Look around.  What do you see?  I see packed buses, traffic jams, busy open houses, expensive restaurants with only 9pm seatings, and friends finding new jobs again.  Double dip recession?  I don’t think so.  With the Dow over 11,000 and the S&P 500 over 1,200, it’s as if last year was just a bad dream.

Yet, it is exactly during good times, when we must be more diligent about our finances.  It’s so easy to forget how bad things were and stray.  Rather than spend more money, save more money during upswings so that we can spend more money during downturns.

When times are good, it’s not necessary to spend more money to create any sort of additional fulfillment or pleasure.  We’re getting paid more, the opportunities for promotions are greater, and the demand for our services surpass our supply.

In essence, we feel good because we feel wanted again.  It’s when a downturn hits when money can help balance the mood out a little with some retail or food therapy, or maybe even a vacation.  In essence, spend money counter-cyclically for better returns.

DAY DREAMING TO RELIEVE DESIRE

There’s an exercise I like to do every now and again, and it’s called “Indulgent Reminding.“  In one minute and not a second longer, type out all your material wants within reason if you didn’t have to worry about money.

My Indulgent List Of Things:

* Two Tennis Racquets ($400)

* 5 tailored three-ply dress shirts ($300-500)

* Sports jacket (blazer) ($500-$800)

* A couple tailor made suits ($1,000-2,000)

* Brown loafers & dress shoes ($200-1,000)

* Digital SLR Camera ($1,000)

* Macbook Pro 13″ ($1,200)

* 42″ LED TV ($1,200-$1500)

* Panerai Submersible Stainless Steel Watch ($8,000)

* Audi S5 Coupe in Silver or Black ($60,000)

* A vacation for two to Greece ($10,000)

* A weekend getaway to Napa’s Auberge Du Soleil with full spa experience for two ($2,000)

In one minute, I’ve been able to come up with $85,000 worth of stuff to spend on!  It gets me giddy thinking about all the goodies I must admit.  The feeling of splurging without having to actually spend money is what financial daydreaming is all about!

After you’ve written your list, try to come up with several conclusions as to what these things reflect.  My list says I like action and appreciate expensive adventures.  Pretty standard guy stuff frankly, not to mention pretty shallow stuff too!  $8,000 watch?  Come on!

Now see if you can come up with a new list with a much cheaper set of things.  See how many of the items you can also happily do without.  Looking over my list again, all I really need are a new pair of brown loafers since my current ones have holes.  Ahhhh, saving $84,700 sure feels great!

CONCLUSION

I don’t know what it is, but I get the greatest satisfaction out of using things I already have, over and over again until they die.  Take my car Moose, for example.  He’s 10.5 years old now, with a finicky CD player, and a broken electrical passenger seat.  With 130,000 miles, it brings me greater satisfaction that he can still bring me from point A to point B just as well as a car 10X the price.

Once you start buying things out of pure desire it’s hard to stop.  Marketers are brilliant at getting you to buy more than you really need.  From shoes, to sporting equipment, to clothes, it’s a never ending list of things you can buy.  You’ll never be satisfied.  Hence, best to just use what you have, and do a little day dreaming to keep your desires at bay!

Readers, when times are good do you feel you tend to spend more or save more?

What are the things you like to do to keep your wants and desires in check?

Anybody else have the condition of really loving the stuff they already have?

Keigu,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

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For those of you who don’t know, I’m a recovering car-aholic.  Funny enough, the way I deal with my addiction is to go to the BMW dealer!  I also go to the Audi, Mercedes, Honda, Land Rover and Porsche dealers too, but only the BMW dealer is on my way home and has an easy parking lot to leave Moose unattended.  I wonder if they cut out the free popcorn and diet cokes because of me.   Hmmm.

Over the past 3 years, I must have visited the BMW dealer at least 65 times to the dismay of the sales people.  They must have a code word for my type, “cheap bastard” or “stop wasting my time you poor SOB” maybe, but I don’t care.  Nothing thrills me more than sitting in a brand new, over-priced automobile and inhaling that unbeatable new car smell!  After every experience, I deftly try and avoid the salespeople and pick up a new brochure so I can extend the enjoyment at home.

In fact, as a joke I wrapped up the latest Land Rover LR4 brochure for Christmas and gave it to my wife.  I told her she should expect a nice shiny black on black beast when we get back to San Francisco.  She was kinda amused, not really.

If the salespeople insist on going for a test drive, who am I to argue?  But, I make it a point to only waste the time of the most eager of sales people beavers.  The fun of gunning a $80,000 BMW M3 every other month is such a thrill!  Besides, I hear they get a little commission for every test drive anyway.

NEW OBSESSION

Ever since I spent $1,450 on an impulse buy at The Apple store this September, and subsequently returned the darn thing weeks later, I’ve been obsessed.  If we’re in the mall, or some general shopping area, I must pay a visit, or 30+ visits since Sept more accurately!  The Genius Bar is wonderful, and all the shiny toys for us to play with for free is such a joy.  Like “Moose”, my current iBook G4 is old and slow, but that’s what makes each visit to that much more exciting!

Did you know that over 80% of the computers sold over $1,000 are from Apple?  It’s not a surprise to me because their products and customer service rock.  Too bad they are just too smart for the US consumer.  The current Macbook Pro is getting dated after the   the latest Macbook edition.  I’m patiently waiting until the latest MBP comes out next year.  Until then, more fun visits!

THE PROBLEM

It’s not like I can’t afford a new computer, it’s just that I have spending paralysis on things I don’t absolutely need.  I also have spending paralysis on myself.  If the gift is for my wife or my parents I’m all for it!  I often tease my wife that she always gets the new stuff, and I get her hand me downs, which I get for her in the first place.  It makes me happy though, and isn’t that all that matters?

The question I’ve been thinking over and over is whether or not my frugality is being taken too far?  Why shouldn’t I drive a nicer car that have car seat controls that actually work and brakes that aren’t so squishee?  Why not produce prose on a speedier machine with a more eye-friendly monitor?  A $1,000 Macbook Pro just consumes 1% of the “Freedom Fund” but still, I cannot let them swipe my card.

NOT SURE IF I CAN CHANGE

The thrill of material things lies in the anticipation of buying, but not actually going through with the purchase. I’m the type of person who is sometimes more excited a week before the vacation, than during the vacation because every day spent on the vacation is one less day of relaxation!  Buying material goods brings down my utility, because the brief feeling of happiness gets consumed by the permanent loss of money.

Sometimes I must have something, and go ahead and buy the darn thing, but return it before the return policy runs out (“Controlling The Urge To Splurge”).  Some say it’s malicious to buy something with no intention of purchase.  Hak-fooey!  Why is there a return policy in the first place?  It’s so the consumer can try before they buy or give us consumers a financial self-destruction insurance policy!

I never thought I’d be obsessed with another “freement” (free + enjoyment) store like the BMW dealer.  But, thanks to Apple I guess there is.  A special shout out to Brookstone for all those wonderful chair massages you’ve given, as well as props to Barnes & Nobles for the magazine experiences.  Let freement reign!

Readers, what are your material obsessions and how do you deal with your obsessions to prevent financial ruin?

Why do women go crazy over shoes, clothing, and hand bags, while men tend to splurge on cars and electronics?  Is a $5,000 Hermes handbag more ridiculous than a $50,000 BMW?

Do you have spending paralysis on yourself?  How do you get out of it and return to center?

Keiju,

Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS feed.

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A True Hybrid

Why is it that some hybrid vehicle drivers eventually start looking down at non hybrid-owning drivers in disdain?  Is the “holier-than-thou” complex too hard to contain during flights of fuel sipping passion?  It’s natural to feel that whatever you purchase is the right purchase.  After all, if I overpaid for a hybrid vehicle (zing!) in hopes of saving the environment when a similar non-hybrid vehicle will do, I’d defend my decision and look down on others as well!  Don’t be mad, let me explain.

THE FINANCIAL SAMURAI VEHICLE

For those of you who have been following this site for a while, you’ll know that I’ve had plenty of cars over the past 10 years, and I now drive a 9 year older beater SUV which is MAYBE worth $6,000.  I love “Moose“, as I affectionately call him, because he adeptly takes us up the snowy mountains during the winter with its 4-wheel-drive capabilities.  Moose can conveniently carry up to  5 people with plenty of storage space, which is especially helpful when our parents visit.  Too bad Moose only gets 15mpg in the City, and 19mpg on the highway.  I can hear the hissing and booing now!

I bought “Moose” for $8,000 three years ago, from a woman who was in a hurry to dump her car before relocating to Amsterdam.  Special brownies anyone?  The hybrid craze at the time was dizzying, where seemingly rational people would spend $25,000 for a Prius vs. $15,000 for a comparable Toyota Corolla.  If people did the calculations, they’d realize the premium price paid for the car is much greater than the gas savings over an average 7 year ownership period.

Consumers weren’t adhering to our “1/10th” rule either, as I knew plenty of sub $100,000/yr income earners spending $25,000 for these hybrids.  I must repeat here again that it is absolutely financial destruction if you are spending more than 1/10th your annual gross income on a car.  Multi-millionaires follow this rule, why shouldn’t the rest of us?  Don’t give into your weak desires!

MOOSE GETS DISRESPECTED, I FIGHT BACK

Moose and I lived in harmony with the hybrids for a couple years until we encountered an evil man on a bike one day.  The bicyclist rides up to Moose, gives him a “thumbs down”, and rides away.  After five minutes, we see the same bicycllist in a parking lot loading up his bike onto his Prius!  Annoyed by the encounter, I drive up to him and explain his hypocrisy.

“Hey you, with the spandex, and shaved girly legs.  You got a problem with us?” I ask.

“Uhhh, no problem.  How can I help?” he answers in shock.

“You dishonor Moose here,” I say as I pat the dashboard. “Let me tell you why your hybrid is worse for the environment than Moose.  You think you’re all enviro friendly and cool just because you have a Prius, but you’re wrong.”

“Uhhhh?”

“By buying a new hybrid, you do more damage to the world than any second hand purchase car can do.  You see, unless you destroyed your old vehicle, you ADD to the world’s pollution when you buy new.  You encourage car manufacturers to pump up their production volume, emitting an incredible amount of waste in the process.  Your Hybrid has higher emissions than zero, compared to zero incremental emissions from my second hand car!”

“Hmmmm, I see.  Please don’t hurt me.”

“So quit with your superiority complex Steve, and hand me a beer!”

“Ok, Sam, you win.  I was just fooling with you!”

We hug it out and go for a ride together.  We’re actually not strangers, but buddies!

CONCLUSION

Good for you for owning a hybrid, just don’t look down on us who don’t.  We may not be able to afford a $30,000 level 4 Prius because we don’t make $300,000 a year like you.  More scientifically, now you know that if you don’t lead your old car to the slaughter house, hybrid owners are doing more damage to the world than us poor second hand vehicle user folks. If you’re considering a car to save the world, then ALWAYS buy second hand, and preferably make it a hybrid if you really care!

Don’t be a vegan who wears leather shoes.  It’s just not right.  Let us all continue to co-exist peacefully.  Ahhh, I feel better now.

Readers, why do you think people buy hybrids when the price premium over a comparable non-hybrid car takes at least 5 years for the consumer to break even under normal driving conditions?  Do some consumers try and belittle other consumers to justify their purchase?  From an environmental point of view, are there better ways we can help the environment?  Do you name your cars silly names like I do?

Keigju,

Financial Samurai - “Slicing Through Money’s Mysteries”

Twitter @FinancialSamurai and subscribe to our RSS feed!

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If you’re a frugal person who loves cars, here’s a list of the top 10 cheapest cars to own according to Edmunds’.  At an average price of around $13,500, you should shoot to earn roughly $135,000 a year and pay in cash before you even think about splurging on one of these puppies.  The Toyota Yaris and the Honda Fit are my two favorite.  Commentary continued below…….

Hyundai Accent GS:

Starting price: $10,690 
5-year total cost: $25,958 
Cost per mile: 35 cents

As basic transportation, the Accent GS three-door isn’t so basic. Its 110-horsepower, 1.6-liter four-cylinder engine delivers decent fuel economy with an EPA estimated 27 mpg in the city and 33 mpg on the highway. The interior is relatively roomy and comes with power accessories and air conditioning.

Nissan Versa Base

Starting price: $10,710
5-year total cost: $27,196
Cost per mile: 36 cents

Nissan Versa: A sedan for the frugal, Versa’s stingy fuel consumption earns it an EPA rating of 26 mpg in the city and 34 mpg on the highway. A five-speed manual transmission ushers the 1.6-liter four-cylinder engine’s 107 horsepower to the front wheels. Its relatively roomy back seat is a major attraction in this segment; otherwise, its cabin is devoid of frills.

Chevrolet Aveo5 LS

Starting price: $12,685 
5-year total cost: $28,360 
Cost per mile: 38 cents

Chevrolet Aveo5 LS: Chevy beefed up the Aveo’s 1.6-liter four-cylinder for 2009 and it now produces 107 horsepower. EPA estimated fuel economy is a very respectable 25 mpg in the city and 34 mpg on the highway. Among its short list of standard features is a four-speaker audio system with an auxiliary input jack.

Suzuki SX4 Sedan

Starting price: $13,994
5-year total cost: $28,965
Cost per mile: 39 cents

Suzuki SX4 Sedan: A number of trim levels let consumers increase content in smallish dollar increments. In its base form, though, the SX4 offers full-power accessories and a tilt steering wheel. EPA fuel economy estimates are 23 mpg in the city and 31 mpg on the highway earned by a 143-horsepower, 2-liter four-cylinder engine.

Pontiac G3

Starting price: $15,055 
5-year total cost: $29,049 
Cost per mile: 39 cents

Pontiac G3: Compared to the first four entries on this list, the G3 is positively loaded with standard equipment. Air conditioning, a six-speaker audio system with CD player and auxiliary input jack, and a tilt steering wheel are all standard. A 106-horsepower, 1.6-liter four-cylinder engine mated with a five-speed manual transmission earns it an EPA rating of 27 mpg city/34 mpg highway.

Mazda3 iSport

Starting price: $15,360
5-year total cost: $29,271
Cost per mile: 39 cents

Mazda3 iSport: Six airbags, anti-lock brakes and a four-speaker audio system with CD player and auxiliary audio jack are all standard in this sedan. A 148-horsepower, 2-liter four-cylinder engine collaborates with a five-speed manual transmission to earn EPA estimates of 22 mpg city and 30 mpg highway.

Honda Fit

Starting price: $15,460
5-year total cost: $29,420
Cost per mile: 39 cents

Honda Fit: Nicely appointed, even the base Fit has air conditioning, full-power accessories and a four-speaker audio system with CD player and auxiliary input jack. Its performance is on par with this group and is provided by a 117-horsepower, 1.5-liter four-cylinder engine. Its fuel economy is among the best with EPA estimates of 27 mpg city/33 mpg highway.

Pontiac Vibe

Starting price: $16,735
5-year total cost: $29,512
Cost per mile: 39 cents

Pontiac Vibe: Fraternal twin to the Toyota Matrix, the Vibe in its base form is fairly Spartan. It does come with a four-speaker audio system with CD player and auxiliary input jack, and a tilt/telescoping steering wheel. Power arrives via a 132-horsepower, 1.8-liter four-cylinder engine. Fuel economy is acceptable, with an EPA rating of 26 mpg city and 28 mpg highway.

Toyota Yaris

Starting price: $12,955
5-year total cost: $29,595
Cost per mile: 39 cents

Toyota Yaris: You have to step up a trim level to get an audio system, but the base Yaris three-door hatchback does have air conditioning and a tilt steering column. Its power comes from a 106-horsepower, 1.5-liter four-cylinder engine. With an EPA rating of 29 mpg city and 36 mpg highway, its outstanding fuel economy earned it a spot on our list of top 10 fuel misers.

Nissan Sentra

Starting price: $16,070
5-year total cost: $29,623
Cost per mile: 39 cents

Nissan Sentra: With the most standard equipment of any entry on this list, the Sentra sedan comes with air conditioning, a four-speaker audio system with CD player and auxiliary input jack, and power windows and locks. Its 2-liter four-cylinder engine generates 140 horsepower. Its EPA rating is 25 mpg city and 33 mpg highway.

Ok, now that you’ve been underwhelmed by what someone making $135,000 can buy, let’s be honest here.  The choices aren’t that great based on the 1/10th rule.  No wonder why so many people who make considerably less, spend considerably more. However, how do you consciously spend $500-800/month on car payments if you’re taking home only $4,000 gross (median US salary), or $3,000 net a month?  It’s just not right for your financial freedom goal.

Use the 1/10th rule as a motivating factor to get that income up or just buy something cheaper!  Don’t be that dumb 26 year old kid you see speeding by you in some shiny new $40,000 BMW.  That was me at one point (“8 Cars In 10 Years”), and I know you aren’t as weak and stupid as me!

I would rank the automobile as the #1 personal finance killer for folks under 35.  For some reason, so many are so obsessed about driving something nicer than they can really afford, knowing the asset will be worth half in 5 years, it’s perplexing.  Meanwhile, our genius government is providing a one-time shot in the arm (“Cash for Clunkers = Personal Finance BOMB!“) to the economy by temporarily boosting auto sales while putting hundreds of thousands of individuals in financial peril. If you can only drive a sub $4,000 beater, it is highly likely you aren’t going to comfortably afford the median car price of $25,000!

I’m curious to know what other car splurge guidelines readers have?  Some have discussed creating a “car fund” which I think is a fantastic idea.  There’s a good chance you won’t deploy all that cash for a car because it’s taken you so long, with many small sacrifices to save up!

Tomorrow, we’ll be discussing college football and the riches these athletes face.

Keigu,

Financial Samurai – “Slicing Through Money’s Mysteries”

Follow me on Twitterhttp://www.twitter.com/financialsamura

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The latest development in the “Cash For Clunkers” legislation is that it may be extended for one more month until labor day. Under the program, buyers of new cars and trucks can get rebates of $3,500 to $4,500 by trading in older models that are then scrapped. Seriously though, is this multi-billion dollar government works program just money spent to appease the car lobbyists? Or is the goal really to get old cars off the streets and save the environment? The good thing is that these old cars are getting scrapped. Otherwise, if you trade in your gas guzzling SUV for a Honda Civic, you’ve NET ADDED to the world’s pollution because someone is still driving your old car, and the new Civic still emits waste!

This is what I’ve never understood about the “holier than thou” crowd who buys hybrids like the Prius. It’s great that you are driving an environmentally friendly car, but if you start looking down on non hybrid drivers with disdain, that’s hypocritical. Buying a new Toyota Prius simply adds to pollution if you don’t scrap your old car. The only way you’re going to really make a difference is if you scrap your old car and just take public transportation and ride a bike! Again, I’m absolutely for driving a nice low emissions car, but the fact of the matter is that these cars are expensive. I’m not spending $30,000, and if you look down on someone who can’t afford the $7-10,000 premium for hybrids then shame on you!
The real problem with this legislation is that it’s giving money to people who don’t need it. If you are driving a car valued at $4,500 or less, it’s probably unlikely you can afford to buy America’s average car price of $25,000! I strongly suggest you stick with my 1/10th rule, which states that you should spend no more than 1/10th your gross income on cars. Hence, only until your income or your combined income is $250,000 should you be buying America’s averaged price car. Spending more than 10% of your gross income on a car is absolutely ludicrous if you’re serious about early retirement, savings, and investing. Say no to car debt!

Supposedly 167,000 transactions worth $667 million have gone through already. I bet that a good percentage of these transactions were made by people who overextended themselves financially to get into that shiny new $38,000 luxury automobile. The thought process is that they can “save” over 10% on the value of this luxury automobile they’re eyeing if they trade in their car. You’re not saving anything! The $3,000-$4,500 is likely the value of your car, unless you’ve got such a heap of junk that you’re getting an extra $2,000-$3,000 worth, in which case you definitely shouldn’t be buying a $25,000 car! When this is all said and done, the government’s plan to boost the economy and improve the environment is going to backfire. There will be thousands more debtors driving depreciating assets and flushing valuable money down the drain every month.

If your gross income is not at least 10X the value of the car, and if you can’t pay cash (you don’t have to, just as long as you can), then don’t fall for this “spend more save more” trap the government is hawking!

Readers, love to hear your thoughts. I know this has nothing to do with the employment and career agenda, but it is topical, and you guys know how much I love cars!

Related article: “8 Cars In 10 Years: I Have a Problem, But You Won’t”

Regards,

Shogun @ Financial Samurai

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Sponsored by: Liberty Mutual Auto Insurance

If there’s one infatuation I and many men have, it is the love affair with cars. When I got my first paycheck, I bought myself not only a nice 850GLT Volvo (yes, an old man car for a 22 yr old kid), but also a Honda CBR600 racing bike! I had nowhere to park them in in NYC, so I actually had to park 20 blocks away, and take the subway back to my apartment! I dumped $18,000 in cash for the vehicles, and had to pay an additional $300/month for parking and transportation fees to my vehicles! How ridiculous is that?

Most of us have some materialistic vice we go gaga over. One lady I know has $20,000 worth of purses, and another $10,000 worth of shoes. But if you think about it, her vice isn’t so bad since the average car a guy desires is probably in the $25-45,000 range. Why we throw so much money discipline out the window when we stumble across our vices, I donno. What I will tell you after purchasing and selling 8 different cars (new and old), is that I’ve figured out some fantastic tips to: 1) Getting the best deal, and 2) Satiating ones desires.

GETTING THE BEST DEAL – 5 SIMPLE RULES

1) First of all, unless you don’t care about money, don’t ever buy new! We don’t live in the 1980′s anymore where cars would start falling apart about after 5-10 years. Cars are so well made now, they will last for 200,000 miles with regular maintenance. The depreciation curve is steepest after 3 years, so best to get a car between 3-5 years old.

2) Now that you agree it’s unwise to buy new, where do you look? The internet of course! 8 cars in 10 years actually requires 15 transactions since I have to buy a new car, and sell the old car. All transactions have been done over Craigslist, Ebay, or Autotrader. Craigslist is my personal favorite, with 13 out of the 15 transactions being made here.

3) Once you inquire about the car, you must then look up at least 5 other comparables to see whether the asking price is reasonable. You should then cross check the price with KBB.com based on a “good” condition selection. Paying Kelley Blue Book is a RIP OFF. In normal economic conditions, you should always strive to pay at least a 10% discount to KBB. In conditions like the 4th quarter of 2008, you could easily get 15% below KBB. On the flip side, if you are selling, you should try and get 90-100% of KBB’s price. Buyers generally feel like they get a deal at a 5% discount to KBB price, but you know better!

4) If the seller is playing hard ball, play even harder ball! There are ALWAYS more of the same models to choose from. You just need to be patient enough to wait for the right deal. When do these great deals occur? They occur during economic depressions for sure, but most often, it’s when the seller just has to sell due to a business relocation, divorce, or financial emergency. Getting a good price may actually come second to just getting a quick and smooth sale. Hence, be responsive, show a lot of interest, and be prepared to pay cash or prove you have your loan documents ready to go. Remember the acronym BATNA, which stands for Best Alternative Negotiated Agreement. In other words, the seller’s best case alternative is to take a big loss by selling it back to the dealer. Sellers do this simple for convenience. As a buyer, you should find out what that trade in value will be, and if you can offer $100-$1000 over the dealer after proving you are a trustworthy candidate, you are getting a STEAL. Remember, a dealer needs to purchase at this price to pay for overhead and salaries.

5) Finally, it is absolutely worth spending the $60-$100 bucks to get the car checked out by an auto mechanic. Make sure to also have a clean Carfax. Don’t be a penny wise and a pound foolish by skimping on a thorough check up. I’ve done that a couple times before with old old cars, and that cost me. The $60 you spend can help you negotiate HUNDREDS of dollars off the asking price since an automechanic will always be able to find something that needs replacing.

SATIATING MY ADDICTION

Before I purchased my 2000 Land Rover in November of 2006, I literally bought a different car every 1-1.5 years. I realize this is an addiction, and does nothing to help my finances. Every time I purchase a car, I have to sell my old one. I also have to spend a couple hours at the DMV to register the darn thing, not to mention additional taxes I have to pay. I also realize that I am a thrill junky, and a deal seeker. It was just too hard for me to resist a great deal until the economy started unravelling in 2008. One would think I would be even more car crazy given the deals now, but the decline in my own networth more than quenched that thirst.

If you have a car addiction, I highly recommend you face the addiction straight on and go to the car dealership! Isn’t that like an alcoholic going to a bar you ask? Not so I say, as if you leave all your credit cards and checks at home, you will hopefully have a very difficult time buying a car. Instead, what you need to do is get in that car, sit in it, inhale that new car smell and ask the salesman to let you take that car out for a test drive!

Gun the heck out of that car, and pretend like you own it while your testing it. Afterwards, say thanks and simply walk away saying you have to think about it. If you do this, you will satiate that car buying desire for at least a month, all at zero cost to you except for a thrilling experience. You’ll realize the car you have is just fine, and that to spend XXX amount of money on another car is just plain dumb.

Recently I test drove a 2009 BMW M3, and the brand new Mercedes Benz E550 coupe. What beauties, and what beasts! 0-60mph in 4.5 seconds is nuts, as is the person who buys one new! Ah, the plush leather and supple ride of the Benz is so nice. And turning the wooden steering wheel is just so wonderful. And when both test drives were all done, I was smiling and happy, much like that feeling you get after riding that amusement park roller coaster. Away I rumbled in Moose, my 9 year old Land Rover, and I couldn’t be happier. Getting from point A to point B for 1/10th the vehicle cost felt great!

FINAL RULE OF THUMB – The 1/10th RULE!

If you live in a major city, you realize a car is a big fat waste of money given the added cost of parking, insurance, and maintenance. The bus I take rocks, except when it skips me b/c it’s so full in the mornings sometimes! One of the absolute best rules of thumb is as follows: The car you buy should cost no more than 1/10th your annual gross salary. That’s right. If you make $40,000 a year, a good guide is to spend no more than $4,000 on a car.

Don’t worry buddy, the ladies will love your frugality and common sense! If you make $750,000/yr, ok, maybe you can spend $75,000 on that 2009 BMW M3. 1/10th your annual gross salary should actually be a floor minimum. Many multi millionaires out there drive cars worth much less than 1/10th. After all, if you make $2million/yr, there aren’t that many $200,000 cars one would buy, or be caught dead driving in these economic times!

So that’s it. Buy a used car, negotiate, set a 1/10th gross salary spending limit, and never be afraid to just walk away. There are plenty of the same models out there. After you’ve found that dream car, you just need to find that right person to buy it from.

Sponsor: Liberty Mutual Auto Insurance.  Apply for a free quote today!

Best,

Sam Samurai – “Slicing Through Money’s Mysteries”

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