A Broken Down Car, and a Test in Financial Stewardship

Many folks know by now that I recently took a full-time position working for the Women's Shelter of South Texas as a Community Educator. The steady paycheck has been a blessing to my family and the job has been a huge leap forward in our ministry to strengthen marriages in our community.

Recently our 2000 Chevy Malibu (aka "Daisy") did not want to start. The engine cranked, but never started. On top of that, we have had issues with taillights, headlights, and a few other key electrical items not working. We feared the worse, and wondered what we would need to do.

We definitely need that second car to work in order to carry on with our crazy schedules. There were a few choices in front of us:

• Write the car off as kaput, and reduce ourselves to a single car. This would require that we pull our kids out of their activities since I would have the truck most of the time for work.
• Get the car fixed at a cost of about $800-$1000 minimum.
• Buy a new car (at least new to us), but we would have to try to get financing.

Although it was  seriously considered, having only one car proved to not be an option. There is just so much that Liv and I have to do that requires two cars not even considering the kids' activities.

That left the options of either fixing or replacing the car.

Emergency Funds Rock! Get One.
I am a big fan of Dave Ramsey, and have been since before I took on real estate in 2006. One frustrating thing to me has been that in the last five years, I have never gotten past Baby Step #1, to create an emergency fund of $1000. It seems that every time we get that fund built up, it gets depleted right away by a legitimate emergency, and I don't mean the I-gotta-have-a-new-tv kind either. Real estate income has been spotty for the past five years for me, which was a major factor in not having enough to rebuild that fund. I would be on the verge of seeking a job to cover expenses, then have a flood of escrowed contracts, pass on the jobs because I'd think I finally made it in real estate, then have the majority of those contracts fall through. I'd end up making just enough to keep my house and the basics still running. Short story, this time around, I finally picked up on the pattern and got a job. I do not regret that decision in any way, and sometime (most of the time) wish I had made the decision sooner. I am blessed that my wife doesn't rub my nose in that one.

What Are We Going to Do About the Car?
Here's the thing. I am leaning towards fixing the car and making do for a little while longer with it. Liv feels that we should go ahead and finance a new one. Not a brand new one, just something "newer" and "reliable". She had seen some auto sales ads showing off monthly payments of $199/month (probably some crazy financing package over five years). Liv made the point that even if we got the car fixed, it would eventually die out again soon and that it would not hold up to the amount of driving that my new job requires. I could only share with her that I physically feel like an anvil is on my chest when the thought of new debt is offered into my life. To me, new debt means new bondage, new slavery to another creditor, especially at a time when we are starting to climb out of our financial mess. I was also concerned that Liv may be thinking again in terms of "monthly payments" and tying up all our available income towards monthly payments, which is the kind of thinking that gets so many Americans into overwhelming debt. We can afford the $199/month, but it would slow us down on our goal to pay off our old debts and save for a future (retirement, move to Little Rock, etc.)

The Budget:
We had two closings with real estate that brought in extra income. Most of that money was used to rebuild the emergency fund, then get ourselves caught up on our bills, and there was some money left over. We planned our cashflow from April through June.

Paying off our past due amounts allowed us to reset our budget & budget calendar (we plan our cashflow on both a spreadsheet for the math and a calendar as a visual aid of the spreadsheet), and that did quite a few things for our finances. One benefit of paying off those overdue bills was that our bills are now lower because we aren't throwing money away on late fees any more. It also changed up when we fund our food and gas categories.

The Outcome:
All this said, we are able to pay for an $800 repair because we earned some extra income through real estate ($425 toward the car), are able to pry another $200 from our current food & gas budget because of our new numbers, and will only have to dip into our emergency fund for $200-$300. Or, we can choose to tough it out for a couple of weeks and leave the emergency fund alone for some other rainy day. Whew! Thank you, God, for all of your provision, and for your wisdom in having me get a full-time job! Not a single credit card will be used by the Dugan family despite this emergency.

So, What About a New Car (The Dave Ramsey Way)?
We will need  a new car in the next year or two. I definitely agree with Olivia on that one. Rather than put my family into new bondage, I plan to follow a Dave Ramsey principle I learned called a "sinking fund" or a "car replacement fund". I can set up a monthly auto-draft into my saving account for whatever amount we would be able to afford in a monthly payment for a car, let's say $199/month. After 12 months, I would have $2388 saved up. In 24 months, I'd have $4776. The latter amount would be enough to buy (in cash) an economy car that was about 7 or 8 years old. It wouldn't be much, but it would be a car without payments. A financed car at the same price for about 3-5 years would hit me for a tune of $8500. That's a terrible price to pay for a car worth about $4700.

Let's say we repeat that process again for about 24 more months, but now we can kick it up to $250/month because we have been paying off our other debts. That would give us $6000 PLUS whatever we sell that economy car for, let's say $1500. We now have $7500 to upgrade to another used car. Two years later, another upgrade if we need it. Never once touching, or even thinking about, financing.

A car is not an asset, it's a tool to get from one place to another, and it depreciates like crazy. I'm not going to finance anything that depreciates any more. My family does not deserve that kind of mistake from me ever again.

Why Am I Sharing So Much?
I'm being very open about our finances right now because I feel led that our story will help you or someone you know. Most marriages end because couples haven't put themselves on the same page when it comes to money. Often, a bad purchase is made on credit as a "compromise", but that kind of compromise will hurt families in the long run. Stick together, and be able to say no when needed to purchases made on credit for the sake of your marriage and your family.