Major Money Mistake Averted

[ontheheel]

I have a weakness for nice things.

We generally keep our expenses relatively low when it comes to the big things (housing, food, transportation, etc), and are working on continuously investing more each year. The thing that has historically thrown us off track is me getting on a kick of buying nice things and justifying it by looking at how low our other expenses are (hello, whole house Sonos system). Because none of this has been as big of a mistake as an expensive car or house, we've always been able to recover pretty quickly - all you've got to do is just stop what you're doing and everything reverts back to normal.

With all the helicopter money being thrown at me by the government, a rising net worth, a major pay raise coming in a few months, low interest rates, and rising used car value on our van, I was an inch away from buying a brand new Tesla Model Y this weekend.

We would have put about $25k down and financed the rest, instantly dropping us out of the $250k to $500k race, and creating a whopper of a monthly payment for the next few years.

I brought the idea to my wife, who has actually been encouraging me to replace my '99 Jeep Wrangler with something new as a reward for my promotion. She wasn't completely opposed from a financial perspective, but balked at the lack of space for three car seats/boosters in the back. That was about all it took to snap me out of it and stop looking at stuff online and dreaming about having a rad new Tesla in the garage.

Disaster averted. I reached out to a good friend to tell him what had nearly transpired and asked for accountability for big decisions like that. Also, today, I came across this clip https://www.youtube.com/watch?v=anSAGb3-cwk from Dave Ramsey on YouTube. His recommendations are a little more liberal than the FIRE community would endorse, but interesting benchmarks nonetheless. 1) Pay cash 2) Don't spend more than 50% of your annual income on all vehicles combined and 3) Never buy a new car unless you have at least $1 Million net worth.

With a current net worth of just over $260k, income a little over $120k, healthy programmed raises, and a guaranteed, inflation-adjusted pension starting at about $65k (plus healthcare) in 12 years (at age 48, when our net worth should be over $1 Million), I think I may not stick entirely to Dave's rule, but certainly won't pull the trigger any time soon. Assuming even modest market returns, at our current savings rate, we'll easily have 1/2 million in the bank within five years, and annual income of a little over $150k at that time. I believe at that point, we'll be able to afford a 3-5 year old Model X, and still have plenty of room for hitting our number and time frame.

Excluding housing, we spend about $42k/y on bills and discretionary items. Our housing is expensive because the Navy puts us in HCOL areas ($30-40k/yr on rent), and we plan to move to LCOL upon retirement, ideally not needing to touch our investments for living expenses.

Having said all the above:

1) How do you stay on track with your goals when it feels like you are finally hitting your stride financially?
2) Does my plan seem reasonable, given my income, net worth projections, pension, and goals?

[ObviouslyNotAGolfer]

Just a brief thought or four from someone with a similar life situation/career stage (my perspective on things 16 Feb 2021):

1.) As my net worth and income have increased and my savings and pension pile up, I feel LESS not MORE inclined to splurge on stuff (travel excepted!!). When I was younger and had little money, I was more inclined to buy all sorts of stuff.

2.) My mother just died of COVID and my dad is in long-term care. After cleaning out their house and dealing with all their crap (I loved my parents but I HATE hoarding), I feel less and less enamoured with buying stuff. And I do like stuff: Music LPs, CDs, audio equipment, camera equipment, mechanical clocks and watches, art, gadgets, etc. Nevertheless, my summer project (one of them) is to unburden from a good chunk of my possessions.

3.) The pandemic has squashed my desire for things like clothes, expensive watches, a new car and the like.

4.) I like Buddhism and stoicism, although I do not claim to be a member of either. These schools of thought teach liberation and peace by minimizing one's clinging to impermanent things and situations. And EVERYTHING is impermanent and speeding toward extinction.

My thoughts. 

[SunnyDays]

You don’t have to own nice things to enjoy them.  Go to a showroom and ogle and drool over a Tesla all day long.  Then go home.  Repeat as necessary.  One can appreciate beauty without buying.

You can also add up all the costs of owning said item over and above what you currently own.  More for insurance, maintenance, etc.  And the worry factor, like when will it get it’s first dent?  After you go through all the downsides, it seems less worth it.  It also makes you less likely to romanticize it, because you’re thinking about other things than how it will feel to drive or how you will look driving it.

[norajean]

If the car is well under 1% of your net worth, go for it.

[AMandM]

You don’t have to own nice things to enjoy them.  Go to a showroom and ogle and drool over a Tesla all day long.  Then go home.  Repeat as necessary.  One can appreciate beauty without buying.

And in the case of a car, you can even rent one once in a while and have the fun of driving it.

[charis]

I'm the you described in five years without a weakness for nicer things. FI can't come fast enough at this point, honestly, so I wouldn't buy a fancy car to deliver my butt to a job to which I'm tethered so I can pay for the fancy car to bring me there.  See the issue?

[ericrugiero]

Like you said, the new Tesla would have been a major mistake.  That much money tied up in something that depreciates is crazy.  I like Dave's rule of thumb idea but I think it's a little generous.  He is a car guy so he prioritizes that spending.  There isn't anything particularly wrong with that but you do need to realize how much it will hold you back from saving money.  Is driving a nice car worth that to you? 

[ontheheel]

All good thoughts, thank you.

I'm actually truly blessed to have a job right now with good work/life balance that I enjoy and that allows me to make a difference in people's lives - it just also happens to come with a very valuable offramp in 12 years, not counting my rental income or investments. If I were trying to RE ASAP, the thought wouldn't even enter my brain - I'd make that van last at least until we were FI.

However, y'all's responses have me thinking more philosophically about purchasing generally. I'm getting to a point financially where I'm earning good money, saving a healthy amount, and where the future looks bright. If I didn't save another dime the rest of my life, pretty much all of my foreseeable expenses are covered, we are able to give away about 10% of my income, my kids have college funded, and I'll end up leaving behind some inheritance.

As my pay continues to increase, we are increasing both our saving and our giving, but not really giving ourselves pay raises - our lifestyle doesn't really look much different than when we had a household income under $40k ten years ago. We do want to avoid the hedonic treadmill, and be strategic with our money decisions, but I am left wondering a what I'm saving for anymore.

At first, it was to pay off my wife's student debt, get my master's, and stay above water. Then it moved into saving/investing and preparing for the possibility that I wouldn't promote (and be forced out of a job). After being selected for promotion this past year, it's left me feeling a little unmoored financially - all the fighting and striving to stay afloat or prepare for the worst is now kinda moot. We have pretty solid ground underfoot and it feels weird.

We do plan to keep increasing our saving/giving as time goes on, but I do wonder exactly what I'm saving for anymore. If we delay or downgrade purchases now for the sake of saving for the future, if that future is already taken care of, are we just saving to afford a more expensive lifestyle down the road?

[Bloop Bloop Reloaded]

I would say it depends how much you like cars. When I was 25 and earned $80k a year I bought a car that cost $30k, when I was 30 and earned $150k a year I bought a car that cost $105k and in a few years when I'm in my late 30s and I'll be bringing in ~$300k I plan to buy a car that will cost $200k. None of these purchases has made any difference to day-to-day lifestyle, though they'll set back my FIRE date I suppose, but I'm pretty happy with being a 'car guy'. OP, sounds like you are too, so I would not have considered buying a Tesla to be a 'major money mistake'; certainly I don't feel like my car purchases have been mistakes. But then we each can only indulge in a few areas of life - if you're a big car guy you probably can't be a business class flights guy at the same time, and vice versa.

Roughly each car I've bought has corresponded to the "10% of net worth" rule and I don't have any great issue with that. All the cars I've bought have depreciated very slowly as they're niche cars. The 1% net worth rule seems to me to be way too conservative. If you want to buy a $400k Ferrari I don't think you need to be worth $40 million. But each to his or her own.

One thing I would say is that right now is not a good time to buy anything. Car prices in particular have inflated about 20% in my area (used) and new car prices have also been going up heaps because of the stimulus money. Since the government is encouraging us all to buy, I think the smart thing is to withdraw as much spending as possible; it is rarely good sense to follow the herd. It is not my duty to support businesses and I certainly won't be buying any cars or big picture products until we get back to a more normal environment with less stimulus.

[use2betrix]

I have let some “lifestyle creep” in as my income has grown. Lately they have been things that I have planned on for a long time that will come with me into FIRE.

1. Personal Gym: My wife and I just moved into our first house (we’ve been together 9 years, in a 5th wheel for 5-6, apartments the rest of the time). We now have a formal dining room we’ve converted into a gym. In total, it’s about about $7k, and we haven’t bought a treadmill yet. I wanted the highest end of everything, as this is something I plan to have for 20-30 years. I’ve been working out non stop since I was 14 (I’m 32 now) and my wife is as equally ambitious as I am in terms of lifting/cardio, so we knew it would get good use.

2. Vehicles. I had a 2013 F250 back in 2013, then sold it in 2017 for a 4runner. After about a year, we missed the truck. Last year rolled around and we finally got back into the exact truck I wanted, with the intent to keep it a long time. Since I owned one before, I knew exactly what to expect and what I didn’t want. I’ve also modified it exactly how I want, and I’m basically done with it. All in, the truck was $75k after TTL, and we’ve put about $12k in lift/wheels/tires/bed cover/rack.

While our spending has been high, our only debt is the truck ($35k), we still saved $145k last year and $165k in 2019. Our total savings/investments is also at about $900k, so we are still on a good track.

Next “buy for life” item is probably going to be a guitar and amp.. I used to play all the time, but between moving, minimal space, etc. I sold my previous guitars..

[SunnyDays]

You say you wonder what you’re saving for anymore.  What’s your answer?  Since you’re on this forum, I would assume it’s for FIRE.  Are you FI yet?  Can you fund all of your living expenses forever more without working?  If not, then that’s what you’re saving for.  Big purchases push that ability into the future and as you don’t have a crystal ball, you have no way of knowing if you’ll continue to be able to earn well into that future.  Crap happens where your life changes on a dime.  Don’t think it can’t happen to you.  So if you truly want a secure future, keep saving until you’re FI, and if you still want the Tesla (or whatever) at that point, buy it then.  Or, if you just have to have it now, buy it, knowing that you’re exchanging a more prosperous and secure future for it.

[windytrail]

For the answer you seek, I recommend reviewing some of the fundamental tenants of Mustachianism by the guru himself.

https://www.mrmoneymustache.com/2016/06/08/happiness-is-the-only-logical-pursuit/

Oddly enough, the flaw in our rich world is a tripwire that we have set up way down at level 2: security. Our consumer culture encourages us to look upwards and earn respect, sexual intimacy, confidence, and even self actualization with the new Toyota Highlander or Ford F-150, when doing so actually destroys our security. By draining our money, luxuries like cars make us desperately insecure and dependent on constant employment. And by keeping us seated and inactive, they drain our strength and health so our lives become even more precarious.

https://www.mrmoneymustache.com/2014/04/14/how-to-make-money-buy-happiness/

But there’s an even more satisfying thing you can do with money, which is rarely mentioned: not spending it.

Huh? But what about all the slogans “Money is no good if you don’t spend it”, “You can’t take it with you when you die”, and “It is better to spend money like there’s no tomorrow, than to spend tonight like there’s no money“?

It turns out that these catchy bits of folk wisdom aren’t in line with much of the science. More recent research on the matter* is revealing that people with money in the bank (or its more Mustachian form of productive, growing investments) receive much more happiness from it than people with the more fleeting pleasures of a high income or high levels of consumption of stuff or experiences.

https://www.mrmoneymustache.com/2018/04/10/hacking-hedonic-adaptation/

The key thing to know about your happiness is that you have a ‘baseline’ level. Some of it is genetically inherited, but you can also have a strong effect on it yourself, by pressing the genuine happiness buttons in the diagram above.

Most lifestyle upgrades (cars, dishwashers, or even my new toilet paper holder) do not press these buttons, unless they truly address a shortfall in your previous life.

In the best possible outcome, you might make a life change that helps you gain new skills, increase your health, or improve your life’s core relationships. This could stretch out the shaded “Actual Benefit” part of the graph to be much longer, in the extreme cases for your whole life.

But in the typical outcome, most of us make changes that produce only a short bump, and then may even come back to haunt us with a payback time (which I labeled the “debt hangover” in the picture. Anything that puts you into debt, makes you less healthy or otherwise compromises your ability to live a happy life fits into this category

[use2betrix]

For the answer you seek, I recommend reviewing some of the fundamental tenants of Mustachianism by the guru himself.

https://www.mrmoneymustache.com/2016/06/08/happiness-is-the-only-logical-pursuit/

Oddly enough, the flaw in our rich world is a tripwire that we have set up way down at level 2: security. Our consumer culture encourages us to look upwards and earn respect, sexual intimacy, confidence, and even self actualization with the new Toyota Highlander or Ford F-150, when doing so actually destroys our security. By draining our money, luxuries like cars make us desperately insecure and dependent on constant employment. And by keeping us seated and inactive, they drain our strength and health so our lives become even more precarious.

https://www.mrmoneymustache.com/2014/04/14/how-to-make-money-buy-happiness/

But there’s an even more satisfying thing you can do with money, which is rarely mentioned: not spending it.

Huh? But what about all the slogans “Money is no good if you don’t spend it”, “You can’t take it with you when you die”, and “It is better to spend money like there’s no tomorrow, than to spend tonight like there’s no money“?

It turns out that these catchy bits of folk wisdom aren’t in line with much of the science. More recent research on the matter* is revealing that people with money in the bank (or its more Mustachian form of productive, growing investments) receive much more happiness from it than people with the more fleeting pleasures of a high income or high levels of consumption of stuff or experiences.

https://www.mrmoneymustache.com/2018/04/10/hacking-hedonic-adaptation/

The key thing to know about your happiness is that you have a ‘baseline’ level. Some of it is genetically inherited, but you can also have a strong effect on it yourself, by pressing the genuine happiness buttons in the diagram above.

Most lifestyle upgrades (cars, dishwashers, or even my new toilet paper holder) do not press these buttons, unless they truly address a shortfall in your previous life.

In the best possible outcome, you might make a life change that helps you gain new skills, increase your health, or improve your life’s core relationships. This could stretch out the shaded “Actual Benefit” part of the graph to be much longer, in the extreme cases for your whole life.

But in the typical outcome, most of us make changes that produce only a short bump, and then may even come back to haunt us with a payback time (which I labeled the “debt hangover” in the picture. Anything that puts you into debt, makes you less healthy or otherwise compromises your ability to live a happy life fits into this category

Good reminders.. I believe that reading all the articles should be a pre-requisite before joining the forum.. I read them all (probably twice) before I knew the forum existed. That’s been 5-6 years ago, worth another read for sure.

[Bloop Bloop Reloaded]

Conceptualising money as power/options/freedom/time is a good way of thinking about it. If a car is going to give you genuine enjoyment or unlock freedom/options (it is unlikely to unlock power, and time can usually be unlocked more efficiently) then go for it, but otherwise remember that the power of money is in having it and being able to spend it - not in spending it per se.

And remember that spending in this current environment just leads to inflation and the needless kicking of the can down the road. Wait for the covid stimulus to end before consuming, where possible. That money is going to waste.

[PhrugalPhan]

I am as much of a person that doesn't give a lick about car models as anyone you will find.  Just get me from A to B.  That said, I am heavily considering buying a Tesla myself.  Of course my situation is much different from yours' (Almost $1.5Mil 'stache, less than 2 years from retirement, and no kids to consider).

I have been researching Tesla (stock & cars) heavily the past few months.  Tesla cars are so different from mainstream cars its hard to explain (one thing - so far they have held their value better than any other maker - though who knows if that will continue).  Yet, here I sit with my 11 year old Hyundai.  Why?  Well, gas prices are moderate to low here, since the "virus" my car usage has dropped dramatically (from 15k miles to ~2k - and over 1,000 of that last year was due to having to make trips to visit my mother and help her after knee surgery) and there are few Superchargers in this area of the country (for now).  And I want to put my money on fixing up my house for now.  So no Tesla for me and I am fine with that.

So what am I doing? I have taken my free investment cash (~1% of the overall stache) and bought Tesla stock on the recent dip.  If the price goes up in the coming years as I believe perhaps this will pay for that Tesla car.  Just like my purchase of the local electric utility 20 years ago has been paying me enough to pay my electric bill going on 8 years and is now worth more than double.

OK, that was a tangent, but if you feel you want the car, and understand how it will affect your stache now and in the future, and you still want it, that's not a necessarily bad choice.  You just need to be totally honest with yourself when considering the ramifications of the purchase.  I wouldn't do it in your place, but I know many who would. 

[Bloop Bloop Reloaded]

Tesla cars are so different from mainstream cars its hard to explain (one thing - so far they have held their value better than any other maker - though who knows if that will continue).

I don't think that's the case. I bought my 981S exactly four years ago for $105,000 drive-away (essentially $100,000 plus on-road taxes) and today an equivalent year, equivalent km model is selling for $115,000 + on-road costs on Carsales. The cheapest listing is $89,000 + on-road costs and that's for a car that's two years older than mine. Now that's what I call value retention!

Meanwhile a Model S 75D from 2017 is listed on the same site for $94,000 whereas its new price was about $125k (AUD).

(Mind you, there's a 20% uplift due to covid stupidity, and there's usually 10% bargaining room in the price, so the true values of all used cars are significantly lower than their listing price.)

[ObviouslyNotAGolfer]

Also, for me--especially after all the time, energy, and money spent cleaning out my parents' place--I have started to really consider the non-monetary costs of purchases:

Is this thing worth the space it will take up? I actually like some empty areas and clean lines in my living space and office. Do I really want to interrupt this space over here with one more thing? What about when we move (I hate and detest SoCal, and moving is definite!)? How much effort and time will it take to move it and make sure it does not get lost or broken.

I have a weakness for mechanical watches and clocks. I am eyeing a new Hamilton Intramatic dress watch for about 900$. But it's not just the money. Watches are like tiny cars--they need to be wound frequently (or worn frequently if an automatic). Sitting around is not good for them. They need replacment crystals, straps, and even the best ones need servicing and repairs. And they make you a target. Is it worth it?

[kite]

My last "new" car cost less than 10% of my annual income and less than 1% of my net worth.
No judgement from me if you want something fancy.
But for me, a car sits idle most of the time.  Pre-pandemic, I probably was in the car about 20 hours per month.  Since the pandemic, that's cut in half.  At most, I need a car only 2-2.5 hours per week.  If I were paying $500/month in payments, insurance & gas, that would be like paying $50/hour.  I could have a driver at those rates.

[ericrugiero]

Tesla cars are so different from mainstream cars its hard to explain (one thing - so far they have held their value better than any other maker - though who knows if that will continue).

I don't think that's the case. I bought my 981S exactly four years ago for $105,000 drive-away (essentially $100,000 plus on-road taxes) and today an equivalent year, equivalent km model is selling for $115,000 + on-road costs on Carsales. The cheapest listing is $89,000 + on-road costs and that's for a car that's two years older than mine. Now that's what I call value retention!

Meanwhile a Model S 75D from 2017 is listed on the same site for $94,000 whereas its new price was about $125k (AUD).

(Mind you, there's a 20% uplift due to covid stupidity, and there's usually 10% bargaining room in the price, so the true values of all used cars are significantly lower than their listing price.)

I would argue that a neither a Porsche 918s or Tesla is a mainstream car.  You are right that a few cars hold their value better than others but almost no cars are a good investment.  Compare the total cost of ownership and your Porsche is WAY better than a new Land Rover but that still doesn't make it a good investment. 

Note:  I'm not criticizing.  Cars are a high priority to you and you are thoughtfully and intentionally spending money in a relatively efficient way.  I love your car and would love to drive one.  But, I personally would enjoy that money more if I spent it in a different way.

[ontheheel]

My last "new" car cost less than 10% of my annual income and less than 1% of my net worth.
No judgement from me if you want something fancy.
But for me, a car sits idle most of the time.  Pre-pandemic, I probably was in the car about 20 hours per month.  Since the pandemic, that's cut in half.  At most, I need a car only 2-2.5 hours per week.  If I were paying $500/month in payments, insurance & gas, that would be like paying $50/hour.  I could have a driver at those rates.

This is an interesting perspective. I actually used an argument similar to this when attempting to talk a former assistant out of getting a new car - she was able to walk to work and the chow hall, and ride shotgun or get an uber for going out on the weekends.

[lutorm]

I find that the major mistake would be to do any kind of large purchase (where large I mean something like >$1k) on a whim. Even if you think it's a good idea, think about it for a couple of weeks. If after mulling it over, it still seems like a good idea, go ahead. But a lot of the time, at least for me, the urge just sort of fades away into a "meh, that's not worth it".

[mwulff]

I guess I'm the odd one out here since I actually own a Tesla. However before people facepunch me into oblivion consider that a Tesla is expensive to buy but incredible cheap to run. Since my wife and I put 25.000 miles on our car annually for work purposes this works out to the best possible deal in history.

Inside the first 2 years the tax deductions alone has almost paid for the car. Zero cost on maintenance so far.

A Tesla is also the only EV with the range to be a viable choice for us as a work-car.

Now buying a Tesla for private purposes is a different story to ours but I would encourage everybody to consider electric vehicles as soon as practically possible.

Some market forecasts see the ev getting cheaper than an ice car as early as 2023 with a collapse of ice sales in 2025. Even if it takes to 2028 I would urge everyone here to have as little cash tied up in ice cars as possible.

[Weisass]

I guess I'm the odd one out here since I actually own a Tesla. However before people facepunch me into oblivion consider that a Tesla is expensive to buy but incredible cheap to run. Since my wife and I put 25.000 miles on our car annually for work purposes this works out to the best possible deal in history.

Inside the first 2 years the tax deductions alone has almost paid for the car. Zero cost on maintenance so far.

A Tesla is also the only EV with the range to be a viable choice for us as a work-car.

Now buying a Tesla for private purposes is a different story to ours but I would encourage everybody to consider electric vehicles as soon as practically possible.

Some market forecasts see the ev getting cheaper than an ice car as early as 2023 with a collapse of ice sales in 2025. Even if it takes to 2028 I would urge everyone here to have as little cash tied up in ice cars as possible.

The minute I can get an affordable ev for carting my family of six around, I’m right there with you.

[ducky19]

We do plan to keep increasing our saving/giving as time goes on, but I do wonder exactly what I'm saving for anymore. If we delay or downgrade purchases now for the sake of saving for the future, if that future is already taken care of, are we just saving to afford a more expensive lifestyle down the road?

I guess I would just like to point out that you're assuming your job is 100% secure until you're able to draw your pension. You may be in a stable profession, but nothing is 100% guaranteed. Continue to save as though you don't have a pension to fall back on. Personally, If I was able to hit coast FIRE in the next few years without taking the pension into account, then I would consider letting in a little lifestyle creep. Worst case scenario, you enable a higher spend or lower draw down in retirement if the pension comes to fruition.

[TheAnonOne]

I exclusively look at spending money as a detriment to FIRE, however, seeing as that I am very close and a few side gambles might absolutely explode me over the finish line, I have been looking at Tesla's as well...

Post-FIRE though? I'm buying whatever I want, and maybe ill consider doing some consulting if I want something particularly expensive. Though, in software we can usually make some big money pretty fast (IE: a new car in a few short months)


Early in my FIRE journey though? Nah, but i'd say if you are 75% + of the way there, there is little you can do to derail yourself at that point, double your contributions or completely stop them, you're moving the needle by a few months at most.

[partgypsy]

You know what they say. Don't count your chickens before they are hatched. I would continue to sock away and up your net worth, revisit the new car down the road. Also some people like making car or vacation funds, to set aside the money to pay for it before making the purchase. I am so not a car person so this is foreign to me. I used to have a gem, jewelry obsession, even had a list of stones I wanted to buy, etc. But that obsession kind of went away, probably for many reasons.

[WSUCoug1994]

Note: I am financially conservative.  You spend $70-82K a year on $120K income with a networth of $260K and you want to buy a $50K car? Oh hell no and I am obsessed with cars - particularly with EV's.  That is almost 1/5th of your networth.  As mentioned above, you are placing too much value your job security and your pension.

[Bloop Bloop Reloaded]

We do plan to keep increasing our saving/giving as time goes on, but I do wonder exactly what I'm saving for anymore. If we delay or downgrade purchases now for the sake of saving for the future, if that future is already taken care of, are we just saving to afford a more expensive lifestyle down the road?

I guess I would just like to point out that you're assuming your job is 100% secure until you're able to draw your pension. You may be in a stable profession, but nothing is 100% guaranteed. Continue to save as though you don't have a pension to fall back on. Personally, If I was able to hit coast FIRE in the next few years without taking the pension into account, then I would consider letting in a little lifestyle creep. Worst case scenario, you enable a higher spend or lower draw down in retirement if the pension comes to fruition.

Nothing in life is guaranteed but the only thing that will stop an intelligent and motivated person with training in a relatively safe field (think medicine, dentistry, pharmacy, optom, some areas of finance, some areas of consulting, some areas of law) from having earning capacity is health issues. And that can be (to a degree) insured against. If you are a good lawyer/doctor/consultant/whatever you will never want for work or money - again, less health issues. Among the close friends I know with "high powered" jobs not one of them has been laid off, fired, involuntarily unemployed, etc.

[MisterTwoForty]

Been mulling over how to respond to this the last couple days.

Under no circumstances should you buy a car that is 1/5 of your networth.  I think you have that figured out. 

You need a strict written budget and financial plan.  Then, stick to it.  You will only make progress to your goal by purchasing assets that go up in value.

[TomTX]

The minute I can get an affordable ev for carting my family of six around, I’m right there with you.

Isn't there a 7 seat Model Y? Admittedly the 2 seats in the back are small.

[SwordGuy]

Been mulling over how to respond to this the last couple days.

Under no circumstances should you buy a car that is 1/5 of your networth.  I think you have that figured out. 

You need a strict written budget and financial plan.  Then, stick to it.  You will only make progress to your goal by purchasing assets that go up in value.

@MisterTwoForty ,

In the spring of 1988 our net worth was around $2000, maybe $3000.     I bought a new car for about $6000 because I had gotten a job paying $30,000 which required a daily 60 mile commute.   It was a 4 to 5 fold increase in income.   Would have been smarter to buy a lightly used car but I was both younger and without the luxury of time to shop for a good deal -- they wanted me to start right away and I wanted to!

So, that car was about twice my net worth and worth every penny.     No way I was going to risk losing that job due to an unreliable used car after 6 years in poverty!

That's the problem with simple rules, real life is more complicated.

[kite]

My last "new" car cost less than 10% of my annual income and less than 1% of my net worth.
No judgement from me if you want something fancy.
But for me, a car sits idle most of the time.  Pre-pandemic, I probably was in the car about 20 hours per month.  Since the pandemic, that's cut in half.  At most, I need a car only 2-2.5 hours per week.  If I were paying $500/month in payments, insurance & gas, that would be like paying $50/hour.  I could have a driver at those rates.

This is an interesting perspective. I actually used an argument similar to this when attempting to talk a former assistant out of getting a new car - she was able to walk to work and the chow hall, and ride shotgun or get an uber for going out on the weekends.

I might reach a point where I can ditch the car entirely and use a car service or short term lease.
For now, I have the care of an elderly relative who is about a mile from my house and having a van at my disposal has come in handy in emergencies.  But most other regular weekly travel is within a similar, walkable distance.
I do like the EV's, but I can't shake the thought that if I needed to finance a car in order to put it in my driveway, something is out of whack, either my choice of vehicle or my choice about where to live.

[ontheheel]

All - just to be clear, I do consider it a mistake to make a purchase like this right now, hence the title of the thread. We are continuing to save, invest, and give away a good chunk of my income, even as I support a family of five in a relatively HCOL area (I have little control over where I am stationed), and do not plan to buy a Tesla anytime soon. It would seriously derail the progress we are making. We roughly doubled our net worth in the past year, and I don't care to take a huge leap backwards.

When it comes to the pension and job security, I crossed a milestone last year that means I am guaranteed (by law) a job at least for the next 12 years until I'm eligible for a pension. If I become disabled between now and then and can't work, I will be medically retired and just receive the same pension (or more) early. There are three scenarios I can foresee that would derail me. 1) I resign, 2) Congress would have to make major negative changes, and since the NDAA is about the only bipartisan thing left in congress, that is an extremely low likelihood, at least in the next 12 years, or 3) The entire country collapses and becomes a Mad Max scenario, in which case my investments are worthless anyway.

I realize that while unlikely, any of the above three scenarios could happen. I deal with 1&2 by saving as much as I can. #3 is a crapshoot, so I try to eat healthy, stay in shape, and keep my powder dry and my deep larder full (and hope for the best).

Again, I'm not buying a Tesla anytime soon. The thing I'm considering is in about five years doing a version of coast FI combined with a future pension. At that point, I should have at least $500k saved, a good bit higher income, and be only seven years from the pension. It would entail me maxing out my tax-advantaged accounts only, and using some of the surplus to get a new(ish) electric car(s?) to keep well into retirement. My Jeep will be 27 years old by then and my wife's van will be 15 years old. I really like the idea of not fixing leaks, clearing codes, and tracking down clunks, rattles, and squeals every few weeks. While I generally enjoy working on cars, and doing the labor myself saves a ton of money, there comes a point when the most recent blown radiator hose or emergency starter swap just gets to you.

All that said, I'm not completely sold on the idea at this point, but it's something I'm considering. At under 10% of NW, and under 30% of annual income, it's at least enticing to ponder.

[MiatAccountant]

Everyone has priorities and definition of "worth" is different for everyone.

I went through something similar, with Miata.
Drove my friend's Miata back in 1994 and always wanted one after that drive.
But with other priorities (financial goals, family, kids, etc), it was never a good time to buy one until 2016. I always told my wife and family that I'm going to get one which they were all supportive (and I'm sure they were sick of hearing) but I set some goals before I decided to make a purchase (hitting FI target, all debts completely paid off, kids can drive on their own, save enough money to purchase in cash, etc.).

Since you're now trying to do the same (with much more realistic short time frame than my 22 years plan), I think your goal you outlined seems reasonable.

I do absolutely agree 100% on cash purchase. Never borrow money on depreciating asset.
Also like the fact you are planing 3 to 5 years in advance. It will give you some time to see your financial pictures and see what your priorities in life going to be. Who knows, in the process you may want Tesla today but it may be Porsche Taycan 3 years from now.

Also the way I stuck to my goals is focusing on why I'm trying to achieve them (not so much on why I can't get something because of such goals....although in hindsight, 22 years is bit ridiculous).

[Wintergreen78]

I really like that you talked the decision over with your wife, then with a friend. Giving big decisions time, so you can weigh pros and cons, and having people you trust to bounce ideas off are two good ways to keep from making rash decisions.

I’m okay with people financing a basic car when they are just starting out. After that, I really like the always pay cash and never more than 50% of income. It is simple and keeps you from buying something ridiculous. I’d add to that, anything over $30,000 is ridiculous, no matter what your income is.

I also think it is perfectly fine to do some virtual car shopping every once in a while. Check them out on-line, go to the dealership and sit in them, then go home and keep driving the car you have. And if your Jeep really is getting old and ragged, it is fine to get something in better shape. There is a big space between old Jeep an expensive Tesla.