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Too personal of a question. I would not use net worth as a good benchmark.
I am a car enthusiast as well. With an income of over 200K spending over 30K felt like a lot to me. 60-70K...way too much for my liking.
I would use this rough measure. How long will it take for you to save up 60K and spend on a car. Then you can look at in terms of time as well as cash.
Good luck.
That’s a good point on the time to save. I think if I don’t have big miscellaneous expenses that I could save the $60k in less than a year. Realistically it would probably take longer since things come up like travel, eating out, etc
Quote:
Originally Posted by hikernut
Yeah, percentage of net worth isn't the right metric IMO. Sounds like this is going to be your daily driver? If so, I'd just include the cost into a budget and see if it all "pencils out" in terms of paying all your expenses and also hitting your savings target.
Yes it would be my daily. Since I am paying cash do you mean to put the insurance and maintenance cost into my budget? I have already done this and on a monthly basis I am more than covered. That’s why I wanted to focus more on the purchase price of the car relative to the cash I have.
Hi guys hopefully this is the right forum for this! I just turned 27 years old and my previous car was totaled by my insurance. I now need a new car and was was looking to splurge a little bit. Please keep in mind that I am a car enthusiast so I am looking to spend a bit more than others would who are just looking for an A to B type car. I also want to stay within my financial means which is why I’d like to know you’re opinions!
I calculated my current liquid net worth to be approximately $285k. I do include retirement assets in the calculation but also excluded equity in a couple homes (not sure if this is right way to calculate). I do want to leave income out of the picture since I am looking to pay cash, however I do have a stable job and have already budgeted the insurance cost. I am looking to splurge on a car and was thinking on spending around $60k-$70k. Is this reasonable given my situation? Let me know if there are any critical details I am leaving out. Thank you for any advice!
The car won't bankrupt you, but what you should be asking yourself is what you value more in life, the car or the ability to FIRE ( https://twocents.lifehacker.com/the-...-re-1820129768 ). It is a personal decision, based on your own values.
Yes it would be my daily. Since I am paying cash do you mean to put the insurance and maintenance cost into my budget?
Of course you can do the accounting however you like.
Personally, I want to know the total cost of driving. This includes the cost of the vehicle, whether I pay cash or take out a loan. For example, if I pay $50k cash for a car, plan to keep it for six years and expect to sell it for $20k, my cost for the car is $5k/year.
If this is just a one-time thing I suppose just spend the money and don't worry about it. But usually once you get used to a certain thing in your life... nice car, nice dinners, etc... it's hard to give it up in the future!
Normally, I would say go for it! You're young and you seem that you have your **** together! However, I do want to share a story. I was your age when I bought my dream car. (Although my taste wasn't as fancy as yours):
In October 2012, I bought my "dream car." I bought it brand new for $28.5k cash, which I bought it at a bargain. Also at that time, I was learning about the stock market since i had significant money tied up into it, but like a young dumbass, I spent a lot of money on **** that I didn't need, including that car.
At that time, Netflix was only trading for $10.00 a share. I wish someone would have told me to invest in the stock market and hold off of buying my dream car. Even though I didn't know much about the stock market, I would have comfortably invested 28k in netflix because it was a big streaming company, and for ten dollars a share, it would have been a bargain for me. In 2012, Netflix would have been on a very short list of stocks I would be comfortable owning without breaking a sweat. If I would have invested that money into netflix stock, I would be a millionaire by now. I could have paid off my house in California, still have roughly $600k in my investment accounts, and I would have a nice passive income stream from renting out my house which would net me over a grand a month. But instead, I have a car that's only worth $10k.
Do you need to buy this car now? $60k is a nice investment that could pay HUGE dividends in 5 years+. I hope you heed my advice and think long and hard. I constantly beating myself up with that decision.
(and this is not the miss opportunity cost of me missing out on Netflix. I literally would have invested 30k in netflix if I was aware about investing. I had other ways to get my dream car and come up with an additional $30k)
But usually once you get used to a certain thing in your life... nice car, nice dinners, etc... it's hard to give it up in the future!
This. If you want long-term financial security, DON'T become a car enthusiast. Cars are the second most expensive thing most people ever buy, and they are all depreciating assets. The average person can't afford to be both financially secure and a car enthusiast, as the money spent on the latter passion is money needed to achieve the former goal.
The car won't bankrupt you, but what you should be asking yourself is what you value more in life, the car or the ability to FIRE ( https://twocents.lifehacker.com/the-...-re-1820129768 ). It is a personal decision, based on your own values.
Good point.
Also, Raymundobaby, you say you should have $1M in 15 to 20 years, which you think will be enough to retire early. That amount won't be nearly enough if you get in the habit of buying 60K cars.
It is highly unlikely that you can retire at 47 with a total net worth of $1M and not outlive your money, especially if you want to live the lifestyle that is exemplified by driving $60,000 cars. The period between 47 and 70+ (whatever the age becomes where you can pull max. SS) is going to eat up a large amount of that $1M. Don't forget, too, that people are living longer. Depending on your genetic inheritance, you might have to plan to make it past 90. The chance that you can earn enough between 18 and 47 (29 years) to live from 47 to 90 (43 years) is small.
Your planning also appears to assume that you don't have any large expenses between now and then (like, say, children).
I can tell you that I am almost 30 years older than you, with several times your net worth, and I drive $30,000 cars. And I am not confident that I won't outlive my money.
Like the previous poster said, lemme tell you a story.
I was 23. I'm a truck and van person, and already had an '83 pickup bought new that I had like 5 payments left ON to payoff.
But it was a new entry, the Chevy s-10 sister model s-15, a new 'midsized' pick up. And I had aspirations, to buy a full sized Chevy or GMC pickup. They were radically changing the body style for the '88 models, and I wanted the last year of what I thought to be "the classic Chevy ". It couldn't be any old truck, had to be full sized, 4x4, loaded with every option, to the tune of $18,500 for an '87 model bought in fall of '86. It had air, cruise, dual tanks, am/fm/ cassette, cloth velour type interior in a hit combo of black and silver exterior and my favorite color interior, red. It had options NOT usually found on the average pick up at the time ( now they all come loaded). Had to have every luxury they'd put on a truck. Plus tags tax and delivery, rust proofing, running boards.
That was about my gross income at that time. I had savings too, but didn't want to touch that and financed the truck at what was a very reasonable rate for the higher interest rates off the time. Thus was when a money market account was paying 15% just to have your money in the bank, and my rate was like 5 or 6%.
Long story short, it was NOT a trouble free vehicle and the problems continues after warrantee was up. I kept it to about 1999. But for the 20k it cost me, plus repairs, including replacing the complete front wheel 4x4 axle and locking hubs ( none of which you may understand if you don't know trucks), the starter motor literally every 6 months almost like clockwork. Etc etc and more. It wasn't exactly a lemon, but costly to own and maintain. heck tires for it cost $700 to replace, about what it costs now for tires for a minivan.
Longer story short, I no longer obviously have the truck. It gave up the ghost almost and I sold it for $1500. There's only a handful around today. They rusted out, the engines all died orThey just gave up the ghost. Almost impossible to find a classic of one in great shape now.
Point being, it's a costly depreciating item.if you kept it for 25 years in tip top shape with low miles you might get what you bought it for, but that's a lot of inconvenience and expense. And I now drive my minivan, as my tastes have changed.
Be sensible if you really want to retire early with a lot of money. Buy a new or 2 year old used reliable $25kor or $30k vehicle and drive it into the ground. Then use cash to buy a replacement, you should have it by then to replace it.
When you reach the $3m or $5m mark, have retired wealthy, THEN buy what will Then be your dream car. Because as soon as the next model you really really just have to have comes along, or you get married/have kids and need something sensible, youll want rid if this dream car. There will ALWAYS be another dream car you'll want or "just have to have".
What will the missed earning potential be on that 65k, if you spend it on a car instead of investing it?
Net worth and car choice are not usually related. Warren Buffet has a caddie.
As far as socking away a million so you can retire goes, that figure needs revision. You will need shoot for three or more times that to retire early.
Last edited by historyfan; 05-08-2018 at 06:41 PM..
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