House or car? Which should I buy first?
Many a young person have undoubtedly asked themselves at some point whether they should buy a house first, or a car.
And it’s a question which usually elicits strong and passionate discussions in the financial empowerment seminars she hosts across the country, says Rose Miller, grants manager at JN Foundation.
“This is a common concern and a question I receive all the time. There are many schools of thought and opinions on the matter but there are really no right or wrong answers. Need, ability and opportunity would be some key motivators,” she tells the Jamaica Observer.
Miller notes that many people choose to buy the car first because it’s more affordable, which means saving for the down payment is easier.
“[But] as young people focus on their goals, their decisions shouldn’t be based on what is easiest. The watchwords must be ‘priority’ and ‘necessity’; not what is ‘cheaper’ or ‘more fashionable’,” she advises.
In fact, Miller says there are two key priorities which should precede the house or car — educational and/or career advancement, and settling debt.
“Are there any educational goals you would like to attain? Did you leave school with proper certification, or with the grades you really wanted? Those are questions to consider,” she advises. “If you didn’t graduate with requisite, competitive or marketable qualifications, then continuing your education should be a key focus.”
“Now, if you left school with proper qualifications then your priority at this point would be to ensure you settle any outstanding debt used to acquire this training. This will help you to build a good credit rating, which will come in handy when it’s time to secure the loan for a car or a mortgage for a home.”
As it pertains to purchasing a car, Miller points out that young people should make their decision based on whether or not it will be a financial asset, rather than solely on the challenges of public transportation.
“For example, do you need it for your job? There are some jobs, such as sales representatives, that require a reliable motor vehicle to effectively carry out work functions. In other words, is the car necessary to earn your income?”
“Can you use this car to facilitate an entrepreneurial venture utilising a skill or even tap into rental opportunities? The unit will then be more of an asset [that is]: fuelling your journey to financial independence rather than a liability — which is in effect a hindrance to that journey.”
In respect to homeownership, Miller says that while it should always be on their radar, it doesn’t have to be at the top of the list for young graduates during the first few years of their financial development.
“Homeownership is of great economic and social value, and a house, and real estate, in general, has over time proven to be a solid investment…[but] at this point your goal should be to create a solid financial platform on which you can build everything else. This should include an emergency fund consisting of at least six months’ living expenses,” she advises.
As they build that platform, Miller says it is advisable that, if possible, young graduates consider living at home with their parents for a few years.
“If you have saved enough for the down payment on a house and are in a position to comfortably make the monthly payments, then a house could also be seen as a means to gain additional income.
“However, if you are renting, then assess how much you are paying for rent and whether that money could be better put towards a mortgage. Also, you could reduce your cost for rent by sharing an apartment with room-mates and save the deposit to purchase a house.”