Chance Favors the Prepared Mind.
Monday, June 6, 2011 at 4:05AM As Louis Pasteur said, "Chance favors the prepared mind." How can one prepare for the troubling times ahead? A big factor in being prepared is your debt load. A heard a sermonar many years ago that stuck with me. I call it a sermonar because it was half way between a sermon and a seminar. The speaker, Ron Dart, gave an 
interesting message on debt. He discussed a hypothetical 20 year old who buys a stereo for $2,000 on credit, but never in his life reduced his credit card balance below that $2000. So @ 15% interest that stereo cost the young man $300 a year for the next 40 years. That is $12,000. It is doubtful the stereo lasted that long. Was that a good choice for him?
Ron gave another example about your car. Since you probably need a car to work, at least for most of us, it is an example of productive debt, in the short term. However, if you buy the car you want and not the car you need, you are going down the wrong path. Instead, buy the cheapest new car you can afford and finance over three years, not the five or more years they want you to borrow. Then instead of buying a new car after 3 years you keep the car for 6. This is the trick: Even when you have paid off the car, you continue to make the payment to your car savings account. Then when it is time to buy a new car, you pay cash. You continue to make the payments to yourself. You never need borrow again. 
You see, the longer they extend the repayment, the cheaper the car seems. The whole sales experience is geared toward this fact. They want you to buy the largest car possible, as most people buy based on the payment. They will try to up-sale you at closing. "But the warrantee only costs $20 a month!" the salesman intones. Sounds cheap. But if you are financing for 60 months, that is $1,200! The salesman and the dealership make more money from these add-ons than from the vehicle itself. This is a typical sales technique of Babylon the Great.
Leaving Babylon is difficult. Not participating in the debt schemes of Babylon are a needed step.
Reader Comments (1)
I am in debt to you Dennis for you posting this article. I read the article very fast though, and will save this banked time for another article that you write in the future, at which point, I wont be in debt to you for writing it!
Eddie H. Nessul
(Read Names Backwards!)