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More bad financial decisions
As I was heading to my hotel room up in the mountains, I overheard two guys talking (quite loud), and one asked an interesting question:
Guy Without The Ride: Nice ride! How much did you end up paying for the ride, if you don’t mind me asking?
Guy With The Nice Ride: 170k, and I also got the extended 15 warranty on the ride and some other features which added another 25k+ onto. I’ve only paid 22k on it so far (I’m unsure why he even mentioned this part, but it was worth mentioning in this article).
This situation reminds me of another guy who bought a car of similar value. He put more down on his car but still owed about 100k on it and barely drove it.
However, he had to put more money down on his car because his credit profile was risky.
The Tesla Guy Who Never Leaves His House: Was The Purchase Worth It?
Thankfully, the Range Rover guy is getting out more, but he sure has a long way to go on paying the car off.
Rule: The Biggest The Purchase, The Bigger Your Pockets Should Be
Whether you buy a house, a car, or any other significant purchase, you should have considerable money in the bank.
One of my car rules is: never go into debt over a car. A house is more understandable, but even then, you need to be strategic about a house purchase; it frequently doesn’t make sense. It more likely makes sense to invest in property with REITs, for example.
Most people follow a different rule, though.
They think: The bigger my income, the bigger purchase I can make.
In some cases, this is okay, but it’s not when you’re living above your means and have multiple debts.
In all truth, if you buy a car worth 200k, you should be able to purchase the car with cash. And if you don’t, make a larger downpayment so you’re not stuck with almost 200k worth of car debt.
200k worth of car debt is 100% a perfect example of a poor financial decision. Not only are cars one of the most significant depreciating assets, but they all do the same thing: get you from point A to point B.
No need to go crazy on a purchase unless you can make more than a 10% downpayment on the car.
Some people have 200k worth of car debt in households with more than one car. Be careful to avoid accumulating this kind of debt. It’s similar to credit card debt, which is also one of the worst types of debt to accumulate.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.