My friend sent me a picture of her date’s car: a newish Porsche 911 convertible. She says she doesn’t care about what kind of car a guy drives, yet she admitted she was all giddy when he picked her up in his new ride.
Being the jerk that I am, I asked her, “How are you going to make out with him since he still lives at home?!” For those who don’t know, there is no functional backseat in a Porsche 911 convertible.
The guy really doesn’t still live at home with his mom at age 35. I was just joking. But he does rent a dinky one bedroom apartment in the suburbs of San Francisco. His house-to-car ratio for fiscal responsibility is totally out of whack, signifying he is a poor financial choice for a mate.
Pay Attention To A Guy’s House Not His Car
I’m in father-to-a-daughter training mode because I know I’ll have a daughter if I ever have a kid. And you know me, I think long and hard about different scenarios way before they ever happen. Protecting my daughter from heartbreak is one of my main goals.
I want to help women around the world who are easily swayed by guys (or gals) with all show and no substance. A car is a perfect smokescreen. No matter how many times a woman says she doesn’t care about a nice car, she almost always does. Guys know this, so they take advantage.
I remember picking up a woman in my 2000 Land Rover Discovery II when he was still only five years old. Even though I bought him for only $8,000, a lot of people viewed Moose as a luxury vehicle costing close to $50,000.
After a couple glasses of wine, my date revealed to me that her neighbor friend texted her during our date saying, “How come guys in Land Rovers always gets the girl?” Apparently she was peeking out the window when I came to pick my friend up. Suffice it to say, I just landed on GO.
If you meet a guy with an expensive car who still lives at home or rents a modest place, warning lights should be flashing due to the incongruities. Start doing some research about his finances.
Here are some questions you should figure out before deciding if he’s the one:
* Did he pay cash for his car? Or is he leasing his vehicle? If he is leasing his vehicle, is he at least leasing it through a company he started?
* If he can afford a luxury automobile, why hasn’t he yet purchased his own home?
* What is his net worth composition? Does he own any assets that have the potential to appreciate?
* What is his debt load like?
* Does he have upside potential with his job?
* Does he have a trust fund or a generous Bank of Mom & Dad? If so, how does that affect the way he sees money.
* Does he read personal finance sites like Financial Samurai to help broaden his knowledge? Or is his favorite pass time playing video games?
* Has he come up with a retirement plan that makes sense? Or is he winging it?
Of course you can’t be so crude as to ask him all these questions directly. But over the course of many dates, you should be able to get a good sense of such things before being more serious. Life is much easier with a healthy financial partner.
Different Strokes For Different Folks
My friend was obviously not pleased with my “where are you going to make out comment,” so she defended her date by saying, “Different people have different values. He likes cars and he’s single, so why should he buy a place?”
My immediate thought was, “He can’t buy a place because he just spent a fortune on a car!” But I responded with a more cordial, “You’re right. Why should he buy real estate when he can have such a sweet ride. I myself am looking to buy a similar type of car once I turn 40.”
I know some of you who own nice cars and don’t own real estate may be a little agitated by this post. But here’s the thing. This post isn’t for you. It’s for all the people out there who are easily swayed by shiny expensive things.
For financial happiness, follow this simple logic:
Be with someone who drives a nice car and also owns a nice house.
Be with someone who drives a regular car and owns his own place.
Be with someone who drives a regular car and rents a regular place.
Be with someone who takes public transportation and rents or owns a regular place.
Avoid someone who drives a nice car and rents a crap hole.
Of course, these conditions are based on the assumption that his debt load is manageable i.e. debt equal to 30% or less of assets. Owning a home he can’t comfortably afford can be much more damaging.
Why Focusing On His House Is Better
For those of you still unconvinced by my argument, let’s make my reasoning crystal clear!
1) Wealth. In 10 years, a mass produced luxury car will lose 90% of its value, but a home will likely gain 22% in value if we assume a 2% long-term annual growth rate (rate of inflation). Even if the person’s house gains no value over the 10 years, the homeowner will likely gain at least 10% more equity due to monthly principal pay down. More wealth = easier life.
2) Stability. A homeowner is more likely than a renter to stay put. How many times have you met someone you adored who ended up breaking up with you because he had to leave? If you are going to spend your time and energy on someone, he better stick around long enough! Even if your potential mate only owns a one bedroom condo, at least you know he’s established roots in the community.
3) Intelligence. Someone who is consistent with his car and living arrangement is fine. But someone who spends a lot of money on a depreciating asset and nothing towards a potentially appreciating asset is not someone you probably want to be with long term. If he can so easily be swayed by the “different values” argument on two of the most expensive things one can buy, what other inane logic might your partner come up with? In evolution, intelligence is attractive because it increases a person’s chances for survival.
4) The Future. Living in the moment is all fine until you run out of money. But a great partner is someone who looks to the future. Buying an expensive car he can’t comfortably afford means he is forsaking your future for his immediate pleasure. Buying a two bedroom or larger property signals that he sees a place for the two of you to grow. It’s much better to be with someone who is thoughtful.
Related: The New Rule For Buying An Engagement Ring
Be Your Own Independent Person
“As I will tell my daughter one day, it’s easier to go from a hard life to an easy one. Almost superhuman effort is needed to go the other way.” – FS reader.
Look, single guys in their 20s can be forgiven for driving outrageously expensive vehicles that cost way more than 10% of their gross income. A nice car is the first thing many guys who start making money after college want to buy. In their 20s, most guys and gals aren’t thinking about settling down, starting a family, or retiring early. They just want to live it up to the max!
But if you’re in your mid-30s or older and are still spending money frivolously, just know that eventually, not only will you not have as much wealth as you hoped for, you’ll probably need to buy an even more expensive car to impress other people. This is because you’ll be older, less in shape, less attractive, and without the skills of a smooth communicator who doesn’t need to rely on an expensive vehicle to get a date.
Life is obviously much easier if you end up with a spouse who is already financially secure. For all the women annoyed with me for giving financial dating advice, not to worry! I’ll be telling my unborn daughter to be an independent woman and to make her own wealth!
Recommendations
Invest in real estate more surgically: If you don’t want to constantly pay massive property taxes, don’t have the downpayment to buy property, or don’t want to tie up your liquidity in physical real estate, take a look at RealtyShares, one of the largest real estate crowdsourcing companies today. You can invest in deals around the country for as little as $5,000. It’s free to explore.
Shop around for a mortgage: Check the latest mortgage rates online through LendingTree. They’ve got one of the largest networks of lenders that compete for your business. Your goal should be to get as many written offers as possible and then use the offers as leverage to get the lowest interest rate possible. Interest rates have finally started to tick higher post election.
Check for lower insurance rates. Esurance is the leading online market place to help you find the most affordable and reliable auto insurance. They get you comparison quotes to make sure you’re getting the best deal. You can easily purchase auto insurance straight from their website if you like what you see. It is very important that everyone gets at least basic liability car insurance. You can total your car and be fine. But if you total someone else’s car and injure them, they can go after you for ALL your assets and wipe you out! Check for a better auto insurance quote via Esurance today.
This post reminded me of similar ideas discussed in The Millionaire Next Door aka avoid people with, “big hats, but no cattle.”
My main takeaway from the subject of cars was that the vast majority of car owners in the 100K+ car category are not millionaires. So, at least 10% of their entire net worth is tied into a massively depreciating asset.
Just as you put it Sam, it doesn’t mean their financial acumen is poor but it can dramatically increase the odds.
Personally, if I see someone with a nice car or a nice watch or anything nice, I typically strike up a conversation and figure out where they stand. An idiot investor with a nice watch still turns out to be an idiot, but a savvy investor with nice toys gains much more respect. I typically draw the line from the first few points you made – is it leased as his first car or purchased for cash and his 4th car.
I totally agree.
I think no matter how much money I had I would have a hard time justifying ridiculously expensive items. There’s no watch worth $15,000 or handbag worth $20,000.
I will add that there are some cars that do appreciate, and if your date has one of those, he might be a keeper. The best modern example is the Ford GT, which sold new in 2005 for $150,000 and are now selling for around $400,000. Air-cooled Porsches are another good option, although they might be having a bubble right now.
Finally, no matter what a guy drives or where he lives, make sure you love him and he treats you well.
Of course, the problem with owning one of the cars that appreciate is that you can’t drive them. If the Ford GT in your example above was driven 15,000 miles/year for the last 10 years it has 150,000 miles on it today. There’s no way that car is worth $400,000 with that many miles.
So, really, a car like that isn’t a car (because you can’t drive it). It’s investment that you have to stash away somewhere and occasionally look at, like Cameron’s dad in Ferris Bueller.
You can drive it, but you probably don’t want to commute in it, for both the value of the car and your personal comfort.
In a car like the Ford GT, you only drive the good miles. Think winding country roads, not depressing, traffic-filled freeways.
Until you get a loose rock chipping the paint.
I’m with you, Sam! I’m pleased to say I’ve never had any interest in any type of car, let alone expensive ones. And I’ve definitely never been impressed with a guy who feels the need to drop a high portion of their income on a car. But on the hand, people work hard and have the right to spend money how they see fit. I’ll drive my 2006 Toyota into the ground because I’d rather funnel my earnings elsewhere.
This was an entertaining read, Sam! As a father to a 16-year-old girl, it is a good reminder that I should give her some financial dating advice before she goes off to college and is on her own! I should probably give my son similar advice, he needs to watch out for women who only want to spend, spend, spend and don’t think about the future.
Let me know how the financial/dating advice goes with your daughter! Maybe wear a helmet.
That should be quite an amusing show to watch ;)
But seriously, some of the greatest problems in life rise from a lack of education: not knowing financial ABC, good parenting, general how-to in the times of trouble.
For some reason school leaves those out and tries to stuff you with as much math, history, etc. etc. as they can. Memorize vs learn, understand and APPLY in life when needed.
When I first met my husband he didn’t own a car, I was the only car-owner in our relationship. I felt a little insecure in my 1990 Toyota Corolla (considering we were 10 years into the 21st century), he had no issues with my car, it was reliable, cheap to run, got us around – he even named it.
The fact that he didn’t have a car at all was the ultimate sensibility of where he was putting his money, more to the point, where he wasn’t putting his money.. he wasn’t putting it into something that just erodes in value, constantly costs you money in fuel and repairs. He was the “public transport” guy – and he still is to this day.. We have upgraded our 1990s Corolla into a 2000s Mazda, but I will never regret choosing the guy who had no car, we save so much more money! It’s very hard to find someone who will forgo the luxury of a car for the cost-savings of public transport (plus I love him, car or no car).
Jasmin
You see, that is being a sensible woman! A lot of guys fear being looked down upon by women (if they like women and are single or even not) because the car has become such a status symbol. It is hard for a lot of guy to drive around in a “beater.” He’s lucky to have someone that thinks rationally!
Imagine the poor fella who has to put on airs and spend $100,000 on a wedding w/ money he/she/they don’t have. Oh man.
Well being called a sensible woman by the samurai himself is quite the compliment!
You make a good point, the guy that drives the fancy car will be more likely to attract the girl that is also materialistic.. a match made in “keeping up with the Joneses” heaven (may they enjoy many years of credit card debt together).
Jasmin
Your post is spot on (once again). I can honestly say my wife didn’t fall for me because of my car. We’ve always believed that our cars should be more functional, yet presentable. Not flashy or super expensive. It makes a lot more sense to invest in property than something on wheels. Although I have still been keeping my eye on this new Tesla set to be released…
“In 10 years, a mass produced luxury car will lose 90% of its value…”
Not a Porsche 911. In fact, a slightly used 911 holds value very well.
Nuh uh. I went DEEP into the Porsche 911 hunting phase for 3 months. The 2011 911 GTS that sold for $118,000 could have been mine for $61,000. Regular 911s and 911 S’s depreciate even more.
It’s only those much older ones that have held family or appreciated in value.
What I’m saying is that the 2011 911 GTS that you could have bought for $61,000 (that’s a really good price, by the way) would be worth close to that in a few years. Once you get rid of the drive off the lot depreciation, they hold value very well. I sold my 2005 for very close to what I paid for it after driving it for two years. My 2006 has held its value very well also.
Maybe I need to go back to the guy and ask him whether he wants to sell for $59,000! It’s been a couple months now, and he’s put more miles on it. It did have 31,000 miles….
I remain hopeful that I’ll one day open up FS and see your post about buying a 911 and taking it to the track!
It will happen…
Well, at least with Porsche you can get yourself a date much faster ;)
There is a hillarious Top Gear episode on “The £1500 Porsche Challenge”.
How much do you pay each year for insurance and maintenance? I’ll bet it’s a lot more than I pay on my Impala.
Some people can really appreciate a car like your 911, but to others its value is in its impression on others.
Well…yeah, at 21 totally fell for a guy who was 29 who drove a really cool Suzuki Samurai of all things! Not that amazing of a car but it definitely was fun and caught my attention at 21! And yep, his apartment sucked and finances sucked worse. Follow the advice here ladies. Nice guy but one of my bigger life mistakes for sure.
Haha… a Suzuki Samurai is not a fancy car! But that’s cool you had fun. Glad you didn’t end up marrying him!
Very good advice. I know far too many guys in my age group (late 20s to early 30s) who have close to 100% of their annual income “invested” in a vehicle, and quite a few still live with Mommy. I’d like to think that throws a huge red flag to women. I can’t imagine driving a $30K truck while earning $30K.
As far as the FS-FR scale goes, Currently my score is about 190 ($1K car, $190K house), This winter I may be picking up a newer car, and my score will change to around 60, which is still a pretty good ratio on the scale.
Well done! Anything above a 20 on the FS-FR scale is pretty darn good.
Spending 100% of one’s annual gross income on a car is simply outrageous.
I have a good friend who bought a $70,000 Cadillac Escalade right out of college and still lived with his parents! While there were a few girls who were attracted to his ride, they were pretty shallow too and that was all they cared about. The relationships never lasted more than a few weeks. While I always admired and wished for nice cars I couldn’t fathom spending a high portion of my income or savings on an automobile.
Now as a father of two daughters I am definitely hopeful they will have financial security and ultimately work and earn their way to financial independence. While it is tempting to just tell them what to do and what not to do, my wife and I are leading by example and showing them what is important to us and our family. And if we don’t mess up too bad, hopefully by showing them how important spending time with family is and leading a fiscally responsible life, those same values will be passed onto them. After all, I wont’ always be there with my daughters to help them make a tough decision no matter how much I want to. Raising children to make informed decisions and understand the impact of their choices may be the toughest task we have as parents.
Great job leading by example! It is so important. I’ve found telling someone to do something only gets you like 25% of the way there i.e. nowhere. You’ve just got to consistently walk the walk until they finally come around.
More parental advice welcome! I can use all the help I can get.
I met my husband in college. Honestly, in college I wasn’t thinking about finances, etc. Everyone was broke. Now I’m a few years older, and if I were in the dating scene I would look for different characteristics. Cars are not attractive to me. When I see a guy with a $50K truck, I think how much does he owe and why does he need a big truck to boost his self esteem? Owning a modest house would definitely be attractive.
What if he rents and invest the rest of the money? Some people consider renting to be the smart financial move, especially since you don’t get the most return from real estate as an asset class.
Of course they rent a crap hole, because they sleep in the nice car! Why else would they need heated seats?
Excellent point! The Honda Fit has this “magic seat” feature that helps people stretch out their legs. Could be a great house on wheels!
I tell my daughter: Get an education or learn a trade. Make your own money that way you can make your own decisions and not be dependent on a guy. Avoid flashy guys. Have your own money so you can pay your part of the check when you go out. There no such thing as free lunch, free dinner or free drinks. Be in as much control of your life as you can.
.
I tell my son: Get an education or learn a trade. Make your own money that way you can make your own decisions and not be dependent on anyone. Avoid high maintenance girls. Have your own money so you can pay your part of the check when you go out. There no such thing as free lunch, free dinner or free drinks. Be in as much control of your life as you can.
.
To both I tell them: There are people who get a blank stare or get the urge to go to the bathroom when the check comes, avoid them, unless there’s a previous spoken agreement. If a girl doesn’t offer to pay for coffee or her half on the 2nd or 3rd date, dump her and dump her fast. If a guy doesn’t pay for the whole check on the 1st date or pay for coffee, he was brought up differently than you, dump him. If you don’t have money, don’t go out. Children learn by examples. If I’m careful with money now and use it wisely, then hopefully they’ll grow up with those same values.
Love it! Especially, “if you don’t have money, don’t go out.” That should motivate people to make their own money.
But the best advice is to be financially independent by making your own money.
Don’t forget to warn your daughter about the expensive jewelry as well. If a guy has more $$ on his wrist and neck than he has in his bank account, WATCH OUT!
So are you saying two gold chains with gold $ signs is not a good sign? Gold teeth might be good though.
I’d agree on if they have more money on their wrist and neck than their bank account… but many folks have nice jewelry and a large bank account… just because people go buy Rolex’s, AP, PP etc doesn’t mean they don’t have healthy bank accounts too, there is often a reason we can afford 5 figure pieces of jewelry … we are high earners and big time investors. Who would be the kind of gentlemen I would want hanging around my daughter as they are likely more driven, more ambitious and will steer her down a path of being more successful in life and being able to be a productive member of society. Just my 2 cents.
Nice post Sam, I’m 24, own my 2009 Nissan Altima, and plan on keeping that baby for at least a few more years. It’s in great shape since I always keep up with its maintenance. Also I’d much rather keep saving and investing my money than start dumping my money into car payments.
What about someone who is understated on both fronts? I know a guy who rolls a newish Civic, and lives in a $200,000 house but makes $140,000. He said he’s gonna have the house paid off this year!
My ideal man
I think you forgot to leave his phone number in your comment. ;)
I try to minimize the “big 3” and invest the rest.
Housing
transportation
food
If you can minimize those expenses you can spen/invest your money on other things without doing any damage to your NW.
As you have said in the past, stealth wealth is very satisfying. You get to see peoples true character without being pandered to because they think they can gain something from you.
I have to disagree with 2/3 of your “big 3” list, housing and food.
We consider housing an investment. Granted, I want my rentals nicely updated to the level where one can get maximum rent. I only need my own house functional, no flashy, expensive decoration or upgrades until kids stop destroying things, lol.
I am also very big on food. Good food keeps you healthy and happy, that’s very important to me and my family. I will never skimp on food. The damage done by not eating well will end up costing way more than the good food at the first place. :)
I should have been more clear:
Minimize housing meaning your primary residence. (rentals do not fall under that)
Food meaning going out to eat for every meal. (eating well should be a given)
Transportation meaning vehicles you drive.
I am a very proud cook with more than 12 years of home cooking under my belt given I just turned 30. So, I actually view going out to eat a far inferior choice over cooking at home — unless it is at a gourmet restaurant where I get to learn to appreciate new cooking techniques and flavors. I love myself and my family those seasonal locally grown organic fruits and vegetables, and locally raised highest quality beef/pork/lamb/goat/goose/duck/wild game/whatever animal protein you name it at my disposal in my deep freezer. :)
Avoided this whole problem but moving into the city and will be taking public transportation rather than owning a car and the many hassles that comes with it.
Had a friend that graduated and bought a sexy Jeep Wrangler the day after he graduated and at the time I thought it was the coolest thing in the world until I learned about personal finance.
Good advice. I only have a son so I don’t have worry as much. He’ll just have to drive whatever he can afford. I think it’s best to spend money on housing too. A car depreciates so quickly and it is just functional. A house is like a piggy bank. Oregonians care a lot less about cars than Californians. Many well to do people drives regular cars.
I don’t really care/know about cars. I once got into a date’s car and asked him what kind it was (because the seats were lower than I was used to), and he seemed incredulous I didn’t know it was a Porsche.
Doh! Money wasted if he could not impress! Did it end well or is the relationship continuing?
We weren’t each other’s types—he ended up marrying a model!
As a father of 3 girls this is some great advice! I try to teach our children the evils of debt, and work on saving for things they want, but your article is some very timely advice. My oldest daughter is turning 16 in 6 months! Boys who can drive will be dating her soon, and she need to understand that the car they are driving shouldn’t be a deciding factor on if she wants to date them. My daughter will be driving a 1998 Toyota Avalon. It has a few dents, but it drives fine, and is a very safe car. This car has served my family well, and if she does get in a accident the financial loss will be almost zero.
Funny, my dad drives a 1998 Avalon!
Nice job teaching about the evils of debt and working for what they want. I wonder what I’d do if I had a daughter turning 16. I believe I’d have the most crystal clear talk possible, and then trust her to do the right thing.
Hi Sam,
I think if you can afford it, own both! A luxury car and home. Yes I have a luxury car, but own my home too lol. Arguably for many, it feels good and creates more confidence to drive a car made with better materials, more power, and a more satisfying riding experience. If you drive your car everyday, why not drive something that gives you more pleasure and satisfaction especially if cars are your thing, and you are saving and investing anyway. I will say that buying a certified used luxury car with low miles is financially better than a new one off the showroom.
Well, the point of the article is that you shouldn’t drive a flashy car if you’re living at home or in a crummy apartment. If you can afford both a luxury car and a nice house, then more power to you. But, to be able to truly afford the luxury car you should follow the FS 1/10th Ratio (https://www.financialsamurai.com/the-110th-rule-for-car-buying-everyone-must-follow/) or something similar.
You buy the nice car AFTER you’ve got everything else in your life in order.
“His house-to-car ratio for fiscal responsibility is totally out of whack, signifying he is a poor financial choice for a mate.”
This statement made me laugh and think of Spock (from star trek) delivering that line.
Sorry, nerded out there a bit. Love the article Sam, and your last one about running out of money in retirement. Thanks for the great content as always.
Resistance is futile.
I met my husband while we were in our last year of college and broke. Both with student loans and junk cars. We married two years later, still driving the junk cars and trying to pay off our student loans. To this day, cars are not important to us (I am 37 and he is 38). They are a little more important to me because I do the majority of driving the kids around and like having a reliable vehicle. That being said, I am currently driving a 2008 Chrysler Town and Country mini-van and he is driving a 1998 Ford Crown Vic that he bought from a family whose grandmother had passed away. Paid $3,000 for it and it had 40,000 miles on it 3 years ago. Both of us drive our cars until they die or until mine becomes unreliable.
This was a great piece of advice and one that I will discuss with our daughter in a few years. We have been talking with the kids about how there will always be people with more than you and always people with less. Be happy with what you have since this will always be the case.
Although I enjoy going to car shows, I’ve never really been into expensive cars. Maybe it’s because I was in a car accident as a teenager and I’m always worried cars could get dinged, scratched or much worse. And the more expensive the car, the more expensive it is to fix. Safety is what’s most important to me.
Sounds like you’ll be a great dad someday and will be really involved with teaching your kids about personal finance and being independent. I think it’s really important to help teach kids about how to be responsible with money from a young age. I wish my parents taught me more about money when I was younger.
Good advice, but focus on teaching your daughter to be financially successful herself. The undertone of this article is that your daughter will obtain financial success via her mate.
Indeed, hence the conclusion.
I want her to be financially independent and rely on no one. At the same time, I realize we are easily swayed by expensive, shiny things, especially when we are younger and haven’t gone through the pains of earning a living.
You may enjoy this post, but I have a feeling you might not! How To Convince Your Spouse To Work Longer So You Can Retire Earlier
We cannot deny that having a wealthy spouse will likely make like easier. So many of my male buddies who I play tennis w/ in the middle of the day have been super supportive of encouraging their wives to pursue their careers to the max. It’s been great!
Even if said daughter is financially independent, it is still prudent to avoid a flashy man (even if he isn’t wealthy), because his flashy financial habits will inevitably burden the marital wealth and possibly ruin daughter financially.
Part of the education to be financially successful and independent is choosing the right mate that complements your financial goals rather than ruin them.
Great point. I agree completely. To have a mate that complements makes life so much easier.
I disagree. Most of the time I practice stealth wealth, but yet I have flashy stuff like a gold Rolex, drive a BMW and will occasionally drop a lot at bars. But I still manage to save over 75% of my income.
I’m 23 debt free and make 6 figures and have a 6 figure net worth from working, saving, and investing. Why can’t I spend a little of my money living it up when I’m successful? Yet I have yet to find someone more aggressive in saving than me (% wise). Sometimes you can live the best of both worlds.
Now to keep it in perspective, you’ll find me dressed as a regular joe guy anywhere my coworkers can be found because it’s best to be judged on your work ethic in the workforce and not your toys.
I agree on the last part. You have to find someone who complements you.
Interesting topic, and I have to agree for the most part, but…there are a couple of things to consider. First off I think that possibly your view of real estate might be slightly skewed to the positive since the areas that you are most familiar with and have lived in are the “rock stars” of real estate appreciation. SF, New York, Hawaii…its slightly different than places like, well nearly every place else lol. Now I’m not saying it isn’t important to take notice of the ratio of a persons car to their home and or net worth, but I for one am going the route of renting vs. owning. A couple of your fellow bloggers have done a great job of doing the real life math behind the cost of home ownership vs. renting. For the vast majority of those it should be considered a life style choice, not an investment. Somebody with an awesome home and a $1M mortgage like you have suggested as the ideal amount but little equity can and will get crushed the next cycle. Yes vehicles are a very efficient means of wealth destruction, but a home can be equally as much of a drain. Best simple explanation is in JLCollinsNH’s blog where he goes through the math on home ownership. It does not make sense if you live in SF type areas though to have not participated though and I get that, but they are the exception not the norm.
Like in any situation there are outliers, but generally speaking most people are driving too much car…but I would say it is equally proportional to those who have too much house. Whether that be leveraged too high, or its a 3,500 square foot home that 2 people live in…all of it at the end of the day is excess. Now if I pick somebody up in my expensive but paid for car and they come to my “rented” residence they would on first impression frown at my “ratio”, but reality is quite different from me being fiscally irresponsible.
There is always a flip side. I wish our generation was not ingrained with “thou shall buy a home because renting is throwing your money away” Most people would be wealthier today and I think the next generation sort of already understands this.
I disagree that most people would be wealthier today had they rented. The reason being is that “most people” find it much more difficult to save and invest every month compared to just paying a mortgage to build some equity and watch their asset inflate w/ inflation.
It’s the same reasoning the gov’t taxes people every paycheck b/c they know most people won’t have enough to come up with their annual tax bill b/c they spent it all and failed to budget.
Do not count out the power of inflation.
Every three years the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).
The wealth gap will continue to widen if people don’t own assets.
Yep, agree with all the facts above…but facts can be deceiving. I purchased my first home for in 1999 $300,000, a lovely 3 bedroom, 2 bath 2,200 square foot waterfront home. (I have sold this subsequently but for the sake of argument roll with me on this).
Did about $25,000 of updates, kept it in good condition. I was single living there alone…way bigger than I needed and could have actually rented a home for about $1,800 on the water each month. I paid cash, today the home is worth maybe $340,000. Add on taxes over the years and general maintenance of 10k per year that’s another $150k burn. If I had put the original amount of 300k in a diversified investment portfolio that earned just 5% would be worth $650k. So after it was all said and done, I could have rented a comparable home and come out a few hundred thousand ahead. I agree though that in certain areas like SF or NY and the like that you would have been way better off buying…but in many areas you would not.
It is true that people have a hard time saving and a home sort of forces that savings, but if you are talking about lack of discipline. I would be really interested to hear your take on JLCollins home purchasing analysis since it seems spot on to me, but I’m always game for learning!
It works both ways. Being an older man, I see my wife’s single girlfriends who have expensive muscle cars, work 50 hours/week to meet their rent payment and 0 savings.
But, oh man, when they pull up in their cars, looking all hot, it can be intoxicating. Too bad it only lasts for a minute or so.
Some boys try and some boys lie but
I don’t let them play (no way)
Only boys who save their pennies
Make my rainy day
‘Cause we’re living in a material world
And I am a material girl
You know that we are living in a material world
And I am a material girl
Fun reading Sam, this Monday morning.
I think Madonna got it right (for once at least) with her take on romance through these two verses.
Hilarious! Never thought Madonna would be involved in the feedback. Ah, the power of the internet and various points of view!
Many years ago, I met a girl at a club. We got along great and planned to go out to breakfast afterwards. Before we left, she started asking me questions leading up to “Do you own a house.” I told her I did not, I rent an apartment. Next thing you know, she left with her girlfriends.
At the time I thought she was being shallow, but I don’t fault her for knowing what she wants.
That is very shallow for a first encounter. But it is interesting she knows what to look for. She just didn’t have the patience or emotional intelligence to find out in the right way.
Sam I understand your points… however I don’t know if your assessments entirely fair in all cases. There may be other reasons for not owning a nice home. A personal example:
Age: 31, single
Own: 2 bdr condo valued in the $170k’s
Income: $185k+
Savings: $700k+
Car Value: $17k
I may buy a entry-luxury vehicle next year, because I feel like it (will lease for tax advantage in my situation). Won’t impact my savings rate because I just graduated with MBA, so that recurring cost (after 4 yrs) has ended. Will have money left over and savings rate should still rise vs prior year.
I don’t want to buy a new, more expensive, place in Atlanta because the local housing market is hyper-inflated right now. The condo fits my lifestyle perfectly and nicer condos have ungodly high HOA fees here… and a single family home is too much hassle since I travel ~50% of the year. New furniture to fill a big house is also very expensive! Probably at least $20k to fill a new single family home with decent furniture… and depreciation on furniture is comparable to vehicles in my experience.
Where am I going wrong??
Mr B., I don’t think you’re doing anything wrong at all! Your FS-FR ratio is 10X, which is higher than the typical American. Comparing your house to your car ratio is just one of the many quick checks one can perform to determine fiscal responsibility with oneself, and with a potential life partner.
You’ll have to share with us how you generated $700K+ in savings on a $180K income while also taking a 2 year hiatus from work and paying for business school! That is a great amount you’ve saved.
Thanks for sharing.
Sam
Because there was no hiatus! Been saving since I was 22… and probably should have been saving even more aggressively. My company subsidized my degree (I covered about half out of pocket… stomach-able).
Did school part-time over 4 years actually… and I recommend that strategy for everyone! (opportunity cost is just too high to drop out of the workforce) The only exception I would perhaps take is if you are going to a top-10 B-school.
Ah, nice. I did the same thing, but it took my 3 years. What took you so long?!
Making a gross income every year more than the value of your place of residence is very conservative.
Good example of the benefits of living in a less expensive part of the country to be able to accumulate a lot of wealth.
As far as dating advice goes, this is pretty sound.
If you ever do have a daughter, the best thing you can do is lead by example. My parents drive their cars into the ground so I’ve never been accustomed to new, high end vehicles but did have the luxury of living in a modest 1200 sq. ft home only 2 houses away from a park in a very safe neighborhood. I grew up valuing those things over something like a car.
On a personal note, I was set up with a blind date in my early 30s and was baffled to learn that he worked for the post office and lived in his sister’s basement, yet somehow he was driving a Mercedes. Needless to say, that was our one and only date since it was obvious that we weren’t compatible. Another guy I dated mainly drove an old pickup truck and owned a house in a decent part of Minneapolis, but he also owned a Ducati. Thinking I would be impressed by that, a mutual friend told me he owned one before I went out with him but I had to ask what it was since I’d never heard of it! Can’t impress everyone, I guess.
Were you able to ask him why he owned a MB and lived in his sister’s basement? I donno if I’d be able to admit that on a first date.
Having a nice sports bike like a Ducati is actually a good mid-life crisis thrill seeking solution. But it might also end your life sooner.
See, and this is what I was going to recommend for the thrill-seeking/prestige crowd. Get a sensible car (or an old pickup truck, apparently) and a really nice/fast bike. The combo costs way, way less than a Porsche, and you can beat just about any car on the road with a decent bike.
You can get a brand new, top-of-the-line Ducati for about $14k, or if you really want a sexy bike, get an Aprilia RSV4 RR for about $16k. Or if you want similar bang for a lot less buck, cruise Craigslist ads for people who bought a superfast motorcycle, scared the crap out of themselves in the first 5,000 miles, and want to unload their bikes for cheap. I got a 6-year-old used Hayabusa with about 6,000 miles on it for about $4,500.
Oh brother. I went on a few dates with a guy who had a Porsche 911. He’s a 24 yr old CPA. But don’t worry, he owns a condo! A fancy new condo filled with lots of pretty useless stuff and nice furniture like a WHITE PLEATHER COUCH. It could only be dry cleaned, he told me. Oh, and since we live in the Midwest where it snows, he can’t use his nice car all year round, so he has a second car. A late model Audi. I ended the dates quickly after discovering all that.
I’m impressed he was able to buy a Porsche 911 and the condo just two years out of school! Do you know his secret?
Could be something great for all of us to learn, except for if it was just help from his parents, then no big deal.
Nice post Sam! I guy I dated off and on in my early 20’s who once gave me a birthday card with a bunch of lottery tickets inside. He was really into cars and in fact his job at the time was being a test driver for BMW. However, he lived in a tiny studio that cost way too much $$$ so he could live near the beach. I had my doubts about his financial skills, but once he gave me the lottery tickets, I knew we were finished. Financially smart people do not buy lottery tickets!!!
Aww, that’s a sweet gift! Give him a 2nd chance by contacting him for a follow up date! He might have ended up doing just fine.
If he looks at the lottery tickets as fun, it’s all good. If he is a constant spender on lottery tickets, that’s not so good.
Hi Sam, I only discovered your website a few weeks ago, but I admire your knowledge and enthusiasm for sharing it. I could not agree more with the viewpoints on this subject. In fact one thing I do is specialize in driving older low mileage cars. My current rides are 2002 and 2003 model year domestic makes. Low mileage used cars are not easy to find, but they are out there if you know where to look and have a little patience. Parts for them are plentiful and easy to find. Don’t get me wrong they are not “beaters” by any stretch, but they are of the best kind of asset….one that is “paid for”. Another thing that I do is look up the potential sales prices on Kelley Blue Book once per quarter and use that data to update my personal net worth spreadsheet with their respective values. I am now at the point with one of them where the value of such is that the net depreciation has ceased to decrease…..what a great feeling!
Thanks again Sam for all you do and the knowledge you share!
Welcome to my site! It does feel good to own an asset that doesn’t depreciate. That’s the funny thing. A house has a good chance of appreciating over time. A car has a 99% chance of depreciating. What happens is that so many people buy a car with payments, and over time, their payments stay the same but their interest in the car wanes. That’s when people get annoyed.
Love this post, was nodding the entire way myself. Now I have a 4 month old daughter, this is something I’ll have to teach her when she’s older. :D
When I was dating Mrs. T, I showed up in my 5 year old civic on one of our first dates. Later when we got married she mentioned that she was impressed that I had a car. She could careless about the type of car.
Busy time around the house! Congrats!
5 year old Civic is still a pretty nice car in my mind. Glad things worked out.
I think renting is often the savvier choice. There are a lot of people who have their finances in order (JL Collins, Mad Fientist, etc.) who are big proponents of never owning property. In expensive cities, sometimes the math points to rent. As always, the blanket advice is not to buy or to rent, but to do the math.
All that said, it’s really hard to justify a large car purchase. That’s separate from any analysis on how someone pays for their four walls and a roof.
Yes, always do the math. In the long run, the math generally points to owning your primary residence b/c inflation is just too much of a beast to ignore. I’ve got a post in the wings about this.
I’d rather be neutral inflation than short inflation.
Thanks for another interesting post, Sam. I can relate to your story about the used Rover. I used to own a Mercedes GL450. Beautiful car even though it was several years old with decent mileage when I bought it. I’ve since upgraded to a brand new Ford Explorer Limited. 2016 with a couple hundred miles. Yet everyone feels like I took a HUGE step backwards in vehicle, even though the Ford cost twice as much as I paid for the Benz.
As the father of a young girl, I’ll forever be on the lookout for guys that are ‘all show, no go’. Thanks again!
To be completely honest, I’ve never judged a guy by the kind of car he drove. I think it’s because I didn’t get my first car until I was 28 and didn’t feel that the lack of a car defined me. Plus, I believe that everything I want in life should come from my own accomplishments. Putting all of this aside, I was impressed with this one guy during college. He sat behind me in calculus class. One day, as we were getting graded papers handed back he said “Hey, you seem to be doing well in class.” I did tend to get A’s in that class. “Can we study together sometime?” During our first study session we weren’t five minutes into the assignment when he said he needed a coffee break and that we could take his motorcycle downtown. Not having been on a motorcycle before it seemed like the coolest ride. Gotta give it to him that he was clever getting me to go out with him without me realizing what was actually happening in the moment. What better way to get a girl he barely knows to WANT to wrap her arms around him!
I’m a lesbian and not at all into cars. I take public transportation everywhere and hate even being in cars. My first girlfriend was a few years older than me and drove a Miata. She was so frustrated that it did not give her points for me. I did not care about it. I could see it was pretty, but we couldn’t even have luggage in the trunk. Pointless. She did own a condo, at least, but the car payment was destroying her financially and she would not trade it in. Once I knew her financial troubles were her own doing, because she liked a fast car, I knew we couldn’t be serious. For a brief part of our relationship, I was unemployed and she STILL had to borrow money from me.
Current girlfriend is much better with her money, and appreciates cars but does not covet them. She turned my head with her personality (and looks). Not some damn diminishing asset.
“For a brief part of our relationship, I was unemployed and she STILL had to borrow money from me.” – This would be the biggest turn off for me!
I would think, “What’s the matter with you?”
Borrowing money from someone who is unemployed shows zero emotional intelligence.
I drive a Lamborghini and live with my parents….
However, I make over $2,000,000/year, own 3 paid for houses, a commercial property, and have millions in other investments.
I choose to live with my parents because I would get lonely if I moved out and right now I am still young enough where it is socially acceptable for me to be there.
Why did I buy the car?
5 years ago, I really wanted a Lamborghini. Then, I started making more money and got to the point where I could easily afford one. Once that happened, I sort of lost the desire to buy one. Then, about 2 months ago, I got the desire back for no real reason. A lesson my dad has taught me is if there is a time in your life where something seems like fun, you should do it while the desire is still there. In several years time, that thing that seems like fun could be of no interest. Of course, you don’t want to do anything crazy, but you get the point.
Didn’t see you on the Bloomberg/Forbes list :)
I’m afraid I am far too poor for those lists, haha. I’d have to be pursuing a much larger opportunity than what I currently am. My current business probably has a theoretical cap between $5-$10M/year (assuming nothing else comes along to put it out of business).
Wow! What do you do?
Whaaaaa? Is this for real???
What are your strategies for bringing dates back home though? What about living with friends instead?
I think it’s great you enjoy living with your parents as an adult. I’m sure they appreciate you around the house as well and can help them w/ random stuff.
Sam,
Good sound advice BUT if according to your red flags, Jane would not have dated or married me! Somethings in life are not so clear cut. Let me explain below.
Strike 1. In the late 80’s at age 23, I purchased a new Benz for 27.5K not including tax. The avg car was 14K. I borrowed 11K for the car. My salary was 28K. My NW was probably negative or zero. We were working 60 hours plus a week and I wanted a new car since age 16. I failed your 1/10th rule. Sam, where were in the late 80’s when I needed financial help!
Strike 2. In early 90’s, Jane and I decided to buy a house for 260K. We put down 80K. My future mother-in-law was not happy and did not trust me because Jane put down 60K and I only put in 20K! I also paid for the closing which was around 10-12K. My car ate up 30K of my savings. I failed again because I put a lot less down payment than the female!
Strike 3. In the early 90’s, I made 39K and Jane made 43K when we brought the house. I failed again for earning less than the female! I started work one year after Jane. Excuses..excuses!
Strike 4. My mother-in-law did not like our neighborhood. She only knows of her area.
When we brought the house we made sure that one person can pay all the bills just in case one loses their job. We were saving at least 50% of our incomes from day one.
It took years to take revenge (in my mind) on my mother-in-law and to redeem myself.
Redemption 1. In 1996, my salary was finally higher than Jane’s.
Redemption 2. I had several promotions thru the years and in 2001, Jane for the first time told her mom that I became a Director. Her mom asked how much I was making and she was shocked. At this point I made over 6 figures and 21K more than Jane.
Redemption 3. Over ten years ago, Jane mentioned to her mom that the house across the street was for sale. She told her mom that it was over 700K and my mother-in-law was surprised. It seems that our neighbor ain’t that bad, huh? Our next door neighbor just sold for 790K and it is the same house as ours but their kitchen and bathrooms are dated from the 80’s. We also have a 2 car garage, new sidewalks, snoop, rear patio, new rear deck, (new kitchen and bathrooms remodeled 5 years ago). I hope for a min of 850K for our house. My mother-in-law’s neighborhood is going down hill. In fact, my mother-in-law tried to convince her other daughter to move to our neighborhood!
Redemption 4. Although, I put down 30K less down payment on the house than my wife, I cut the grass, install new drywall, and painted the entire inside of the house. I replaced all interior doors, trims, baseboards and 3 new windows. I put in a lot of sweat equity.
Redemption 5. I track our NW from the beginning and made investments to finally become FI in 2014 at age 48/49. We now have passive incomes triple our expenses when we reach age 55 for our pensions and age 60 for 401Ks.
I think the most important decision in life is picking a spouse. I knew that Jane is down to earth from day one. She was never materialistic and in fact I became more like her. We became fugal. Paid off the 30 year 180K mortgage in 11 years in 2002. We saved 85% of our incomes for the last 5-6 years.
After reading this post, I asked Jane why did she stayed with me when I spent so much money on my first car? She said she knows nothing about cars and did not know the Mercedes Benz brand. When Jane went to Italy, she noticed that the taxis and trucks were Mercedes so she did not think much of my car. She just said that she likes me because I am funny. Funny looking? She said no comment!
I failed your “test” as the guy in his early 20’s but I turned into a responsible financial guy after we purchased a house in my late 20’s.
It is very important that both are on the same page when it comes to savings and spending in order to retire one day.
PS. I drove my benz for 25 years. Our current american sleeper car is 18 years old and it is still going. My dream car still from age 16 is the Mercedes Benz SL. The current 2016 550SL model is $110K new. Although, we can afford to buy it now, we prefer steath wealth. I think I rather buy an american muscle car instead.
Adam
Wonderful story Adam! Dang, A $27.5K Mercedes per-tax at age 23 in the late 1980s is huge! What were you doing for work then? That’s like buying a $65,000 car at age 23 today.
Thank your lucky stars Jane went to Europe and saw all those MB taxi cabs.
I do think anybody reading this post now who is looking for a mate will rationally want to figure out some of these questions I mentioned before taking the next step. Wouldn’t you want your daughter or son to do the same thing before getting really serious?
Given you’re over 50, retired early, and have income 3X your expenses, I bless you with your desire to buy a newish 550SL! If you could do it at 23 when you had no money, you can do it at 50+ when you are financially set for life.
But maybe start a business so you can write it off as a business expense first :)
Hi Sam,
At 23, I was young and stupid but At least I got the nice car out of my system. I was a computer programmer at age 23. Being asian, we lived with our parents rent free until we got married at 27. I am still employed at the same company doing IT for 29 years. Jane just reached her 30th year in the same company.
These days I prefer to not spend more than 35K on a new car. With an expensive car comes with worries and too much unwanted attention. We learned the phrase Stealth Wealth from your site. We rather not draw attention to us. Jane and I prefer to live in Hawaii instead of having a nice car. I will put my dream car on hold for now.
We are not retired yet but I wish we were! Jane was given a package with a 50K pension at the end of this year so Jane will be retired. I am told that I am safe for now with all the laid offs. If I retire at 55 then my pension will be 70K.
More than 50% of my team got laid off. There is no one to support a certain software so I will use this to my advantage. I told my boss last week that I am willing to swap with my co-worker that will be laid off so that the team can provide coverage for that software. He will speak with his boss.
Due to company policy to not let go both husband and wife, I doubt they will go for it. I gave mgmt a viable solution and it is up to them to decide. I also did my best to get a severance package. If I get a package then i would get a 50K pension with 7-8K for medical yearly.
Right now my pension is 37K at age 55 if I quit or if they fire me before age 55. It is stupid for me to quit so I will ride it out for 3 more years to try to reach 55 to beef up my pension and to get 8-9K for healthcare yearly. I would not be surprised if they fired me in the future before I reach 55. I am prepared for anything.
It is definitely a great idea to start a business to write off an expensive car but Jane and I are not business minded ppl. We will be happy getting an ocean view condo in Hawaii. We can only think about Hawaii after I know my fate in the company. In the meantime, we need to purge and get the house ready for sale since we dont want to own a house anymore. We want to simplify our life.
Adam
Adam,
Did you read this? The Fear Of Running Out Of Retirement Is Completely Overblown
If you enjoy your job, might as well continue. If you don’t… well, as they say, run the numbers and live life with no regret!
S
Sam,
Yes, I read your post and you are 100% correct for us. Since we over planned to have 3x expenses, we should not run out of money in our retirement even if I quit now.
I still hate my job. I just plain hate working! :) There is choas in the company during the laid offs. A train wreck in slow motion.
I am taking your advice to never quit and to negotiate my lay off. Let’s see how it will play out this year.
I am also taking advice from a couple in their mid 70’s we met on vacation. The husband retired at 55 in 1995 with an ample pension back then. Now, 21 years later with inflation, he is 76 working part time to bring in extra income. His wife does not have a pension. Their advice to me is dont quit now and to retire at 55 to double my pension and to get medical coverage.
I definitely hear you and I truly believe that we have enough. It will be more stress at work with less ppl but I have to not care because mgmt does not care.
I prefer to get a severance now and to stop working. I figured that any extra pension above my current 37K will be used to rent a nice place in Hawaii.
I told Jane if work affects my health then I will quit before 55.
Nothing is written in stone and we will take it one step at a time.
I must admit that it is tough to walk away from a pay check. Let’s see what destiny have installed for us.
As always, thank you for your input!
Adam
There is a saying in India, that my parents also taught me – paraphrasing – If you want to judge a person, do not look at their face but at their shoes. If you want to judge a home, do not worry about how messed up family room, check their bathrooms.
An expensive suit but unpolished shoes, a shining living room but a dirty bathroom. Hmm.
Indians take it for granted that the kitchen has never been entered with slippers/shoes on. Kitchen is akin to a place of worship for its cleaniness.
Just some cultural thoughts on what a daughter/son should pay attention to! :-)
Regards.
Awesome! I think I heard a shorter version of this a long time ago when I was in Delhi.
Shoes and bathrooms….. I’m gonna clean all my bathrooms and shoes today because of this! :)
(-:
Smiles and Best wishes.
How do fathers of daughters teach their daughters about relationships and finances without being seen as the bad guy?
Hmm..other than I told them, (I have two daughters), they can’t date until they are 30? (they are still young so I have time)
Don’t care if I’m the bad guy. They are my daughters and I’m going to look out for them. Perhaps if the guy she wants to go out with shows up with a $$$ car I might let the air out of the tires. Let’s see if he has any skills to fix a flat or panics. That would tell me a lot right there.
Ok I really wouldn’t do that. (I’d pay the neighborhood kid to do it)
More seriously, my FS-FR score is off the charts. I just paid off my house that is worth $800k and my car is only worth around $5k. It’s a Lexus RX300 but I bought it in 2000 and it’s now 16 years old. My goal is to see if I can keep it until it’s 20 years old..just because.
Haha, hilarious!
I will try the “You cannot date until you are 30!” and see how it goes. I might add another stipulation like, “You cannot date until you are 30 AND after you have developed at least 3 income streams other than your day job.”
How do fathers of daughters teach their daughters about relationships and finances without being seen as the bad guy?
Easy peasy, be the great example. The example you set is subconsciously implanted in her mind. Lol, only now, in my 30’s I’ve realised that what I’m looking for are qualities that my dad has.
“Life is much easier with a healthy financial partner.”
I’ve been poor, I want a better life for myself and the partner I’m looking for, has to want more for himself and me.
Dating these days is so tough, even if you know what you’re looking for. You won’t believe the amount of money guys put in their cars and we’re not talking youngsters, we’re talking 30 and above.
And then I’ve met the guys who partied their 20’s and 30’s away and realised they aren’t going to live forever and are now starting to hustle and make money. Absolutely no financial stability.
I met one gold-digger (boy was he hot!). Didn’t have anything to offer, just wanted to take, take and take.
Glad to see that much of what I’ve surmised about men at age 33 is in this post. But then I had help, a woman on a talk show was accused (by her sister) of only wanting to date men with nice cars and she replied, “The man I’m dating can drive a prius but must have the mindset of a Bentley.” Sums it up nicely don’t ya think?
Believe it or not – Most people plan financially, not for themselves, but for their immediate family. Spouse, daughter, son, parents.
Because people who actually plan, are planning for their family or else we wont have life insurance as the very first step to financial planning, before we talk about stocks, CDs, or rentals.
A financial plan for an individual is NOT about a person alone, but with or without him/her, also.
Trying to open a door for further posts on this site for 45+ folks with older parents and HS/College going kids, most of which matter to me, and not talked about much.
Regards.
Please don’t tell your daughter to check out her date’s house on the first date…
Good advice!
“If he is leasing his vehicle, is he at least leasing it through a company he started?”
This made me LOL. I’m imagining you as the dad in Meet the Parents.
Very good article though! More young ladies need to look at things this way.
I may very well have to buy a lie detector and make my daughters date go through a 20 question checklist! hahahaha.
I will quiz him on several key personal finance metrics of course.
A spouse’s money is not your own and as long as you can’t earn your keep you will always be at a disavantage, wheter your significant other is good with finances or not.
It’s even more likely that the better the earning spouse is with money, the worse of financially you will be. Think about it, if they’re good with money that means that they will manage the household finances and that means that you will never get the crucial knowledge needed to manage your own money.
Best case scenario, you get a bunch of investments when they pass away, but then you need to learn how to manage them as a 70 year old.
Worst case, they kick you to the curb past your expiration date and you don’t have enought knowledge about the family’s assets to even get your fair share in a divorce.
Every kid needs to understand money and be able to be on their own financially when they finish college. Whom they marry afterwards is not something a parent can or should control, but as long as they have been thought good money management practices, they will be just fine.
If you teach your daughter to become financial independent, you don’t have to worry about whom she is going to marry. Because she will be smart enough to either make the right decision in her dating life, or to know when to cut her losses and give up on a bad deal.
You are spot on. I’m very empathetic to the stay at home spouse raising a child to have a good settlement/alimony. It is extremely difficult to get back into the working game after being out of work for 10+ years. I’m witnessing it with my own eyes right now w/ a friend.
You bet I will teach my daughter the importance of hard work and independence!
As a parent of a 20yo daughter, I would definitely warn her against someone with loads of debt and poor spending habits! But, I also encourage her to focus more on the guy’s character and traits. The money stuff can be learned, as can career tips, etc., if the person is someone of strong character and principles.
True. Which is why the questions, “Does he have a trust fund or a generous Bank of Mom & Dad? If so, how does that affect the way he sees money,” is really to assess his character.
The person who has everything, but works hard anyway to make his/her own mark is the keeper.
You are the reason why I have not gotten a BMW or I am not the guy with a BMW but has a zero bank balance. Thank you! I may be 45 and older than you – but the advice you give works!
Awesome to hear! Keep soldiering on. Having less money stress is totally worth it. The excitement of shiny things don’t last as long as the joy of financial independence.
Haha great advice! When I first met my wife I picked her up in my 1997 honda civic hatchback, thankfully she’s kinda into frugality, or maybe it was the puppy I had recently adopted…
Guys: ditch the sports car for a puppy, it works every time!
Puppy works way better than a car! But… I wonder what might be more expensive over a 10-20 year period. But, how can we put a price on love?
A classic Porsche 911 could actually be a good investment, if you can get one for a reasonable price! Maybe one that needs a little touching up, buy it cheap and flip it for a profit :)
I’ve never felt attracted to the guys with the flashy cars, and I hope to teach my daughter the same. So far she only shows special interest in men on motorcycles, but we have to cut her some slack for that. She is two years old.
Haha, nice. I wonder if mothers fear for their daughters as much as fathers fear for their daughters. Hmmm.
“Being the jerk that I am, I asked her, “How are you going to make out with him since he still lives at home?!”
LMAO! Hilarious :) Can I borrow you to make snarky comments to my idiot friends? Lots of them own fancy shit they don’t need that are destroying their finances.
Hubby and I have never once owned a car. We mostly use public transportation and car sharing. I hate cars. Depreciating assets are the WORST.
I think it’s cute that you’re looking out for your future daughter. You know what they say: “for a son, you only have to worry about one penis. For a daughter, you have to worry about a million penises.”
(And yes, I just wrote ‘penis’ on your blog. I’m a horrible person.)
That is a good saying I have never heard before! Thanks for sharing. Now I’m really afraid.
HA HA. It’s scary because it’s true.
These are blatantly sexist comments.
What’s wrong with penises? There are plenty of women who wish they could encounter more penises in their lives. And why shouldn’t your (theoretical) son be afraid of all the vaginas he’s going to encounter?
I used to want to get a nice car, a Porsche Cayman to be exact. I’m glad I used that money for my house down payment. It boosted my net worth by quite a lot with the hot housing market in the area.
My goal is to drive my car for at least 15 years. I’ve seen coworkers and friends who lease and finance nice cars, paying from $600/month to $1800/month. It hurts hearing those numbers
You are smart. I was not. At age 24-25 I bought a $72,000 (at the time) Mercedes G500. It was awesome for a year, and then I returned the keys a year later for around a $18,000 loss or something. Too painful to hear. BUT, I did so b/c it would fit in the condo parking lot I bought. Thank goodness I didn’t pass up on the SF condo in 2003!
I spent over 40k on a car four years ago even when I didn’t own a house and had more in loans than I could count. 4 years later, l still don’t own a home and still have waay too many loans but the car was paid off within a year. Driving it every day brings me immense Joy and happiness which most people may derive else where. Just thinking about my car makes a rough day feel better. Obviously not a wise financial decision but it has done wonders for my happiness levels. I do not wish I had a beater. I don’t use it too impress. I could care less what other people think. Now my goal is too pay off loans, save and buy a home. Once that is done, I might upgrade the car even more. Or who knows, I might just settle for a junker. If your goal is to drive a junker and live in a modest home, that’s easy. Not much effort for that needed. Yet surprising that so many have difficulty reaching that goal.
Raggaman, if that car makes you happy, then that’s all that matters. I hope your car happiness lasts for a long, long time!
For most people, their happiness over a car or another material thing fades over time. The worst is when the payments stay the same, or if you don’t have enough money to leave your job to do something else. May this never happen to you!
I personally would have MUCH rather have bought a property in 2012 SF. I’d be rich now and could sell the house, buy a $100,000 911 with cash and still have probably $200,000 left over.
I wouldn’t get much of a property for 40k :-)
Four years ago I had no interest in buying property due to many reasons, including the need for mobility. I agree that most people’s happiness fades very quickly with most items. Some of us buy things we cherish and those bring us profound happiness. If I don’t care, I’ll buy something cheap.
I paid off the car in less than a year. Have enough saved to live a few years if I don’t work. Thankfully having a job in very high demand with good pay helps. Basically I live in a rental with a luxury car. Not ideal but this situation works at this point for me due to many uncertainties.
And Sam, my wife wants you to know that she doesn’t understand my love for cars but she sees how happy it makes me. She says if she had followed your advice she would’ve missed out on me :-P
I agree – personally I never owned a car. I don’t see any reason.
My gf thinks that we should have one and I shouldn’t spend much money on rent.
I see it differently – considering I work from home it means I spend 90% time here.
Plus save money for gym membership because we have two usable gyms in the condo building.
In this case, your car & house are both at 0, so this article places your value at 0.
But you have a gf, so perhaps this entire article doesn’t even apply to you. After all, it seems you’re in a rare situation where you don’t have a need for a car. Good for you.
Just discovered your website.
I have a vaguely similar history to yours: Went to a Public Ivy, got a job for an asset mgr, became a corp bond trader by 25, had ups and downs until the Market Armageddon of ’07-’09 made me accept my mortality and so decided to pull the ripcord at age 39. I was actually massively short banks/financials that was offset by a long industrials cds trade that would have been a legendary trade (it was nominally valued in the $billions) – but I was forced to take off the trade in late summer of ’07 due to accounting reasons…ugh! Bear Stearns went under a few days later out of the blue. I should have been bitter like those dudes who were trapped in that window thing in the original Superman movie but instead I took the whole experience philosophically – I figured that was a sign to find a new road on this hiking trail we call life.
Fast forward to today, I have been busy the past 6 yrs raising my daughter as Mr. Mom. By far the hardest job in the world for a man is to raise an infant/toddler without outside help. Men are not engineered mentally, emotionally or biologically for the task of raising little human beings. Having said that, the bootstrapping method works in all facets of life: With kids, I discovered great success in simply forcing things to work because they had to. There is no greater reward in the universe then the love of a child so all the hard work is easily worth the great reward.
I will certainly teach my daughter to identify substance in things and in people. In this age, the world is becoming broader with the channels opened via the internet, while concomitantly smaller in the sense that people are physically spending most of their waking lives staring at either a tv, computer or smartphone. It is a strange paradox in this current age.
Anyway, technology is always changing but people’s character, morality, integrity, etc. are still measurable like they have always been so it is still important for a parent to teach their children all the rights and wrongs about people and life. Like you and most readers on a site like this, we are pragmatic and sensible types so it is obvious to us why someone with a $100K car who lives in a $1000/mo rental is a dangerous person to get too close to. I, for one, score approx 130 on your FS-FR scale and am proud of it. Of course, there are others who would probably view that score for themselves as an invite to call the Porsche dealer in the morning. I view those people in an agnostic way: they are neither right or wrong. I will, however, guide my daughter to keep those types of people at arm’s length since they are not compatible with what I believe will bring happiness for my daughter.
Anyway, thanks for allowing me to ramble…
Welcome to FS! What took you so long? I’ve been around since 2009. :)
That trade does sound legendary…….. oh man, how big would your bonus have been if that went through? $100M?!
Interesting perspective on Mr. Mom. What does the Mrs do and does she have to work? Seems like you did very well financially.
I don’t peruse the personal finance sites often since there are too many opinions on so few tangible topics that they’ll probably end up confusing me…I’m also one of the countless people – you’re obviously included – who can’t wait for this low rate environment to pass so that there will actually be investment options to discuss. We truly live in the worst time ever to retire early given the rates situation. I have bookmarked your page – your writing is clear and the layout is nice.
As for the short financials trade, as you know the sell-side trader works for a P&L while the buy-side trader works under investment guidelines, benchmark targets, etc…different perspectives and risk profiles exist b/w the two traders. Sell-side traders eat what they kill, in a sense, so they take home more while the buy-side trader has more career stability. Anyway, the trade would have made $billions but that would have been spread out over hundreds of accounts and so forth – it would have been a home run and probably cemented my career but I wouldn’t have gotten a % of the P&L.
The Mom works full-time doing client service work – lots of travel – so the timing of my daughter’s birth coinciding with my career decision made the arrangement seem like the optimal one. I will reiterate that raising a little human being makes for the longest days known to man, but at the same time they are the fastest years known to man as the early years are so precious.
Financially, I won’t go hungry anytime soon but there are many luxuries and toys that I gave up by retiring early before my prime earning years. I don’t get too excited about toys, gadgets, etc. anyway so it doesn’t pain me. It’s like going to Hawaii for vacation: I will have to stay at 3-4 star hotels rather than the 4 Seasons but I’m fine with that since I love Hawaii for the ocean and the mountains rather than the hotel pool and restaurant.
Yeah Female here, mid 30s , six figure income, own a town house in east bay area. Pretty stable job ( Healthcare) with a very healthy 401k balance. What I find amusing is when I go on a date with a guy who is probably making less than me or maybe the same amount as me but is living it up in the city ( In their mid to late 30s) renting a place with a roommate, probably paying more than my mortgage and also has way less job security than me ( high tech careers are not meant to last after 40). And they look down on me for living in suburbs and buying a house there ( oh poor you , you are stuck there!) and driving a Toyota Rav 4 and not living it up. I almost one to send them to financial counseling after each date, but well we all have to learn our own lessons. I will say I have observed the same pattern amongst good number of my girlfriends as well
I bought a car worth way, way more than 10% of my income. It’s my transportation, entertainment system, hobby, relaxation machine, pride, and part-time wife. I wouldn’t have minded spending twice as much as I did for a good, sexy car.
That money bought much more happiness than I could ever buy with a house, especially when decent houses in my region are 6.5 – 7 figures. To each his own.
(That being said, my savings are excellent, so I could afford to splurge on the car.)
My daughter always makes fun of the fact that my leg hair is rubbed off at the sock line. I always tell her to never date a guy who doesn’t have hairless sock lines. This either means he’s a loser or his parents are so rich he never needs to wear socks to work ;-). The odds of loaded parents is slim.
Damn you Sam, sometimes this site is a painfulto read! Just sold an expensive Porsche for profit and convinced myself that buying a cheaper Porsche was akin to ‘saving’. As we know, spending less is still spending, not saving. But this Porsche will definitely depreciate and my net worth is only ~$1,000,000
Future me thanks you for this timely reminder.
I can honestly say that I’ve never cared about any guy’s car and that in fact the nicest cars always made alarm bells go off for me (probably due to my rural Alabama roots and naivete, but still a helpful reaction).
In college I once had a guy at a club press his car keys into my hand and become angry when I didn’t recognize the Ferrari logo. I kept thinking he was too drunk to drive and just giving me his keys! I also once was shown the garage on a tour of some guy’s house at a party which contained several expensive cars (probably Lamborghini’s or the like). The house wasn’t that awesome though, and again I was pretty disgusted and also alarmed; suddenly I felt trapped like I was in some drug dealer’s house or at the very least with men who cared a helluva lot about trying to get laid above all else. I went running for a taxi.
I love this post! Whenever I see a new shiny expensive car my first thought is always “what are they compensating for and who are they trying to impress?” Yes, some people do make a lot of money and make wise money choices but there are probably more people who do not. I am so not impressed with one’s ability to spend money on a car. I am much more impressed by someones net worth, which of course you never do know. I am thankfully married to a wonderful man but after a date with a guy like that I would be hesitant to continue a relationship unless I knew he was actually financially stable and not up to he eyeballs in debt.
I went out with a guy who turned up in a beat up old car.
Sadly, his (rented) apartment was not much better.
A flash car would put me off for all the above reasons, but a nice car I think makes a good initial impression. Much as you would ponder over whether a flash car has been paid in cash, you could also wonder if the guy is driving a heap of junk because that’s all he can afford!
Plus, you’re hardly going to be asking about his savings rate or networth on a first date!
I dated a guy who had a good job with potential for advancement, an ok car, nothing flashy and lived with his mom who had some medical stuff going on. Looked ok at the start. He did buy his own place, rented the other room to a friend, turned that into a rental when he got the next house. But after thinking he knew the business better than his boss and losing the job ( a few times), not having the money to repair the car, letting a 401k be disbursed to him, I had some big questions. I would pay for a Friday night date (2 for $20) because he didn’t have the funds. When he got the 401k money it meant (7 years older than me ) he had $0 saved for retirement. Was he expecting me to pay for both of us? He was one of those people who hates working for someone else, but didn’t want to pursue self employment, but I knew he wasn’t going to be happy working when I retired if he wasn’t happy working then.
I have soooo many red flags now! Yet a lot of this is why I intend to have a pre-nup. All my hard earned money is mine, yours is yours, and we can co-mingle what we earn together.
I am so much happier now! It can be more than the car, house etc, it’s the money mentality that is revealed over time.
You are right about having a strong money mentality. You either think about saving first or spending first. I want to be someone who wants to save and invest for his or her future, and then use the proceeds from the profits of his or her investments to pay for a wonderful life.
Life is much much easier once you think about your future a little more carefully.
I like this post. Most personal finance sites tell you to drive a reliable, boring car, and while I think that’s great advice, it ignores a small group of people–people who like cars. And I don’t mean “people who want a Benz to say that have a Benz”, I mean people who actually enjoy vehicles for more than how luxurious they are. And I think owning something more than, say, a 10 year old Civic doesn’t necessarily mean you’re financially irresponsible, just that you spend your money on things you like (cars) and may be responsible on things you care less about (kind of a Ramit Sethi approach).
But I’m biased. I drive a 2009 Mustang, and also have a motorcycle. Both bought used, and owned outright. I rent a less-than-amazing apartment (it’s not a shithole, however), but rent where I’m at is crazy and I have student loans coming due soon–but I have a few months of savings (and it’s growing), I sock away money in my 401(k) every paycheck, and pay off my credit card in full each month. Owning a fun car doesn’t necessarily have to mean you’re financially irresponsible, you just have to get a fun car that doesn’t break the bank while being financially responsible in other areas.
I suppose it helps luxuriousness in cars doesn’t matter to me–I really don’t care to have a push-to-start car, or something with fancy video screens everywhere, just give me something with a manual, and some power to it. I’m thinking the next car may happen in a few years, and it’ll probably be a used Civic or something similar, in a sportier trim than base though. I’d absolutely hate life if I had to drive a boring car every day, but I want something with a bit more reliability than a Mustang (I’ll always have a soft spot for muscle cars, despite their flaws).
I think a good rule of thumb is that if you want something to look flashy or cool, and there’s no other reason (e.g. buying super expensive clothes if you don’t enjoy fashion, but just to claim you have them), don’t buy it.
LOL! This post totally reminds me of somebody I know. This individual is 27 years old, lives at home rent free. He just told me a couple weeks ago he just ordered a brand new Corvette ZR1. He literally spends the majority of his income on depreciating toys! I have tried on several occasions to talk with him about personal finance. He does have a home based landscaping/contracting business where he will do odd jobs for people in the neighborhood. The last I heard he probably makes on average about $4,000 per month net. I have tried to talk to him about changing his spending habits, buying a home and taking more personal responsibility. Although he always says he agrees with me, his actions show otherwise. As far as I know he has absolutely no plans to leave his parents’ home. Pretty amazing the mentality of some people.
I’ve got a little girl myself and was the victim of financial abuse by my ex; I’ve talked to a lot of other women who’ve been in that boat, too. I read a study recently that said that 98% of domestic violence victims surveyed (female, for this particular study) had experienced financial abuse at the hands of their ex. It’s more common even than physical abuse, since often DV can be emotional/psychological without hitting. Also, around half of homeless women are homeless because of having left a DV relationship, and financial insecurity is the #1 reason for staying in such a relationship (we’re not talking oh-no-I-can’t-afford-nice-cheese type of insecurity, we’re talking sleeping-with-kids-in-the-car kinda insecurity)
Keep in mind, DV happens in nice suburbs too, and even to girls with great fathers, so this is stuff your daughter might need to know one day too.
I’ve thought about what lessons I want to teach my daughter based on my own experiences and that of other victims I’ve spoken to, and in addition to the sort of thing you’ve mentioned, this is what I want to teach her:
1. Don’t rely on anyone else for your financial security. Make sure that you can be financially independent if you need to.
2. Don’t rely on your potentially-future-ex being honest, either. A lot of marriages end in divorce, and it’s not uncommon for one party to that divorce to royally **** the other.
3. Always have some money in a bank account that’s just under your name, so if you need to get out, you can.
4. Any assets NEED to be in both parties’ names.
5. Just because you love and trust someone doesn’t mean you shouldn’t protect yourself.
6. Don’t be scared of money. There’s still a societal attitude that “girls can’t do finances”, and it’s way too easy for a girl to accept a guy’s offer of “I’ll look after the money since I’m the head of the household/breadwinner/*insert 50s stereotype here*”. Letting someone else take the reins entirely is a recipe for disaster.
You live, you learn, huh :(
Also, your future daughter might meet an absolutely lovely guy who’s a starving artist, while she’s working as a CEO. Encourage her to find her own successes so that she can look at the person first, house and car second. There was a thing going around on TV in China where a very materialistic girl said that she’d rather cry in the back of a limo than laugh on the back of a bicycle; it’s great to be rich, it’s great to marry rich, but I still think that the best thing is to have a life full of joy and love.
I don’t know whether to give you a standing ovation or a hug, but I feel like doing both. You’re doing your daughter a huge favor by teaching her these lessons in advance. I have also been a victim of domestic violence/abuse and financial abuse was a material component of it.
The only one of your rules that I have a slight issue with is #4: “Any assets NEED to be in both parties’ names.” I think it just needs to be clarified. Any assets that were purchased with joint funds need to be in both parties names. Any assets that were purchased with YOUR FUNDS ONLY need to be titled in YOUR NAME ONLY.
In my particular case, my then-boyfriend (the abuser) lived with me in my home. One of his chief complaints was that it always felt like MY home and not OUR home, no matter how much I encouraged him to rearrange things, paint, etc. I am embarrassed to admit how close I was to deeding at least a small percentage of the house to him, just so he would feel like it was his home, too. Thankfully, I didn’t. Can you imagine how awful it would have been for me to buy that little sliver of my own house back from him later? He might have made me tangle in the courts for years to get him off the deed, and I might have had to sell my entire house to be rid of him.
So for #4, absolutely make sure the stuff you helped pay for is titled jointly. And make sure that the stuff you paid for all by yourself is titled ONLY in your name. If the person you’re in a relationship with gives you grief about having your own separate property, tell them that it is rightfully yours because you bought it, but you’re happy to share so long as you two stay together. If they insist on you titling your separate property in a joint name with them, that is a HUGE red flag. Don’t give into it. And if they keep insisting on it, break up.
Oh yes! I hadn’t thought of that, too easy to just think of things in my context! I put my income in his bank acct and let him buy the house with my savings cause he never saved, but in his name alone. Fortunately courts have seen this b4 so I think I’ll be OK to get my fair share, but gosh, I look back and think how love really is blind! Oops.
I have a $1,500 car that smokes when I drive it, I rent a great townhouse that costs me 13% of my pre-tax income, and I save 30% towards savings and retirement. Would you date me?
Probably not. But that doesn’t mean you won’t have a fun and successful dating life. How is it by the way?
Do fine for myself – got a great long-term GF. I remember trying to tell a co-worker who made $45k/yr that he didn’t need a Camero to get the girl. He didn’t believe me. He’s still making payments.