Is Anyone Giving a Car for Christmas?

The title question posed above is likely to provoke a response along the lines of, “none of your *#@!!# business” which would be expected.  However, the reason I ask is because during my weekly NFL bacchanalia of wall-to-wall football today I saw no less than 20 different airings of various commercials where someone gave someone else a car.

And I’m not talkin’ the Matchbox or Hot Wheels variety.

We’ve all seen them of late, here’s a sample of the type of commercial I’m referring to.

At the core of my title question, is perhaps a more fundamental  question….. Has the economy rebounded so well that members of couples are now exchanging license plates and registrations with one another?

I think the answer is "no." 

But fiscal reality has never stopped Madison Avenue advertising juggernauts from dangling a financial fiction in front of people who can’t afford it.  That’s one of the causes of the 2008 Recession – people living beyond their ability to pay. 

One of the greatest books I’ve ever read was titled “The Millionaire Next Door” – which simply states that one of the most critical habits of the top 5% of wage earners and keepers of a high net worth (assets – liabilities = net worth) is that those wealthy individuals live BELOW their means.

In other words, they can afford a $50K Mercedes Benz, but they consciously choose a $24K Jeep Cherokee – by the way, the Jeep, according to the authors, is the number one car owned by U.S. millionaires.

The fact is that truly wealthy individuals spend less than they earn – this habit allows them to conserve their wealth.  Guess what poor people do??  They consume their wealth, with frivolous nonsensical spending.  Buying things like….oh, I don’t know….giant bows for over-priced new cars that they want to gift to family members.  Here’s a better gifting strategy for the ones you love.

Instead, why not bank half that cash and save it for your kids’ education?  Statistics show that during the average lifetime, people with advanced degrees earn more than those who only have a high school diploma by multiples – now that's a gift that keeps on giving! 

Next, take a quarter of that crazy cash you were going to spend on a new car and pay down/eliminate your credit card debt - boom, automatic double-digit return on that cash.  Then Take 15% of the remaining funds and use it as a down payment on a quality used car – there’s tons of great used car inventory out there from people who bought new vehicles but couldn’t make the payment.  Lastly, take the final 10% and (gasp) give it away to someone in greater need than you.

Giving away 10% is much more sane than blowing 100% on a single asset purchase (i.e. a new car), which is going to lose nearly HALF of its value when you drive it off the dealer’s lot in most cases.

There was a time in this country when frugality was a virtue,  I think we have to make it so again if we ever hope to be a national economic superpower, instead of the largest debtor nation in the world – which is what we currently are.

But it’s got to start with “We The People” – because the government can’t control its own spending habits. Someone has got to be the financial grown-up and it needs to start in our own homes.