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Woodpeckers
By admin | July 17, 2008
Why does a woodpecker smash his head against a tree? I assume its probably to find food or maybe some other logical explanation, but does anyone find this funny that it HAS to do that to find its food while other birds do not. If this is the case (to find food), why wouldn’t the woodpeckers explore other options rather than just see from all other woodpeckers that is the way it is done? I wonder if it hurts.
It makes me think of the way many people handle money. We see many people doing things a certain way and we think, “that is the way it is done.”
For example, have any of you ever thought or said the statement, “I’ll always have a car payment.” Or maybe have you ever heard someone rationalize an expensive car or a lease (which mathematically are not good ideas) with the excuse, “I’ll always have a car payment, I might as well drive something nice.”
I promise you that is not the only way to have a car. It is possible to never make car payments.
Sounds silly right? It is a concept called delaying pleasure (driving around an inexpensive but reliable car while continuing to make car payments to yourself) I will show you what it does.
Car 1:
Normally we buy a nice car for:
$18,000; with a loan for 7 years at 10% interest; payments of $300; value after 7 years, $800
Car 2:
Or we could buy instead a:
$6,000 car; with a loan for 7 years at 10% interest; payments of $100; value after 7 years, $400.
The other $200 per month is saved at 10% (mutual fund) for 7 years = $24,190
Now who made the right choice:
At Year Seven
Both cars are fully depreciated, but in the 2nd plan:
Savings $24,190
Buy a one year old car and pay CASH ($16,000)
Amount left in savings: $ 8,190
No Car Payments!
Now what if you continued to make payments to YOURSELF for the next seven years while you drive this car you just purchased.
Another Seven Years
Saving $300 per month from year 7 to year 14
plus interest on $8,190 (10% return) the car is fully depreciated again.
Savings $52,245
Buy another one year old car for cash ($25,000)
Left in savings $27,245
No Car Payments!
Here is the exciting part:
After 14 years you are in a position where you are set up to never have to make another car payment just because of a decision you made 14 years ago. Literally, the interest will build on top of what you have invested with the power of compound interest and that increase will be at a greater rate than what you need to take out every 7 years for a car. Basically:
YOU WILL NEVER HAVE A CAR PAYMENT AGAIN!
Is that not amazing!!!
I don’t think people should make car payments after 14 years. Make a decision that in 14 years from TODAY you will never make a car payment again. It will take a little work and a little delayed pleasure but it is so worth it.
It is a shift of thinking from, “I will always have a car payment” to “I never want a car payment.”
Banging your head against a tree is not the only way to do things. Just because almost all woodpeckers do it does not mean it the best way to do things.
Disclaimer: I do not know ANYTHING about woodpeckers so if you e-mail me and let me know why woodpeckers do this and it debunks my whole analogy that is okay. Hopefully you understood the concept of what I was going for.
By the way, I do not normally advertise this service on here but today’s post got me fired up that I want EVERYONE who reads this to be in a position 14 years from now to never have a car payment. If you want an individual consultation on how to get there, e-mail me at chriskakarasblog@gmail.com.
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