The answer is none. Well, I’ll back up and say your reasonable house mortgage makes sense, only because a housing cost is something you will be incurring anyways throughout your life, and you might as well be purchasing an appreciating piece of real property along the way. Other than that, I believe you should never have a car debt, and only have one credit card with a maximum $5,000 credit limit.
If you have more debt than this, then let’s face it, you are living beyond your means.
Don’t feel bad about being in this category. You would be among the vast majority in Hawaii who have co-existed with an oversized vehicle debt and credit card load. With Hawaii’s expensive cost of living, it’s easy to ease the tensions of monthly economic shortfalls by reaching for that plastic in your wallet. No one could blame you, because everyone does it.
The problem is that without the discipline of saving to buy a used car with cash, or budgeting to meet your monthly needs without borrowing you are not generating wealth. You need savings in life for a lot of things, including children’s college, your health emergencies, and most of all for your retirement.
Buying a new car on credit is a very wealth-draining event. By the time you pay for all the interest, over about 5 to 7 years, and the car depreciates in full, over about that same period of time, you have left with a worthless asset and a hole in your finances that could have been used to curtail the “just can’t get ahead” complaints that many people quietly mumble for most of their productive lives. Yes, you can say “no” to that glitzy TV commercial that makes that car of your dreams pop off the screen and plop you behind its steering wheel. Buy an old beater and save up the money to purchase a reasonable, but already pre-depreciated, used vehicle. That kind of car won’t cost you a penny in interest, nor go down in value by 1/3 in 3 years.
Most people aren’t aware that the interest cost of a credit card is brutal. That tank of gas on the card which costs you $100 will translate to a $2/ month minimum payment but will last for 19 years. (Yes, that’s the amortization period on an 18% credit card paying the minimum payment.) Simple math: you will pay about $556 for that tank of gas. We all need tanks of gas when we need them, but can you go without that restaurant visit, that extra Christmas spending, that trip to Disneyland, that flashy new pair of Nike?
Most people who are reading this are already searching for an attorney, so there’s no need for me to chastise you over the debt load that’s already under the bridge. My comments are more geared at the obvious, and that is, once I help you get out of debt, let’s keep it that way. We don’t want you to be on the lifer plan at my office.
We can help you read the writing on the wall. It’s OK to lose the battle but win the war. Let’s get your wealth generation back on track. Our office performs bankruptcy, debt settlement, and tax resolution services. Obtaining a fresh start is usually, but not always, your best business decision. Give me a call to explain how you can wake up tomorrow with a renewed enthusiasm about your economic future.
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Blake Goodman received his law degree from George Washington University in Washington, D.C. in 1989 and has been exclusively practicing bankruptcy-related law in Texas, New Mexico, and Hawaii ever since. In the past, Attorney Goodman also worked as a Certified Public Accountant, receiving his license form the State of Maryland in 1988.
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