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Confusing Needs And Wants Is A Great Way To Blow Up Your Finances

Buying high-end SUVs rather than low-end cars transforms these vehicles into luxuries, not necessities.


Given the frequency with which I spend time attacking the lack of fiscal discipline among lawmakers in Washington, a recent viral video provided a variation on a common theme. In it, a TikTok user complained about paying $3,000 per month on two vehicles in her household.

One can only assume that the video, which spent time trending on Twitter on April 1, isn’t just an April Fools Day prank. But even if it started as a practical joke, the video provides valuable lessons in smart financial management, how to practice it, and why it matters.

Transportation Is a Need — But Luxury Isn’t

Start with the types of vehicles discussed in the video: a Chevrolet Tahoe, the 2024 model of which has a manufacturer’s suggested retail price starting at $56,200, and a GMC Sierra that the user said her husband financed (used) for $78,000. Depending upon the details of the Tahoe purchase (i.e., when they purchased it and what trim model they selected), it seems safe to say the couple spent at least $100,000 and possibly up to $150,000 buying the two vehicles.

In many, if not most, parts of the country, families need at least one vehicle to drive back and forth to work, run errands, chauffeur children to and from school, etc. But going beyond that basic utilitarian use of transportation, to get from Point A to Point B, can quickly transform a critically important “need” into a discretionary luxury.

Suffice it to say that the “need” component of transportation stops well before a family spends at least six figures on two vehicles. Buying high-end SUVs, rather than low-end cars, transforms these vehicles into luxuries — meaning that if the user feels so financially stretched as to complain about the size of her vehicle payments, she should have selected a more economical vehicle in line with her budget.

Add to this fact that the user also claims her household has an Audi, which suggests (at least) three vehicles for this married couple. But an individual can only drive one vehicle at a time, making at least one of these car payments, and quite possibly both, a superfluous luxury.

Useful vs. Harmful Interest

The user also complained about 14 percent APR (annual percentage rate) interest on the loan for the Sierra. She noted that even though her husband paid $78,000 for the vehicle in August 2022, they still owe roughly $72,000-$74,000 on the Sierra. Based on that rough math, it appears that 1) most of her husband’s payments have gone toward interest rather than paying down the principal on the vehicle, meaning that 2) they likely owe more on the Sierra than its current value.

Even though interest rates have risen over the past two years, a 14 percent APR on a secured line of credit — that is, one backed by a vehicle (i.e., the Sierra) that the bank can seize for nonpayment — seems very high, when GMC is advertising interest rates (albeit on new rather than used cars) of only 1.9 percent. It suggests the couple in question has questionable credit, as does the user’s suggestion that “maybe we should just let [my husband’s] truck get repossessed,” which would hurt their credit score even more.

In many cases and likely in this one, interest represents the tax families pay to try to live above their means. Whether paying for pricey SUVs via loans with a 14 percent APR, or putting vacations on credit cards, most of which now carry rates well above 14 percent, interest will allow individuals to ignore the basic laws of budgeting — money coming in must equal, and in most cases should exceed, money going out — only for a time. When the music stops, as it surely must, families will find themselves worse off than before.

Only in the case of a mortgage does interest go toward paying something that will rise rather than fall in value over the long run. (It’s the only debt I took on as an adult, and a debt I paid off as soon as I could.) Paying interest on anything else, from a car to a vacation to clothes or jewelry, amounts to a sucker’s bet, in which one pays more tomorrow to fund a pleasure they couldn’t afford today.

Stop Overspending

In some ways, the TikTok video represents a microcosm of our federal government’s problem, spending too much money we don’t have on politicians’ promises that we cannot afford. It’s why interest on the federal debt now exceeds what we spend on our national defense, and Medicare is already functionally insolvent.

Ultimately, Washington and our TikTok user need to understand the same message: They cannot keep spending more than they take in, for to do so will be the ruination of their family — and the nation.

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