My Impulsive Car Purchase

No, I did not actually buy a Porsche 918 Spyder (I wish) in the image above.

I would consider myself a relatively frugal spender. I mean, I still eat out with coworkers once a week. I make monthly car payments that I will admit, I sometimes have regrets about. I live with my parents, but I still pay rent. Add up all my expenses and it’s about 32% of my take home pay. Being 22, recently graduating, and still living with my parents, I still don’t have huge expenses. I don’t have to worry about caring for a child. I don’t have a monthly mortgage payment or any expenses related to maintaining a house. When I bought my car, it was kind of an impulsive decision because I’ve always had an interest in cars and I always dreamed about what car I would buy as soon as I got a job. 

I seriously considered selling it and buying a much cheaper option, but ended up keeping it because I do like my car and enjoy driving it. However, I still don’t like paying so much monthly for it, so I decided to get creative and find other ways to reduce my expenses. I live about 30 miles from my work and factor in rush hour traffic to Downtown Houston and that’s a hefty gas bill. Therefore, I’ve just recently started taking the bus to work and the employer pays for it.  

Not only do I pay a lot less for gas, but my car is not depreciating as quickly and I will not have to take it for repairs as often. Now, I estimate that my expenses will be about 29%. If you think it sounds like a tiny difference, read my article about compound interest to see how profound of a difference a few dollars a month can make. Put that extra money in investments and it’ll build up.

If I ended up selling my car and buying one half the price of my current, I could reduce my expenses to as low as 24% of my take home pay. With my current finances, I don’t think that’s completely necessary. However, if you’re in a sticky financial situation, I’d recommend going as cheap as you possibly can on a car.  

I’m not even done mentioning all the added benefits of this little decision to simply start taking the bus. During my first week taking the bus, I found myself either wasting time on my phone or just looking out the window. This is what ultimately led me to the idea of starting the Future Millionaire’s Blog as a side hustle to help others with their personal finance. I spend at least two hours on the bus a day, and I figured that I should be doing something of value.  

I really want to emphasize that everyone’s financial situation is different. I’m assuming most of you are also on the same journey as me, so I would highly recommend not splurging too much on a brand new car. For most Americans, car purchases are a very serious deterrent to building wealth. The average new car purchase is over $36,000! I can’t give you advice as to what car you should buy, but it is essential that you do not live beyond your means.  

How do I know what is beyond my means? My personal rule of thumb is that my car payment should not be more than 10% of my take home pay. You need to be aware of what your financial situation is. Know where your money is going. If you don’t, then make an excel worksheet or find a free budget app to track your expenses. Then plan your car purchase accordingly. For those of you who only see a car as getting you from Point A to Point B, you could get easily find a cheap, used vehicle under $10k that can still be very durable. 

You don’t have to be like everyone else. While everyone else is buying brand new, forty-thousand dollar cars, you could be putting that money into something that will actually appreciate in value over the long run. Would you rather appear rich to your friends, or actually BE rich? Again, I think my car purchase was rather impulsive, but it wasn’t brand new and it certainly wasn’t over thirty grand. 

How much car you can afford is personal to you. That’s why it’s called “personal” finance. You need to be aware of what YOU can afford. Like I mentioned before, I personally do not want my monthly car payment making up more than 10% of my take home pay. If I really wanted to, I could’ve just gotten a crappy car paid in cash and it’ll still get me from point A to point B. I just don’t feel like that was necessary given my financial situation. I mean, if you’re one of those FIRE (Financial Independence, Retire Early) fanatics, then you’re looking for cars as inexpensive as possible. But that’s a whole ‘nother level of extreme frugality that I’ll talk about later. For now, just assess your financial situation and plan your car purchase accordingly. 

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