So you are, or want to be an Owner-Operator.....Are You Prepared?
- Thread starter usafk9
- Start date
moose
Veteran Expediter
A VERY good OP.
thanks for sharing.
i would like to touch only one point.
credit line vs cash reserve as a business saving account.
lets say that a H/W O/O team drivers have 50,000$ in the bank, are doing well. have a good cash-flow,and paying down their debt as they go.
that 50 grands LOOSE a % of it's value.
that % will be depends on the highest interest rate this one small business households owe.
for example, lets say that they have a house payments at 4%apr, and a truck payment at 12%APR.
that 'money in the bank' COST them a 12% in interest charges, as same funds can be used to pay off, or pay ahead the loan.
for 50,000$ annually @ 12% that's 6,000$ a year, or 500$ a month.
securing a high limit credit line is NOT in everyone best interest, and not available for many.
but if all possible, a credit line can replaced TO A POINT a cash reserve.
for example a risk ratio can be 12,000$ of cash reserve per truck.
all the rest is in the hand of a high spending limits for a business credit card one have obtained after long years of improved credit score. {say 30,000$}
paying a large repair bill using a credit card can 'cost' a lot in interest charges, but once such charge is been made into a card, it is wise to quick go & obtained a 'cheaper' loan to cover the remaining balance.
{there are also credit company's that will give a loan for truckers to cover maintenance costs.}
from that point it is back to square one, paying off debts, starting with the highest interest loan.
there is one more problem. as you can all read from my sig. line.
cash reserve looses it's value.
more so, when {not if} a massive devalue occurs, cash reserves will be a hard work going to waist, & will be lost.
i will NOT advise no-one not to save, but i will advised not to save cash.
that cash reserve can becomes & IS expensive.
here's your calculator:
My highest interest loan is :
my highest financed charge rate is:
my cash reserve in the bank is:
my cash reserve in the bank cost me : ....annually.
my cash reserve in the bank cost me : ....monthly.
i'm O.K with that. ...yes ?....no?...
{BTW, if you are making money, and you are not making an estimated quarterly payments to the IRS, then that's probably your highest interest loan...}
good luck.
thanks for sharing.
i would like to touch only one point.
credit line vs cash reserve as a business saving account.
lets say that a H/W O/O team drivers have 50,000$ in the bank, are doing well. have a good cash-flow,and paying down their debt as they go.
that 50 grands LOOSE a % of it's value.
that % will be depends on the highest interest rate this one small business households owe.
for example, lets say that they have a house payments at 4%apr, and a truck payment at 12%APR.
that 'money in the bank' COST them a 12% in interest charges, as same funds can be used to pay off, or pay ahead the loan.
for 50,000$ annually @ 12% that's 6,000$ a year, or 500$ a month.
securing a high limit credit line is NOT in everyone best interest, and not available for many.
but if all possible, a credit line can replaced TO A POINT a cash reserve.
for example a risk ratio can be 12,000$ of cash reserve per truck.
all the rest is in the hand of a high spending limits for a business credit card one have obtained after long years of improved credit score. {say 30,000$}
paying a large repair bill using a credit card can 'cost' a lot in interest charges, but once such charge is been made into a card, it is wise to quick go & obtained a 'cheaper' loan to cover the remaining balance.
{there are also credit company's that will give a loan for truckers to cover maintenance costs.}
from that point it is back to square one, paying off debts, starting with the highest interest loan.
there is one more problem. as you can all read from my sig. line.
cash reserve looses it's value.
more so, when {not if} a massive devalue occurs, cash reserves will be a hard work going to waist, & will be lost.
i will NOT advise no-one not to save, but i will advised not to save cash.
that cash reserve can becomes & IS expensive.
here's your calculator:
My highest interest loan is :
my highest financed charge rate is:
my cash reserve in the bank is:
my cash reserve in the bank cost me : ....annually.
my cash reserve in the bank cost me : ....monthly.
i'm O.K with that. ...yes ?....no?...
{BTW, if you are making money, and you are not making an estimated quarterly payments to the IRS, then that's probably your highest interest loan...}
good luck.
Lots to ponder there, Moose. Between our monthly truck payment (our reserves, pre-engine replacement, were almost enough to pay the truck off-glad we didn't pull that trigger) and our averaged monthly repair before the engine replacement, were more than a new truck payment.
That new truck comes with a warranty, but loads of new emissions reduction items that scare me. One more thing it comes with is a large payment, for a long time.
That brings me to the bottom of your post, the debt. The biggest thing both my scenario here, and yours above scream to me is "RISK". Debt and I have had a rocky relationship in the past. I've paid tons of 'stupid tax', and have sometimes drug my wife into it. Her love for me, and her subsequent desire to help me chase my dreams (sometimes... okay, a lot,....to my own detriment) persuaded her into going along with some of my, um, schemes.
Lots of costly things can happen in this business, with an engine replacement or a (hopefully) temporarily disabled child, causing you to come off the road being just two of them. There are more than just you, Moose, who are in the camp that our dollar is rapidly devaluing, and some fear that another recession is lurking around the corner. We don't have those beliefs, but don't want anyone ever chasing us for money again. Our solution to that is to build (rebuild) our capital reserves, while continuing to eradicate those remaining debts.
Each person's risk tolerance is different. Not having folks chasing us if things go awry is comforting, and helps me sleep well at night. While we do realize that our truck won't last forever, and that in the next few years, it will probably make little financial sense to keep it, we also realize that cash is king, and having a healthy downstroke on a new one, coupled with real cash reserves will be a win for us. We'd rather our strengths be defined by the demonstrated discipline to save cash, rather than by our ability to continually borrow.
Excellent post, usafk9, and you close with one of the most important questions a prospective owner-operator can ask.
If all prospective owner-operators asked that question and made being prepared a top priority, the trucking industry would look different than it does today.
Many shippers, brokers and carriers know all too well that the industry is filled with owner-operators who live run-to-run and paycheck-to-paycheck. They know they can dupe such people into running for half price by calling a load "backhaul." They know that when unprepared owner-operators who run cheap and do not manage their money well run out of money, others will rise to replace him. They know that the more unprepared owner-operators they can find, the less they have to pay them and the more money they can keep for themselves.
In contrast, owner operators who have preparation as a top priority force themselves to know their numbers and learn how to know if their business is profitable or not. They select loads and drive miles not to keep the wolves behind them, but to secure a better future ahead.
Owner-operators have a choice. They can live worried each day and try to drive away from their fears, or they can be at peace today and drive with confidence toward a desirable future. The difference, as you illustrated so well, A.J., is preparation.
*** Paragraph 3 is one of the reasons so many come and go like water over the dam. It is easy to fall head over heels in the aurora of expediting until the reality of expenses finally hits home and then its: Oh my, I gotta buy my own gas and fix my own truck, whoops, how did that happen? So the final outcome, 15,000 expediters are no longer in the race,imho.
Exactly! But that's not the end of the story. When 15,000 expediters fall out of the race, 15,000 more come in to replace them. Successful expediters make this job look great, but far more fail than succeed.
I wish all the best of success in expediting. It was the most fun job I ever had, bar none. Maybe someday I will be back. My getting out was never over the engine failure and so on, but other reasons. But now , I would need an up to date van or maybe a Sprinter or one of the new Transits when they get their act together on the right size of ride.
It's nice to see that Zorry's daughter is recovering so well. Her problems may act as a wake up call to some. That waitng two years to have your blood pressue checked at a DOT physical isn't a really good idea. Most Wal Marts have a machine located near their pharamcy to check your blood pressue. It's not called the "silent killer" for nothing.