Thursday, September 12, 2013

Responsible Teenager...Is Still A Teenager!

Dear Tazi:

I am 18 years old and I have worked since I was 16; part-time during the school year and full-time during vacations. I work as a waitress at a very popular diner, and because I work hard to turn my tables and keep a pleasant personality with all of my customers I earn quite a bit of money in tips (especially from my regulars). Now that I have finished high school I have decided to attend college part-time while I try to figure out what I want to do with my life and work full-time at the diner. I truly love waitressing, but I know that I cannot make it my life’s work. I think I would like to one day own my own diner; my boss says that he cannot do it forever, and his kids don’t want to take over the business so maybe someday I will. Again, I am not certain that I want to do this, but I am taking a class in business and a class in basic accounting at the local campus of my state college while I think things through. My Mom is okay with all of this, so long as I continue my education. You are probably wondering why I am writing to you!

I have almost $30,000 cash saved from work (I told you I do well with tips!) and I would like to buy a new truck. My Mom is flipping out over the idea of putting all my money into a vehicle, but I do not want to take a loan. Because of my age I have no credit history so I would be paying a high interest rate. Mom can’t co-sign because she is not creditworthy (her divorce left her credit in the dumpster a few years ago and she hasn’t completely rebuilt it yet). I pay rent and board every month (have been since I started working), and continue to live at home in order to help out my Mom and I have never missed a payment. This is my money that I have earned through my own hard work, and I think I should be able to spend it as I want, so long as I am responsible with it. It’s not like I am taking it to the riverboat casino and gambling it away!

My Mom has always been good to me, but I am an adult now and I think I should have some say in my own financial matters. Her Mom, my Granny, has taken my side and told Mom that she can’t control me forever, but that just made Mom angry; she doesn't get along very well with Granny. Mom suggested I ask someone impartial for advice and she agreed to “seriously consider” their opinion. I know I could take the money and buy a truck without her leave, but she is my Mom and I would like to respect her. We both love cats, so I have decided to ask you for your impartial opinion.

Signed,
Truck Girl

Dear Truck Girl:

You sound like a very mature and responsible young woman and I admire the respect you have for your mother. It can be very hard for a Mom to let go and to allow her child to grow up, and buying a vehicle – and paying cash for it – is a very grown up decision. You have managed to save quite a bit of money in a very short time. This represents a great deal of hard work and sacrifice on your part, as well as a financial safety net for the future. I can understand why your mother would want you to save some of it for emergencies, but I can also understand why you do not want to pay high finances charges due to your age and a lack of credit history. I am going to suggest a compromise:

Put 50% of the cost down in cash and finance the remainder over 24 – 36 months (the optimal amount of time for the lowest finance charges). In order to establish initial credit, apply for a credit card in your name only and use it to pay for things you would normally pay for with cash. Pay off the balance in its entirety at the end of every month. This way you are building a credit history and avoiding finance charges. After five or six months you will have enough of a credit history to bring your interest rate down to a reasonable level. Check out various financing offers through Lendingtree.com or any other clearinghouse that will send your information to multiple banks that will compete for your business (due to credit reform legislation, inquiries will not affect your credit rating). This compromise will allow you to build a solid credit history just in case you need a bank loan sometime down the road because you want to buy your own diner! It will also leave you with money in the bank to pay for emergencies or even allow you to support yourself should you decide to go to school full-time.

I know waiting to buy your dream truck is not what you would prefer to do, but February is a notoriously slow month for auto sales, so it is a good time to get a good price on a car or a truck, especially since manufacturers are usually offering cash back rebates to the customer and bonus money to the dealer for each sale made; the combination of these two incentives can save you a good chunk of money on a truck!

Snuggles,
Tazi

Ask Tazi! is ghostwritten by a human with a Bachelors of Arts in Communications. Tazi-Kat is not really a talking feline.

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