Tag Archives: Car Lease

7 Deadly Financial Sins

As a high school student, I was a bit of a nerd (I still am today!). Though I was well-rounded – a decent athlete and very active in music and student government – I rarely went anywhere without a book in hand. I read a wide variety of authors, including Rand, Twain, Chaucer, Dante, and Steinbeck, among dozens of others.

In hindsight, I enjoyed reading so much because of the fascinating characters and moral dilemmas contained in each book. After learning about the Seven Deadly Sins – hubristic pride, greed, lust, malicious envy, gluttony, wrath, and sloth –  in ninth grade honors English, I began to take greater notice of character development and general character flaws. I also began to notice how these flaws manifested themselves in my friends and even my own life.

Money Sins

As a financially-conscious adult, I now see that these sins are ever present in the day-to-day financial decisions of the average person. Rather than attempt to isolate direct correlations between the aforementioned Seven Deadly Sins and common financial mistakes, I wish to present seven of the top financial sins which have been on my mind in recent weeks.

Payday loans. I grew up in an area of the Midwest which painted an accurate picture of the lives of the “haves” and “have nots.” My family fell somewhere in the middle as an average middle class family. However, the occasional trip through the seedy parts of town provided shocking glimpses of life on the other side: low income housing, gang violence, pawn shops, and payday loan centers.

I am optimistic that predatory payday loans may soon be a thing of the past, given Google’s crackdown on payday loan advertisements. Finally, awareness is growing about this criminal cycle of debt and the outrageous interest rates charged by payday lenders. You can read more about this problem here.

Spending more than you earn on a long-term basis. This needs little explanation, as the math is quite simple. Unless you are poised to receive a large inheritance or other similar windfall, a negative savings rate is a sure-fire to place yourself in financial peril.

Borrowing money from a retirement account. Unless you are facing bankruptcy or foreclosure, borrowing money from your 401k or other retirement accounts can be disastrous. In doing so, you are failing to make financial progress, continuing to overspend, and weakening one of the greatest partnerships of all: time and compound interest.

Failure to have a will in place. I dislike being the bearer of bad news, so I will make this very brief: There is a 100% chance that you will die, and getting a will in place won’t change these odds in any way. Given this undeniable fact, it is borderline inexcusable for anyone with typical assets and liabilities not to have a will.

Buying or leasing brand-new vehicles. Unless you are a millionaire or otherwise financially-independent (FI), purchasing a brand-new vehicle represents a significant and immediate loss the moment you drive off the lot. Most new vehicle purchases are motivated by pride or jealousy. There is nothing wrong with purchasing a nice, well-maintained used vehicle.

Related: The Car Lease: A Formidable Villain

Whole life insurance. In my opinion, whole life insurance is a scam. On the surface, a slick salesperson can make it sound like a great deal by dropping words and phrases like “cash value” and “guaranteed to remain in force.” However, term life insurance is a much greater value. For most healthy adults, a sizeable 20 year term policy is available for little more than the cost of a meal at Applebee’s. The best part: low monthly premiums will allow you to invest the money you save and become self-insured by the time your term ends.

Lack of a financial plan. In many ways, I am an open book when it comes to discussing my finances. Mrs. Superhero and I are believers in stealth wealth, which means you won’t find us disclosing our incomes our value of assets any time soon. However, I am always willing to discuss our financial game plan with others. By being transparent in this way, we have learned a lot from other people, made changes to our plan after careful consideration, and hopefully helped a handful of people be more intentional with their finances.

At the same time, I am continually amazed by the number of people I speak with who do not have a defined financial plan. To make matters worse, these people are typically unaware that this is a problem. With automated tools like Mint and Personal Capital, among countless others, there is no excuse for the failure to have a financial plan in place.


Readers, what other financial sins should be added to this list? Which one do you think is the worst?

Whining Is Easier Than Winning

Two weeks ago, I channeled my inner Cesar Millan and began training our newest four-legged friend, Coda, who joined our family on Easter. I stood at the top of the staircase and looked down at my puppy. He stared back at me. And then it started: the shrill, deafening barking.

Some readers may find my training methods a bit cruel, but I refused to walk down the staircase to carry the little pup up the stairs. Yes, I felt bad, but after a few minutes of prolonged whining, Coda’s persistent protest gradually shifted toward perseverance.

One step. Two steps. A struggle to conquer the remaining steps.

Success!

Without becoming overly philosophical with this illustration, I believe Coda succeeded for a reason. It was not because of my tough love. He made it to the top of the stairs because he had not yet been conditioned to give up.

In this moment, it occurred to me:

Whining might get you pity, but it won’t net you any PROGRESS.

Unfortunately, the average person yields to his own inner whining and gives up far too easily. We are conditioned by our culture to seek and accept the path of least resistance. Furthermore, we whine and complain that life is so difficult and trying even in the absence of real difficulty, discomfort, or strife.

I am guilty of it from time to time, and chances are, you are, too.

The Problem

Despite my best intentions to avoid association with chronic whiners and complainers, society has conditioned us all to complain as an odd sort of coping mechanism. We are encouraged to talk about our problems, yet rarely are we encouraged to act upon potential solutions.

So instead of helping each other to grow and overcome difficulty, we lend a listening ear, nod in agreement, and encourage the status quo.

Typical Whining

Over the years, I have heard it all. Nothing surprises me anymore. The following are some of my favorites:

The little guy never gets ahead.

I often wonder who started this myth and why it continues to linger in the collective consciousness of the people. It is ironic that this statement is believed by so many, while countless underdog stories prove otherwise.

For example, consider the life of businessman Tom Gores. Born in Israel, Gores moved to the United States prior to turning five years old. He grew up playing playing football, basketball and baseball at Genesee High School in Genesee, Michigan. He stocked shelves at his father’s grocery story in nearby Flint, graduated high school in 1982, and attend Michigan State University, where he earned a Bachelor of Science degree in Construction Management.

Tom Gores
Photo credit to Carlos Osorio/AP/Detroit Free Press

Gores did not experience a privileged upbringing by any stretch of the imagination.

Today, Gores’ net worth is $3.3 billion. The founder of Platinum Equity and majority owner of the NBA’s Detroit Pistons, Gores is a self-made man. His high school coaches credit his business successes to his competitiveness, perseverance, and decision-making. None of them expected the quiet-but-talented athlete from a town of 24,000 people to follow the path Gores has blazed, but the little guy did it.

I’ll always have debt of some kind. It is a necessary tool for most people.

My head nearly explodes every time I hear this or a similar variation. When I achieve financial independence, I may take out a month-long ad in several major newspapers to remind the public that debt is not mandatory. These ads will also include a reminder that debt is not an exclusive club designed for lifelong participation, though Visa, American Express, and MasterCard would like you to believe otherwise.

I will not sport a holier-than-thou position and claim that debt has not helped me. Debt has allowed me to earn two college degrees and buy a house. However, these experiences would have been far sweeter had debt not been part of the equation.

When Mrs. Superhero and I finish paying off my student loans in the next few months, there is no turning back into debt (barring absolute catastrophe). Income is the only we will use to support our family and lifestyle.

I’ll always have a car payment/car lease because I can’t afford a nice car without one.

This statement also sends me into orbit every time. The truth is that moving up in vehicle is a process which need not involve debt nor take long if you are willing to be patient for a short time. Mathematically-speaking, a car payment or car lease are usually the worst methods toward owning a vehicle.

Let’s suppose you currently own a $2,000 beater car. While it is likely to depreciate over the next 12-24 months, I am willing to bet the vehicle could be sold for $2,000 in 18 months with careful marketing. Let’s also suppose that you saved $250 per month for 18 months prior to selling the beater. Through this flipping method, you could afford a $6500 vehicle. Continue the plan for another 18 months and an $11,000 vehicle is in reach. One additional cycle could allow you to purchase a vehicle valued at $15,500.  In four and a half years, you’ve moved up in car from a 1993 Honda Civic to a 2013 Hyundai Elantra. And you did it without a single payment! Of course, saving more than $250 per month could significantly change the conversation.

I deserve to be paid more than my current salary.

I find this phrase (and similar offshoots) is most often uttered by millennials. Please allow me to apologize for the collective whining of my generation.

Most millennials really need a lifestyle and attitude adjustment, not a salary adjustment. While the millennial median income is admittedly low across the United States, that hasn’t stopped millenials from living far beyond their means.

Facebook envy is largely to blame. Pictures of new cars and new houses lead the average millennial, especially men, into foolish spending in order to maintain appearances.

I am not saying that millennials should not increase their earnings. However, I am saying that whining is not the way to achieve that increase.

Recommended Action Plan

If you want to be successful, not just with your finances, you must start by addressing your attitude. Stop whining and take action to get ahead. Envision what you want your circumstances to look like and figure out how you will make that vision a reality. This will require V-SMART Goals, a plan to achieve the goals, and accountability. Ask a friend to call you out every time you complain about any financial struggles in your life. Put your wasted time to good use and correct the circumstances you hate.

A friend recently commented to me and Mrs. Superhero, “You two are busier than any other couple I know.” I had to hide my excitement that she had noticed! Ironically, she probably doesn’t even know how right she is; collectively, Mrs. Superhero and I typically work over 120 hours per week.

If people are noticing your hard work, you are on the precipice of greatness! Mrs. Superhero and I have done some basic math. There are 24 hours in one day and 168 hours in one week. This gives you plenty of opportunity to change your circumstances. Time is the great equalizer.  It is an asset everyone possesses equally.

Suppose the average person logs a 40 hour work week and sleeps 40 hours per week. This is less than half of the available hours in a week!

If you have significant financial problems, you have approximately 88 hours each week, when you are not working or sleeping, to roll up your sleeves and pursue progress! Pick up overtime, extra shifts, work a little harder to earn extra commission, start your own business, work as an independent contractor, start a new side hustle, or launch your own blog. Even if you worked one additional hour Monday-Friday and five hours on Saturday or Sunday, your progress would be significantly boosted.

Time is the great equalizer.  It is an asset everyone possesses equally.

My dad is a great example a Finance Superhero in this regard. He typically works 55+ hours per week. Similarly, Superhero Grandpa often worked 16+ hours per day in his younger years and even worked 8+ hour days on his side hustle in retirement.

Grandpa was too busy making (and counting) money to whine or complain.

As an added bonus, if you work additional hours for a short time period, you will not have time to spend money foolishly or put yourself into further debt. This is a worthwhile, temporary sacrifice. Yet people today are averse to hard work because we are conditioned, as I wrote earlier, to seek the path of least resistance.

This is why Americans are in love with debt. Our society must learn to see hard work, in a sense, as a punishment for putting yourself into a situation to have to pay off debt. Yes, you should be a little masochistic for a while. It will be good for your progress. Too much comfort breeds contentment, and contentment is the enemy of progress. Every time you feel tired or just want to quit, you should relish the feeling and know that you are on the verge of winning.

You won’t have to work hard forever. Do it for a short time and earn the right to relax in early retirement. As talk show host Dave Ramsey often says, “Live like no one else so later you can live like no one else.”


Readers, what do you do to guard against whining and complaining? How do you respond when others do it? What is the most common complaint you hear when others whine about their finances?

The Staycation: A Cure For Burnout

One month ago, Mrs. Superhero and I were about to embark on a vacation to Nashville, Tennessee. We had our hotel room booked, dinner reservations were made, and our itinerary was packed, with plans to visit the Parthenon, the Grand Ole Opry, and check out the local music scene. When we received word that one of our preferred dog breeders had puppies available, we scrapped the vacation plans in order to stay home with the newest addition to our family.

Our Easter surprise
Our Easter surprise

Give us some credit! At least we tried to take a vacation.

According to Kelly Phillips Erb at Forbes, most Americans utilize only half of their allocated annual vacation time, while seventeen percent (!) use no vacation time at all. This shouldn’t be too surprising. Erb cites a 2013 American Express press release figure stating that the average American vacation costs $1,145 per person, or an astounding $4,580 for a family of four. What was once a summer tradition for nearly all families in previous generations has become an impossibility for many families today.

While our planned vacation would not have cost anywhere near these figures, it would have represented a significant cost. At the top of the list of projected costs, of course, were hotel fees, fuel, and meals.

And while we would have been fortunate to avoid the high costs of flight tickets, Disney World passes, and the uncertainty and stress of international travel, our vacation would have been a busy one. Truth be told, I was exhausted prior to the vacation and was already looking forward to my vacation from the vacation.

Why Americans Overspend on Vacation

Based upon the aforementioned average vacation costs, there is little doubt that the average family is spending obscene percentages -around 10 percent- of their annual income on vacations.  While the reasons for this are varied and plentiful, the opportunity cost is devastating. And the average family does not even realize it.

Imagine spending $2,000 per year on vacation and saving the remaining $2,580 each year for 10 years. I think I could live with that scenario. Factor in compound interest, if you were to invest that money each year. I hope I have your attention.

Excuses, Excuses, Excuses . . .

Over the years, I have most often heard the following rationales excuses for overspending on extravagant vacations:

But my kids deserve a vacation!

I will not debate the fact that your kids likely want to go on a vacation. Whether they deserve one is not my place to determine. However, I can determine this with certainty: Your kids want quality experiences and your undivided attention, neither of which cost $4,580.

My greatest memories of childhood vacations involved inexpensive vacations. My family always had fun staying in average hotels, eating in local diners and mom-and-pop restaurants, and partaking in reasonably-priced attractions.

Years later, your kids won’t remember the vacation more fondly because of the money you spent. They’ll remember the time you spent together!

Everyone else has been to ________.

The Keeping Up With The Joneses mentality is nearly as powerful as the kids-related guilt trip, by my observations. The problem? Keeping up with the Joneses is one of the most anti-Superhero moves you can make. The Jones financed their $4,580 vacation on their American Express card at 25.99% interest. It is OK, they insist, because the monthly payment is “manageable.” The Joneses probably lease a vehicle or two, as well. Don’t even think about following the Joneses. They’re likely broke.

The Solution

When planning a vacation, Mrs. Superhero and I have very different ideals. She would be happy to be parked on the beach for 16 hours per day, while to me, this sounds a lot like a scene from Dante’s Inferno. I am good for a couple hours at the beach, but afterwards, I suffer from insatiable wanderlust. I long to see and do everything a locale has to offer. Yes, the Superhero Principle of Maximization has even followed me into the realms of vacationing. I am sure Mrs. Superhero and I are not the only couple to experience this kind of disagreement.

Despite our differences, Mrs. Superhero and I always have fun on vacation. We both understand that everyone needs to recharge from time to time. Most employers today provide vacation time in order to ensure that their employees avoid burnout and remain productive in their roles. However, the type of vacation we have been reviewing thus far rarely offers the opportunity to recharge.

Ever feel like you need a vacation from your vacation when you return home? Bingo.

The Staycation

Based upon my most recent experience, I believe the staycation is the answer to all of our problems. Compared to a vacation, a staycation allows for several built-in savings:

  • No hotel fees ($100-300 per night, on average)
  • No rental car ($50 per day, on average)
  • No obligation to eat 2-3 restaurant meals per day ($10 per person per meal, on average)

With the realized savings (likely exceeding $1,000) associated with a staycation, you are presented with several opportunities:

  • Go out for one nice meal at a restaurant you would not normally visit
  • Complete a necessary home improvement project (Boost your home’s value by choosing an improvement with a high return on investment and increase your equity at the same time)
  • Get started on a side hustle
  • Visit friends and family
  • Actually rest!

My Staycation

The time away from work turned out to be the perfect cure for the burnout I had been experiencing. During our staycation, Mrs. Superhero and I reaped the benefits of several of the suggestions listed above. In addition to bringing home our new puppy, Coda, we were able to spend time with our newborn niece, experience quality time with my in-laws, host friends for dinner, and complete many items on our spring cleaning list. I took a nap every afternoon, read several quality books, and took Mrs. Superhero to a couple restaurants we had been waiting to visit.

Coda, our adorable teddy bear
Coda, our teddy bear

Perhaps most importantly, I launched FinanceSuperhero after several months of contemplation and poking and prodding from Mrs. Superhero. I had an incredible amount of fun and began work on a project that will hopefully help thousands (eventually) of people Restore Order to their World of Finance.

Further Benefits of the Staycation

Obviously, the opportunity for savings associated with a staycation are sizeable. Depending upon your circumstances, you might invest your realized savings, build your emergency fund, or use them to reduce or eliminate debt. You can be responsible while having fun!

Staycation Pitfalls and How to Avoid Them

When planning a staycation, follow the Know Thyself Superhero Principle. You have inherent weaknesses which threaten to derail your staycation, and it is up to you to know yourself well enough to neutralize the threats posed by your weaknesses.

If you have a tendency to work too much, even when you are on vacation, take concrete action to prevent this. Unplug your devices, set an auto response to your e-mail, and let clients and associates know in advance that you will be unavailable for the duration of your staycation. Provide an alternate contact who can handle matters and contact you in case of emergency or crisis.

If you have are in the habit of wasting time off completely by mindlessly watching TV or sleeping in until noon, you need to anticipate these problems and build in structure to your staycation. While you need to rest, this should be planned to some extent. Develop a loose, non-restrictive itinerary with your spouse/family so everyone is in the same page. Base the itinerary on designated priorities for your staycation.

If you are likely to spend too much money, be certain that you create a line item for your staycation in your monthly budget. Most Superheros will create a separate budget. Yes, make a separate budget for your staycation, even if you do not plan to spend sizeable sums of money. Without hotel and travel costs, you should be able to afford a few luxuries, such as massages, nice dinners, or shopping trips; your budget will help you understand what opportunities are within your reach.

Plan Your Next Staycation

If the concept of a traditional vacation stresses you out, straps your cash, and leaves you feeling like you need a vacation from your vacation, a staycation may be right for you. A staycation allows for time to rest, revisit and reevaluate your goals, focus on helping others, and declutter your financial life, among the aforementioned possibilities. What are you waiting for?


Have you planned a recent staycation? How did you maximize the realized savings? What are your favorite staycation activities? Share your tips in the comments section.

The Car Lease – A Formidable Villain

Yesterday, while driving around town to complete errands in my fuel-efficient, three-year-old Hyundai Sonata, I found myself waiting at a lengthy stop light. Naturally, the wait annoyed me to some degree, as I was the only car in sight. However, Moonlight (my wife’s affectionate name for our Hyundai) and I weren’t alone for long, as we were soon joined by a sleek, shiny 2016 Audi A8 Sedan.

2016 Audi A8, courtesy of www.audiofdesmoines.com
2016 Audi A8, photo credit to www.audiofdesmoines.com

While I am admittedly a car lover, I must admit that my interest was divided equally between the A8 and its driver. Why? The driver could not have been a day older than 25, by my observation, and naturally, the Finance Superhero in me could not compute many scenarios in which this young man could afford such a fine vehicle.

I know what many of you are thinking:

  • Good for him! This fellow has clearly done well for himself.
  • Did you strike up a newfound friendship with Mr. A8?
  • Age is hard to predict; maybe this hot shot is older than he looks.
  • Weren’t you jealous?

My thoughts:

  • Maybe.
  • No.
  • Maybe.
  • No.

Jealous? While others may have felt envy, I only felt pity.

Yes, it is quite possible that this driver was closer to 35 than 25. It is possible that he is a new partner at a leading law or accounting firm. However, statistics dictate that it is more likely that he is a 20-something who earns slightly above the median US adjusted gross income ($36,841 in tax year 2013, according to IRS.gov). Regardless, I assert that the driver’s income is a variable that pales in comparison to the opportunity cost in driving such a fine vehicle.

I Hope He Likes the Car

Except in cases of significant wealth, the luxury vehicle represents one of the largest financial boat anchors in the lives of Americans. It is a formidable villain capable of derailing one’s budget, dreams of financial independence, and even hopes for a modest retirement.

Let us assume, for the purposes of illustration, that Mr. A8 is leasing his vehicle. The current manufacturer lease offer for this vehicle is $899 per month for 36 months with $4,644 cash due at the time of signing. This represents a total cost of $37,008 over three years, or $12,336 per year! Should I don my cape and rescue this fellow from his foolishness?

What’s that? You’re still not convinced that Mr. A8 isn’t getting a fine deal?

Let’s assume that Mr. A8 utilized the $4,644 cash due at signing on the Audi and instead purchased a much more affordable yet attractive vehicle. For example, suppose he found a deal on a 2004 Honda Accord and stretches his budget to $5,000. In this scenario, he would not have any monthly auto expenses, aside from gasoline and regular repairs. This would free up $899 per month!

How might a Finance Superhero manage these additional funds? Here’s a suggested monthly breakdown (rounding up to $900 for the sake of simplicity):


$400 placed in a money market account as a sinking fund designated for the purchase of a replacement vehicle when the Accord goes to the junkyard in the sky

$500 invested in a company 401k/403b, up the company match, with remaining funds invested in a Roth IRA


 Again, for the sake of simplicity, let us suppose that our 25 year old driver’s investments earn an average return (after inflation, the generally-accepted return figure for the S&P 500 is approximately 7%) and is compounded monthly. After thirty six months, our developing Superhero would have just over $20,000 combined in his 401k/403b and Roth IRA accounts, not including any company matching. Additionally, he would have $14,402.22 saved in his money market account (assuming a very non-Superhero interest rate of .01%) toward the purchase of a future vehicle. If he continued investing this same amount each month until age 65, he would be poised to retire with investment accounts valued at approximately $1.3 million.

I hope Mr. A8 really likes his fancy car!

Common Objections

Despite the fairly simple math above, which clearly illustrates the disastrous opportunity cost of leasing such an expensive luxury vehicle, some people may still wish to raise objections. As a developing Finance Superhero, it is your duty to gently correct people when the following objections are raised.

I need a luxury vehicle for work purposes.

I understand that for many professionals, the appearance of one’s vehicle is of high importance. However, a 3-4 year old Honda Accord or even 10 year old BMW will get the job done. A Finance Superhero uses his brain, remains persistent, saves money, and like Finance Superhero Grandpa, flashes cash to secure a great deal.

I am not handy when it comes to automotive maintenance, so a lease makes sense for me.

Let me count the reasons that this objection rarely rings true. First, in 2016, very few people are capable of maintaining their own vehicles beyond routine fluid changes, brake replacement, and tire rotations. Leasing a vehicle does not eliminate maintenance costs. And no, maintenance is not free with a lease. You are paying for it, as the costs are built in somewhere.

Second, new vehicles are often subject to repairs that will later be addressed by manufacturer recall. Strategically purchasing used vehicles which have already had these concerns addressed and repaired and have already had their 50-60k mile maintenance performed is a much better way to go.

With a lease, I can drive a new car every two or three years.

Listen. You need to make a decision. We are talking about your vehicle or your retirement! Which do you want more? 65 year-old you will want to kick 25 year-old you in the butt for being stupid and leasing a vehicle when you could follow the simple mathematical plan above and still simultaneously fund your retirement AND drive nice vehicles. And 65 year-old you is likely to get that opportunity, as Apple will probably have invented the iTimeMachine by that point. Don’t screw things up for future you!


What are your thoughts on car leases? Does it ever make sense to lease a vehicle? Have you or someone you know ever been burned by a car lease? Share your thoughts in the comments section.