Dear Dave,
I’m a senior in high school, and I have a job after classes and on weekends. I made a down payment of $2,500 on a $7,500 motorcycle last week, because I always wanted to have one before I got out in the real world and had bills and other responsibilities to think about. I asked my dad if that was a smart move, and he said I should ask you. So, what do you think? Should I go ahead with the purchase?
Tad
Dear Tad,
I’m glad you’re working and learning the value of money and having a job. But I think your dad set you up on this one. I’ve got a feeling he knew what I’d say, and he wanted you to hear it from me.
I teach people how to stay out of debt and build wealth. And there’s always one thing I remind folks of when it comes to buying anything — if you can’t afford to pay cash for the whole thing, then you can’t afford it. The only thing I back off on is when it comes to buying a house.
I love shiny things that go fast, and so do a lot of people who work here at my office. Right now, there are about six or seven motorcycles sitting in our parking lot, and they’re owned by folks who make good money. And the bikes sitting out there probably range in value from about $1,000 to $10,000. But you know what? Whoever rode in on the $1,000 bike had just as much fun as the one who owns the $10,000 bike.
A motorcycle is a toy, and you should always pay cash for toys if you want to be wealthy one day. Having lots of payments and handing your paychecks over to the bank is not the way to build wealth. I would advise talking to the guy at the bike shop to see if you can rework this deal for a ride you can actually afford!
—Dave
* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.
