Business

Fast cars and city lights

with
CLAUDJA WILLIAMS

Wednesday, October 11, 2017

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As young people, many of us dream of having “the life”. A nice car, our own place free from our parents, and the ability to do and buy what we want when we want it.

In fact it's safe to say that most people dream of achieving this regardless of age, gender or culture.

Unfortunately when we are young we often don't think long-term. We don't think about retirement, we don't think about illness, we don't think about strategic wealth accumulation. After all, time seems to be on our side.

Before you get a loan for that car of your dreams, consider the following:

1) A car is a constant expense and a depreciating asset. After you make that initial purchase of a vehicle, the maintenance costs are considerable and recurrent: gas, repairs, insurance, licensing, fitness, replacement parts, etc. Not only that, but your car loses value over time and therefore is not a good long-term investment.

2) Ensure that your house is in order before you get a motor vehicle loan. If you have student loans, ensure that they are repaid or your salary is sufficient to comfortably carry both payments.

3) Will you be able to acquire other assets while making car payments? That is, will you be able to make longer time investments in financial assets (stocks, bonds) or real estate?

4) Do you have insurance? Life insurance and critical illness insurance can be life savers in the event of medical adversity. Some policies even have a cash value portion which allows you to acquire significant savings over the life of the policy. This cash portion can come in very handy in the event of emergencies. The younger you are when you get insurance, the lower the cost will be.

5) Will you still be able to save every month? After accounting for all the costs associated with motor vehicle ownership, ensure that you will still be able to put aside a fixed amount each mouth towards your long-term savings.

Claudja Williams works as a consumber advocate to the financial sector. The views expressed are her own.

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