Some people purchase a home as their first major purchase when they move out of their parent’s house. Some people decide to take a summer long vacation after graduation, and travel to exotic places; their first major purchase becomes the journey of a lifetime that they will never forget. I graduated from university in 2005 and my first major purchase was my brand new Honda Civic.
On June 1, 2007 I drove off the car lot as the proud new owner of a Honda Civic, at 26 years old and over $30,000 later. In the beginning my car was a novelty, it was the first item that I had ever purchased on my own…with all of my own money. I had owned a car before, but I had never paid for my own car. In my early 20’s my father gave me an old Honda Prelude that I drove until I handed it down to my younger sister, who crashed it within 24 hours.
I did know how to be financially responsible because I had purchased other large items such as a flat screen television and I had also paid for my own mini vacations. I had been supporting myself financially and paying for my own monthly living expenses since I moved out of my parent’s house at 19. However, my Honda Civic was my first major purchase.
After the novelty of my new car wore off, I quickly learned that my shiny new car was definitely not a smart financial decision…especially for my first major purchase. The day I bought my car I called my father to share the great news of my first major purchase. “Kristina, a car is a money pit.” He responded. I had a feeling that my father’s advice was correct, but at the time I didn’t care. I didn’t actually need a car, since I live within walking distance of my work. I bought it because I felt that a young professional who is 26 years old should have a car.
Even if I over look the fact that I overpaid for my car, the monthly expenses were definitely overpriced. It wasn’t that I couldn’t afford the $800 per month for my car payment, the insurance, indoor parking in my apartment building, and gas; it was that a Honda Civic is not worth $800 per month…or $30,000. In September of this year I sold my Honda Civic. Now, I feel that an $800 financial burden has been lifted off of my shoulders.
Here are 3 major financial lessons that I learned from the financial mistake of my first major purchase:
– Never buy anything because it seems like the right thing to do.
– Always weigh the opportunity cost of a major purchase. Ask yourself is the benefit worth the cost?
– Always shop around and compare prices. Do not make impulse purchases because usually we end up being overcharged.
(Photo By Gillian )