Photo Credit: m anima