Can a car lover achieve Financial Independence?
I was born a car guy, I’ve always loved everything about cars… the looks, sounds, smell, the rush when flooring it or going around a tight corner. But can a car lover achieve financial independence?
As much as I love cars, I’ve always been able to see past the instant gratification of going out buying a car I can’t afford because “I deserve it”.
A large part of Financial Independence is delayed gratification, why buy an expensive car right now when I can get a better one 10-20 years from now when I can actually afford it.
If you are like me, you’ve already read a ton of financial blogs, so i won’t go through all the reasons not to buy a fancy car.
Car payments, they are the arch nemesis of the FIRE world, any blogger you ask will tell you to get rid of that car payment. Car payments can be easily be one of the biggest money suckers, limiting your ability to build wealth. Once you finally get out of the constant cycle of buying a new car once your old car is paid off, you can see you bank account start to grow.
I’ve always like cars, my dream car has always been a Porsche 911 Turbo. This is a ridiculous car starting around $184,000, with a few options probably more like $200,000. What kind of money do you have to make to afford a car like that? My guess is most people who do end up buying a car like this end up financing it, just as we would a normal car purchase, just happens the payment is the cost of a mortgage payment.
How am I achieving Financial Independence while being a car guy
The key to still being able to achieve FI while having a car you enjoy is all about expectations. I don’t expect to drive around in a Porsche at 32 years old, I haven’t earned it yet. It’s so easy today to just get a loan and buy anything you want, without actually earning it yet. This also ends up costing you more money in the long run.
I drove an old ass car, I just recently sold my car, it was 12 years old. I had bought it used for 12k, didn’t have any payments on it. Buying a cheap car early in life can help you start to get ahead. This allows you to build up some cash or start saving for your next vehicle. If you can get off the cycle of using a loan to buy, you can stop wasting money on interest.
I saved for a while, thinking I was going to buy a 60-70k truck or SUV, I had about 30k saved. Luckily I started reading about Financial Independence before I made this purchase or I would have been stuck on the never-ending treadmill of consumerism.
I took my 30k and bought a hot hatch, basically a daily driver car with a bit of sportiness added. It’s no Porsche but it gets to work and back just fine. I also found when you save up $30,000 it’s hard to go shell it out, couldn’t imagine if I had saved 60k. Many financial experts will say spending cash is a lot harder than financing, if you finance you are guaranteed to end up spending more money. Whats an extra 5k on a 60 month loan, sure add it on.
I don’t have a car payment, this means I can invest at least $750 per month, helping me get to financial independence.
Financial Samurais 1/10th Rule
My FI could have been accelerated if I had about a $5,000 used vehicle, putting the rest into investments. For some people a 30k car would be at the very top of their budget. Financial Samurai says to spend 1/10 of your income on a car, no I don’t make 300k per year. So I ended up spending about 2x more than I should have, but at least I’m not paying any interest right?
Some other options for a car nut
While I don’t buy super expensive cars, I can still work on my car, making it my own.
You can also rent expensive sports cars in some citys. I went to Vegas, paid about $600 for a few hours driving Ferraris, Lamborghinis and other luxury cars. You get to experience the car without the huge expense.
In the end its up to you to justify the amount you spend on a vehicle and its easy to justify spending more.
Sometimes I wish I spent less, but then I get in my car in the morning, slam through the gears and enjoy the ride.