Thank you for continuing with my husband and me on my Millennial son’s financial education journey!
As Boomers (and Gen Y parents), we have lots to share regarding debt. According to a recent study by Wells Fargo, 42% of Millennials say their top concern is the amount of debt they carry. We are attempting to help my son balance his debt with his desires, and create a spending and savings plan. In total, he currently has student loan debt and a line on a credit card, and has just assumed more debt after purchasing a new car this month.
Before I talk about how he dealt with buying the car, I want to talk about the spending plan, a.k.a. his budget. I am very proud of him for sticking to the budget we created back in September. It was very aggressive. Now, I am not sure he stuck to the budget because he was used to having little extra money from previously working part-time in retail and has learned to survive on less…or, he wanted to show me he could, after I told him he was not a very good saver (Millennials can be quite the know-it-alls).
Basically, he saved for the last four months as if he had to pay rent, a car note, utilities, and food. After his dalliance with long-term debt, which I described in the last installment of the blog, he now pays off his credit card each month, and also pays his insurance, student loan, gas, and lunch out of his own pocket, and sets aside a small allowance for entertainment and clothing. Since he stuck to his spending plan, he had enough money to put a substantial amount down on a new car.
Now, I know most would say, ‘buy a used car’, but after watching him drive around in a jalopy for the past four years – a jalopy that continually needed anti-freeze added to keep it going for the past month – I cannot convince him to buy another used car. Besides, I believe everyone deserves a new car at least once in their lifetime.
My son was contacted by an auto dealer, no doubt because he was browsing for a car online (their lead capture process seems to have worked – hooray for direct marketing!). At his insistence, he wanted to visit the dealer, and his father and I accompanied him.
Once we arrived at the dealership, however, it became painfully obvious that we were experiencing the old ‘bait-and-switch’: we quickly learned that our son was not going to receive the car of his choice. Fortunately, he refused to settle. I mean, who would want to put a large down payment on anything but your dream car?
We walked out, to the utter surprise of the salesperson – and AFTER an offer of $1,000 to just take what they had available! We went to our preferred local dealer and not only did our son get the car he wanted, but a fully loaded smart car. The added bonus? A car note well below his monthly budget.
But wait – there’s more.
Our son also received a 32” Samsung LED TV for purchasing the car that weekend.
With the car purchase ‘in the rear view’, we are reviewing his spending plan to make sure he is on target to reach all of his goals within the next six to nine months. Because he came in under budget for the car, he will be able to participate in his company’s matching 401k plan, for which he becomes eligible in about two months. I think it is never too early to begin saving for retirement (some of us Boomers had to learn this the hard way: according to the same Wells Fargo study, over 40% of Boomers cite ‘saving for retirement’ as their number one financial concern, after paying day-to-day bills).
Starting in January, he will reduce his savings to pay for his car and his additional insurance premium. He will save the balance of his paycheck for a security deposit and first month’s rent for his own apartment, and his emergency fund (six months of living expenses).
So far, he has done really well, and we are proud of his accomplishments. However, stay tuned to see how life happens and plans may become derailed.
A Boomer Parent, soon to be an Empty-nester