Episode Summary
Cars are the worst! Aside from a house, cars might be the largest expenses you have. People can spend so much money on a car, but in reality, does anyone really care what you drive? If you’re driving a car because you love it and can afford it, then that’s great for you. But if you’re driving a car because you’re trying to impress someone else or “keep up with the Joneses”, then it might be time to reconsider.
Episode Notes
We start off by addressing a call-in question about how people earlier in their careers and starting out their lives can balance saving for retirement while also trying to save for a house, prepare for kids, and more. You’ll have to listen to hear our thoughts on this one!
Mike kicks off a discussion with cars by sharing a story about his grandfather who used to work for Ford, and reported to Henry Ford directly. Mike and Maggie then share what kind of cars their families drive:
- Mike drives a 2003 Ford Explorer and his wife drives a 2014 Ford Edge.
- Maggie drives a 2016 Toyota Prius V and her husband drives a 2011 Prius.
We discuss how cars are very expensive to own and operate, yet there is very little difference in their utility between an inexpensive car and a really expensive car.
Why are cars the worst? To clarify, we mean they are the worst financially.
- Depreciation. Some people claim cars are investments, but an investment is something that appreciates over time. Cars instead depreciate over time. Always and quickly.
- The way most people buy cars is very costly. People often lease or finance cars, and often ones they can’t quite afford. Financially speaking leasing is costly idea. We discuss a number of different expert’s points of view on how much you should spend on a car, from Dave Ramsey’s (your car should not total more than half your annual income, only pay cash for a car, and never buy a new car unless you have a net worth over $1M), to the Financial Samurai (only spend 10% of your annual income on a car).
- If you have a more expensive car, a bunch of other related costs are also magnified, from maintenance to repairs to insurance.
Mike + Maggie’s overall advice on cars is:
- Stop caring because nobody else cares about what you drive. Check out Accidentalfire’s Instagram post re: what you think people are thinking about your car vs. what they are really thinking.
- Be honest with yourself about why you want a certain car.
- Buy something that’s modest, preferably used, and pay cash.
Other topics we cover on this episode:
- Consider thinking about how much longer you will need to work to cover the cost of the type of car you want to drive.
- Maggie and her thoughts on Maseratis, and how nice cars make her nervous.
- Mike talks about his 2003 Ford Explorer, a lot.
Show References
Accidentalfire’s Instagram post re: what you think people are thinking about your car vs. what they are really thinking.
Playing with FIRE book
Playing with FIRE Documentary