Toyota GR86, 86, FR-S and Subaru BRZ Forum & Owners Community - FT86CLUB - View Single Post - Can I afford the FRS/BRZ? Please help me decide.

bucket · 03-21-2013, 12:49 AM

.02
Think about what you will need for when you are not working...when do you want to stop working? 65? How long do you think you'll live? 80? 85?....go with 85. You're going to need 20 years worth of money then....how much a year though, how about $60k? Medical needs, world travel, place in Florida with friendly neighbors. So right now, that's going to be $1,200,000 in today's money. Over a long time, inflation is around 3%, so in 35 years, today's $1.2 mil will be $3,914,445.

Starting with $5k, and using the historical 7% S&P 500 index gain for investment returns, you'll need to save $1725/mo.

How much is that $500 car payment worth in 40 years in such an index fund? $7487

...and the same argument goes out to everybody who says to always pay cash for a car. Since May of last year, the S&P 500 has gained 10.88%...car loans are like 2-3% with good credit. With $32k in an index fund you would already have enough gains for some wheels and brakes.

Most financial advice tries to maximize gains at the old end of the spectrum, and most Americans seem to maximize gains at the now end of the spectrum. Everybody who writes a book or gets on TV telling you to maximize gains at the old end of the spectrum most likely already has an 8+ figure net worth. They didn't get there by following the advice they are giving you. They took more risk than that (or they started out with/married money). It's possible to live well in the present without sacrificing your retirement. You can take into account that what you make now will probably be one of the lowest salaries you will ever have, and up until you are in your 30s there will still be time to catch up.

TL;DR...don't buy the car now, but don't wait around until you can pay cash or have x months living expenses either.

Also, maybe start looking for another job. Just going by the degrees that you have, you should be making at least 75% more than you are now. Don't become a boiled frog.

Personally, I figure out how much I need for fulfilling everything I have to pay for in a month, add in a healthy food/entertainment budget, use two net paychecks as my figure for "monthly pay", and target $1k leftover for saving/investing/paying debt/hookers. During a 3 paycheck month, dump like 80% of that straight into savings.
It could be awhile before you can afford a new car with that calculation, but you'll still be young enough to enjoy it and not living paycheck to paycheck in the interim.

03-21-2013, 12:49 AM	#88
bucket Senior Member Join Date: Nov 2011 Drives: 4 wheels Location: tampa bay Posts: 108 Thanks: 7 Thanked 25 Times in 21 Posts Mentioned: 0 Post(s) Tagged: 0 Thread(s)	.02 Think about what you will need for when you are not working...when do you want to stop working? 65? How long do you think you'll live? 80? 85?....go with 85. You're going to need 20 years worth of money then....how much a year though, how about $60k? Medical needs, world travel, place in Florida with friendly neighbors. So right now, that's going to be $1,200,000 in today's money. Over a long time, inflation is around 3%, so in 35 years, today's $1.2 mil will be $3,914,445. Starting with $5k, and using the historical 7% S&P 500 index gain for investment returns, you'll need to save $1725/mo. How much is that $500 car payment worth in 40 years in such an index fund? $7487 ...and the same argument goes out to everybody who says to always pay cash for a car. Since May of last year, the S&P 500 has gained 10.88%...car loans are like 2-3% with good credit. With $32k in an index fund you would already have enough gains for some wheels and brakes. Most financial advice tries to maximize gains at the old end of the spectrum, and most Americans seem to maximize gains at the now end of the spectrum. Everybody who writes a book or gets on TV telling you to maximize gains at the old end of the spectrum most likely already has an 8+ figure net worth. They didn't get there by following the advice they are giving you. They took more risk than that (or they started out with/married money). It's possible to live well in the present without sacrificing your retirement. You can take into account that what you make now will probably be one of the lowest salaries you will ever have, and up until you are in your 30s there will still be time to catch up. TL;DR...don't buy the car now, but don't wait around until you can pay cash or have x months living expenses either. Also, maybe start looking for another job. Just going by the degrees that you have, you should be making at least 75% more than you are now. Don't become a boiled frog. Personally, I figure out how much I need for fulfilling everything I have to pay for in a month, add in a healthy food/entertainment budget, use two net paychecks as my figure for "monthly pay", and target $1k leftover for saving/investing/paying debt/hookers. During a 3 paycheck month, dump like 80% of that straight into savings. It could be awhile before you can afford a new car with that calculation, but you'll still be young enough to enjoy it and not living paycheck to paycheck in the interim.