Here's To Well Defined Goals!

Photo by Vek Labs on Unsplash

Over the past 7 months, we have purchased two new Teslas – a Model S P100DL and a Model 3 Dual Motor Long Range. Doing so meant we took out a total of $148,100 in loans. Our combined minimum monthly car payments are $2,209. That’s a lot. It’s more than our house payment was a couple years ago when we were living in Arizona.

We are actually paying $2,625 a month towards the loans. That’s what we have budgeted and we can, thankfully, afford that much while still putting aside enough in other savings accounts for other things such as emergencies, etc.

You might think that taking on such a huge monthly payment would worry me a bit, and you would be right. The future is uncertain and this is one of the reasons we have an emergency fund built up.

Yay For Debt?

But, now that the loans have actually been taken out, in a strange sort of way, I welcome them. You see, back before we got the cars, we were saving $2,625 each month towards their purchase. So having that monthly loan payment hasn’t really changed anything from the perspective of our budget. The only difference is I’m sending the money to the loan company instead of to a savings account. (I’ve already explained that the EV tax credits we received more than cover the interest costs of the loans, so we’re not losing money by taking out loans and paying interest.)

When I was saving up our funds, the money was going into an account and accumulating. Saving seemed like something that was just going to go on forever. Now that the money is paying down a loan balance, the end is in sight.  By having a loan, I’ve got a very well-defined end point.

It's All About That Bass Motivation

It turns out, I get more excited spending money to pay down the loans than saving the same amount of money for the cars in the first place. I know this is because the finish line is so specific. While I was saving up money over a period of years, my target was always changing. As time went on, the cost of the Model S kept rising, making it seem like I was not making progress. Likewise, I never fully defined what kind of car we planned on getting for my wife. I just threw money into an account each month and figured we’d decide on something when we got a decent sized amount saved up. I never defined what a "decent sized" amount was.

Both of those goals were very fuzzy. It’s hard to get excited about progress towards a goal when the goal isn’t clearly defined.

Well, we’ve now got a clearly-defined goal – two paid off loans!

My wife’s loan has the smallest balance ($44,100) as well as the highest interest rate, so that’s the one I will concentrate on paying off first. This is really exciting to me because I have been saving for a car for her in some form or another for at least 3 or 4 years. Paying that loan off means freeing up money in our budget that had been allocated for years! Once her loan is paid off, the money we sent towards that will get redirected to my car loan, increasing that payment by over 66% and enabling that loan to be paid down even faster!

And when those two loans are paid off – jackpot! We will have freed up a crapload of additional money each month. No more car payments. No more saving towards a car. Instead, we’ll have an additional $2,625 each month that can be used to save and invest. That is truly exciting to me! That is a goal I can really get motivated to work towards!