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Six-Figure Wheels or Six Figures Broke?
For Those Who Have Nothing In The Bank
Ever seen people with bad a** cars but bum a** house? There’s nothing wrong with a bum a** house – especially if it’s paid in full, but there is a problem if you have a very nice car and zero money in the bank.
There are also those people with cars that cost close to 6 figures and they live in a basic apartment, and no, they aren’t earning six figures. These types of people always confound me.
I call these people appearance addicts. These people will often wear trendy clothes, take the most pictures on social media, and give you a picturesque view of their “enviable” lifestyle. But if you go to their bank account, you’ll find they’re barely making it; their account might even be over-drafted (ever experienced that?)
Okay. Some of them are high earners, but they burn through cash as if they have unlimited amounts. Usually, these people end up downsizing (e.g., selling their house, getting rid of their car, selling some other stuff) to keep up appearances.
For Those Who Have Something In The Bank
Then you have the people who have the nice car with the bum a** house or an average looking house – except they have money in the bank. Their car payment is also not costing them their entire paycheck. They live below their means and want to splurge on a vehicle because they can afford it.
Stop Buying Things You Can’t Afford
Some people don’t care about where they live; they want a nice car, and that’s it. But the people who drive nice cars often want lovely homes to go along with it. The catch is, it’s easier to acquire a car you can’t afford versus a house you can’t afford.
There is more red tape when it comes to buying a house, which is why most people don’t own one. Even the people who buy a house usually don’t own it until they pay it off in full, which doesn’t usually happen until decades later – if they don’t keep using the equity and refinancing.
A good rule of thumb to follow when you’re buying a car is the 1/10th Rule:
The rule states that you should spend no more than 1/10th of your gross annual income on the purchase price of a car. The car can be new or old. It doesn’t matter so long as the car costs 10% of your annual gross income or less.
If you follow this rule, you’ll always be good to go. The goal is to live within your means. There is nothing wrong with driving a luxury vehicle and living in an apartment. The question comes down to can you afford it and does it make sense for where you live?
8 Lessons On Cars & Money
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.