Wednesday, November 21, 2007

Got Vehicle(s)?

Pool Boy graduated from Iowa State University in December 1992. Go Cyclones! His degree is education, so he spent the first semester doing substitute teaching. That was fine because I was still in college and we weren’t married yet. He had no student loan debt, so all he really needed money for was his rent and bills.

We got married in August 1993 and Pool Boy landed a teaching job. We were in awe at the regular income that started coming in. I mean, he was making $14,000 a year, people! We were loaded! We had never had that much money! (I gasp in horror now, looking back...)

With our great fortune we had come upon, we made our first stupid purchase. (Keep in mind I’m still in college so not contributing any money to the situation other than my part-time job.) We bought a brand new bright red 1993 Pontiac Grand Am . It was gorgeous. We paid approximately $18,000 for it I think.

So let’s do the math on that, shall we?

Income = $14,000 (and that’s gross income, folks)
Grand Am = $18,000

I don’t know about you, but that just doesn’t look right to me. Our car was worth more than our annual income? What the heck. How did we even qualify for a loan?

Financial experts say the value of your vehicles should be less than half your annual income – and preferably FAR less than half of your annual income. I can promise you that we are in not the same situation that we were back in 1993, car-wise.

How about your cars? Total up the current value of all of them. Are they less than half your annual income? Or are they dangerously close to half? Or are they over half? If they are close to half or over half, are you willing to “act your wage” and fix the problem? I hope so, especially if you are making more than one car payment.