Are You Financing Your Vanity
How much can you afford per month?
The entire world is engaged in a shortage of goods and supplies. From building supplies to new cars, everyone is essentially on a waiting list. Oddly enough, many of those goods and services revolve around feeding vanity.
One of the oddities of this economic condition is the continued “need” for things that you could normally do without. Due to some strange psychological condition, humans tend to want things they can’t have — and slick marketers know that.
When this emotional response sets-in, people tend to become unreasonable and compulsive. Cautions that would normally be undertaken are tossed to the wind with gleeful abandon.
The sticker price of vanity
The easiest of these things to observe is the new car market. The cost of a new vehicle has an MSPR (Manufacturer Suggested Retail Price). They can range from $20k to $100k depending on the model.
If that vehicle is financed, there are certain procedures that the lenders have to follow. Banks/lenders are in the business of making money with interest acquired through loans.
Almost all lender require that a loan be financed at or around 80% to value of the item being purchased. A basic example: A $100k item will typically only get a loan of $80k from a lender.
The underwriters (those who check the numbers, value, and credit status of the buyer) have a series of checkboxes to go through before they will approve the loan. One of the major factors in this process is the actual value of the item.
These valuations come from catalogued book values, rarity, and current market price. The market price is the big factor here. Scarcity drives demand. What is amazing is how when people feel that something is going to be gone, they move Heaven and Earth to acquire it — including overpaying.
What are we feeding?
There is clearly a hunger that we are trying to squelch. Some of us are simply addicted to feeling good. As outlined in this article:
Others of us just have shear vanity that we must parade around — but at what cost? Almost all middle class Americans are living with some form of debt, wether it be a mortgage, auto loan, student loans, and our consistent friend, the credit card.
Not all f these monthly payments are for vanity, some are necessities. The problem comes from when those necessities are acquired with vanity in mind.
Rather than a modest home with payments that are able to be doubled so as to reduce the debt quicker, many opt to max out the payment for the more luxurious home in the nicest neighborhood.
Instead of the reliable Toyota Camry (highly recommended), many go for the Audi or Mercedes. These are nice cars but are not as friendly when it comes time to maintain.
Then there is our long time friend, credit card debt. Too many people are carrying a regular high interest balance and use these things as a means of survival — with no realistic plan of escape.
Look within, not without
When we catalogue and breakdown all that we purchase, it becomes clear that a disproportionate amount of the excess is spent on “luxury”. “Can we afford it?” should be replaced with “what do we really need?”.
Simply downsizing our appetites and understanding that we are buying things with money we don’t have to impress people we don’t like is a form of sickness. It is a disillusion that we feed with hard earned money and great sacrifices of time.
Many of us can “make do without” but therein lies the problem. We consistently look for the things we DO NOT have and succumb to the urge to fill a void that we created.
Pay off your debts, reduce your dependence on cheap thrills, vanity, and trinkets that your kids are just going to toss when your gone. Invest in time with loved ones or experiences. Those things have the highest value of all and never depreciate.
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