Living beyond your means

[Papa Bear]

Originally Posted By: Bluestream
I've always lived below my means and invested my money. I've never had a car loan in my life


Me too .. but we are Canadian.

 

[Clubber_Lang]

Yes, there are trade offs with everything.
But that new car warranty is NEVER financially worth
what you pay for it in terms of vehicle depreciation,
taxes, insurance, ect.

My old man loved sports cars. He did buy new, but he drove it
for 30 years, and took GREAT care of it (Supra). He taught me the
value of frugality, even if he (in my opinion) shouldn't
Have financed it. JMO opininon, but if you cant pay cash
You cant really afford it. Debt is risk. How much risk will
you take?

Originally Posted By: Quattro Pete
Originally Posted By: Clubber_Lang
to give an
example, say you love lightweight sports cars. Why spend
Or finance 25k on a Subaru BRZ, if say you can locate
A pristine excellent example of that 85 mazda rx7 gsl se
You always wanted when you were younger, with 50,000
miles for $6500 (just an example) in my opinion that
is finding the sweet spot.

Because that '85 rx7 is a 30-year-old car and will require frequent work/fixing. Some people don't mind it. Others just want to drive, not tinker in their garage.

 

[Quattro Pete]

Originally Posted By: A_Harman
Originally Posted By: Quattro Pete
Originally Posted By: Bluestream
Originally Posted By: Hokiefyd


I personally never buy cars with cash. I make far more off that money invested than I save in interest.


True, but you are still buying a depreciating asset,

So what? Buying it with cash does not make the car depreciate any less.



It at least saves you paying the additional interest in excess of the purchase price on a depreciating asset.

And again, that is only looking at one part of the equation. On the other hand, you could have invested that cash that you dumped into the car purchase and earned interest. If that investment interest is higher than what your loan interest is, then you're making more money by taking out a loan on that car.

 

[Quattro Pete]

Originally Posted By: Clubber_Lang
JMO opininon, but if you cant pay cash
You cant really afford it.

The point is, I can easily pay cash, but that does not mean that I will. For the reasons stated above, I may choose to buy it with a low interest loan because I know I can invest the cash at an even higher interest than what I'm paying for the car loan. It's not risk. It's sound financial planning. And it doesn't meant that I can't afford it.

 

[Quattro Pete]

On the other hand, my current daily driver is 12 years old, I see no need to buy another car for as long as this one still runs and doesn't cost me too much in upkeep and is reliable.

 

[Mr Nice]

Originally Posted By: Papa Bear
Originally Posted By: Bluestream
I've always lived below my means and invested my money. I've never had a car loan in my life


Me too .. but we are Canadian.


Canadians are smarter than Americans. Fact not my opinion.

 

[CourierDriver]

Originally Posted By: Boomer
I remeber a story some years ago in the press where they interviewed people who had a real net worth over $1,000,000. The characteristics always stuck in my mind and some are as follows:

1. Lived in a more modest house that was paid for.
2. Had almost NO electronic subscriptions. No cable TV, cell phone at a minimum, etc.
3. Paid off credit cards in full each month, ie they treated it as they would their checkbook and only used it for things they could pay for.
4. Many had older cars and kept them an avarage of ten years or more.
5. Debt payment on mortgage was religious and mortgages were typically paid off in under 10 years. Means all available cash was used to do this for a time.
6. Took as much advantage as they could of 401k, IRA, etc.
7. Rarely went out to eat.

By the time these folks were at 50 years old, they were debt free and worth over a million dollars or more.



Good stuff. If folks quit smoking and had no cable tv, thats alot of money over 30 years.

 

[cashmoney]

Some simple truths...

1. The wealthy earn and are paid interest on their investments, the suckers and poverty class pay interest on their debts.

2. Consistently live a little below your means and you very likely end up wealthy and much happier and more secure that those that do the opposite.

3. Credit is absolutely fine when used in moderation on appreciating investments - that's called financial leverage. Credit on depreciating assets (like cars, boats, fancy vacations, etc) is a sucker's game.


In terms of buying a new car I am inspired by a long term friend of mine who has net worth in excess of $20 mil. Like me in his early 60's he has never owned a brand new car. Says he can't afford to buy a new car because the depreciation is just ridiculous on a new car. My net worth isn't in the same league as his, but I figure if he makes the effort to buy really nice used luxury cars then I can do the same.

Invest for the future and also when you have built up some savings and investments then spend your money wisely to live well. This is way better than living like a financial fool like so many millions of Americans currently do.

 

[KrisZ]

Originally Posted By: LT4 Vette
Originally Posted By: Papa Bear
Originally Posted By: Bluestream
I've always lived below my means and invested my money. I've never had a car loan in my life


Me too .. but we are Canadian.


Canadians are smarter than Americans. Fact not my opinion.



I wouldn't be so sure...

 

[jeepman3071]

I don't think the point of this thread was about financing cars vs. paying cash, it was about living beyond your means, which means trying to buy things you cannot afford.

I've always paid cash for my vehicles, but if someone can afford a car loan, it isn't an issue. The issue is when people try to loan cars and other items they cannot afford. That is the definition of living beyond their means.

Example:

I have a friend who is the same age as me. He didn't go to college, so he has no student loans. He got a job with an HVAC company, so he could have a steady paycheck coming in if he didn't take on any debt. Well he decided he wanted a brand new truck. The truck is nice, but he can barely afford the fuel for it after making the monthly payments. If it needs service, he is unable to afford it since he has no money left over after making the monthly payments and paying for fuel to get to his job. The amount of money he is spending is starting to be larger than the amount he is making. That is the definition of living beyond your means. It has nothing to do with car loans vs. paying with cash, it is about what someone can afford to do vs. what they cannot afford but try to do anyway.

A lot of it has to do with "image" in our society. Many people would rather "look" like they are wealthy than actually be wealthy. If the friend I mentioned above bought a vehicle with lower monthly payments, and was making more money than he was spending, he wouldn't be living beyond his means because he isn't spending more than he is bringing in.

 

[Bladecutter]

Originally Posted By: LT4 Vette
Originally Posted By: Papa Bear
Originally Posted By: Bluestream
I've always lived below my means and invested my money. I've never had a car loan in my life


Me too .. but we are Canadian.


Canadians are smarter than Americans. Fact not my opinion.


How much do you guys pay for the same goods that you can buy in the US for less?
Gasoline?
Generic Midsize Automobile?
Motorcycle insurance?

You're not that much smarter, if at all.
Otherwise, all Canadians would be living in a border city, taking advantage of the best of both countries as much as possible.

BC.

 

[Hokiefyd]

Originally Posted By: jeepman3071
I don't think the point of this thread was about financing cars vs. paying cash, it was about living beyond your means, which means trying to buy things you cannot afford.


Which was my point to begin with. Financing always comes up in a discussion like this, and it's sometimes said that if you finance it, you can't afford it. I hope people can look into why that's not necessarily true. One can choose to be free of debt and not owe payments to anyone. And that's great if that's how they like to live. Others will buy things on credit because they really can't afford it and are upside down, financially, in multiple aspects of their life. Still others buy things on credit despite the fact that they really can afford it, and they will use the power of investing to their financial advantage. Debt itself doesn't imply living beyond one's means.

To the point that you could lose money on investments...this of course is true. Investments can be volatile, especially in the short term. It's an undeniable fact, however, that investments are very solid performers when taken long-term. Risk adversity, of course, depends on age. Someone who is 25 and has 30+ years of solid investing in front of him can probably shoulder some more risk than someone who is 65 and will be drawing those investments out and need them to be stable. All of this supports the fact that accurate generalizations...or at least accurate qualitative generalizations (this is good, or this is bad)...can't be made. There are simply too many factors at play, too many variables, to make a blanket statement that applies to everyone.

 

[Turk]

Originally Posted By: Boomer
I remeber a story some years ago in the press where they interviewed people who had a real net worth over $1,000,000. The characteristics always stuck in my mind and some are as follows:

1. Lived in a more modest house that was paid for.
2. Had almost NO electronic subscriptions. No cable TV, cell phone at a minimum, etc.
3. Paid off credit cards in full each month, ie they treated it as they would their checkbook and only used it for things they could pay for.
4. Many had older cars and kept them an avarage of ten years or more.
5. Debt payment on mortgage was religious and mortgages were typically paid off in under 10 years. Means all available cash was used to do this for a time.
6. Took as much advantage as they could of 401k, IRA, etc.
7. Rarely went out to eat.

By the time these folks were at 50 years old, they were debt free and worth over a million dollars or more.



Hummmmm......

Similar to me!

 

[Nick1994]

Originally Posted By: jeepman3071
I don't think the point of this thread was about financing cars vs. paying cash, it was about living beyond your means, which means trying to buy things you cannot afford.

I've always paid cash for my vehicles, but if someone can afford a car loan, it isn't an issue. The issue is when people try to loan cars and other items they cannot afford. That is the definition of living beyond their means.

Example:

I have a friend who is the same age as me. He didn't go to college, so he has no student loans. He got a job with an HVAC company, so he could have a steady paycheck coming in if he didn't take on any debt. Well he decided he wanted a brand new truck. The truck is nice, but he can barely afford the fuel for it after making the monthly payments. If it needs service, he is unable to afford it since he has no money left over after making the monthly payments and paying for fuel to get to his job. The amount of money he is spending is starting to be larger than the amount he is making. That is the definition of living beyond your means. It has nothing to do with car loans vs. paying with cash, it is about what someone can afford to do vs. what they cannot afford but try to do anyway.

A lot of it has to do with "image" in our society. Many people would rather "look" like they are wealthy than actually be wealthy. If the friend I mentioned above bought a vehicle with lower monthly payments, and was making more money than he was spending, he wouldn't be living beyond his means because he isn't spending more than he is bringing in.


Yup, a guy I went to high school with got a regular job and went out and bought a 2013 Dodge Dart. Sure he looks cool, but he has higher cost of insurance and a car payment. I have an old Camry. I obviously don't have a car payment. Sure I don't look cool but I couldn't care less about that. Why in the world would you want a car payment on a brand new car at 19 years old?

 

[OVERKILL]

Originally Posted By: Nick1994
Why in the world would you want a car payment on a brand new car at 19 years old?


And that sir, is why I bought a 12 year old M5. I sure as heck don't have 100K kicking around to buy a new one with cash. Now of course I'm not 19, but the same logic still applies. I've never bought a new car and probably never will. Luxury sedans seem to depreciate like crazy, so picking one up in good shape used, with the knowledge of what it will take to keep it in good running order is still massively cheaper than doing the payments thing. And you end up driving something you enjoy. At least in my experience

 

[Nick1994]

Originally Posted By: OVERKILL
Originally Posted By: Nick1994
Why in the world would you want a car payment on a brand new car at 19 years old?


And that sir, is why I bought a 12 year old M5. I sure as heck don't have 100K kicking around to buy a new one with cash. Now of course I'm not 19, but the same logic still applies. I've never bought a new car and probably never will. Luxury sedans seem to depreciate like crazy, so picking one up in good shape used, with the knowledge of what it will take to keep it in good running order is still massively cheaper than doing the payments thing. And you end up driving something you enjoy. At least in my experience

Exactly, the only thing that's cost money for my car was tie rods (super cheap) an alignment ($39) 2 tires ($49 each) and a timing belt kit with water pump and tensioners ($99) and some spark plugs. I see no repairs in it's future after that basic maintenance.

 

[Clubber_Lang]

And that car serves you well. So many have to make sure they
meet the standards of strangers.The same strangers who might
not urinate on you if you were on fire.

Originally Posted By: Nick1994
Originally Posted By: OVERKILL
Originally Posted By: Nick1994
Why in the world would you want a car payment on a brand new car at 19 years old?


And that sir, is why I bought a 12 year old M5. I sure as heck don't have 100K kicking around to buy a new one with cash. Now of course I'm not 19, but the same logic still applies. I've never bought a new car and probably never will. Luxury sedans seem to depreciate like crazy, so picking one up in good shape used, with the knowledge of what it will take to keep it in good running order is still massively cheaper than doing the payments thing. And you end up driving something you enjoy. At least in my experience

Exactly, the only thing that's cost money for my car was tie rods (super cheap) an alignment ($39) 2 tires ($49 each) and a timing belt kit with water pump and tensioners ($99) and some spark plugs. I see no repairs in it's future after that basic maintenance.

 

[surfstar]

Boglehead here too.

LBYM means Live BELOW Your Means!

I'm not a fan of work, so I try not to do it too much and am saving to be financially independent in my early 50s. I don't feel deprived currently - I take more weekend trips and short vacations than 95% of my friends. I just happen to enjoy cheap outdoor hobbies, find "fine dining" lacks value (burgers over a campfire is way better ambiance) and am secure enough to drive older cars.


Madison Ave has done a wonderful job inserting itself into every bit of our life.
How many people stand in line to buy a $600 phone! Its a PHONE! I'll take a year old one for a huge discount and still have more computing power than I'll ever use and not be extending an overpriced contract each year.
Me, me, me. Now, now, now. This is what our society has become.

 

[Clubber_Lang]

+1. People are so frivolous and cant even meet their basic needs.

 

[sciphi]

Credit can be a useful tool when used wisely*.

*If I'm responsible to have the full purchase price already socked away for cheaper items, and a backup plan in place for something like a mortgage.

For those of us who are younger, we sure as heck don't have $150k socked away to purchase a house for cash. But spending $1000/month on a mortgage on a nice house in a good school district sure beats spending that same $1000/month on a small apartment in a worse school district further away from my job/groceries. And in a bit of time I'll own it outright instead of throwing that same money down the sinkhole that is renting/leasing. So taking out a fixed-rate mortgage at a historically low rate makes a lot of sense to me. Throw in the tax benefits of owning a house instead of renting, and it's a no-brainer for me at this point in my life to be paying a mortgage instead of a landlord (even though the servicing company is just a less-restrictive landlord!).