I have written about this before, but in the past week I was involved in an incident which made me want to reiterate that personal finance is less about the numbers, but more about personal decisions based on one’s personalty, perspective and life.
The first came when a good friend came by my house and told me about his mom who is deciding between buying a 2009 fully loaded prius vs. leasing a base 2009 Mercedes C-Class. He came to me because he knows I love creating spreadsheets to compare the costs associated with any decision.
So, I opened up Microsoft Excel listed all the months for a 4 year period (explained why in a second). Then I listed the monthly payment for a 3 year lease on the Mercedes, $450/month – cumulatively over $16,000…this is without the expected over mileage (overage because she already went over on her last car and her lifestyle is not changing). Then I compared those numbers with a fully amortized loan taken from home equity at 6% at $671/month. Then we take a deduction assuming a 25% rate.
As I started looking up residual rates on the prius…while I am doing this, creating this bad ass spread sheet (if I say so myself) my buddy gets a phone call from his mom who then gets on the phone with me. As I explain what I am doing, it comes out that she has always had Mercedes and feels weird getting a prius.
At that point, I close my spreadsheet…when I realized this has nothing to do with numbers. It has to do with the following saying
ONCE A LUXURY NOW A NECESSITY
I told her that I thought she was being dumb, because being on a fixed income she has more opportunity to change or alter plans with the prius (i.e. sell when you want, pay more when you want, pay less when you want, etc.). She said I was right, and then not more than 20 mins ago, I got a text from my buddy, what did it say?
Mom went with the Mercedes she got a sick deal