As you may or may not know I am a HUGE sports fan. I love em all. One of my favorites is NFL football. This morning I heard the news that the Dallas Cowboys has officially released Terrell Owens (eating a 9 million dollar hit on the salary cap in the meantime).
It made me think, “man this was a huge financial mistake.” It’s not like people didn’t advise Jerry Jones (the cowboys owner) to not sign this guy. He had caused problems with the 49ers and Eagles and everyone knew he would inevitably cause problems in Dallas.
Jerry Jones likely made the right decision today…even though it was such a hard financial decision. At some point, you have to recognize a mistake and cut your losses.
We see this all the time in our financial life. But rather than cut ties…we just let the problem fester. Allow me to explain:
If you finance a car, for let’s say $20,000, and at some point in your financial life you say “oh no, this makes my budget too tight…or maybe even makes it in the negative” this will cause major problems because you are stuck with a decision. #1) Keep the Car #2) Sell the car.
Many times people in this situation will find themselves upside down in the car, meaning that they owe more on it than its worth. (Might still owe $18,000 on it but it’s only worth $14,000) This is when people say, “well I’ll just keep it rather than take the loss.” However, I would much rather you sell that car and keep a $4,000 debt and add an extra $2,000 for a new “beater car.” $6,000 of debt (and drive a beater) is better than $18,000 (and drive a nicer one) because the only way you can be free is by making that debt $0.
People that disagree with this always push-back with how they want to keep their standard of living (i.e. drive a nice car). However, I would argue that by keeping the car, this would actually ruin your standard of living. Proverbs 22:7 says that the borrower becomes the lender’s slave…when you are in debt, you have the same emotional implications that slaves do…you’re trapped (I have met too many people that are in this position for me to know this is true).
Sometimes a financial mistake, whether its Terrell Owens or a car that you can’t afford, may hurt when you cut ties…but it is better to do so than let the problem fester.
