Illustration from Financial Peace, Revisited

April 11, 2007

I highly recommend this book! The first few chapters are purely motivational, but each chapter gets deeper. I just read a chapter on finances in a marriage and a chapter dealing with teaching children financial principles. He doesn’t just deal with numbers; he deals with the heart and gives some real wisdom for building relationships, too. It’s great.

Anyway, here’s an example that I really liked, which compares buying a new car now to buying an older car and saving for a new car (pg. 116-118 in Financial Peace, Revisited):

[Buy a new car now]

Buy a new car for $16,000 and pay it off $300 per month for approximately the next 6 years. Have no money saved for a new car, so buy a new car and start making payments. Continue for the rest of your life.

[Buy a used car now, SAVE for a new car]

Buy a used car now for $5,400, pay $100 per month for seven years, and save the other $200 at 10% in a mutual fund. When you go to purchase your next car, you will have amassed $24,190 in savings. So, buy a new car for $16,000, enjoy seven years of no car payments, leave the other $8,190 in the mutual fund at 10%, and save ONLY the $100 you had been using for car payments (I’m sure you can find something to do with that $200 per month you just freed up). In another seven years, you will have $28,539 in mutual fund savings. Repeat process for the rest of your life.

I just thought this was cool. I am such a freakin’ dork. Bye.

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