Friday, August 01, 2008

How much do you have to spend?


I got home late from the dealership last night. But my five year old son was still up. He happened to be stimulating his brain cell by reading a Donald Duck comic book. As I headed to the basement to get changed, he noticed me and said, "Dad, let's talk." I waved and said, "Okay. Why don't you follow me." So, while I changed into pajamas, Trenton waited on the stairs and we talked. Here's how the conversation went.

ANDY

Welcome to Leikin Motor Company, little boy.

What kind of car would you like to buy?

TRENTON

Umm... a SAAB.

ANDY

Great! I can help you with that.

We currently have four SAABs in stock.

Would you like a truck or a car?

TRENTON

Umm… a truck

ANDY

Very good. I have two black SAAB 97X SUVs.

How much do you have to spend?

TRENTON

(pause) I'll give you 50¢ per day.

That made me laugh. If only that were possible. We'd all be driving a luxury cruiser at that rate. That got me thinking and I figured that at 50 cents per day it would take Trenton approximately 100 years to pay off a $20,000 loan with 0% interest and no money down.
365 days x 50¢ = $182.50 per year
$20,000 / $182.50 = 109.6 years
So, wanting to take advantage of the moment, I quickly guess-timated the amount of money Trenton would need to spend to knock out the loan in three years. I told him it would be about $15 per day. Let's see how close I was.
$20,000 / 3 years = $6,666.67 per year
$6,666.67 / 365 days = $18.26 per day
I was a bit off, but I think he still got the point. No matter how attractive the price seems to be, it all comes down to whether you have enough money in your budget. Trenton doesn't. And if most people are honest, neither do they.

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