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Financial Preconceptions

It occurs to me that many people have financial preconceptions. I posted previously about private education and whether or not it’s a good investment (my feeling was that it wasn’t). I wonder, though, if that’s the tip of the preconception ice burg. This lead me to thinking about other financial preconceptions that people might have.

Financial Preconceptions

  1. Newer cars are cheaper than maintaining old cars

We have had this debate in our house. I’m sure you’ve heard it in your house: “It’s costing me too much money to maintain; time to get a new one”. A friend of mine complained about the cost of running his old Ford Focus, which was costing him about $1000 a year (on average) to maintain. He was thinking of selling for it for $1500 and buying a late model Honda CRV for $20,000. Sounds like a good decision, right?

Well your $20,000 CRV is likely to be worth $18,000 next year, and while you didn’t spend money on repairs, you ended up loosing more money on depreciation (or as I like to call it, the silent killer).

I say drive it till it dies or they stop making the parts. I’ve personally had four cars die on me in the last 15 years. Not one of those cars cost me more than $2000 and didn’t cost me more than $600 per year to maintain.

What are some other financial preconceptions people have?

 

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