Earlier, I wrote about the dumbest financial move I ever made. That was the purchase of my 2004 Mitsubshi Outlander. Coming in at number 2 of dumb financial moves didn’t cost quite as much but was foolish none the less.
Warning: The events you are about to read took place when I was wondering through what I call “dark territory” of my financial journey. There was little to no regard for even the most basic of financial principals. Not for the faint hearted…proceed at your own risk.
In the summer of 2005 (only 6 months after my last dumb purchase), I decided I needed a new laptop. The one I had was a few years old and it was time for a replacement. With no product specifications in mind, I visited Dell’s website and browsed all the shiny new toys. My eyes landed on the Dell Inspiron 6000.
This computer had a 1.6 GHz Intel Pentium processor, 60 GB hard drive, and 512 MB Ram, I also upgraded from Windows XP Home to Windows XP Pro. While those stats sound archaic today, that was a respectable machine in 2005. Buying directly from Dell, I was able to customize my PC. Originally retailing at $1,700…my “blinged out version” cost just around $2,000! Hey, what a coincidence, that is the limit on my new Dell Preferred Account (aka credit!)
I justified the purchase because of all the time I spend on the computer. I needed a good desktop replacement model.
This was a dumb financial move for 3 reasons:
1.I went shopping for a major purchase without any product specifications. I let the manufacturer feed me pretty pictures of the latest and greatest model.
2.I purchased on credit with no regard for how it would impact my budget
3.At the time, no emergency fund
What comes next in this story is just humor, irony and insult to injury. Continue at your own risk!
About 3 months after I purchased my new desktop replacement (which, by the way did more travel than staying stationery), I was laid off from my job and since I didn’t have an emergency fund (see above), I made minimum payments from another credit card.
Fortunately, I was only laid off for 3 ½ months. I resumed work and business as usual with minimum payments sprinkled with a few late or missed payments. Time flies when you’re having fun! Fast forward 3 years and I am still paying for my not-so-shiny, not-so-new laptop. At the beginning of my financial awakening (that’s another story) I decided to figure out how much I still owed. I mean, $2,000 for 3 years….I should be almost done right?
In August of 2008 I owed $2,200 on my Dell Preferred Account! That is more than the original retail value and certainly more than it’s worth 3 years later. I was underwater with my laptop! Late payments & finance charges pushed my balance over the limit and resulted in new fees, my minimum payments barely touched the principal. At some point my annual percentage rate was 28%!
I cringe when I think of how many times over I’ve paid for this laptop! I ran the numbers using a debt payoff calculator, and if I continued with minimum payments, it would have taken my 23 years and cost over $5,000 in interest to pay off my $2,000 laptop. Whoa.
The story gets better from here:
Through an unrelated chain of events, I left the dark territory phase of my financial journey, owned up and took responsibility for my actions and charted the path to become debt free! I am proud to report the laptop is paid in full! I still have it and plan on using it until dies. I took the suggestion of Trent from The Simple Dollar and installed the Ubuntu Operating System as it is a little less bloated than Windows, thus creating my own frugal laptop.
I’ve learned my lesson! The next machine I buy will be cash only and my specifications.