Lenny Lawson dives into the importance of financial responsibility across generations, emphasizing the need for older individuals to organize their financial documents for their heirs. He shares personal anecdotes about estate planning and the significance of having a clear roadmap for loved ones. Transitioning to younger generations, he discusses instilling a work ethic and understanding money management, including budgeting and the dangers of credit. Lenny encourages proactive financial planning and the development of good habits to ensure a secure future.
"...and ending up with a tremendous amount of negative equity and a monthly payment that you cannot afford to make."
Negative equity means you owe more money on your car than it's worth. If you try to sell it, you wouldn't get enough money to pay off the loan.
Negative equity occurs when the amount owed on a vehicle loan exceeds the vehicle's current market value. This situation can arise if a car depreciates faster than the loan is paid down, leaving the owner in a financially precarious position.
"...So the vehicle ends up getting repowed. What happens when a car gets repowed?"
Repossession happens when a bank or lender takes your car back because you haven't been paying for it. This can happen if you miss payments for a while.
Repossession is the process by which a lender takes back a vehicle when the borrower fails to make the required payments. This often occurs after several missed payments and can significantly impact the borrower's credit score.
"...and then they can garnish your wages wherever you're working. Of course, you always have another option, bankruptcy."
Garnishing your wages means that part of your paycheck is taken by the court to pay off a debt you owe. This usually happens after a lender wins a lawsuit against you.
Garnishing wages is a legal process where a portion of a person's earnings is withheld by an employer for the payment of a debt, typically following a court judgment. This can occur after a lender successfully sues a borrower for unpaid debts.
"...sometimes I will see somebody driving down a road in a, I don't know, like a Cadillac Escalade, for example."
The Cadillac Escalade is a big, fancy SUV that many people buy for its comfort and luxury. It's known for having a lot of space and nice features, making it a popular choice for those who want to drive in style.
The Cadillac Escalade is a full-size luxury SUV known for its spacious interior, high-end features, and powerful performance. It's often associated with luxury and status, making it a popular choice among affluent buyers.
"...if they'd gotten a new Chevy Tahoe that cost $40,000 less. But many times, as you, as we all know,..."
The Chevy Tahoe is a large SUV that can carry many passengers and their belongings. It's great for families and trips, and it has a powerful engine for towing things like trailers.
The Chevy Tahoe is a full-size SUV known for its spacious interior and strong towing capabilities. It's popular among families and those needing a versatile vehicle for both everyday use and outdoor adventures.
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Hey folks, Lenny Lawson here, the Car Guru, and today we're talking money. Money in finances,
money and responsibility. We're going to start with you if you're older and we're going
to go down to your teenagers and we're going to talk about some of the things that are
critical that you must be doing and thinking about if you haven't. For the older generation,
we're going to start, well, we can talk about your car collection if you want to. I'm going
to talk about mine because my car collection is a problem. It's a problem not for me. It's
a problem for those that I leave behind. What are you leaving behind that's a problem
or that will be a problem for your kids, the people who inherit what you leave behind?
You may be leaving behind nothing, you know, and I could say good for you, but that's not
necessarily good. So why have I been thinking about this? Well, because next month I'll
turn 69 and I've had some good friends recently passed away that are my age and I just know
what's inevitable. So it's time, it's really past time for certain things to be happening
if you happen to be my age. Do you have a will? Because if you don't, that's a big problem.
Some judge is going to decide what to do with your estate. So we just redid our wills. But
you know, I opened up my file cabinet and I was here in my office and I started looking
at, okay, let's say that I'm not here and they come in a week after I'm gone and
they start going through this. Is it going to be hard for them to, it's going to be hard
emotionally, but is it going to be hard for them to find the things that they need to
find in order to be able to proceed with taking care of my estate? So no, the drawer
was a mess. It really was. And so I thought about it this weekend and I knew that
my first stop on Monday morning was going to be Staples. So I went to Staples and
I bought a bunch of colored files and colored hanging files. And I decided what
each color was going to represent. I thought green was perfect for bank accounts and
money. Red, well, blood is red. So I just decided that all of my insurance
information, all my policies, summary of policies were going to be in red
folders. And then the blue folders were all of my estate planning things. And then
the yellow folders happened to be for all of my grandson, all of his stuff,
because he's the son of my son who, who was killed in a car accident in 2011.
And there were a lot of different things that had to happen with insurance
money back then. And I've had to track everything. And when he,
theoretically, well, not theoretically, by law at, at age 18, he can get all this
money, but he's not going to get it because I'm not going to let him have it.
But this is, this is a planning process is something that you have to have
organized. So that let's say that, that I die, then my daughter comes in
here and she doesn't have to say, what do I do now?
Because I wrote a letter and that letter, I showed them where it, where it is
yesterday. And I said, this is the file that you go to. If something happens to
me, it tells you what you need to do with the dealership, with my real estate.
As far as my insurance is concerned, where all my bank accounts are, where
the keys are to my safe deposit box, all the different things that I have
other than just personal assets that's handled in a will.
This is what you need to do. They have a roadmap. Do your kids have a roadmap?
Does your wife have one? If you proceed her in death or vice versa?
You know, you, I hit listen to some of the advice shows and stuff like that.
And they touch on these subjects, but you know, this is, this is something
that's, that's real. And I think that it's not that hard to do.
It could be daunting at first. I mean, this, I basically was able to
consolidate two large hanging files into just one drawer, just by getting rid of,
of stuff that didn't matter anymore. Just old documents. You don't have to
keep everything, you know, as far as tax returns and stuff like that.
It's not a bad idea to keep them pretty far back and some of the
records that, that provided the information for those tax returns.
But I believe that you're safe if you go back seven to 10 years somewhere
in that neighborhood, but do your family a favor and take care of this for them.
And so that, you know, they don't have to guess. Well, I thought he had
an insurance policy, you know, that you shouldn't have to think about that.
It should be very clear. And mine is now, but three days ago, it wasn't.
They would have figured it out. They would have called the insurance agent,
except he's 80, 86 years old now. Yeah. My barber's 91 and my insurance agent is 86.
So, you know, they better have a backup plan and they do.
So, you know, they could run down all this information.
I had to do a lot of that for my parents when they passed away.
It was fairly clear cut, but there were some, you know, I wasn't sure about some
of the insurance policies and things like that.
So just clear that up for your family. You do all the research.
It's a fun little project. Go buy you some colorful folders and separate it
into different categories. And I think you'll be happy with the result
and then invite your family in and say, okay, this is where everything is.
If something happens to me, go to this file first and then it would explain
the rest of it. I think that's a beautiful gift that you can give to your family.
Okay, I'll be back in just one minute.
Okay, so we have all the old folks taken care of. Now let's go all the way
to the other end of the scale. Let's talk about your teenagers, your grandchildren,
your children and what you should be doing for them.
Do they have a work ethic at all? You know, I see so many kids today
that come in and apply for jobs and they are absolutely clueless.
They have no idea how to present themselves to an employer.
And if you ask them any kind of in-depth questions about what they want to do or
you know, I don't even bother to say, what do you want to do five years from now?
It's because they have no idea. I don't even ask that question anymore.
I say, what do you want to be doing next month? And sometimes you'll get an answer.
But when does all that start? It starts when they're very young.
And how do they develop an understanding of the value of money?
We don't want to make money the center of their life.
I mean, we all know what the center of their life needs to be.
It needs to be their faith. But money is important.
And learning how to manage it, learning the value of it,
not feeling that you're entitled to everything and just whatever you ask for that you get,
you have to work. You have to have a work ethic.
My wife was out on the driveway. She was trimming a crepe myrtle that we had.
Beautiful bush slash tree. And my four-year-old grandson was helping.
And you would think a four-year-old grandson wouldn't be much use,
but this kid has an incredible work ethic.
She had trimmed this tree, went inside for just like five minutes,
came back that entire tree, the remnants of it,
were loaded in the back of our side by side.
He had done that all himself.
And he was in the process of sweeping up the residuals.
Unbelievable. She couldn't get over it.
She called me and told me about,
Lenny, you won't believe what Leo did.
But now I've got other grandchildren that aren't anything like that.
You have to ask four or five times in order to get them to do something.
We shouldn't have to, but that's just the way it is right now.
Those habits will hopefully change,
but these are the beginnings of responsibility, right?
We have to teach them how to budget and how to plan for purchases that they want to make.
I think it's important to sit down with somebody maybe in the 10th or 11th grade
and say, okay, let's just think about how much money you think you're going to be making
when you get out of school.
Let's say that you decide not to go to college
and you decide to get a job right out of school.
What do you think you're going to be able to make?
Well, my buddy makes $25 an hour.
Well, yeah, but what is he doing?
Are you going to be able to make $25 an hour?
I don't think that's something you can count on.
So let's start with an amount that you can count on.
And say you come up with $15 an hour, let's say.
Okay, what's it going to cost for an apartment?
Find out what apartments cost.
Let them do the research.
Let them Google it.
Find out what it costs to eat and to buy clothes and to pay utilities
and all the different things that we have to pay in order to be able to live on our own
and see what's left over.
There's probably nothing left over, especially if they go out and
spend money on things that they shouldn't.
I thought, you know, how are you going to get around?
Are you going to ride a bicycle?
Because you certainly don't have enough money in this budget to buy a car.
You know what the average selling price of a car is today?
You know, it's a new car that's approaching $50,000.
You know what the monthly payment is on a $50,000 car?
And where do you get the money to buy a $50,000 car?
You know, if you need to pay 20% down, how much is that?
So, okay, $10,000, where are you going to get that?
How long does it take to save that when you're making $15 an hour?
I don't want to talk about that.
I'm just a kid.
Yeah, well, just like anything else, that won't last because you'll be an adult before long.
And then if you go to college and you have to borrow money to go to college,
then what's that monthly payment going to be?
And how's that going to impact what you can do as far as your lifestyle after college?
We had a guy come in here the other day applying for a job and
you know, sometimes we'd like to find out what their experience is if they have any
and what they were making.
And we asked him, you know, what was your gross pay?
And out of that, what was your net pay?
He didn't know what the difference between gross pay and net pay was.
You know, when you fill out an application to buy a new car,
they're asking what your gross pay is.
But why do they want to know that?
Because that's not what you're taking home.
But they assume a certain tax rate based on the income level.
There's a lot of assumptions made when it comes to lending money.
Because, you know, that's how the banks make money.
A lot of people think banks make money by taking on deposits.
Well, that's how they get money to lend.
A lot of that money that they take in on deposits allows them to lend money.
But no banks make money on something called net interest margin and on fees, bank fees.
So, you know, they take deposits at 4% and lend it at 8%.
And that extra 4% margin that they have, that's how banks make money.
And then also they'll charge you a mortgage fee or a surveying fee, whatever.
Just there's all kinds of different fees that they come up with.
You know, overdraft fees, that's an important source of income for banks.
But they make money, most of it, by lending money.
And they want to lend money to people that they're fairly certain will pay it back.
Otherwise it becomes a charge off and they go the wrong direction.
So what are they looking for?
Well, probably the same things you would look for.
If you lend money to a person, maybe a friend or whatever,
do they have the capability or the capacity to pay you back?
I mean, if they're living beyond their means, they can't pay their other bills
and they're having to borrow money from you to be able to pay their power bill
or their water bill or whatever, or their tattoo bill.
Then, you know, you don't want to loan them money.
So banks are interested in your capacity.
Do you have the income to cover your existing expenses
and then this new car that you're trying to buy?
They also want to look at what kind of capital you have.
That's what you own.
Okay, when we're talking about capital,
we're not talking about the capital of Tennessee.
We're talking about assets.
Do you have any assets?
Like if you're buying a car, the car itself becomes the collateral for the loan.
But if you just walk into a bank and borrow money,
say, I need to borrow $10,000.
They say, what do you have for collateral?
Well, I'm a good person.
Well, that's probably not enough.
Now, I could go into a bank.
I'm not bragging or anything,
but I could probably borrow half a million dollars on a signature.
What do you think that is?
Well, it's because of the third thing that they look for,
character.
Do you have a reputation for paying debts?
I mean, I've got a 47-year reputation in the car business
of paying my debts.
And so they know that if I come in there and borrow that much money,
they do want to know what I'm going to use it for,
but they may not require any collateral because I'm a businessman and I have
significant assets that theoretically they could come after me if I didn't pay it.
So it's not about what your name is or who you are.
I mean, you can be the child of a very successful businessman
in Johnson City or Kingsport or Knoxville.
But if you have no track record, then you're just another person
and they're going to analyze you and analyze your credit worthiness
based on capacity, capital, and character.
Now, don't you think that these are things that people that are going into the workforce
and going to be borrowing money and spending money that they need to know?
They also need to understand the danger of too much credit, too easy credit,
and that usually comes in the form of a credit card.
Credit card debt has probably forced more people into bankruptcy
than just about any other single thing.
The second most prevalent cause of bankruptcy is buying too much car
and trading before it's paid off
and ending up with a tremendous amount of negative equity
and a monthly payment that you cannot afford to make.
So the vehicle ends up getting repowed.
What happens when a car gets repowed?
Well, the bank takes the car to the auction, sells it.
The difference between what they get for the car and what you owed,
they sue you for that.
They take you to court and they get a judgment
and then they can garnish your wages wherever you're working.
Of course, you always have another option, bankruptcy.
What does that do to you?
It's important for people to know.
I don't think bankruptcy has the sting that it used to
because banks, they're all different kinds of banks,
used to be just all banks were conservative.
And now you've got lenders out there that,
you know, they're not even officially banks.
They're just loan companies and they're able to loan
money at extremely high interest rates.
And sometimes those loans have to be collateralized
and sometimes they don't.
They have developed ways to collect money
that, you know, a short of breaking people's legs
and, you know, smashing their toes,
they're just able to get people to pay.
And what they can't is offset by the interest rates
that they charge and the upfront fees that they charge.
It's called predatory lending.
And even a good credit card company,
Capital One or Bank of America
or just any Visa or MasterCard or DiscoverCard,
you know, that's kind of predatory,
especially on people who don't know how to handle money
and don't pay off their credit cards every month.
And so, you know, these warnings have to get to the right ears.
One of the things I like doing is going to speak
into high schools.
And if you have a school,
if you're in the Tri-Cities region
and you know of a school that needs a speaker,
I would like to have somebody to come in
and speak to their 10th, 11th, 12th graders,
get ready to graduate from high school.
I volunteer just got to put it on the schedule
because they need to learn these lessons
so that they don't make the same mistakes
that many of their parents have made.
Okay, I'll take my last break.
I'll be back here in just a minute.
All right, I'm back.
There's this big group that's in the middle of us old folks
and the teenagers that are out there
and they're living their lives
and they're doing, some of them are doing just fine
and managing their money very diligently
and building a 401K that they can add to their Social Security
and retire comfortably and enjoy a long and fruitful retirement.
But there's a whole lot more people that don't have anything
and they are, you know,
thinking that they can survive on Social Security
and they have terrible credit and they're wrong.
You know, a lot of those people end up in their old age
getting a job at Walmart.
Not that there's anything wrong with that,
but you know, I'm sure they would prefer not to
when they're 70 and even 80 years old
and working at a McDonald's or as a greeter at Walmart.
You know, it's just, it's not ideal.
And a lot of the folks didn't put themselves in that position.
It, the circumstances did, you know, a major illness,
death in the family, loss of a job, you know,
their plant closed down.
I mean, that can change your lifestyle
and throw you for a loop financially.
But the important thing is to sit down
and really early on when you're young,
don't wait until you're 50 and get a financial planner,
get somebody to start working with you
pretty much as soon as you have a little bit of money
in the bank after you've graduated from high school
or college and you've got a job
hook up with a financial planner and start working a plan.
I mean, you may not have any big investments,
but you can start, you have to start somewhere.
Even if you're saving $100 a month,
you know, be consistent with it.
Act like it's just another one of your bills.
And as you can increase the amount of that bill.
And then you're saving, next thing you know,
you're saving $500 a month and then $1,000 a month.
And then you look up and you got $25,000 in the bank
and you want to go out and buy a car
and you got to pay $5,000 down.
It's not a problem.
You've got the money.
I like the idea of having financial milestones.
Like for example, when you hit $20,000 in savings,
you get some type of reward.
Something happens.
Maybe that's when you buy a car.
Maybe that's when you go on that special vacation.
And then when you hit $50,000 or $100,000,
then the next thing you know,
before you're in your late 40s,
you've got a million dollars somewhere
with some investment broker.
And you've got friends that don't have anything in the bank,
not a dime, still living paycheck to paycheck.
And it's all because you had a plan and they didn't.
You know, sometimes I will see somebody driving down a road
in a, I don't know, like a Cadillac Escalade, for example.
And I said, there goes a big car payment.
And the truth is, they probably would have been just as happy
if they'd gotten a new Chevy Tahoe that cost $40,000 less.
But many times, as you, as we all know,
that occasionally we let ego drive our decisions.
We get the feeling that we're financially secure
just because, well, we got all of our bills paid this month.
But you got nothing in your savings account.
Doesn't exist.
But the good news is, this is all driven by habits.
And the foundation of those habits are priorities,
the things that are most important to us.
And it's not always, like I say, it's not money,
but if you look at just the financial aspect of our lives,
within that, there has to be some guiding principles
and priorities and some solid habits
that will help us achieve things
that we don't even think about now.
I didn't think about retirement when I was 30.
That wasn't important.
But I'm very grateful that a guy came to the dealership one day
and told us about this new thing called 401Ks.
And I started saving money.
Back at that time, you know what the guaranteed interest rate was
on our 401K?
12.5%.
I wish I could get that now.
But that was the beginning of my retirement plan.
Of course, I'll probably never get to retire.
But that's okay because I still enjoy what I'm doing
and still enjoy being in the car business.
And if you need to take advantage of any of my automotive expertise,
you can get the CarGuru guidebook
just by sending me your email address.
Text it to my cell phone number, 423-552-2020.
I talk about a lot of this financial stuff in that book.
It's only 32 pages long, but it's packed full of good stuff
that will help you make better decisions
when it comes to your car life.
So send me your email address to 423-552-2020
or you can email me, Lenny Lawson, 2020 at gmail.com.
And I'll see you on the next edition of my CarGuru.
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