Usually I see bloggers posting questions from their readers about what they should do in certain situations. No one asks me any questions so I thought I would lay my own dilemma out there for you. My wife and I own two cars both of the are paid in full. I love the fact that I have the title to both of these cars and aside from fuel and maintenance they don’t cost me anything. I know a lot of people who wish they didn’t have a car payment and let me tell you I love the hell out of it.
Recently my wife has decided it is time for her to pick up a new car, the old one is just old to her now. Not only does she want a new car but she wants a 2007 or newer Black Chevy Tahoe. I don’t know if you have ever priced out a Tahoe before but a 2007 with decent miles costs at least $10k more than we paid for either one of the cars we own now. I attempted to explain how ludicrous it is to even consider such a thing as buying a new car, “why the hell do you want a new car the one you have is fine, I won’t have it PERIOD.”
For those of you married men out there, telling your wife she can’t do something is the equivalent of punching them in the face with a brick in your hand, they don’t like it. I still haven’t completed recovered from this little misstep although she did soften her resolve for a few months. We had discussed the option of a car swap, where I take her car and she takes mine. That way the cars are new, to us anyway. To me this was the best solution to the problem and one I embraced wholly. The only things I need to take care of are some new tires and window tint which I have been dragging on but plan to take care of soon.
Thinking that was the end of it I forgot about the dilemma entirely, until recently. I have caught my wife once again perusing the ranks of CarMax in search of the perfect used Tahoe with the occasional “Oh, look at this one Kyle it is only $36k.” Which usually results in me coughing and choking on my beer.
The way I see it is that I am failing to adequately support my desire for not wanting another car payment, these are the facts I think lean most towards us not purchasing, with a loan, a new car:
- Both Cars are in good working condition
- Out of the two of us working I am the only one contributing to a retirement account
- With two children we are saving $0 per month for higher education
- Student loan has not been paid off
- Second mortgage has not been paid off
My wife really wants a new car, and I don’t want her to be unhappy I just don’t think it is the best thing for us financially right now. The fact that this hasn’t been worked out yet is probably 90% my fault for failing to communicate adequately. What would you do in this situation? What should I do?
No bashing my old lady, she is entitled to her wants just like anyone else, help us out an weigh in on the problem.
During my years as a first party collector for a mortgage company we learned a lot about people who don’t pay their bills. One of the most common things we noticed is the people didn’t really understand why they couldn’t pay. They just knew that at the end of every month they had less money than was required to pay whatever bill it was that happened to be due. Most mortgage payments are due around the first part of the month so guess who didn’t get paid? There are so many reasons someone falls behind on their bills from gross neglect to dire medical emergencies. Our jobs as collectors was to take the emotion out and sympathize without allowing ourselves to empathize with them. In theory this allowed us to take an objective look at their situation to determine the proper course of action to resolve not only the delinquency but the situation that caused the delinquency to occur.
There is a big distinction in 1st party collections and 3rd party collections when it comes to the initial mindset of collections. As a 1st party collector you are a direct representative of the mortgage lender and your main goal is to ensure the borrower pays on time every month for the full duration of the loan. You don’t just want to collect, you want to make sure they are able to stay current. Your ultimate goal is to improve the bottom line for the business and that means collecting regular interest payments from the borrower, not pissing them off and having to repossess* their home.
1st Stage of Collections
Collections on an overdue mortgage in my office would begin anywhere between 2-15 days past due. The initial contact attempts are mainly just to check with the borrow to ensure they didn’t “forget” to pay their payment or to see what the problem is and make arrangements to pay the current months payment. A good collector will realize someone who is already 15 days past due this month may not be on time next month and try to make arrangements for future payments as well. Collectors shouldn’t force the issue to much during this stage of “lateness” because the loan is most likely not considered delinquent until they are at least 30 days past due.
True Collections
When a loan reaches 30 days past due the loan is officially delinquent. Depending on the reporting dates for the mortgage company it could be reported on your credit report as late/delinquent immediately or not until the following month. Collectors are in for a tougher go of it because they have to not only collect or make arrangements for the current months payment but they also have to make arrangements for the missed payment as well. The ultimate goal, regardless of the stage of delinquency, is always to bring the account current and ensure the borrower can keep it that way. The goal of a good collector at this stage should be to take full assessment of the situation and determine what caused the delinquency and what the borrower might be able to do to ensure the account is brought current and stays that way.
Collectors can find themselves taking on the role of a very much uncertified debt councilor to people who don’t know they have anywhere else to turn. It is a hard situation to be thrown into but you learn to adapt and hopefully provide help to people who are in disparate need of it.
The Exception
When it hits the last week or the last couple of days of a month take all the good stuff I said about collectors trying to help and throw it out the window. In fact throw it in the garbage, crap on it, and set it on fire. At this point in the month the only goal of the collector, their boss, and probably their bosses boss is to meet the target delinquency goals so they can all get their bonus. What this means for the borrow is instant demands for payment, a total disregard for the customers overall well being and lots of phone calls. It isn’t unheard of for a collector to suggest a borrower take a payday loan or title loan to pay off their delinquent debt to the mortgage company. This is the point where you start to see people lose their cool, the bonuses for meeting goal can be quite substantial giving the collectors a big incentive to disregard what is best for the borrower and look at what is best for them. This is the unfortunate truth and greed of the collections world.
*When I talk about my collections experiences you may see me use the terms repossession and foreclosure interchangeably. To me they were mostly the same term since I worked as a collector for a company that did loans on mobile homes. If a mobile home had no property financed with it it is treated like a vehicle and registered with the Department of Motor Vehicles (DMV). You don’t foreclose on a car you repossess it, the same holds true for non-land deal mobile homes.
A lot has been said across personal finance books and blogs about the danger of debt and how the elimination of debt can speed you on your way to “financial freedom.” While debt is certainly a hurdle which could prevent you from maximizing your earning potential I don’t think it is THE reason you aren’t where you want to be financially.
The mere presence of debt is not the reason you aren’t reaching your financial potential. You have made choices in life which have determined where you are today. Those choices may have been to travel constantly on borrowed money which resulted in a large amount of revolving credit debt. The debt is not the reason but the result. The choices we make everyday affect our financial future. Getting ahead and on track requires a change in the way you think about your spending and how you interact with money.
Just waking up one day and deciding you are going to pay off your debt and start saving isn’t going to get you to financial freedom. It is certainly a step in the right direction, but it is only a step and not a solution. There is a reason you have so much debt, some you can’t control like medical bills others are entirely your doing like cars and credit cards. The key to improving our finances is to identify the underlying reasons for what is keeping us back and then altering our behavior and mentalities.
I have seen many people question the need for budgeting and several bloggers who talk about budgeting who don’t do it themselves. In the progression towards mastering your finances budgeting has a role to play but doesn’t have to be permanent. Budgeting forces you to analyze your spending so you can track your progress in each of your budgeted categories. This is the real benefit of budgeting. By forcing you to analyze your spending you will start to realize what habits are costing you the most. This will allow you to start to change how you think about those categories so you affect a change in the way you spend.
I am a firm believer that you can’t figure out where you are going with out knowing where you have been. Budgeting and tracking your spending let you figure out where you were. Once you have figured out where you were determine where you want to be. If you don’t know where you are going you can’t develop a plan to get there. Setting goals for the future doesn’t necessarily have to mean you are 100% debt free it may be part of the means to get there but isn’t a necessity. Don’t assume that you have to be debt free to achieve your goals. I understand the reasoning behind being debt free and I hope that one day I can say I have the option to be either debt free or not. Don’t let the dream of being debt free keep you from achieving the things in life you want to accomplish. It could be one of your goals, but it doesn’t have to be. Debt doesn’t have to be bad, if you don’t abuse it you can use it.
