When we first graduate, we have little-to-no options since we know nothing. We're a cost center that does what we are told and likes it. We develop skills that provide us more options over time. We look for better opportunities or ask for raises with more skills. Sometimes we get complacent and just stick with a company for way too long like a bad boyfriend or girlfriend.
Eventually we stop being so parsimonious with our money because our financial nut grows to the point where we can afford luxuries otherwise foreign to us in the past. The luxuries I'm willing to pay up for now are convenience, time, and less stress. I used to be OK waiting at the DMV for 3-4 hours to register a used car. No more. I used to be fine waiting 45 minutes for a bus instead of taking a cab. But no more. Waiting in line for hours to get cheaper event tickets was no big thang. Now I am more than happy to pay a premium to get access to nice seats.
I think most of us who really care about our finances have a strong frugal side. Savings is in our DNA. We know that so long as we always spend less than we earn, we'll eventually reach an amazing financial place. But due to the confluence of old age, awareness, and more money, we eventually change our spending habits.
HAVING OPTIONS IS PRICELESS
I come to you a little bruised by the comments left in my post about leasing a car. The general feedback is that I'm foolish for leasing Rhino instead of buying him or buying a used car. Spending money on a car for most of us is bad for our finances because it is an expense. Mass produced cars will never appreciate, unlike homes, which at least have a chance. Therefore, we should try and minimize our car expenses as much as possible.
Conventional wisdom says leasing is the most expensive car-owning option. Based on my research for Rhino, that is indeed the case by $1,091 more over three years than if I paid $20,100 in cash for him. Let's exclude the $1,400 I could earn risk free at 2.2% a year from the $20,100. The real cost is paying $8,700 for the depreciation after three years and NOT buying Rhino for $12,800 at the end. This is where reader Ricky makes a great point, so thank you for highlighting.
I'm about 75% certain I will buy Rhino in three years given I owned Moose for almost 10 years. It's been less than a month and I find myself grinning from ear-to-ear every time I zip around town. It feels wonderful to get 30mph+ a gallon, charge my phone, and listen to Pandora. You never know how good or bad you'll feel until AFTER buying a big ticket item like a home or a car. This is why I tend to be conservative because I hate feeling stupid with my money decisions.
Let's not talk about the fact that I didn't spend $24,000 – $45,000 more for an alternative vehicle and review why I'm not 100% certain of purchasing Rhino in three years.
Why I paid a $1,091 premium to lease:
1) I'm unsure about my family size or needs. If I have triplets, I will need and want a bigger car, for example.
2) I'm unsure about my permanent residence in SF after the third year. There's no way in hell I'm moving within 3 years given I just bought my house and am doing some remodeling. The reality is that I've made a promise to not move for 5 years since moving is such a PITA and selling a home is costly. But, I've always played around with the idea of writing from my place in Lake Tahoe.
3) I'm unsure about work after three years. I took two years off from Corporate America to do my own thing, and it was wonderful. I'm nine months into a great consulting gig that could easily turn into 1-3 years. Hopefully I'll still have plenty of enthusiasm after three years, but one never knows what other opportunities may arise. Maybe Financial Samurai grows massive and takes a lot of time away. Maybe the company I'm consulting for gets acquired two years from now. I want to have the option to fly to Australia and consult for six months if I ever get the call. Being mobile is one of the best reasons for running an internet business.
As I review my three reasons, I've come to realize that these three reasons probably resonate with many of you. Life is always changing. We should hope for the best, but always prepare for bad times.
The value I pegged at the option of not having to go through the hassle of selling Rhino in three years is $2,000, or double the premium I paid to lease. I just don't want to haggle with flakers on Craigslist anymore, or deal with third-party sellers even though selling a Fit with low miles in San Francisco will probably be pretty straightforward.
MONEY IS ABOUT HAVING OPTIONS
Money is about never having to feel restrained from doing something you want to do. We have this inherent desire to not do as we are told ever since we were kids. We go through a lot of this friction during work. When work is over, we relish the time to ourselves. This is why vacations feel a little more awesome when we continuously work hard. Being on permanent vacation starts feeling numb based on my experience of traveling for over 10 weeks a year in 2012 and 2013 while not having to answer to anybody.
The more money you have, the less you want to be tied down. We are all at different stages of our financial journey so it's hard to truly understand how each person views money. I've written about frugality many times in the past, and although I couldn't bring myself to pony up $44,000 to buy the Jeep Grand Cherokee, I did pay up to keep my options open in the future.
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