If you're new here, this blog will give you the tools to become financially independent in 5 years on a median salary. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger of losing their jobs.
Here's almost a thousand online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before looking for the crowd's wisdom for your particular situation in the forum journals.
If you enjoy the blog, also consider the book which is much better organized and more complete. You can read the first chapter for free, listen to the preamble, or see the reviews (1,2,3,4,5,6,7,8,9, A,B,C,D,E,F,G,H,I,J,K,L,M,N,O,P,Q,R,S,T,U,V,W,Z). Subscribe to the blog via email or RSS. Get updates on the facebook page, join the forums, and look for tactics on the ERE wiki. Here's a list of all the ERE blog posts.
In an effort to sell cars to debt laden consumers Toyota is now offering 84 month car loans(*). The immediate effect is to lower the monthly payments. In the long run this could have two effects.
The first long term effect is an increase in the price of new cars (relative to inventory) just like lower mortgage rates cause real estate to rise. The reason is the people finance according to their monthly purchasing power and not the total loan value.
The second long term effect is a decrease in the sales of new cars. New cars depreciate really fast. A 7 year car loan will be paid off very slowly. This means that people will be underwater (owing more than their car is worth) for a long time. Therefore the car can not be used as a trade in.
In the short term the auto makers hope to sell more cars at the same price.
(*) Some lenders like GMAC (General Motor’s financing arm) and various credit unions. are even offering 96 and 108 month loans, but these are not (yet?) very popular.
The side effect of this double whammy is that used car prices will go up as the market dries up. This will increase the consumer price inflation.
Cheap credit tends to cause a bubble. Will people never learn?
Car loans stretch to 7 years or longer
Originally posted 2008-02-16 07:47:17.
