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Precision vs. Perception


When it comes to making decisions about your cash flow, precision beats perception every time.

Let’s say you’ve taken your car in for several repairs in the last couple of months. You might start assuming you’ll need to replace it soon. You starting checking to see whether or not you’ve got enough cash…should you try to get one of those zero percent finance deals or use my cash?

Perception is the way your money feels at any given time…like right after the mechanic tells you that your automatic transmission is leaking anti-freeze, causing a rupture in the rack and pinion suspension system indicating that you’re going to have to have your headlights rotated and your air-bags balanced….blah, blah. Blah…$958!

@#%!#@! That’s how you feel about your money, your car and your mechanic all at the same time.

I can recall a time when I had three kids in college (yep, at the same time). I was taking cars to the mechanic so often he was giving me frequent flier miles. I didn’t like it one bit.

But when I compared the $105 for a new battery installed, $195 for a new water pump, and $395 for new front struts…I came up with less money than two or three car payments on one new car.

So…don’t let perception drive you to spend more money than you need (or want) to spend.

“Yeah,” I can hear someone ask, “but do I really want to spend several hundred dollars on an old car? At least when I spend more money, I’m spending it on a new car…”

Yes, a new car…that will one day be worth zero.

So don’t fall prey to the idea that spending more money on a newer car is always financially a better deal. Either one is an expense that you will never recoup. That doesn’t make new cars a bad deal, or old cars a good deal. It just means that both are expenses, so regard them as such.

Here is precision: add up all the car repairs you’ve had in the last three or four years. Group them by years. Do you see much of an upward trend? Take your most expensive year. Compare that to the cost of the monthly payments on a new car.

The difference is what the new car will likely cost you over and above what you spend now.

Is it worth it to you to part (forever) with that money? If the answer is yes, then go shopping with a smile on your face and a skip in your step.

Either way, at least you’ll be dealing with precision, not perception.

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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