Blog

Short blog posts, journal entries, and random thoughts. Topics include a mix of personal and the world at large.

The math is not math-ing

The most dangerous time for a car enthusiast, is when they are about to pay off their car. No more car loan debt means that money is freed up for something else: another car, naturally. The mind wanders at the possibilities. Perhaps it’s time to buy a car with a drivetrain layout you’ve never had before. Or perhaps it’s to re-purchase a car you shouldn’t have ever sold (thank goodness I cannot comfortably afford to buy another Porsche 911 GT3).

If there’s money in the bank account, you have to spend it. Isn’t that the American way? This entire economic house of cards is dependent on people’s continuous, often times reckless, spending.

My 2021 BMW M2 Competition will be paid of in a few months. And boy is the itch to buy another car itching intensely as that date draws nearer. I’m not being irresponsible! It will be the same money that would have gone to the M2 each month! It’s very easy to rationalize to yourself any purchase. The only reason I don’t have a mortgage is because the banks wouldn’t lend me the money.

But, as I like to say since last year: “Not in this economy!” Some people think that because they can afford the monthly car payment, they can afford the car. Don’t be like those people. We have to take in account the total operating cost. That means insurance, gas, and maintenance. And unless you’ve been living under a rock, all three of those things have gone up a lot in recent years thanks to inflation.

Never mind the fact that new cars have gotten rightly expensive. (Average transaction price in America is $47,338 as of this January.) High interest rates also means that monthly payment will be up as well. It’s really not a good time to be buying a second car, taking on tens of thousands of debt for another five years. I am going to keep telling myself that this entire 2024.

Get the Michelins

Ally bank is sneaky. They are quick to email me when the interest rate on the savings account goes up, but not a single peep when it goes down. I didn’t even realize it went down until my friend told me that it did. It came as a surprise because the Fed has kept the federal funds rate at the same level for the past several months. So it’s double sneaky: why am I getting less interest when the benchmark rate hasn’t moved at all?

Don’t make me move to SoFi! I really don’t want to do that!

In this post-pandemic era of high inflation, it’s never been more important to have a money cushion. Unexpected items arise and you kind of have to deal with it. For example, my friend recently found a tire defect (a sidewall bulge, likely due to San Francisco’s lovely potholes) on his Tesla Model Y. Because of this - combined with significant mileage on the original set of tries - he had to fork over $2,000 to replace all four Michelins.

If (the royal) you don’t have a savings cushion, that $2,000 will be one of those setbacks that you see in people with heavy debt. They are making steady progress in paying off debt, then boom, an unexpected $2,000 kicks them right back down the chute. Okay, maybe they’re paying $1,000 instead for the Chinese brands. For four split payments with Affirm. Or Klarna.

Honestly, nobody really budgets for tires, right? They see the monthly payment for the car, and petrol, as the only true outlay. The rest is out of sight, out of mind - because they occur not nearly as often. Insurance renewal only comes around twice a year. Maintenance - unless you drive an overwhelming number of miles - is once a year. Tires? Let’s say once every few years. But, if you have a money cushion, then these maintenance events won’t ever be shocks to the finances.

The interest rate may have lowered slightly on my savings account, but that money serves a critical, foundational purpose: emergency fund for unexpected expenses.

Just keep buying?

What if we simply stopped spending? Let’s vote with our wallets.

With all the price inflation going on, the one thing consumers have control over on the supply-and-demand seesaw is our spending. Prices too high - I don’t like it - therefore I am not buying (looking at you, McDonald’s). If enough of us do that, then the proprietors will have no choice but to lower prices. At least that’s what I was taught in economics 200.

Of course, people are still happily(?) buying. That’s why we have not seen a reduction in prices. The entrepreneur wouldn’t lower them if current pricing is sustainable in terms of customer count. Any savings in production cost should be pocketed as increased profit margin. It’s not greed, it’s math. People aren’t running charities. When high prices actively hurt the bottom line, only then will they go down.

Nearly half of Americans cannot cover a $1,000 emergency, and consumer credit card debt is at record highs. That tells me that lots of people are recklessly spending money well into the red, seemingly undeterred by inflation. Please don’t give me the bullshit about folks being poor and unable to afford necessities - thereby going into debt: my parents made less than $2,000 a month for a household of four for the longest time, and yet they still managed to save money over the years.

Overspending is the problem. During the pandemic, when supply chains were impacted, new vehicle inventories were low. A classic supply and demand problem: low inventory, high transaction prices. Because the American appetite for cars is insatiable. I never got mad at dealer markups, because they exist precisely because someone out there is willing to pay. If absolutely nobody was willing to pay, then the markups wouldn’t exist.

It only takes one. And it only takes consumers continually spending for the current high prices to remain. That’s not going to be me, though. I am hugely price elastic. Printed books have increased in price, so now I begrudgingly buy the digital Kindle version.

Do your job

My Youtube rabbit-hole this past weekend was personal finance videos. In particular, this episode of Caleb Hammer’s Financial Audit struck emotional resonance with me. The person having her finances checked over by Caleb is child of Chinese immigrants. Her family migrated over to America when she was eight years old. So did I! But unlike her, I am not swimming in credit card debt.

But like her, I bore the burden of supporting Chinese parents who did not know the English language, and were wholly unfamiliar with American culture. Whatever childhood we had were arrested abruptly, and we had to become essentially adults soon as we learned English. Any interaction with the outside world was automatically thrusted upon me. Can you imagine needing to go to the hospital, and it's your kid that has to communicate with the staff and fill out forms? Actual adults were suppose to do that!

I couldn’t ask my parents about anything. They simply did not know.

Needless to say, a lot of my proclivities and neuroticism stem from that period. Because I had to shoulder so much more burden than any typical kid, I absolutely detest anyone who cannot put their own weight. Nothing annoys me more at work than people who cannot do the one job they’re suppose to do. Me having to pick up the slack takes me right back to my childhood of performing the adult duties that my parents could not.

Another thing stemming from that time is my inability to ask for help - even when I totally can and should. Because I never could ask anyone for help back then. There was nobody to share that burden. So the adult me ends up trying to do as much as possible, by myself. Not because it’s the best way, but because I simply have not developed any better.

Obviously, I don’t blame my parents. It is, indeed, what it is.

There's no fairness here

I am still slightly peeved that my car insurance has gone up 20% in this recent renewal period. This, for a car I only drive for weekend leisure, and have zero accidents and claims on record. Inflation sure is a bitch, isn’t it?

What is keeping me peeved is responsible drivers like me are practically subsidizing those who are not so responsible. It’s not me that insurance is worry about - it’s the other drivers on the road. California insurance minimums are too low to afford anything. Cars are so laden with technology that a simple bumper repair on a 2021 Toyota Corolla is over $10,000 (personal knowledge). Any basic fender-bender caused by me - god forbid - my insurance is out at least five-figures just to fix the other party’s car!

No wonder my premium has increased. And I thought it was suppose to decrease consistently as I get older! Lies!

The worst of the worst driving out in our roads are those uninsured and unlicensed. If one of those drivers were to hit me - I am absolutely on my own. There’s no opposing insurance to get money from. And because those who are uninsured aren’t likely to have any assets, there’s nothing for me to sue after, either. The proverbial rock cannot be made to bleed.

Again: the responsible drivers with proper insurance are paying for the subset of drivers who are not insured, or under-insured. It’s not fair, but that’s life. We got to protect our assets and cover potential risks.

It’s sad to see on the r/insurance subreddit folks complaining after accidents. It would typically involve an offending driver with no insurance, but the victim also doesn’t have collision coverage on their policy! So they had a perfectly working car, then boom, now they don’t. Their own insurance won’t pay to fix the car, and the other driver doesn’t have anything. Bad luck, absolutely. Bad planning? Heck yeah. The victims should have had collision on their policies.

Got to cover any downside risks that you cannot afford!

Take it easy

It’s been said that depression is dwelling on the past, and anxiety is focusing on the future. To be perfectly content, you must be attentive to right now.

I guess my anxiety lately then is focusing too much on what’s coming next, even though I am thoroughly enjoying nexts that are coming up. Life is going great. I like the work that pays me well, and my hobbies and whatnot is intensely fulfilling. But that doesn’t obviate the fact there is a list of things to do, every day. Things need to get done, no matter that I enjoy doing them.

And there lies the problem. I would wake up and get anxious about the to-do list. You know how back in the schooling days, we would get home from school and eagerly tackle our pile of homework. Because we know that soon as we finish, we can go do the fun stuff, like playing video games. I’ve been treating my daily to-do list kind of like that: to get them done as quickly as possible so I can relax.

But that’s the thing: I can’t relax. There is no leisure to be found when knowing that the very next day - after a wonderful night of sleep - I have to do it all over again. So I end up chasing this phantom that never arrives. Sure, I am getting things done - but to what end? If all of this is what I want to do, why can’t I seem to achieve this promised peace of mind?

What I need to avoid is speed-running through life. The only thing waiting at the end, is death. I have to slow all the way down. Don’t walk so fast to get to work. Take my time and allow in the magic of the walk itself.

That’s what I am working on these days: slowing the F down.

Already great and wonderful

My aunt and uncle are moving to a new apartment soon. For the first time in nearly three decades, they will have a proper living room (proper, as the British like to say). And a living room deserves the single best furniture in a home that isn’t the bed: a super comfortable couch.

Is there a better feeling than plopping down on a couch after a long day at work? I don’t think so. Even in this tiny studio apartment of mine, I bought a chaise lounger because the relaxation of laying down is that important to me. As much as I prefer the Japanese aesthetic of limited furniture and floor-based seating, the West got it correct: a large couch is where it is at.

This sort of comfort used to be the domain of kings and aristocracy. Nowadays, any common man can afford a couch with bit of saving. Perhaps it’s incorrect to compare timelines this far apart, but truly, the middle class of today live a life better than monarchs of old. Emperors of China wouldn’t even be able to comprehend luxuries like flushing toilets, and on-demand hot water. He did have a comfy dragon throne to sit on, though…

I think these sort of comparisons are an important exercise to keep us in perspective. Sure it may be worthwhile to keep chasing the better next, but what we already have - the most basic of modern living standards like regularly scheduled garbage disposal - is pretty great and wonderful.