The “F” Word Motorcyclists Don't Want to Address
There's a big "F" bomb that motorcyclists don't want to think about. No, not f***. I'm talking about the other dirty little "F" word. Finances. While motorcycling is certainly less expensive than some sports like horseback riding or a country club membership for golf, there's no denying it can be a pricey sport. It's more than just the cost of the bike. There are ongoing expenses like tires, oil, maintenance and protective riding apparel. And then there are upgrades, mods and activities like track days, racing or overnight trips. These things add up.
Over the years, I've heard many motorcyclists lament about financial struggles. When you have a motorcycle addiction, it's tough to abstain from throwing money down on all things motorsports. Early on, I made my own not-so-great financial choices. My husband and I financed both of our first motorcycles during a time that left us strapped. However, since then, after completing my Masters of Business degree, landing my first job out of college as a financial analyst and working with a financial advisor, I've learned a lot about financial planning. It made us change the way we approach the financial aspect of our life on two-wheels. Now, this is the point where a lot of people will stop listening. There is the misconception that being financially responsible as a motorcyclist means you'll have less fun--and fewer motorcycles. But hear me out. What I'm about to tell you is that you can make good financial decisions that lead to reduced financial stress AND have what you want. But first it's important to understand a few concepts.
We live in a society that wants instant gratification. You want a motorcycle, so you go out and buy that motorcycle even if you don't have the cash for it. Like I mentioned above, I've made that mistake. When you finance a bike, you're paying interest, and interest is money down the toilet. Over the years you've financed your bike, you're losing a lot of money. Depending on the interest rate, you may be paying a third of what the bike costs just in interest. That's a lot of track days and motorcycle parts that you could’ve had! So I developed a new mentality. As much as my bikes feel like necessities, they're not, and if I don't have the cash to pay for a bike, I don't buy it. I save until I have enough to buy it with cash. I've found that actually works very well since if you have the cash to throw down on a bike, you can often get a killer deal on a used one. I got the deal of the century on my R6 because I bought it used and the person selling it needed to sell it quickly for cash--and I had the cash to do so. The other reason for not financing a bike leads to my next point...
There's a satisfaction in looking into the garage and seeing bikes that are 100% yours with no monthly payments. I feel like it makes them that much more enjoyable. They're not a financial burden. Also, since you've paid for the bike with cash, what you would have spent on monthly payments you're able to save. And guess what that means? You either have more money saved up for more motorcycles, or, you can make an even better choice by investing it.
When you have debt or run up credit cards, it's incredibly easy to ruin your credit score. Miss just one motorcycle payment and your credit score drops. Plus, if you have high credit utilization, it will also negatively impact your credit score. It's imperative to have a good credit score since you may want to buy a house in the future--or your car may die and it's your only means to get to work and you may need an auto loan. When those times arise, you need good credit so that you can get a loan approved. Once your credit score drops, you'll have to work hard to get it back up and it can be a real uphill battle. Sadly, I've talked to a handful of young motorcyclists over the years who admitted to ruining their credit scores because they couldn't make their bike payments on time.
The other issue with financing bikes or purchasing motorcycle parts or events on credit is that you may find yourself strapped from the payments--and that can create stress that could have been avoidable. Sure, having that bike you've always wanted provides happiness, but once those monthly payments start hitting you may find you dread paying the bill. Those living paycheck to paycheck and lack a solid savings will find themselves in some real trouble. What happens if you have an unexpected medical bill arise or an unusually high power bill hit? In America, according to a survey by H&R Block, 59% of people worry about finances all the time. That's a majority of people! And a lot of stress! So here's my two cents: Don’t make a decision that could leave you feeling financial anxiety.
Does This Mean You Shouldn't Purchase Anything on Credit? No. Here's Why
There are certain instances where it makes sense to use a credit card, take a loan or finance a motorcycle. Having a credit card actually has a positive impact on your credit score—after all, to build credit you have to use credit—but ONLY if you pay it off each month or pay the bill on time. Also, there are credit cards with 0% interest rates for the first year, so if you make your payments on time and pay it off within a year, it will help build your credit and you won't be wasting money on interest. It's important to remember that there's good debt and bad debt. Good debt is an investment that will grow in value or generate long-term income such a college loan or mortgage on a house. Motorcycles tend to be considered bad debt since they typically have higher interest rates and lose value over time. However, an example of where a motorcycle could be good debt is if you're using it as your primary vehicle to commute to work and the gas and parking fee savings off-sets the interest.
Gaining Financial Freedom While Satisfying Your Motorcycle Addiction
Financial freedom means freedom from stress and having the ability to afford the things that are most meaningful to you. This is very possibly to achieve. It just requires setting some goals, being patient and making good decisions. The first rule of thumb I learned from a financial advisor I worked with is "pay thyself first." What that means is that when I get paid, I pay myself (in the form of setting money aside in savings) before purchasing anything--like tires and track days. Since I've taken that money out of play, I won't be tempted to spend it. One thing I've found that's really helpful is to set up an automatic draft to a savings account. You can set it up for weekly transfers--but you can also do it monthly. I did this because I’m bad about remembering to physically transfer money to savings so this literally forces me to save. Once you have a solid savings, you don't want to go out and blow the whole thing on a new bike of course. However, you can set savings goals and allocate a percentage of that savings for that dream motorcycle you've always wanted. That's how I paid for my R6. After riding my DRZ for a year I desperately wanted a sport bike right away, but didn’t want to sell my DRZ and also didn't want to blow my savings. So I made do with just my DRZ and saved for a couple years until I could pay cash for my sportbike. It was hard not to have it as soon as I wanted it, but the wait was worth it.
Making Your Dreams Happen
I've heard a lot of people say they want their dream bike, or they want to do track days or they want to do Yamaha Champions Riding School but it's too expensive. The truth is, nothing is out of reach. For some people, it's just a matter of making it a priority--saying "no" to a beach vacation and making Champ School the vacation instead. Or choosing to wait on buying new furniture so you can do a track day weekend. Everyone's financial position is different though. For some people, it's simply a matter of taking control of debt and setting savings goals. But for others, finances are a very serious issue and the thought of building a savings may seem completely unachievable. Many of us have been through those times. I spent four years in undergrad college and two years during my masters degree living paycheck to paycheck. I couldn't even afford to go out to eat let alone buy a motorcycle. And up until recent years, I had to make hard decisions. For example, I had to take a hiatus from track days and motorcycle vacations while my husband and I made a career change, paid off debt and saved and bought a home. That was really hard to do, but in hindsight, it was incredibly worthwhile. I'm thankful for those years because by taking control of our finances, setting goals and knowing when to say "no", we now have a much brighter financial future and financial freedom we didn't have before.
This topic is personally very important to me because financial stress is so prevalent and a burden among motorcyclists yet it doesn’t have to be.
The New Year is almost here, so if you're feeling the weight of finances, make 2020 the year to gain the peace-of-mind financial freedom can bring. It's ok to start small. If you're not saving any money now, just start with $25 per week. Over the course of a year that's $1,200. That's pretty good considering 69% of Americans have less than $1,000 in savings. That $1,200 in savings can be that little buffer you need when hard times hit. Or, it can be the start of achieving a dream.