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Are You Broke? Could This be the Reason Why?
By JLP | January 16, 2007
Liz Pulliam Weston over at MS Money has written an interesting article that I think is worth sharing. She believes (and I do too) that a lot of people who are broke are broke because of their choice of car. I mean, look around. Have you ever noticed how many $30,000 + cars there are? You can’t tell me that ALL of those people can actually afford those cars.
I thought this quote from the article was interesting:
Credit counselor Bill Thompson of Jacksonville, Fla., estimates that one out of every four clients his agency sees has overspent — sometimes dramatically — on a car.
“They may be spending 15% to 20% of their (take-home) pay on just the car payment,” said Thompson, who supervises credit counseling for the nonprofit Family Foundations, “and that doesn’t include insurance, gas, maintenance and all the other costs of owning a vehicle.”
According to the Bureau of Labor Statistics and the Census Bureau, the average American Household spends $8,344 per year on transportation. This figure includes vehicle purchases, finance charges, insurance, fuel, maintenance and repairs, public transportation and other out-of-pocket expenses but not vehicle depreciation. Unfortunately, as high as that number sounds, it is probably right inline with what my wife and I spend each year. Of course, that number will go down in June once our car is paid off. It won’t stay down long because my wife’s car is due to be replaced within a year or so. Hopefully it will be the last car we have to finance.
It’s too bad that Americans don’t value their 401(k) as much as they value their car.
Topics: Budgeting |
