Hello Hivers,
This will be my first time to post my knowledge and insights about financial related topics. I hope you’ll like it. Let me know about your thoughts in the comment sections.
“Owning a car doesn’t make you rich.”
Most of the generation Z graduates right now are looking at the car as their ultimate goal and measurement of their financial success.
“Wow! They have car it means they are rich. When I’m going to start my job, that’s the first thing that I’m going to buy,” – Aileen an Engineering graduate, seeking for a job.
I don’t know if in your place kids are already informed about financial matters, but here in our country financial education is not being taught at school.
Most of the people cannot even distinguish assets versus liabilities. Assets are your owned resources that generates income and increase the net worth, some of the examples are cash, property, and investments.
On the other hand, Liabilities are owed obligation and decreased net worth like loans, debts, and unpaid bills.
It’s been six years since we purchase our first car. I remember it was October 2019 when we decided to acquire a hatchback car- Toyota Wigo for business purposes. We thought we could use it for travel so we could reach more clients. It happened during the first three month my sales were boosted but as the year 2020 started, the pandemic came and we couldn’t afford to travel anymore plus we lost multiple clients due to financial crisis. In the end, I got frustrated and I lost confidence to continue the business in its new phase- powered by online systems. I don’t have means to adapt to the tools needed to operate online so my sales have dropped and eventually I was kicked out from the program. Everything seemed frozen but the bills and the mortgage of the car still continued.
We don’t have any choice but to search for opportunity that could still fit even during pandemic. After considering the restrictions and limited financial capability of the people around us, we jumped into selling of consumer goods like chickens and eggs, using a borrowed fund from my friend. The business continued until some restrictions were lifted, and we survived our car mortgage through the help of my friend.
After the pandemic prices of almost everything went up specially the gasoline, so we switched into homebased business. We built a store and started a public transport again, so our car was stocked inside the garage. It cannot generate any income anymore, so it became a burden to us.
Something that suppose to be an asset becomes a liability, and that was not part of the plan.
Maybe you are wondering why I shared my story, right? The reason behind, it I want to give you short but realistic scenario that acquiring something from a mortgage is not simple specially if its long term.
There’s nothing wrong with buying a car specially if its your dream, but consider all these things;
It is really a need? If you are buying a car just for convenience and to avoid commuting, try to add this to your budget – gasoline, insurance, car monthly preventive maintenance, tool, accessories, extra budget for parking spaces.
Furthermore, car decreases its value overtime, it’s called depreciation. It means you are losing almost 20% of your money every year from buying cars. If you are planning to buy one, you should categorize it, if it will generate your income then it’s an asset but if not, it will be a liability that will give you burden in the long run.
Thus, making a wise and informed financial decision is really difficult but very important, how I wish I knew this before acquiring mine too. So instead of buying an obligation why not build your emergency fund first, and little by little start on a liquid investments like stocks, equities, and digital assets like cryptocurrencies. Learning about investment takes time, and always know your risk appetite because all of the investments have risk. Only invest what you can afford to lose.