Every January the North American International Auto Show is held in Detroit, Michigan aka “The Motor City”. Industry leaders arrive from all over the world to boast about their new line of vehicles. Beautiful models are appointed to showcase glossy cars under glittery lights. Media outlets anxiously come in droves to cover and promote the show. It’s an event filled with emotion and excitement.
Cars are no longer marketed solely as a reliable and safe means of transportation. Automobiles are advertised as an extension of someone’s personality or level of success.
Many people are led to believe that certain types of cars and brands define who they are as a person. Sports cars appeal those who want to be seen as young and sensational. Certain trucks appeal to people who like to be perceived as strong and tough. Luxury cars appeal to individuals who want to be seen as economically successful.
This is not a productive mindset to have. Material objects do not define who you are. Your spirit, character and accomplishments define you. In the long run people will admire your greatness as a person, not your material possessions. Material objects never come to mind when people remember high achievers such as the Wright Brothers, Martin Luther King or Steve Jobs. No one talks about what kind of car, clothes or house they had. People only care about the impact they had on the world.
Don’t go into debt to impress friends or strangers on the road who you will never meet. The average new car price was $33,000 in 2015 with an average monthly payment of about $500 a month. You have to pay about $60,000 or close to a $1000 per month if you want a vehicle with any trace of luxury or unique style. The novelty of a new car rapidly wears off after about 5 months of usage. The bank continue to demand their monthly payments after your enthusiasm for the car disappears. You will feel stressed out when you have to continuously pay between $500 -$1000 a month on a car that does not excite you anymore.
New cars serve as a huge financial burden for the typical American. Its common knowledge that new cars lose significant value as soon as you drive them off the lot. Use those monthly car payments to invest in your future financial independence. Make your money grow and work for you. Purchase assets that will appreciate and produce income such as rental property or a dividend paying blue chip stocks. A mere $500 a month consistently invested in a total stock market index fund with a 10% average annual rate of return will eventually accrue into a million dollars.
There is nothing wrong with buying a beautiful new car when you are financially independent with multiple sources of passive income. If all you currently have is a job as your only source of income then you have no business buying a new car. Avoid new cars even if you are a well paid employee making well over $150,000 a year.
The majority of your disposable income should be used towards investing and creating multiple streams of income. Never use money from a job to fund major discretionary purchases. Major discretionary items should only be purchased with recurring income streams that you don’t have to physically show up to work for.
Until you become financially free, just purchase a 2 or 3 year old entry level base model vehicle. You can usually buy a car for half price if you wait until it is 3 years old. With proper care and maintenance, a typical car will last 20 years or more. If you live in a major downtown then you may not need a car at all. Many downtown city dwellers find it more convenient and cheaper to use bikes, public transit and taxicabs.
The more you focus on accomplishing goals and creating wealth, the less you will care about materialism. Some of the most successful and wealthiest people in the world practice frugality with their choice of vehicles.
Billionaire Mark Zuckerberg drives a modest entry level Acura TSX. His wife drives a Honda Fit.
Billionaire Warren Buffet is very frugal with his car purchases. He drives a 7 year old Cadillac DTS.
Billionaire Ikea furniture store founder Ingvar Kamprad reportedly drives a 20 year old Volvo.
Los Angeles Clippers team owner Steve Ballmer drives a Ford fusion.
Los Angeles Raiders team owner drives a 1997 Dodge caravan.
Alice Walton is one of the billionaire heirs to the Wal-Mart fortune. She drives a Ford F-150 pickup truck.
The late Steve Jobs’ wife Laurene Jobs drives a $40,000 Audi. She is reportedly worth $9 billion.
While on your journey to wealth and independence, it would be wise to emulate the frugal spending habits of those aforementioned billionaires. Living below your means will keep you on a sure path to unlimited wealth and prosperity. There is nothing wrong with partaking in luxurious living after you become independently wealthy. You are meant to live a life of comfort and abundance. However, you must learn to crawl before you walk. Stay focused and frugal in the beginning so you can live debt free and lavishly later.