How To Recover From A Financial Mistake (Purchasing Car That Is Too Expensive)

This post is part of the “How To Recover From A Financial Mistake” series here at JosephSangl.com. Click HERE to read the entire series of posts.

Financial Mistake: Purchasing Car That Is Too Expensive

Raise your hand if you’ve ever made this mistake. I remember graduating college and running down to the car lot to purchase a new vehicle. My twin brother and I had been sharing two cars: a 1981 Datsun B-210 and a 1986 Pontiac Firebird. They weren’t in very good condition after enduring years of abuse from us.

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I went to the new car lot and purchased a brand new 1997 Chevrolet Cavalier. I even bought one to reflect my allegiance to the mighty Purdue Boilermakers. It was painted black with a metallic fleck in it, and I had a gold pinstripe added to it to reflect the Purdue Black & Gold colors.

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It was a financial mistake. With student loans, credit card debt, engagement and wedding ring debt, and an approaching wedding and honeymoon to help pay for, it turned out only to compound my financial woes.

So, how does one recover from this financial mistake? Consider employing one of the following methods.

  1. “Sell it” Method  Sell the car, absorb the financial loss, and purchase a used car.
  2. “Attack the debt” Method Adjust budget so you can swiftly pay off the car and then drive it for at least four more years after completing pay-off.

“Sell it” Method  This approach requires one to sell the vehicle immediately. For example, suppose a person recently purchased a new car for $25,000 with payments of $564/month for 48 months. They are experiencing great financial distress due to this purchase, but they owe more on the car than it is worth (also known as being “upside down” in a car). They have paid the debt down to $24,000, but the car is only worth $19,000. Here is how they can sell the car – even with this negative equity:

  1. Determine the true value of the vehicle. This is an important step. The owner of the vehicle will invariably over-value their car and potential buyers will naturally under-value it as they seek a good deal. Kelley Blue Book is a terrific resource for understanding the true market value of your vehicle.
  2. Find $7,000 to bridge the “negative equity gap” This could be a combination of a 401(k) loan, tax refund, selling some stuff, or working an extra job. This is a challenging step for many people, but it is definitely achievable!
  3. Find a buyer who will pay the true value of $19,000 for the car  You will be able to put the $19,000 from the purchaser with $5,000 of the $7,000 you’ve gathered in Step #2 so the lender can be paid in full. This provides a clear title to the purchaser and eliminates your car note.
  4. Purchase an “I’m fixing my financial situation” car with the remaining $2,000  Now, it is imminently clear that a $2,000 car is nowhere near as nice as a $25,000 vehicle, but it is amazing on a budget.
  5. Save the monthly payment for the next two years and upgrade. By saving $564 for the next two years, this family will have $13,536 to upgrade their ride – with cash money and zero debt!
  6. Presto! You’ve fixed your financial mistake!

“Attack the debt” Method  This approach requires diligence and changes to the monthly budget in order to pay off the vehicle in a swift manner. For example, suppose a person has purchased a $25,000 car of which they still owe $24,000. Their monthly payment is $564 for 48 months. Here is how they can fix their financial mistake.

  1. Eliminate costs from budget and apply savings to the car payment. Suppose this family decided to reduce their cable television services, eliminate their home phone, cease their gym membership they haven’t been using anyway, and reduce their visits to restaurants. By taking these steps, they are able to apply an extra $300 per month toward their car payment.
  2. Focus. Focus. Focus.  Nothing of significance really happens without great perseverance. By sticking to this for just 29 months, the vehicle will be paid off!
  3. Drive the car for another 4 years and pay the car payment to yourself. Reward yourself for paying your car off by adding the $300 savings back into your budget for other items, but continue paying the $564/month payment to yourself. In just four years, you will have saved $27,072 for your next car!
  4. Presto! You’ve fixed your financial mistake!

If you are interested in learning how to take your finances to an entirely new level, I encourage you to check out the study I have written called I Was Broke. Now I’m Not. The study can be completed as a group or on an individual basis. If you are serious about changing your financial future, check out the study HERE.

How To Recover From A Financial Mistake (SERIES)

Let’s face it. We have all made financial mistakes. Whether you once carelessly spent money on useless trinkets while on vacation or bought a house at the peak market price only to have it drop in value like a rock, financial mistakes hurt. They hurt a lot.

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I remember receiving a brand new Velcro wallet for Christmas one year when I around 10 years old. There was a place for paper money as well as coins. If I were to sum up this wonderful new wallet in one word, I would choose “Amazing.” In this amazing wallet was money I had received from my aunts and uncles and grandparents. A total of $38 in paper money was in the wallet plus some change. After Christmas was over, we took one of my older brothers to the airport so he could fly back home. He was looking to purchase a newspaper. Since I wealthy beyond measure with my $38 cash money, I offered to buy the paper for him.

At the newspaper stand, I took out my wallet and opened it. This yielded the unmistakeable Velcro sound so everyone in the concourse knew I was opening my treasure chest. I chose the coins necessary to buy the paper and then placed the wallet on top of the newspaper stand so I could have both hands free to purchase the paper.

With newspaper purchase complete, I walked away – leaving my wallet on top of the newspaper stand.

You can probably guess what happened next: I soon discovered my error and raced back to find my wallet. I found it, but the money was gone. What a terrible and awful feeling it was!

Financial mistakes have a way of making us feel really low. This leads to any number of negative feelings: despair, depressed, frustration, desperation, anger, embarrassed, humiliated, confused, and ignorant.

In this series, I will be addressing some of the most common financial mistakes people make. We will talk about each mistake, its consequences, and how to recover from it.

The good news is you can recover from a financial mistake. It took several weeks, but I recovered from my lost Velcro wallet. And my huge credit card balance. And my student loans. And my furniture loan. And my engagement/wedding ring loan.

You can do this!

NOTE: If you have a particular type of financial mistake you want to make sure we include in this series, please fill out the CONTACT FORM and tell us about it.

Read the entire series (available after 8/10/2014)

Monday Money Tip: 5 Swings of an Ax – PERSISTENCE

In today’s Monday Money Tip, I share a great parable on the topic of PERSISTENCE. This applies to far more than money so be sure to take 5 minutes to watch it right away. I truly believe this particular tip could change your life TODAY.

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Monday Money Tip: Make Your Debt Pay-Off Journey VISUAL

In today’s Monday Money Tip, I share one of the ways I had FUN while I attacked my debt – coloring! It made our Debt Freedom March much more visual and enabled us to see the progress we were making.

 

 

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Free Budget Template Tools

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The I Was Broke. Now I’m Not. Team takes great joy in being able to provide practical personal finance tools that help people win with their money. Over the past month, we’ve been working on a “How To Budget” series of videos, emails, and tools to help with this vision.

The series contains approximately 10 videos/emails that will be received over the course of a few weeks. If you have been struggling with your budget, I really encourage you to sign up for this helpful series. It even includes a special announcement about our Core Coaching Program – our intensive 12-month personal finance class.

Learn more and register HERE.

Can’t see the link? Copy & paste the following link in your favorite browser: http://iwasbrokenowimnot.com/freebudgetdownload

 

Monday Money Tip: How Compound Interest Works

In this Monday Money Tip, I share how compound interest works – and how it can be your greatest friend or enemy.

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Fantastic Opportunity – Really An Opportunity?

There is a phenomenon that seems to happen during every person’s financial journey. It’s called the “fantastic opportunity.”

Here’s how it usually rolls out:

  1. Make a major financial commitment  You commit to eliminate debt by saying, “It is time to pay off all of my non-house debts.”
  2. Progress is made  You manage to eliminate one or two debts.
  3. Fantastic Opportunity appears  You can purchase an awesome piece of furniture for 75-percent off (it will, of course, need to be financed).
  4. Pivotal Decision Required  Will you pursue the “Fantastic Opportunity” or stick to your major financial commitment?

By the way, this is a cycle. Along the journey to any financial goal, you will be required to navigate this decision process multiple times. Knowing this fact as you make your financial commitment will help prepare you to resist each “Fantastic Opportunity.”

This phenomenon is also known as the “Look! A squirrel!” or “Greener pastures” phenomenon. Resist. Don’t chase it. Stay the course. You’ll make much swifter progress toward a fully funded life.

Monday Money Tip: Importance of Diversified Investments

Think your investments are appropriately diversified? In this Monday Money Tip, I share a common mistake many investors make, and how to address it.

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You Can Do This “Money Thing”!

This post is for the person who needs encouragement in their financial journey right now.

You may have experienced tremendous challenges recently. Perhaps you’ve encountered an unexpected lay-off. Maybe an illness. The car may have broken down and a child fell and broke his arm. Maybe an investment tanked or your small business that once thrived is now on life-support.

Whatever the case, you can do this “money thing”!

In fact, I’ve discovered that financially challenging moments are where I’ve learned new financial skills.

You see, if I had never experienced an empty bank account, I would never have saved money during times of plenty.

If I had never experienced car and credit card debt, I would not have known how important it was to avoid this type of debt in the future.

You can do this!

If I had never experienced a broken down car, I would not know the joy of driving a paid-for brand new one.

If I never had credit card bills beat me home from vacation, I would not know the luxury of paying cash for vacations.

You can do this!

When you are faced with a discouraging financial situation, remain steadfast in employing the financial fundamentals of:

  • Planning your income before you receive it (budgeting)
  • Saving for Known Upcoming Non-Monthly Expenses (so you can avoid budget-crushing expenses)
  • Invest (so you can see compound interest work for you)
  • Give (there is something healing and soothing about giving to others – even when you are struggling financially)

You can do this!

One or Two Decisions Away From Changing Financial Future

After being able to serve more than 1,000,000 people with personal financial teaching and resources, it has become very clear to me that most people are just one or two major decisions away from completely changing their financial future.

Not twenty. Not forty. Just one or two.

And these key decisions are usually far easier to implement than most people think.

Consider the 23 year-old young woman who just obtained her first full-time “career” job earning $40,000 per year. Since she has just exited college, a $20 bill is like a million dollars. So she makes a decision in the human resources office to max out her contribution to the company retirement savings plan which is 13-percent of gross income at her place of employment. The company matches her contribution with an additional 3-percent. Even if she never receives a raise over her 44 year career, she will end up with over $5 million for retirement. Just one decision made the difference.

Or the 55 year-old couple who decided to eliminate their debt, including their home mortgage, by the time they retire at age 66. By doing so, they lower their monthly cost of living from $5,000 per month to $2,500 per month. This will allow their retirement nest egg to last more than twice as long. Just one decision made the difference.

Another person decided to invest in rental homes beginning at age 40 and managed to purchase and pay off 25 of them by age 70. With average rent of $500 per month, her investments are delivering $12,500 per month in gross income plus the homes are worth a combined total of $2 million. Just one decision to embrace the awkwardness of learning the rental investment business changed the trajectory of her retirement.

In my case, my pathway to financial success began with the simple implementation of a monthly budget. It allowed me to be very intentional with each and every dollar I received. As a result, I was able to prioritize giving, saving, and investing. It allowed my family to move into living a fully funded lifeJust one decision made the difference.

QUESTION: What are one or two decisions you need to make to completely change your financial future?

Monday Money Tip: www.AnnualCreditReport.com

This is definitely a step you can take with your finances – checking your FREE credit report. The federal government has required the “Big 3″ credit reporting agencies to provide access to our own credit reports at least once per year. You can do this with www.AnnualCreditReport.com. I encourage you to watch the short Monday Money Tip video where I will share some helpful tips you will want to know when pulling up your credit report.

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3 Crazy Statements People Make About Money

People are crazy. We know that. I’m crazy. You’re crazy. We’re all crazy. When it comes to money, some of our “crazy” becomes amplified. With this post, I thought I would share three crazy statements people make about money.

  1. “I saved $50 today when I purchased these clothes!” saved money by spending money? If a person keeps saving money this way, they will end up in the poor house!
  2. “We wanted to spend more time together as a family, so we invested in a new camper.” Most campers/RVs drop in value even faster than new cars! If a person’s investments always dropped like this, they would almost do better by lighting their campfires with $100 bills.
  3. “It’s impossible for us to get ahead financially.” So how did millions of other people manage to move from total broke to prospering?

What are some other crazy statements you’ve heard people say about money?

The Importance of Diversification – Ecclesiastes 11:2

I have a question for you:

Are your investments appropriately diversified?

Before you answer this question too quickly, let me ask the question in a more extended version:

Are your investments appropriately diversified – both within and outside of the stock market?

This is a very important addition to the question. Let me explain.

When the entire stock market goes up, it tends to drag the stocks of lower performing companies up with it. However, when the entire stock market goes down, it tends to drag down the stock price of companies that continue to perform very well. This is why it is vitally important to diversify your investments – both within and outside of the stock market.

Many people only have investments within their company retirement plan where they are offered various stock market investment options. As a result, their investments are subject to the greater market’s performance.

Ecclesiastes 11:2 provides this great wisdom: Invest in seven ventures, yes, in eight;you do not know what disaster may come upon the land.

This is why I have invested in both market-based investments as well as non-market-based opportunities.

Here are some great non-market-based investments to consider:

  1. Rental Real Estate – Commercial and Residential
  2. Land – They’re not making any more of it – except in a few volcanic islands
  3. Precious Metals – Gold, Silver, Platinum, etc.
  4. Antiques
  5. Talents – Write a book, Record an album, etc.
  6. Business – Start up a small business

I’ve found Ecclesiastes 11:2 to be very helpful in my money journey. As I’ve invested in a variety of assets, some of them have encountered struggles. By having a widely diversified set of investments, my other assets have helped carry the load until a struggling investment improved.

Last Chance For $5 Book Offer (Ends at Midnight)

Today we wrap up our five day celebration of I Was Broke. Now I’m Not.‘s 5th birthday!

SPECIAL NOTE: The special $5 book offer ends tonight at midnight, so be sure to GET YOUR COPY before this one-time offer ends.

As we finish our celebration, I want to share some final “behind the scenes” moments that have happened that have helped shape our organization.

ONE: The day we were invited guests to sit with Dave Ramsey during The Dave Ramsey Show.

My first question for Dave was, “I’ve written a book. Should I self-publish or seek a publisher.”

Dave’s response helped me greatly. He said, “Stay away from vanity press. Do print it and do sell it. It’s worth it man!”

Just five month’s later, we released I Was Broke. Now I’m Not. It is amazing what has happened since!!! Thank you, Dave, for everything you have done for me and my family.

TWO: That time when my story was shared in Money Magazine.

Thank you, Donna Rosato, for including my story. It helped fuel the dream more than you know.

THREE: When a church parodied the “FreeCreditReport.com” commercials with “I Was Broke. Now I’m Not.com”

The 1 min 9 sec YouTube video is still funny for me to watch!

FOUR: The “surprise” that happened 16 days after launching IWBNIN full-time on June 1, 2009 – And the encore 4 years later

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On June 1, 2009, I left my full-time job with some saved money and a dream. Sixteen days later, we discovered a miracle was on the way, and I shared the news with the world. Now, four years later, we’ve even had this little miracle join us.

FIVE: Serving more than 1 million people over the past 5 years.

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Through the live events all over the U.S. and Canada, our books and resources, free financial tools, and this website, we’ve encountered people from all walks of life and financial backgrounds. The stories you’ve sent to us through the years have been nothing short of AMAZING. We’re grateful to serve each and every one of you.

Can’t wait to reveal what’s coming next …  Here’s a hint: It’s a game-changer – coming This Fall!

Celebrating 17 Years of Marriage

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Today, my bride and I are celebrating 17 years of marriage.

Count them.  1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 years.

What an amazing journey it has been:

  1. Having three children – a daughter, then a son, then another beautiful daughter
  2. Four great years at Purdue University. Then Clemson University for graduate school.
  3. Helping start NewSpring Church in Anderson, SC and watching it grow from 15 people to more than 32,000 people per weekend
  4. Renting a house and two apartments, then purchasing four different homes
  5. Working for a couple of huge publicly-traded companies, becoming a pastor at NewSpring, then launching I Was Broke. Now I’m Not. full-time
  6. Purchasing INJOY Stewardship Solutions
  7. Being broke and in debt up to our eyeballs all of the way to living a fully funded life
  8. Navigating tough circumstances together – knowing we have each other’s back all of the way through it
  9. Traveling all over God’s green earth to visit family and make memories

There are so many more great moments, and it is awesome to know we get to start our 18th year at the beach.

I love you, Jennifer Sangl!

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