13 year old Moose is starting to give me fits. His cruise control just died and I’m starting to worry about safety. I just spent $800 this summer on a new steering pump, timing belt, and 125,000 mile tune up so it’s disappointing to see another issue come up.
Besides the cruise control not working, the brakes are mushy, the airbags haven’t been serviced at the 10 year mark, the traction control and ABS lights are on, and a couple $220 M+S tires are balding. Oh yeah, the CD player doesn’t work either and there’s no bluetooth of course! My trusty mechanic of 12 years said Moose is operationally fine. The dashboard lights are just on due to a broken fuse lodged deep inside the control panel that makes it not worth replacing. Still, I have my doubts.
Now that I no longer have a job, I’m having a more difficult time accepting my 1/10th rule for car buying. I introduced the rule to those who still had to work for a living in order to not have to work forever for a living. It seems only fair that someone who is retired should be able to spend more than 1/10th their income on a car since they were able to cross the finish line don’t you think?
Based on the 1/10th rule for car buying, I can buy a new compact car. The problem is, I want the latest Range Rover Sport that costs $90,000! I’m not pulling in anywhere close to $900,000 a year so I’m forced to strategize and change my car buying guidelines to fit my desires. See how easy it is to justify our spending choices?
INTRODUCING THE 5% OF NET WORTH RULE FOR CAR BUYING
The 1/10th rule only accounts for one’s annual income when deciding on how much to spend on a car. Perhaps a greater barometer to determine car spending is your overall net worth. After all, if you can live in a 100% paid off $5 million mansion and live off $150,000 a year in disposable income you’re much better off than somebody who earns $300,000 a year with no assets to speak of.
Based on my net worth by income post, a 30 year old should have roughly 2X their salary in savings or overall net worth e.g. $60,000 annual income = $120,000 net worth. Hence, to keep consistent with the 1/10th rule for car buying and my net worth by income calculations, I think spending 5% or less of one’s net worth on a vehicle works very well (5% X $120,000 = $6,000 = 10% X $60,000). The net worth rule for car buying covers those who’ve retired, are temporarily out of a job, are a stay at home spouse, have a medical condition and can’t work full time and so forth.
Let’s say you worked for 40 years and accumulated a $1 million net worth by the time you are 65 through diligent savings and investments. You’re now living off roughly $60,000 a year from social security, dividends, and a pension. The 1/10th rule says you can only buy a $6,000 car which seems much too onerous for a person of your stature. It’s time to live it up a little! My net worth rule provides a guideline for the retiree to buy up to a $50,000 car instead.
Below is the net worth guideline by income chart for your review. As you can see below, a 50 year old person who makes $200,000 a year and has a $2,400,000 net worth should feel comfortable spending up to $120,000 on a sweet Porsche 911 CS instead of just $20,000 on a Honda Civic. Whether he does or not is another matter. If I’m sporting a $2.4 million net worth and $200K income, I’m still driving a $20,000 car, but that’s just frugal me.
CAR RECOMMENDATIONS BY NET WORTH AMOUNT
Cars are so much fun. I understand every single one of you who salivate over the latest model sports car or SUV. But cars are also the biggest money wasters. Nobody really needs a car that costs over $5,000. Cars built after 2000 are so much more reliable than those building in the 70s, 80s, and even 90s.
The money we spend on cars could be invested in real estate or stocks that will super charge our net worths. I’d like every car buyer to think in terms of opportunity cost when making a decision on which vehicle to get. Every time I think about plunking down $50,000 on a new BMW, I shudder to think how it could turn into $100,000 10 years later if it grows at 7.2% a year.
Basing a car buying decision on one’s net worth may actually be harder than basing a decision based on income. Our net worth is a lifetime achievement whereas income is only one year at a time. Are we really comfortable spending 1/20th of our lifetime’s work on a depreciating vehicle? Maybe, but that should certainly be the max.
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Great article. Would this apply to all “toys”. For example if you want some cars AND a boat does it all have to fit into the 5%?
You should include your boat. I heard from Dave Ramsay that all your toys (which he said anything has a motor, has tires or requires gas) should cumulatively not exceed 5% of your net worth.
I guess I’m a little late to the party since this article was published as I think at age 50 it should be in the 3 millions for net worth. Interesting enough that I’ve followed my ideas in finance and aligns quite a bit to this site. Some of it like F.I.R.E., however not to the extreme.
I’m approaching 50 now and working toward my 4th million in net worth with salary(not including investments income) averaging over 200k a year (past few years now). Kids college all paid for (529) and everything paid off. Maybe retire at 50 since my investments can cover over 100k a year now.
Here’s my rule on purchasing cars that I followed throughout the years, I recommended to my friends and family 15% of home value for married couples otherwise 10% for singles. (this kept up well with housing market and car prices and I call it “Home to Car Rule”). An example, it would seem very silly driving a 150k Mercedes in a neighborhood where homes average 500k.
I never leverage the NW approach which I find interesting, let’s label this as “NW to Car Rule”. If I was to consider it, then I would recommend 5% rule to NW (be careful of being car rich going higher than 5%). For me that would be NW of 4 million equates to 200k total cars (not single car), but equate it to what you paid for them and not current value. I already have my luxury SUVs and toys today (I followed the 15% “Home to Car Rule”), but now considering a exotic car (Lambo), however that means a used one at the 5% rule to NW and a little passing the “Home to Car Rule”, but throwing away my minor “Frugal” label.
So here’s what I’m considering as options to my next big car purchase:
I can retire at age 50 with my investments covering a recurring income of over 100k a year, however not feeling comfortable leveraging my 5% rule toward “NW to Car Rule”, perhaps stay around 65k for that cheaper car.
Or I can stay in the workforce and continue to make around 200k in salary and buy that exotic sports car (probably being frugal a used lambo), but 5 years more would solidify many things.
Or perhaps look to part-time which likely will be around 120k a year outside of the investment income, but still enough to consider an exotic sports car (again used)
Or nothing which is likely seems to be my default in past years and just continue to dream for it. However I get to laugh it off when the self-driving electric cars take over the world!
BTW, as I’m writing this, I find it very silly that the luxury cars I currently own has depreciated so much, but if I would have brought that used Lambo years ago instead of my last luxury SUV, the Lambo would still hold about the same value (not counting inflation).
HI,
I’m earning 1 lac per months in hand and after deducting lively cost & other liabilities, balance amount is 40K net saving for investment / expense.
What car I shall buy for mumbai- day to day usage for office ?
daily commute – 30-40 KM
family size – 4
Existing car – premium hatch back and want to show off also with new car
Unless you have already addressed your financial goals and are a car collector or have the skills to fix and flip cars, buy a used car. 2-3 years old will keep you from spending 1000’s and still get a warranty.
1) Buy the car you are going to drive for the next 20+ years and learn how to care for it.
2) If you don’t live in a Rustbelt, your car might begin to appreciate after 20 years.. :)
3) If you are in sales, buy a nice car, refresh it before 10 year old. Especially if you are a Realtor or travel with your clients. Not a top end model unless you are catering to the 1%.
4) Give your wife, who takes care of your children, the best car with the best tires. You will drive it when she gets a new one.
5) All cars require maintenance. There is no such thing as lifetime fluid if you want it to last 20 years+. 3,000 miles on Walmart Mobile 1 (High Mileage) + filter goes a long way toward making your car last. Your car’s engine will last longer, consume less fuel, develop less oil leaks if you stick to the old schedule. Ignore the newer intervals.. they only want to get you out of warranty.. Change the coolant every 2 years, transmission and diffs at 30k, rotate the tires every 3-6k if they are the same size.
6) Run the Premium fuel. It is usually $0.25 more, your engine knocks less and lasts longer (knock sensors help.. but are a crutch for poor fuel), but gives you better fuel economy. Don’t believe me, run several tests of both types of fuel and track your mileage.
7) Drive a plain, simple, and comfortable to work. It was not that long ago strong arm windows, manual locks and 5-speed manual transmissions were all the rage!
8) If you live in the South, get A/C.
9) All things require regular maintenance, the more skilled you are or become, the lower your maintenance costs, which go a long way toward reaching your finical goals. Labor will chew through a budget fast, even most BMWs, Mercedes, and Porche can be owned on a budget if you have the skills and time to do the work yourself. Do you earn $100-150 an hour? Very few do.. That is the going rate if you can’t do the work yourself. The parts themselves are not too much more unless you purchased a very one-off model.. with YouTube and the internet so much is available to what used to be a “secret” of the trades. But a good trades person will have the skills and training beyond what you can learn from YouTube… but if you have already learned some of these skills, it might be an option.
Save the Ferrari collection for something to do with retirement money because you over-invested, instead of spending during your working years.
Love your article! Good perception on what you really need to realize to be safe financially with getting your new car.
Base on the 1/10 rule and/or 5% rule I would qualify for a used Honda Accord. Yet, I’ve always have a nicer car and one that I truly want. Here are the steps to get that better car:
Step 1: Plan at least one full year before getting that new car- do you research on ratings and value
Step 2: Pretend you purchase the new car and put monthly payments into a car fund (don’t touch it)
Step 3: After one of making pretend payments truly ask yourself if you can afford it—like not eating top ramen or mac & cheese every night
Step 4: If you can answer yes to step 4 than go for the car you want plus you now have a decent down payment
Eh? Now you’re changing your own rules to accommodate net worth instead? Are you 21 or something? AND you said that’ 90’s cars were more reliable. But now a car from 2000 is more reliable than a car from the 90’s? What you smoking boy?
Hi. This article is very timely for me. I’m retired (age 65), debt free with a net worth of about $3.3 million, and income and expenses of around $80K year. My wife and I saved all of our life, put 3 kids through college, and lived conservatively. Due to my wife’s extreme medical conditions, I’d like to buy an extremely safe and comfortable car for our long distance travels to family and friends. A $120K S-Class fits this to a tee. Based on my own financial analysis, I felt I could afford this purchase, but your analysis helps with my decision. Great that I was finally able to obtain purchase info analysis based on net worth, as opposed to annual income.
My dad is worth $6.5 million (house $1.5 million, liquid $5 million) at the age of 60. He makes $500k/year pre-tax, though his income hasn’t always been this high. It’s only been around this level since around 2011. Prior it was $400k/year for a couple of years, $300k/year for a couples of years, etc., all the way down to $40k/year starting back in the late 1980s. You should correct your ideal net worth multiplier to apply to something like an average income.
$500k/year times 20 suggests he should have $10 million, but there is no feasible way he could have accumulated that much given that he hasn’t been at $500k/year for the entirety of his working life (most people aren’t – the only exception I can think of are maybe some investment bankers after a couple of years and specialist physicians like orthopedic surgeons, neurosurgeons, cardiologists, etc. after residency.)
He does not feel wealthy even with $5 million in liquid net worth. His reasoning is that at a 4% withdrawal rate, $5 million is nowhere near enough to replenish anywhere near his current pre-tax income of $500k.
Although he makes $500k/year pre-tax, he certainly doesn’t spend anywhere near that much. $125k or so goes to federal income taxes right off the bat. He maxes out his retirement plans ever month and with everything said and done his take home per month is in the $22k-$26k per month range.
Of that, he and my mom spend anywhere from $10k to $12k per month and pump the remainder into his brokerage accounts (TD ameritrade, etc.)
He’s never spent more than $60k on a car because he does not think that he can afford to buy more. Being able to technically pay for/write a check for a car does not mean he can “afford” it, in his opinion.
He needs $12.5 million in liquid assets to replace $500k/year in pre-tax income. He is on target to reach $12.5 million by his intended retirement age at 74, but only assuming the stock market does well and barring any major crashes. A catastrophic setback could cause him to have only $7-$9 million at retirement, depending on when it occurs. Granted, he’s slowly phasing his money into bonds over stocks as he ages and fortunately for him a $7-$9 million nest egg would still be sufficient to replace his typical annual spending (though not his total annual pre-tax earnings).
He still actively worries about being able to generate enough income to replace his pre-tax working income, and so by that standard he’s far from wealthy. He considers himself squarely upper middle class and would scoff at the idea that he can afford a $250k Lamborghini Gallardo Spyder just because he has $5 million in liquid net worth.
Spending $250k on a car right now would mean forsaking $500k in future net worth 14 years down the line at retirement age (assuming (72/14)% compound annual growth rate).
I might even go a step further than this. There is a big difference between someone who lives in a big city and their house value has gone up by $500k vs someone who has $500k in investments.
This is actually very helpful for me as I am considering if I should put in close to $1k to fix up my 2001 4Runner or just buy a “new” to me car.
In the end I think I am still better off with my older 4Runner consider it is just basic maintenance plus it is a very reliable car.
Hello Sam,
I’m going to be 36 years old today. i have 2 mortgages, a house – where i live (worth 700K and i paid off 60% of it) and a condo (300K haven’t paid anything on it yet, plan is to get Airbnb to pay the mortgage for that). I can save 25K/yr and ive managed to accumulate 120K over the past couple of years. The original plan was to direct that cash towards my house to lower my monthly payments but lately, i’ve been really dreaming about buying a brand new porsche 991.2 4S for 150K or a new AudiS4 for 72K but i really want a porsche. (btw, i currently drive a dodge). I know its not the most sane decision but based on what i shared with you. Is there a way to recover? (the only reason i’m having 2nd thoughts is that i have 2 kids and i feel responsible for them but then my counter argument is that i’m the one making the money and i need to enjoy it while i can!)
I love the 991.2. But $150K is such a STEEP price to pay for a car based on your net worth. If you follow my net worth rule for car buying, you should really wait until your NW reaches ~$3M.
I’d rent one for a weekend to get your thrills out first. Your home to car ratio will be totally out of whack with a $150K car!
Keep your Dodge and wait several more years. You’ll appreciate the Porsche more and you’ll be much wealthier too!
Related: The Average Net Worth For The Above Average Person
Sam
Hey Sam,
This is my update. I’m now 38, I have 31K left on my house and 270K on my condo. The dodge is no fun dude. Wanna revise your NW guidelines?
I’m willing to go for a Model 3. I can no longer stand the dodge. I don’t want to do a foolish thing though.
I know I’m late with this post by a couple of years but hoping I can get some input from the financial samurai. Since anonymity is at my advantage here I will be blunt with my numbers…my situation is as follows
Age: 32, wife is 31
We’ve been working for about 4 years since finishing school
Household income: 550k/yr
Student loans: 215k, we started with 500k and have been aggressive paying them off and putting minimal towards savings. we hope to pay it off entirely by 2019 and begin aggressively saving.
Bought a house in 2016 for $360k with a new doctor loan which requires no down payment so our mortgage+escrow is about $2.7k/mos.
No credit card or consumer debt.
We live fairly frugally, don’t plan on having children.
Our entire monthly overhead for mortgage and required bills is about $3k.
Last year as a reward for myself I leased a BMW M4 through my business, with a monthly payment of ~$1k with everything rolled in. I’ve always loved cars and always wanted an M3 and now I have one.
Being able to pay for it through my business is a major advantage tax-wise, and even though the $1k/mos is under 1/45th of what my gross monthly income is, sometimes I still feel like I am being irresponsible being that I have no savings right now. I put about $10k/mos of post-tax money into my wife and I’s student loans.
So in my mind, either I put $11k/mos towards loans and have a more responsible car, or I put $10k/mos into loans and have something that brightens my day whenever I drive it, and is something that I’ve always wanted.
I can’t help but feeling a bit guilty, especially reading this article on your site, however I also know life can be short and fleeting, especially in my line of work I see it all the time. And I don’t want to be one of those people that delays their gratification so long they miss out on things they are passionate about.
In the end, am I looking for validation of my choices? Heck yeah. Do I think I ultimately made the best choice for my situation? I guess that’s for any brave soul that read this entire post to answer!
Thanks for your time,
Tragedycat
I believe if you mixed both theories of buying a new car. This would be more of a realistic buying criteria. No person with a net worth of $50,000 would buy a car with a value of $2,500. Maybe using 5% net worth with a 5% gross annual income combined would be more realistic. Also a factor is the length of time the person will keep the car which maybe approximately 5 years depending how well the person takes care of the vehicles and condition of the vehicle. I live in a suburban area which is a necessity. Other individuals that live in a urban area will never need a vehicle for their work commute.
Investing a little more money for a quality car will prolong the depreciating asset. Vehicles that are more than 10 years old and/or have high mileage are more likely to accrued high repair costs that may equal the cost of the vehicle. Base on the idea that previous owners may have not followed the maintenance care of their vehicle.
I am as well a previous Civic owner and currently a Accord owner. The Accord has saved my life in two different occasions. I do believe that we do not necessary need a higher end vehicle for safety. The last decade our safety standards have steadily increased. Higher end vehicles just add more assurance to our safety.
Th e problem with believing that your $50,000 will earn you over 7% a year and net you a hundred thousand dollars in 10 years is this,
inflation will eat most of those profits away. Even if you take the official government inflation numbers as fact, and nobody in their right mind believes the government’s numbers, your hundred thousand won’t have anywhere near the purchasing power It has today.If you believe non government inflation figures, you will be lucky if your hundred thousand dollars will buy you what $50,000 buys you today.
$50,000 in forever stamps will likely be a much better investment.
The key is to be like “Financial Samurai” and have had $50k 30 years ago in the Bay Area. Then you’d magically have $5M today thanks to the preposterous real estate bubble created by foreign investment and NIMBYist land lords who are now free to milk the current working generation AND preach to them about “fiscal responsibility” for good measure.
Of course to folks like this “7% on $50k” (I’d LOVE to see that… unfortunately the market is heading RIGHT back down so BUH BYE GAINS!) seems ‘easy’ because they fell ass backwards into right place/right time real estate in BS markets.
Unfortunately that requires a time machine.
Man, I’m not 60+, Im 38. That would be sweet if I turned $50K into $5M. Alas, I’m not so lucky.
You seem frustrated. Maybe this post on The Average Net Worth For The Above Average Person will pick you up!
Okay, so my dad is looking at buying a new car. Currently, he drives a 2013 Toyota Tundra. He bought me a 2014 Jeep wrangler for my 16th birthday last year for about $36,000 which is much nicer than his car. My mom has a 2013 Nissan Pathfinder which is nice as well. Anyway, my dad brings in about $400,000 through his real estate. He’s developing a neighborhood with two other partners and besides the $400,000 a year, he’ll make another $1.5m from the units/houses that are sold. That is not yearly, however, it will take about two years to sell all of the units. Anyway, we also own 17 apartments in our complex. We profit about $3,000 a month, because he uses the rest to pay off the apartment building. Also, as ridiculous and impossible as this sounds, we bought a house about four years ago for $400,000, renovated and had it appraised for $1.7-2m… That’s another million and a half that we have. Our net worth, excluding our house and the $1.5 from the neighborhood’s houses, is right about $3,000,000. Sorry for the all the other information above. Anyway, about how much would be appropriate to spend on a car. I caught him looking at 2008 Bentley Continental GTs, even though he’d never buy one because he doesn’t want to be flashy. Would spending $70,000-80,000 be appropriate? Thanks
I like both the 1/10 and the 5% rule – I think they are good “brackets” to bound spending. But people forget that finances are more than of immediate concern. Often, money is a consequential concern, as in the case of getting killed or severely injured in a car accident. Cars are a necessity. Safe and reliable cars are a requirement. I see no point in putting my wife and daughter in a Fit or Smart Car – put that up against a head-on with a semi-tractor and see what happens. So we driver larger Lexus vehicles with 10 airbags each. Yeah, we have high NW and high income, but we pay the price for safety and reliability, not for the sake of having an expensive car. We don’t drive fast, rather boring actually. All that adds up to greatly increased odds of living longer and injury-free – to make more money and enjoy! Small cars and fast cars are a prescription for disaster. Just look at accident statistics. Sports care are inherently safer by design, yet have the highest death rates. Small cars are, well, just plain deadly by virtue of their low mess when they do the tango with a larger vehicle or road barrier. Mini-vans are inherently unsafe but have the lowest death rates because they are driven slowly by soccer moms – they aren’t driven fast enough to die in. These considerations should be the focus of which car you buy and how you drive it. If you want to risk dying early and ruining your family financially, by all means buy a sardine can-sized car or buy a sports car and drive like a nut. If you want to do what you can do to survive an accident, then buy a safe, luxury car, with an airbag in each seating position, preferably a large sedan or mid-size SUV (Lexus LS 460 and GX 460 or RX 350) and get it with pre collision, lane tracking, driver attention. And be a boring driver. That way you will likely survive most accidents AND live to continue earning more money, or at least enjoying what you have. Instead of buying the new $30K Honda Accord, buy a 3 year old Lexus RX 350 with 10 airbags for the same money. They can be had a dime a dozen. The car you drive has a much longer-term bearing on your financial future than just the immediate purchase. You might save $1000/year in gas driving a Prius, but you won’t save any money when you can no longer work because it got nailed by a dump truck and you are crippled for life – that is actually worse than simply getting killed. And if you have a family, these effects are multiplied by each family member that stands to lose their life or their physical well being in a car wreck. My 2c, FWIW.
Thanks Mark for putting it so accurately. I am looking for the safest vehicle for my family as well and this is hands down the biggest priority for me.
How true the old adage: “Life is about Compromises”. Do we enjoy life now, or later? Will we have enough later, if we spend now? And then you toss in the “What is the meaning of happiness?” question.
I am a car nut. Have been since I could walk and talk. I have over $3M in net worth, and pull in over $430K/year. I drive an 11 year old Infiniti with just over 100K miles, and I’m sure it will keep running for another 10 years as I’m meticulous with maintenance. Yet, the emotional tug of buying a new car constantly creeps up on me. So articles like this help me see clearly again.
In response to the car enthusiasts out there, here is what I recommend. Get yourself a classic car. It doesn’t have to be expensive, or shiny, or even be considered a “classic”. I have a 1967 Alfa Romeo Duetto that I bought about 10 years ago for $11.5K from the original owner, who had had it restored to street quality.
I greatly enjoy driving it on weekends. Registration is just $150/year. The only major repair has been an engine overhaul at $6K. My annual insurance is $200 for full coverage at an agreed value of $20K. I’ll have to bump that up now because these cars have appreciated, and are fetching $40K at auction! Not a bad investment for a car.
It depends on how you calculate networth. The majority of my networth is in my businesses and factoring their value I would have a networth that allows for a 100k car. If I were to factor just my cash and home equity it would only allow, by your standards, a 20k car.
However, as one of the previous comments stated it sometimes doesn’t matter…
I enjoy your car buying posts. I think they may be a tad too restrictive for some on the lower end of the spectrum, but these low percentages are the wake-up call that many people need from a financial health standpoint.
To poster above, maybe I’m misunderstanding your particular brand of math, but the 5%/1% NW rule sounds downright miserly unless you are a multimillionaire.
I think Ed makes an excellent point that some people have a preference towards spending money early in life rather than binge saving. He seems to be enjoying his AMG. I would only argue that I don’t think it is precisely an either/or proposition. Once you have a good retirement base going, you can continue to save and spend a little more.
Also, I think it’s worth noting that there’s an abundance of enthusiast-approved vehicles that fall into $10k-$50k range… especially when considering used.
$10-$50K cars are great provided you have a net worth of $200,000 – $1 million.
So by your estimation the car industry should shut down completely.
How many people in the US have even a $100k net worth? (answer – very few)
So in your view *no* person in the US should be buying *any* new car.
it’s completely ridiculous, but I get it. You had the great fortune to make enormous sums of money and can now presume to dictate to folks working regular jobs how they can “get rich”.
Here’s an idea. Tax Bay Area real estate at say….. 25% of total value PER YEAR and put that in a fund to help normal people buy cars thereby keeping the auto industry (that employs millions) alive. No? Yeah.
Incidentally, how about food, vacations, clothing, etc? What other “frivolous expenses” should the working class rabble leave to rich, property owning, folks?
What’ wrong with taking the bus, walking, or riding a bike?
Check out: Spoiled Or Clueless? Trying Working A Minimum Wage Job As An Adult
Gotta face reality instead of wasting your time and money.
We found this very interesting as we have had a similar process for house and car for decades. Ours is a tad more conservative though: 5% NW for house and 1% for total of cars. This is , obviously, too restrictive for younger folks just starting out. We adopted this over the years as we observed a lot of “wanna-be” folks in our area ( big hat, no cattle). This approach is certainly not for everyone but we are quite content with the results. It allowed us to retire in our 50’s and do as we please. The money that would have gone to house and cars is used for travel- just depends on what folks find important to them.
I do .01% of net worth for house and .0001% of net worth for car. I think 5% and 1% is pretty crazy really.
Out of curiosity… Where the F in the US can you possibly live that “5% of NW” can equate to *anything* that can realistically be called a “house”?
Let’s say you have a 1M net worth. With NO house (because by your calculation, house cant be counted in). This would make you literally one of the richest people in the USA and, by extension, on earth. Sitting on $1M in CASH.
So by your calculation…. you now feel that a FIFTY K house makes sense.
Are you sure you don’t mean house PAYMENT? Even so, that’s insane.
Let’s take a look at the average person with an actual decent job. Call it $90k a year. After the government is done, they’re taking home $60k *tops*. Lets say through some sort of magic and parasitic behavior leeching off of friends and family, they save $50k/year of that.
After FIVE YEARS of that they’d be possibly at $270k net worth. Cash. With basically no possessions at all.
By your calc, they would now be ready to spend…. wait for it…..
$14k.
ON A HOUSE.
Yeah. Makes TONS of sense.
Honestly, Sam, some people don’t care about having 5 million when they are 60 yrs old. You can either lead a mediocre life saving and investing all your young years, and then live extravagantly when your old and wrinkly, and only have 20 yrs or so until your dead.
OR
You can live a enjoyable life your WHOLE life, never becoming rich. I’m your age, drive a c63 amg, and only worth 200k. But thats ok. I don’t mind. I don’t care if I only have 1million vs 5 million when I’m old. I don’t care to leave my millions to my children. I’m a car lover, and it’s one of my few hobbies. Live is about enjoying reasonably your whole life, not trying to amass wealth when your old. Thanks for reading!
Ed, I agree with your point. We all have different thrills.
My thrill is owning property, hence why I just spent another $1.35 million in a panoramic ocean view property in San Francisco that I’m absolutely giddy about. Yet I also finally just traded my 2000 Land Rover in and only bought a 2015 Honda Fit.
The thing is, I love the Fit! Feels like I’m driving a M4! And I love being able to finally be able to watch the sun set in the ocean and potentially see an appreciate of my investment.
Enjoy the C63!
https://www.financialsamurai.com/increasing-passive-income-through-leverage/#sthash.QyN5edpA.dpbs
“The thing is, I love the Fit! Feels like I’m driving a M4!”
I’m sure the Fit is a fun little car. But comparing it to an M4?
Sounds like your putting $$$ aside for hallucinogens as well.
Maybe. But I’ve had an M3, and I’ve driven an M4, and I love the new Honda Fit equally as much. When you can park in 25% more spots around the city, having the fit is a dream come true. The women in this city looooove the Fit too. It’s all about econo cars here.