Impulse control. Paying attention to the long term math.

That car you’re about to buy is actually $50,000, not “$600 per month”. When you shop by payment, you’re only thinking about the monthly cost of ownership. A few hundred a month is easy, right? You can afford that. No big deal.

The problem is that when you’re focused on $600, you aren’t thinking “$50,000”. But in reality, whether it’s all at once or over time, that’s $50,000 of your dollars that you will never see and won’t ever be able to use for anything else.

It will never make it to your savings account. It will never make it to your retirement account. You’re giving $50,000 to the bank, all for a car you won’t even want anymore by the time you finish paying for it.

Think about it this way; pretend banks didn’t loan money for cars, and you had to pay cash:

• Would you be able to buy that car?
• If you had $50k in the bank right now, would you really want to write that check?
• If you don’t have $50k already, would you be willing to put $600 a month in your savings account for the next seven years, and write a check for it then?
• Which would you rather have: $50,000 in your hand right now, or that car?

Every dollar you give to a bank, or a car dealer, or anyone for anything, is a dollar that you no longer have and will never see again. You probably aren’t going to miss a few hundred bucks a month. But when you start thinking about the actual long term cost, what you’re really paying, your mindset changes. Or at least it should.

This mindset difference is how some people can earn $60k a year and have a paid off house by the time they’re 40, while other people can earn $100k a year and still feel broke.

Think before you spend. Especially when it’s money you haven’t even earned yet.

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