Most of us have heard the Suze Orman segment called "Can I afford it?" where someone wants to buy a big item and lays out their financial situation for Suze to say whether she thinks they can afford the purchase or not.
My situation below is real, but I'm not actually GOING to buy the car. This was a fun conversation between my wife and I about whether we could "afford" to purchase the car or not, what the word "afford" really means, and what the MMM community would say about it.
The item I want to purchase: 2014 Lexus IS350 F-sport. = $41,000 USD
Our situation:
Ages: Both 31
Location: Chicago suburb
Her Salary: $125k last year, $140k this year (Sales position, Base = $90k, Commission varies)
My Salary: $55k
Debt:
Mortgage: Owe $185k, 3.5% on 15-yr mortgage, 13 yrs left
No car loans, student loans or CC debt
Assets:
Home Value: $220k
Cars: None yet - need to buy (2) cars!
401k's combined: $110k
Roth IRA's combined: $45k
Cash: $150k
We spent 2 years overseas (Melbourne) for my wife's job where I worked remotely. I realize our cash is high, but that's because we were limited on what we could invest while in Australia, plus a few big bonus checks came to us near the end.
So, knowing the above, can we afford the car?