Is Your Car Payment Keeping You Broke? How to Stop the $700-a-Month Money Drain | 74

Hello, do you ever feel like you're doing all the right things but your budget still feels tight? What if the biggest drain on your money is sitting in your driveway? The average car payment in the United States is now over $700.00 a month and that doesn't even include insurance, gas, maintenance, or the emotional toll of car stress. So today we're going to be talking about cars and if your car is the thing that's keeping you broke. So I know this was something for my family that was very challenging to move past.

And so I'm going to share a little bit about my story, but also some tips for you to help understand if your car is the thing that's keeping you where you are financially.

Welcome to the Debt Ripple podcast where we discuss the insurance and outs of personal finance for families so you can eliminate the burden of debt, create financial margins, and learn a new way to interact with your money. I'm your host, Jules the Budget Nerd, and I have been in your shoes. My husband and I have paid off over $107,000 in consumer debt until we finally threw in the towel and decided it wasn't for us. Throughout our journey, we learned another way to do life without debt, and that's my hope for you.

You can learn more about our story and see full show notes on my website, julesthebudgetnerd.com. That's JEWLZ, the budget nerd.com. Now let's dive into today's episode. All right, before we dive in today, I just want to say an extra special thank you and welcome to our alliance coaching membership, our alliance coaching members who just joined us recently. Because this topic is one that comes up a lot in my my coaching practice. But also I wanted to address it for our podcast community because it is one part for our family that was quite a game changer when we shifted our mindset about car ownership and our our transportation to and from work.

So I'm going to, as we dive into this, I want to talk today about why or if your car is the thing that's keeping you broke. So one thing that we found for ourselves, I grew up, my parents didn't have car payments. My grandparents didn't have car payments. They always paid cash. You know, I wrote a check for a car and even if it was a brand new one, they always, they always paid cash for it was never financed. So then when my husband and I, it was right before we got married, he was actually working at a car dealership.

And so we thought, hey, we're going to be getting a really good deal. He had a car payment at the time, my car that was a car that my parents had purchased for me when I was younger and I was still driving that and we wanted to buy a car together. So my husband was working at the car dealership at the time as before we got married, but he was working there. So we thought, hey, we're going to be getting, you know, the friends and family discount. And we were just about to get married over that. Hey, this will, we can do this, right?

And it was about the same price he was paying for his car payment that he already had. So we decided to go for it and we bought this. It was it was, it was more on the luxury side for a car, you know, leather seats and the, you know, the brand, that kind of stuff. And we got into a spot where the driver's side window broke not long after we purchased it. And when we found out how much it was to replace it or to fix it, we decided we would wait. And then like, you know, headlight went out. And because of the make of the car, there were some things that we weren't able to do ourselves.

And so we had to have a shop do it for us. And so those bills added up very quickly, so to the point where we were trying to make the car payment, pay for the insurance, obviously the gas, you know, taxes, registration, that kind of stuff. And we couldn't pay for all of those things all at the same time because we had overextended ourselves in our budget to the point where we just had to roll the window up and let it go. And so we had a driver's side window that didn't work. I would, well, let's see, it worked for a couple of months after we first got it, But for the the remainder of the time that we owned that one, even when we sold that car, the driver's side window didn't work because we couldn't afford to do that.

We had to make sure that the payment was paid and there was a time when we couldn't do all of those things. And I hear a tow truck come up the driveway and I think that's the day that our car gets repossessed because we just couldn't take all of the expenses all at one time. So when we talked about the difference between we go to maybe a dealership or something like that and we're going to purchase a car, we think about the car payment, but we sometimes can lose sight of what the actual costs are.

Like we know that the cars need to be insured. We know we got to put gas in it. We know all those things. But do we know the actual expenses for that particular car and what it's going to look like for us? And how is that going to change our family's financial situation? So at the time, you know, insurance for newer cars is more expensive. Gas prices were very different back then, but still that's all relative, right? And then we purchased a car that we couldn't do some of the maintenance and the repairs on ourselves.

And then you've got your registration, taxes and fees. And then there is the one thing that we didn't take into account and that we didn't realize that we were in a situation that was causing us some emotional stress. And it was, it was an emotional cost. So there was this stress because, my gosh, we have this, we have this car that we're trying to make payments on, and it looked really great from the outside. We were the only ones that knew that the driver's side window didn't work. Yeah, of course, we didn't go through Dr. Thrus because we couldn't get the window down.

We'd have to open the door. And so that was super embarrassing. So that goes to that whole part of trying to keep up the appearances that we had. It had it together. And so that's one of those hitting costs I think that we don't necessarily take into account when we're purchasing, you know, big, we're making big purchases. So sometimes this can happen with homes, but especially with cars. Our culture really puts a lot of value on the kind of car we have, maybe our address, that kind of stuff. And so those things can really distract and take away from the joy and the things in life that bring us joy and rob us of the mental capacity to focus on other things.

And so today I want to encourage you, whether you maybe you have, you're in the situation where you're like, you know what, the bills for the car are adding up way faster or maybe I'm in a lease or a situation where I don't want to do this anymore. We're going to talk about a little bit more about that in a minute. But one of the things when I'm when I'm talking about the distractions and that kind of stuff, it is an opportunity cost. So if we're going to use the example that the average, the average US family has a car payment of $700.00, what else could we be doing with that $700.00?

So that's right there. That's a huge chunk of an emergency fund. Imagine how much debt you could pay off every single month if you had an extra $700.00. Or maybe what kind of vacation you could take every year with $700.00. When we sign for a car payment, it isn't how much per month it is. It is we do ask ourselves how much per month, but there's a much bigger price tag that goes into that that sometimes we can not take into account. So for US one of the things was the negative equity. So when we purchased that new car or that new to us car, it was it was still a used car.

But when we purchased that then my husband's previous car had negative equity. So we had to roll that into the new loan. So if you add that on top of the purchase price of that car, then maybe the interest was higher, that kind of stuff. It just is a snowball in the opposite direction that we want to go. So when I talk about a debt snowball, we don't want it to be that kind of like it's just building and building and a debt part. We want to be reducing that and eliminating that debt. So one of the things that our culture says is that car is like a sign of success for us.

And so I know that I myself, when I first started out in real estate, I was, I was very aware of what people thought about real estate agents and what kind of car they drove, how successful they were, whether or not they wanted to do business with me. And so I had a Volvo station wagon and I was like, I'm not able to get a new car. So you know what I did, I was very young at the time, I was 22. And so I got glasses and I wore my hair a certain way because I wanted to look older so that people would take me seriously.

And so some of those things and some of those traps that I got myself into was I was more worried about what people thought of me then I needed to be. And I allowed that to be a distraction in my life. So just like when we bought that car, we thought, you know what, this is a sign of success. It's the first thing that were purchased. So, well, the second thing, we bought a house together, but it was the second thing that we were purchasing together that I was like, hey, everyone else is doing this.

And then we got into that situation where we couldn't do, we couldn't make all of the payments and maintain it and all of the things all at once. And so that's when we decided once we got rid of that car that we weren't going to go back to car payments because it's such a huge expense. But like I said, the opportunity cost there, the other things that we could be doing without money are are very different from paying a bank to lend us the money to have a car that isn't going to work anyway, right?

So what do we do instead? So this is where we have to, we kind of, we kind of flip things on its head, right? This is where the countercultural jewels, the budget nerd, the debt rebel comes in. Because I want to challenge the way that you think about your car. Right now, your car is just the mode of transportation that you use to get your kids to school, to their activities. The thing that you do to get your family to maybe, you know, Rd. trips, that kind of stuff. You want it to be safe, obviously, but you, it is the thing.

It's a tool that we use to create the memories with our families. So now the things that I'm about to share, this is not to bring any kind of shame because trust me, I have I have been in your shoes. And if you're thinking, you know what I, what she's saying makes a little bit of sense. It sounds a little bit crazy, but hear me out because I want to challenge you in the most positive way to re evaluate some of the things that we think our needs in our lives for. Maybe this is a short season and maybe I'll explain more here in a second, but one of the things that our family really looked at was do we absolutely need 2 cars?

Now at the time, my husband worked close to work and so and I didn't. We could coordinate our schedules so that I could take him to work and it wasn't going to be that much of an inconvenience. But then also his employer provided a bus pass. We live really close to the, you know, bus system, so that was an option. He could ride his bike. So there was a time where we were down to 1 car because it fit our lifestyle and our financial goals better. There was a time where we, like I said, that car that we had, we got it down to the value that it was actually the market value.

So we owed more than the market value. We finally got down to where we could sell it and just got rid of it and then paid cash for a used car from there. There was another time where as we were actually gifted a truck, which was an amazing opportunity. It was amazing gift and it wasn't, it wasn't a brand new, it wasn't a brand new thing, but it was something that was going to help us get through a season so that when we had the opportunity to gift another vehicle, we were able to do that for another family.

And so those things might might not be an option for you, but it's just we want, I want you to, I want to challenge you to think outside the box and think about really is your, your car situation? Is it serving your family the best right now? So like I said, you can you know another opportunity or another way that you can eliminate some car stress is AC about paying off your current car early. Maybe you are you can shop for a different insurance that one's and will help when you own a car that is so newer cars have higher insurance rates because the cost to replace them is much higher.

So one of the reasons why our family drives cars that aren't brand new, that are, that are new to us, but that I have smaller, smaller value is because the monthly insurance costs a lot less. Usually the recalls have already they've already made their way through and those are over and done with. We know what we're getting. One thing when you're shopping for a vehicle, that's a really great tip is if you find one that you like is just Google or a get on ChatGPT and say, Hey, what you know this year, make and model, what are the biggest issues now?

If you see stuff like, you know, they have huge engine issues or electron electrical issues, that kind of stuff, steer clear, right, because you know that the expenses are going to be higher for repairs on those things. Now all all new cars, whether they use gas or electric, there's going to be maintenance. So you and you want to factor those things into your budget, but all cars are going to need some maintenance. You're going to get a flat tire at some point. Those types of things happen and that's what happened to us recently.

My car that I absolutely love, it meets all of our needs. And that's one of our big jokes about it is because it really does meet all of our needs. But it's getting older. And I went to turn the air conditioning on the other day and all of a sudden, like the this light pops on. And so I pull over, get it towed to the shop and the and needs a new and need a new battery, which we hadn't replaced the battery since we got it and we've had it for a while. And also the alternator went out. And so those those types of things, we have money set aside for that.

So that didn't become a stressful situation. I was with my daughter. That part wasn't what, but I got to a safe spot and I could just like if I was driving a brand new car and had an issue with it, the exact same thing is going to happen. However, this wasn't as stressful because we have money set aside for these types of things because life happens, but also and we didn't have the added stress of trying to make a car payment and do all of these things while making the repairs as well. That's where the next the next thing is, is to have that sinking fund that you have is just money set aside.

Maybe it's in a separate checking account or savings account for your repairs for your car so that you don't have to swipe your credit card when those things come. And so today I want, I want you to hear me say that our cars, just like our credit scores do not define us. But today I want to encourage you to think about maybe driving an older car that's paid for is going to give you a better quality of life than the stress of that $700.00 every month bill. Because the the time and the energy and the money that goes into maintaining a car.

All cars, like I said, need maintenance, but all of the efforts that go into that kind of thing could be redirected somewhere else if you didn't have to worry about that $700.00 every single month. And so if you are thinking, hey, you know what, maybe maybe my car is the reason why I can't make the kind of financial progress I want to make for myself and for my family. And maybe it's not your car. Maybe it's some other little expenses that are just really keeping you from that financial freedom that that you deserve.

This is my special invitation to you to join the Alliance Coaching membership. And this is where we do that kind of evaluation together. We create a plan and help you to take action in real life. So we get together a few times a month online and we work on our budgets together, provide AQ and a session where it's your ask me anything opportunity. And there's also step by step plan to eliminate your debt 10 times faster because when you have support and accountability, you're going to cross that finish line much faster than if you did it on your own.

I would love it if you would join me inside the Alliance coaching membership. You can join us at Jewels the Budget nerd.com, that's JEWLZ, the Budget nerd.com/membership and get your next paycheck working for you and not for your car. So I hope that today's episode was a challenging one, but a good one for you. I would love to hear what you think. You can send me a message on Instagram and you can also catch me inside the Alliance Coaching membership. All right, talk soon. Thank you for listening to the Debt Rebel podcast.

Now, if you want to take your next step, check out my website, jewelsthebudgetnerd.com. That's JEWLZ, the budget nerd.com. I've created a bunch of resources just for you. So hop on over, check it out and we can connect more there. If you love today's episode, I would be honored if you would hit that subscribe button and leave me a review. And remember, every step towards financial independence is a rebellion against debt. So stay strong, keep pushing forward, and fight the good fight until next time.

Debt rebels stay resilient.

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