Receive the latest Trees Full of Money articles FREE in your E-Mail or via RSS.
While leasing my Toyota 4Runner was probably the worst financial decision I’ve ever made (so far…), my purchase of a brand new Honda CBR 600F4i motorcycle back in 2003 was the straw that broke my financial back.
I never considered myself the “motorcycle type”, but as more and more of my friends began purchasing and riding their bikes around, I thought it would be a cool thing to do.
The first hurdle in my quest for my motorcycle was to get my motorcycle permit. In Maine, all that is required to obtain a motorcycle learner’s permit is an 8-hour course. Ironically, the course is held in a class room and no time is spent actually riding motorcycles. The class was easy and I think I scored a 100% on the written test (multiple choice).
The next hurdle was acquiring a motorcycle. For me the choice was easy, three of my friends already had similar Honda CBR600 motorcycles and I was 99% sure I was going to purchase that same model as well.
Based on my experience of buying new vehicles, I wanted to do the smart thing and buy a used motorcycle. Unfortunately, after calling several banks, I was unable to find anyone who would approve me for the amount I needed.
“We’re sorry sir, but your debt to income ration is too high” they kept saying.
In hindsight they were right…between rent, my 4runner lease, another car payment, student loans, a wedding loan, and credit cards, my debt to income (DTI) ratio was approaching 40%! The warning signs were right in front of me, but I needed that bike and I was determined to make it happen.
After a few more days of frustration, a buddy tells me that Honda Financial Services (Honda’s in-house financing company) is very lenient with their financing standards. The only problem was that I would have to purchase a brand new bike if I wanted to finance with them.
That’s right…the traditional banks found me financially incapable for a $5000 used motorcycle loan, but Honda was willing to finance me for a brand new one at $8600.
I should have known better but there is not a rational thought that goes through a man mind when he’s staring at a shiny new toy!
I filled out my application and was approved on the spot, I couldn’t believe it.
Not only was my decision to buy an expensive motorcycle unwise given my current financial situation, it was also unwise because I had never ridden a motorcycle in my life.
Essentially, I was purchasing a top of the line performance bike (and paying for it with money I didn’t have) without ever having ridden one in my life.
As the warm summer season turned to fall, I cold temperature forced me to put my bike into storage. Unfortunately, that motorcycle bill kept coming in and I found myself putting more and more things on the credit card. It wasn’t just the purchase of a new motorcycle that eventually brought me to my financial knees, but it was the last purchase that I ever made on credit. Since that fateful day in the summer of 2003, my family and I have paid off over $90,000 in consumer debt and are debt free with the exception of our mortgage.
In retrospect, I’m glad that I fulfilled the urge to buy a motorcycle. Had I not done it I’m sure I would still be carrying that urge today. Another important note was that I eventually did pay the bike off and then sold it to get my debt snowball rolling in my eventual path to debt freedom.
Who knows; had I never bought that bike I may have never actually gotten to the financial bottom where I decided that what I was doing was not working and that I needed to change.
Related Articles:
I Finally Bought a Car the Right Way
How to Clean Up Your Credit Reports
How to Use the Debt Snowball to Pay Off Your Debt
My Tips to Prevent Identity Theft
36 Ways to Reduce Your Home’s Energy
Related Posts -
The Frugal Yuppie's Car Buying Guide With the economy in a funk, many young urban professionals (affectionately known as yuppies) are finding it harder and harder to project an image of success by driving an exotic late model car. If you are one of these vain individuals who “are what you drive” but the economy has...... -
I Finally Bought a "New" Car the Right Way: Part 3 The following post is one of a series of articles I am writing detailing our recent cash purchase of a "new" family vehicle. From deciding which make and model to buy, to closing the final deal, follow along on our car buying adventure! How We Decided Which Car to Buy...... - I Finally Bought a "New" Car the Right Way: Part 1 The following post is one of a series of articles I am writing detailing our recent cash purchase of a "new" family vehicle. From deciding which make and model to buy, to closing the final deal, follow along on our car buying adventure! As our young family has grown, my......
- Dave Ramsey Shifted My Financial Paradigm One of the most important steps in fighting any addiction is to admit there is a problem. 4 Years ago, our addiction was spending money and the consequence, DEBT, was quickly becoming a dark cloud over our lives. Fortunately, we were able to take steps to correct our mistakes before......
- The Complete Guide to Protecting Your Credit and Identity It's no secret that identity theft is at an all time high. In this day and age, taking measures to protect you and your family from becoming victims is essential. Although there are preventive steps you can take, people often do not know exactly what they are, or how to......
Related Websites - 14 Quick Ways To Raise Cash In the days before emergency funds are fully established there will come a time when you need to generate some...
- 50+ Personal Finance, Investing, And Money Tweeps Worth Following Miranda writes for Bankling, a personal finance portal, which contains both a blog, and a tools section that contains resources...
-
How to use Debt to Improve Your Credit Many of us have the wrong idea when it comes to debt. After years of being told that it is... -
Generation Debt Generation Debt is one of those books I wish I had available back when I was 20, and just entering... - Untapped Riches: Never Pay Off Your Mortgage--and Other Surprising Secrets for Building Wealth by Susan Cutaia, Anthony Cutaia and Robert Slater On the surface, this book seemed like the ideal read. It has a strong premise of how to create multiple...
{ 0 comments… add one now }