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I read "The Millionaire Next Door" also. I live by it. It's just that I am at the point where I'm quite a bit ahead of the game (for my age early 40's) and have a little desire to own something nice (like a BMW M car). My childhood dream car is a BMW M3. I am not saying I NEED it, I am just entertaining the idea of "WHAT IF" I buy one without affecting other priorities in life (ie 401k, 529, Roth IRA, mortgage). Will the numbers work out for me if I have say over 1.5MM networth.. etc.. that's all.
Dave Ramsey advised a guy with 1 million in net worth that he thought it was okay to buy a new car at that level. Otherwise, he usually recommended used. You can get quality from a used car.
The trap of buying a status car like a BMW is that you are cheating a bit. You cheat a little now, feels good. Got a wink from that cute young girl. Now, you need more bling. The guys at the wine and cheese party that have beemers have Rolexes. Hey, I can afford a Rolex... and so on.
Before you know it, all your cash is going to Fifth Avenue in NYC to prop up a temporary false image of yourself.
There is another risk. Start showing up at work with the status car and people might start thinking you are paid too much. Jealousy is a terrible enemy.
Avoid high status brands of everything and it will make you richer.
In your opinion, how much net worth to afford a BMW M2 comfortably?
I've noticed that in LA there's a lot of posers who have about 80% of their net worth tied up in their car. Fancy cars are like invitations to get car jacked or get your car stolen. I like cars that get me from point A to point B for no more than $20,000. When you're stuck in traffic going 6 MPH it doesn't matter if you only have 4 cylinders, regular fabric seats and stock rims.
Sorry, but real studies of real millionaires say otherwise. Think about it. How does one amass a lot of money? Not by spending it on cars that depreciate their value over time.
The "huge" luxury market you speak of is probably smaller than you think and it fueled by hyperspenders that have high incomes. Think physicians, lawyers, stockbrokers, and bankers. These people tend to spend what they make and have low net worth relative to their incomes. That's who drives these cars. Not real millionaires.
If you are curious, read The Millionaire Next Door. I am listening to the audiobook again. Saving and being wealthy are not fairy tales people tell themselves. It's the way wealth is built. One dollar at a time.
Yes, yes...I've heard all about the book - I'm not convinced the authors are knowledgeable researchers with an unbiased sample. I'm saying this board goes to extremes. There are very few multimillionnaires driving rusty Ford pickups (but that makes for great reading and a dramatic image!)....there are a lot who have at least ONE car worth $50k...and only a few driving a Rolls. Let's not forget the guy in the middle because there are MANY of them.
I don't live my life based on extremes...I'm not an obsessive compulsive person...I'm frugal without being a freak and I have no desire to drive a rusty Ford...I have a 10 year old Mazda RX-8...I LOVE IT. And I bought it new. My "winter" car I bought 2 years old and I'll keep it at least 10 years. And I have a very nice 401(k) and emergency fund...and my retirement budget will allow for LOTS of travel...and yet I still plan to retire before FRA. But I won't eat dog food or...drive a rusty pickup in order to retire a bit early because I'm not into self-flagellation or into pi$$ing contests on who can drive the oldest car with the most miles on it - think Zen and the middle-road.
OP,
How old are you? If your NW is over 1MM and you have many years to go before you retire, Go for it.
You DO only live once. Hope you post some pics!
One of the traits of rich people is not putting resources into any asset that loses money. All of the truly rich people I know drive older Chevy's, and pickup trucks. Another trait of rich people is to not attract attention by wearing expensive watches or jewelry.
Not true in my case. I can afford it, pay cash even.
Then you don't have to ask. Go for it, if you think it'll be worth it.
If you're not sure if it'll be worth it to you, you may want to rent something kindasorta similar for a week or two or three. Or buy something used. A former co-worker of mine owned a 7 year old Honda Accord and had been a "buy the reliable car, drive it into the ground" type of person for much of his adult life. Rather than keep the Honda for another 7+ years, he traded it in to buy a Jaguar. A used Jaguar. The car would have been 70K new, but cost him under 25K.
It was beautiful if you're into that type of car (I'd be more into an M Series BMW sedan or AMG series Mercedes sedan if I were to pay up for that sort of thing), and yes, being used it had maintenance costs that reminded you it was luxury car (insert joke about putting the mechanic's kids through college), but he got his "luxury car jones" out. As it happened, he enjoyed it more than he expected (AFAIK he still owns the thing).
Everybody has some area where they "splurge". Cars are generally not a good place to spend a bunch because they're depreciating assets and the expensive ones usually have higher maintenance/upkeep costs, but hey, dinner at a fancy restaurant is gone in a couple hours and the calories are basically the same as rotisserie chicken and a salad from Costco, but many people still go out to eat and somehow save money. If it adds enough "value" to your life to prioritize it over other things, then go ahead. People save money so they can live the way they want, not just for the sake of saving money.
Then you don't have to ask. Go for it, if you think it'll be worth it.
If you're not sure if it'll be worth it to you, you may want to rent something kindasorta similar for a week or two or three. Or buy something used. A former co-worker of mine owned a 7 year old Honda Accord and had been a "buy the reliable car, drive it into the ground" type of person for much of his adult life. Rather than keep the Honda for another 7+ years, he traded it in to buy a Jaguar. A used Jaguar. The car would have been 70K new, but cost him under 25K.
It was beautiful if you're into that type of car (I'd be more into an M Series BMW sedan or AMG series Mercedes sedan if I were to pay up for that sort of thing), and yes, being used it had maintenance costs that reminded you it was luxury car (insert joke about putting the mechanic's kids through college), but he got his "luxury car jones" out. As it happened, he enjoyed it more than he expected (AFAIK he still owns the thing).
Everybody has some area where they "splurge". Cars are generally not a good place to spend a bunch because they're depreciating assets and the expensive ones usually have higher maintenance/upkeep costs, but hey, dinner at a fancy restaurant is gone in a couple hours and the calories are basically the same as rotisserie chicken and a salad from Costco, but many people still go out to eat and somehow save money. If it adds enough "value" to your life to prioritize it over other things, then go ahead. People save money so they can live the way they want, not just for the sake of saving money.
Agree with all of this. You might even want to consider BMW's European delivery. It is an awesome program that allows you to drive your car in Europe while generally paying about 10% less than retail for the purchase.
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