2022-07-27_How_to_Buy_a_Car_Ep_1
00:00:00.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,
00:00:03.760 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:07.760 | building a plan for financial freedom in 10 years or less.
00:00:10.560 | My name is Josh Rasheeds, I'm your host, and today I'm going to explain to you how to buy
00:00:15.640 | a car.
00:00:16.880 | This question will be answered in a series of episodes.
00:00:20.840 | We'll talk first today about whether you should buy a car.
00:00:23.840 | We'll talk about ways to think about the kind of car you should buy.
00:00:27.480 | Then we'll move on to systems of negotiation, how to finance a car or not finance a car,
00:00:33.240 | how to get a good deal on a new car, how to get a good deal on a used car, how to decide
00:00:38.720 | whether you should lease a car, buy a car, etc.
00:00:41.720 | But today we begin with the foundational question in how to buy a car, which is simply ask yourself,
00:00:48.040 | should I buy a car?
00:00:52.360 | One of the thinking tools that is best cultivated in our lives is always, is this even necessary?
00:01:00.960 | For example, in productivity training, one of the first lessons that you learn in productivity
00:01:08.140 | training is to ask the question, is this necessary?
00:01:13.040 | Before you set up a system to do something efficiently, ask yourself if it's even necessary
00:01:19.140 | or useful.
00:01:20.720 | Many many people confuse efficiency with effectiveness and their personal productivity.
00:01:28.200 | They go through life doing things with excellence that don't need to be done at all.
00:01:33.920 | So when you're sitting and looking at a list of tasks, things to do, one of the first things
00:01:37.740 | you should ask yourself is, which of these can I simply eliminate?
00:01:42.060 | Before I go through and figure out how to delegate this task to another person, before
00:01:45.960 | I go through my list and try to create a system for handling this task in a more efficient
00:01:50.560 | way or with more advanced tools, can I simply eliminate the task?
00:01:55.600 | What are the consequences for eliminating the task?
00:01:59.280 | And this level of addressing or thinking about the consequences is important.
00:02:04.480 | And we're going to talk about the consequences of owning or not owning a car in a moment.
00:02:09.540 | Many tasks can be eliminated from someone's to-do list with zero negative consequences.
00:02:16.200 | But we usually eliminate those things fairly automatically.
00:02:19.900 | We naturally procrastinate on those tasks.
00:02:24.040 | There are other tasks that we can eliminate, but there's going to be a cost.
00:02:30.200 | And one of the skills of personal productivity has to do with learning to understand the
00:02:35.520 | actual costs of eliminating a task and being willing to accept the cost if it's low enough.
00:02:42.760 | Back to cars.
00:02:44.440 | The question to ask in how to buy a car is, at the very beginning, do I need to buy a
00:02:50.880 | car or do I want to buy a car?
00:02:55.920 | I want to talk about this from a financial perspective and also from a lifestyle perspective.
00:03:03.080 | There's no question that for most people, the answer to these questions is automatically
00:03:07.000 | yes.
00:03:08.640 | For example, I both need and want to own a car.
00:03:14.000 | I have not established my lifestyle in such a way that I live easily without a car.
00:03:19.840 | This is due to simply my family.
00:03:23.120 | When you have children, cars are way better than virtually every other option.
00:03:27.720 | It's also simply due to the lifestyle that I want to live and the kind of freedom that
00:03:30.840 | I like to have.
00:03:32.360 | Having ready transportation where I'm not dependent upon a chauffeur, where I'm not
00:03:36.720 | dependent upon a commercial service of some kind is for me a great advantage.
00:03:42.480 | I like the lifestyle benefits of having a vehicle and of being able to use a vehicle
00:03:48.080 | whenever I want to.
00:03:49.880 | However, there are a lot of lifestyle benefits that could be accrued by someone in a different
00:03:54.420 | situation than my own where the lifestyle benefits of not owning a car are much more
00:04:01.920 | substantial.
00:04:02.920 | Let's begin, of course, on a personal finance podcast with a brief discussion of the financial
00:04:08.600 | impact of owning a car.
00:04:11.400 | There's no question that cars are a financial hassle.
00:04:16.320 | Cars are a financial hassle.
00:04:18.240 | Depending on where you are in your wealth-building journey, you will want to consider the car
00:04:23.160 | and whether it will add to your life and your lifestyle and your finances and your enjoyment
00:04:27.320 | of life or not.
00:04:29.640 | For many people who are at the beginning stage of their career, who are just starting their
00:04:34.440 | process of earning money, establishing themselves and their lifestyle and their career, cars
00:04:39.640 | will be the biggest expense both up front and also the biggest expense on an ongoing
00:04:45.960 | basis.
00:04:47.880 | For the, say, 20-year-old young man or woman who's going out to buy his or her first car
00:04:52.640 | or 16-year-old or 24-year-old, whatever age you want to use, most likely that first car
00:04:58.080 | purchase will be the first big expense that that individual will make.
00:05:03.280 | I remember for me, my first car cost me $2,000 and it was the largest single expense that
00:05:08.280 | I had made at that point in time.
00:05:10.800 | As your lifestyle grows, cars will usually be the biggest regular expense that you'll
00:05:17.200 | face.
00:05:18.200 | They're really dwarfed only by house purchases.
00:05:20.400 | But it's not uncommon for someone to go and purchase a $50,000 car, $100,000 car and to
00:05:24.520 | do that every few years.
00:05:27.200 | Unless you're running a business where you regularly have large business expenses or
00:05:30.720 | unless you're purchasing real estate, for most normal financial households, that will
00:05:36.400 | be the biggest expense that you make on an ongoing basis.
00:05:39.680 | So cars are expensive to buy.
00:05:41.560 | You have to put together the cash or put together the credit to make the up front payments necessary
00:05:46.560 | to acquire the vehicle.
00:05:48.800 | Cars are also expensive to own.
00:05:52.960 | Usually the biggest expense of a car is its depreciation.
00:05:58.160 | Depreciation is a word that we use to describe how much something will decline in value due
00:06:04.400 | to its ongoing use.
00:06:06.640 | And with cars, in normal markets, that number is pretty significant.
00:06:12.200 | Traditionally, I have to give these caveats because the last few years in the vehicle
00:06:15.920 | market have not been anything like what we understand to be normal due to the microchip
00:06:20.240 | shortage and the global supply line disruptions, etc.
00:06:22.720 | But traditionally we say that cars normally lose about 20% of their value in the first
00:06:28.280 | year of ownership, assuming that you purchase one new.
00:06:31.440 | And they also then lose about 15% of their value on an annual basis.
00:06:37.800 | This has not been true over the last few years.
00:06:40.680 | I've worked with many people who've gotten offers for their two or three year old car
00:06:44.200 | where people and businesses have offered to pay them more than they paid for the vehicle
00:06:48.920 | when it was brand new.
00:06:50.740 | But I think this is a temporary condition that in most places will diminish and is already
00:06:56.220 | showing significant signs of diminishing.
00:06:59.100 | So let's put this into context for a moment.
00:07:01.440 | Let's assume that you go and today you purchase a fairly ordinary new car.
00:07:06.000 | Could be a new middle of the road minivan, new pickup truck, new car.
00:07:12.800 | This number would be applicable for most cars except kind of an entry level economy car.
00:07:17.320 | Let's say you spend about $40,000.
00:07:18.680 | Well, in the first year that you spend $40,000, you can expect that car to decline in value
00:07:24.440 | by about $8,000.
00:07:27.200 | That would be the first year depreciation.
00:07:29.440 | It would decline in value from $40,000 to $32,000 and you would have $8,000 of depreciation.
00:07:35.320 | Why?
00:07:36.320 | Why does this exist?
00:07:37.640 | Well, most people who are going to buy a $32,000 car could go out and buy a $40,000 car if
00:07:44.520 | they wanted one.
00:07:45.920 | And so they're not willing to pay you as much for your car that they can go and get the
00:07:51.680 | same car from the dealer.
00:07:53.560 | Why would somebody pay you $38,000 for your one year old car when they could go pay a
00:07:59.880 | dealer $40,000 for a brand new car and get all of the goods and guarantees that go with
00:08:05.840 | the new car?
00:08:06.880 | Everything from perfect warranty coverage, knowing the full service history of the vehicle,
00:08:10.600 | having the dealer protection plans and all of the special sales packages that you can
00:08:14.880 | get with a dealer.
00:08:16.360 | Everything to even the new car smell and the thrill of having a shiny new car that you
00:08:19.840 | know no one has driven except you.
00:08:21.960 | So a used car is in most people's lives much less valuable than a new car.
00:08:29.340 | That's why we have depreciation.
00:08:31.160 | The reason this has changed over the last couple of years is that there was a wide shortage
00:08:35.240 | of new cars and there was a wide shortage of new cars with the features and options
00:08:39.720 | that people wanted, especially due to the microchip shortage.
00:08:43.040 | And so they wanted a car with certain features and the only way to get that car was to go
00:08:46.520 | and buy one that was a little bit older.
00:08:48.600 | But again, this is not a permanent condition.
00:08:52.640 | So in the first year of your $40,000 car purchase, you'll have $8,000 of depreciation.
00:08:58.080 | I want you to imagine the kind of person who will often go out and purchase a $40,000 car.
00:09:05.160 | Frequently that will be somebody who is just getting established in his lifestyle, somebody
00:09:11.280 | who's just building his savings.
00:09:13.720 | $8,000 of depreciation can be a pretty heavy cost for someone who doesn't have a lot of
00:09:18.720 | money to bear.
00:09:20.580 | After all, there are many households where the people involved struggled to even fill
00:09:26.200 | up a Roth IRA.
00:09:27.840 | Well $8,000 is more than an annual contribution to a Roth IRA.
00:09:32.560 | And so if you recognize that some people are scrimping and saving to go and put $6,000
00:09:39.120 | in a Roth IRA, but you're having $6,000 in depreciation on your car, you're basically
00:09:43.680 | not actually making any forward financial progress.
00:09:46.840 | For every payment into your Roth IRA, you then have the exact same amount fly out the
00:09:51.880 | door in terms of depreciation.
00:09:53.480 | This immaterial expense that we can't really see but is actually there.
00:09:58.400 | In the next year, it continues.
00:10:00.120 | So now if we depreciate our $32,000 car by 15%, that would be a cost of depreciation
00:10:06.560 | in the second year of ownership of $4,800.
00:10:10.120 | Almost $5,000.
00:10:11.760 | Once again, we might be scrimping and saving to put $5,000 in our Roth IRA and here goes
00:10:16.760 | $5,000 depreciation out the window.
00:10:20.120 | So that car can be an expensive thing.
00:10:23.840 | And the biggest expense is depreciation.
00:10:27.040 | There are of course other expenses to be accounted for.
00:10:30.880 | On your purchase expenses, you have taxes in addition to the purchase price, taxes,
00:10:34.720 | registration fees.
00:10:36.040 | On an annual basis, you have fees of insurance.
00:10:39.640 | You have fees not only, you have costs not only of depreciation but also of direct mechanical
00:10:44.280 | repairs, insurance expenses, fuel to fund the thing, to make the thing go down the road,
00:10:51.120 | and then just all of the other ancillary things, accessories, ways that you want to get your
00:10:54.560 | car just how you want it, accessories to make it more useful to you, to make it appropriate,
00:11:00.680 | et cetera.
00:11:01.680 | So cars suck up quite a bit of money.
00:11:05.000 | They also suck up quite a bit of time.
00:11:07.800 | For me, I don't worry too much about the money that a car costs, but I often get annoyed
00:11:12.680 | with the time that a car entails.
00:11:15.880 | Time to go and get your registration done.
00:11:18.680 | Time to go and take it to the mechanic when it needs to be fixed.
00:11:22.500 | Time to have it washed and wash it yourself or time to have it washed and vacuumed, et
00:11:27.480 | cetera.
00:11:28.480 | I often find myself annoyed with the time required to maintain a vehicle.
00:11:32.600 | Now certainly those are pretty ordinary things.
00:11:35.640 | It's not that big a deal, but there are some downsides.
00:11:39.400 | In addition, owning a car can be a significant source of personal liability.
00:11:44.520 | There can be first of all a sense of liability of worrying about the thing.
00:11:49.480 | If you have a thing that is big and expensive, then if it represents an overly large amount
00:11:55.720 | of your budget or an overly large amount of your finances, the actual ownership can come
00:12:00.880 | with a significant psychological cost.
00:12:03.520 | Somebody who scrimps and saves and buys a car that's outside of his financial resources,
00:12:09.520 | it gets very worried when a new scratch appears or gets very worried when there's a shopping
00:12:13.040 | cart headed for it.
00:12:14.720 | So that's one consideration.
00:12:17.160 | It's also consideration even from the perspective of liability, personal liability.
00:12:21.360 | It's interesting as somebody who practices a little bit of coaching and planning with
00:12:27.680 | regard to asset protection planning, I frequently speak to people about asset protection planning
00:12:33.880 | and the first thing I ask them is, "What is the source of liability that you face?"
00:12:38.760 | Many people dramatically overestimate the actual liabilities that exist in their life
00:12:43.960 | and in their financial world.
00:12:46.760 | When we talk through it, if you're somebody who works at a job, goes to work every day,
00:12:52.240 | comes home, isn't managing a company, doesn't have employees, doesn't have trucks driving
00:12:56.080 | all around town with your name on the side of them, generally the only liabilities you
00:13:01.740 | face are liabilities for either personal actions such as wronging someone, harassing someone,
00:13:08.160 | etc. or something related to your car or your home.
00:13:14.400 | Those things can be controlled.
00:13:16.160 | Your home of course has less liability where you can protect it quite a bit.
00:13:22.200 | People talk about, "Oh, there's a slip and fall on my front sidewalk," but that's one
00:13:25.840 | thing to talk about.
00:13:27.400 | It's another thing to actually have somebody bring a successful lawsuit against you, at
00:13:31.360 | least if your sidewalk is in proper working condition.
00:13:34.140 | But your car on the other hand is frequently the biggest source of personal liability.
00:13:38.880 | Your car because you can't often control the circumstances that you're in.
00:13:43.080 | You can't control the roads, you can't control what people do or don't do, how other drivers
00:13:47.020 | drive or don't drive.
00:13:48.840 | You can't control all of those aspects of it and frequently you might even commit a
00:13:55.340 | wrong in being negligent for a moment, sending a text message in your car while you're driving
00:14:01.000 | that distracts you.
00:14:02.480 | So that automobile itself is often a source of significant personal liability.
00:14:07.240 | Now you can handle that with a quality liability policy as part of your car insurance and then
00:14:12.920 | you can link that with an umbrella liability policy in your home and you can handle the
00:14:16.040 | liability pretty well.
00:14:17.040 | There's a reason most people have cars.
00:14:19.480 | But pointing out that cars do have downsides.
00:14:23.280 | The longer you own a car, the more those downsides increase.
00:14:26.560 | It seems that no matter what you do on the front end, the longer you own a car, the more
00:14:31.180 | you have to go and change out the tires, the more you have to take to the mechanic, the
00:14:35.360 | more you have to go and do inspections and registrations, etc. and the time and the money
00:14:39.880 | continues forever.
00:14:42.880 | We'll get to the positives in a moment.
00:14:45.720 | But if these negatives are significant, you know I didn't even talk about other hassles
00:14:51.120 | because I don't live in the city and I don't think much about this.
00:14:53.040 | First of all, if you live in the city also, think about things like parking expense or
00:14:57.080 | think about things like the hassle of even keeping the car safely parked and keeping
00:15:01.080 | the car moved so that you don't get excessive tickets.
00:15:04.120 | Where are you going to park the thing?
00:15:05.120 | It takes up a lot of space.
00:15:06.600 | That's to say nothing of even the lifestyle impact of designing cities around cars.
00:15:12.360 | I'm a fan of the designs of cities that don't involve cars because I think they make for
00:15:16.600 | more pleasant housing for people, more pleasant towns.
00:15:20.480 | And when we design most of our modern cities around car ownership, they make very unpleasant
00:15:24.480 | cities.
00:15:25.720 | And so there are environmental impacts that people can consider.
00:15:30.860 | There are many other reasons that you can fill in.
00:15:32.920 | So could you avoid owning a car in the first place?
00:15:36.840 | I think undoubtedly many people can.
00:15:39.360 | And in the future, more and more people will be able to avoid owning a car.
00:15:44.400 | Let's begin with the old-fashioned ways of handling this problem.
00:15:48.800 | First, people who have little need to commute can generally avoid owning a car.
00:15:56.080 | If you work from home, either in the modern sense of being a knowledge worker who works
00:16:00.900 | from your home office, in a traditional sense of being a homemaker, your need for a vehicle
00:16:06.720 | on a daily basis is pretty diminished.
00:16:09.200 | If you are at home and if you're living in a home where you like to be, and if you're
00:16:13.440 | living in a home where you can access the things around you that are nice for you and
00:16:18.800 | for your family, then there's little reason for you to need a car on a regular basis other
00:16:23.840 | than an occasional Costco run, etc.
00:16:28.000 | And so if you can build a lifestyle for yourself that doesn't revolve around car ownership,
00:16:35.040 | that can be a major improvement.
00:16:37.360 | Years ago, my wife and I, after we've been married a little bit, we bought a house.
00:16:40.640 | And one of the things that I prioritized in the purchase of that house was to purchase
00:16:44.320 | a house that was less dependent on needing a car.
00:16:49.320 | We didn't go car-free, but we went car-light at the time, dropping from two cars to one
00:16:54.120 | car.
00:16:55.120 | And it was not only a savings of finances, it was not only a savings of hassle, but it
00:17:01.200 | was genuinely a significant lifestyle improvement.
00:17:04.960 | I purchased a house that was about a third of a mile from my office.
00:17:09.480 | I did work in an office and I needed to go to an office, but I would simply walk or ride
00:17:13.360 | a bicycle to my office.
00:17:14.880 | That was wonderful.
00:17:16.240 | When you think about the lifestyle benefits of not having to rely on a vehicle, not having
00:17:20.100 | to sit in traffic, not having to sit on the road, not having to deal with the time suck
00:17:24.440 | of commuting, it's a major, major benefit to be within walking or bicycling distance
00:17:31.160 | to your office.
00:17:32.660 | But more importantly, we bought a house that had good access to a lot of the things that
00:17:38.000 | our family benefited from.
00:17:39.880 | We were similarly about a quarter of a mile from a grocery store.
00:17:43.320 | A good, excellent grocery store where we could go, we would take our bikes and our bike trailer
00:17:47.440 | and do our grocery shopping and bring our groceries home in our bicycle trailer.
00:17:50.860 | We were slightly more, a quarter, half a mile from a library.
00:17:55.640 | So we would do regular library outings and that was the primary focus of outings with
00:18:00.200 | the children, go for library story time, go and get books, et cetera.
00:18:05.440 | We were close to several parks, several municipal parks, so we could easily walk and ride bicycles
00:18:09.800 | to those parks.
00:18:11.120 | So most of the things that we needed on a daily or weekly basis were within striking
00:18:15.960 | distance of our home, easily achievable with a pleasant walk and/or a pleasant bicycle
00:18:21.120 | ride.
00:18:22.600 | That was not, again, that was a lifestyle improvement.
00:18:25.960 | And so if you have little need to commute because you can arrange that kind of lifestyle
00:18:30.480 | with telework, that's kind of an old-fashioned term, with just modern working from home,
00:18:36.240 | that's a phenomenal improvement in lifestyle to not have to deal with the hassle of a car.
00:18:42.040 | Now of course, another way to accomplish this is by living somewhere where there's a strong
00:18:45.980 | public transportation system.
00:18:48.520 | And if you live in a place where public transportation is convenient, where it's reasonably priced,
00:18:53.480 | where it's useful to you, then obviously this becomes much more achievable.
00:18:57.880 | Many of the biggest cities in the world have great public transport systems, and having
00:19:02.840 | a car is just—or sorry, not having a car is considered the normal affair.
00:19:07.080 | If you live in the suburbs or you live in an American city that's sprawled out all over
00:19:11.760 | the place, then the public transportation system is probably so inconvenient that once
00:19:16.160 | you scrape together a few shekels, you're ready to go ahead and get a car for the convenience
00:19:19.760 | factor.
00:19:20.760 | But you can make an intentional decision to live in a place where there is a strong public
00:19:24.680 | transportation system.
00:19:26.500 | And you can even do this by thinking about, for example, living on a hub, somewhere where
00:19:31.840 | you're conveniently located to the transportation system.
00:19:35.580 | You might be a little bit out of the city, but you live near a train terminal or near
00:19:40.220 | a bus stop or near some form of transportation system that makes it convenient enough for
00:19:44.720 | you to go, get on the train, put that time to productive use so you don't have to spend
00:19:48.980 | it sitting in your car yourself.
00:19:51.700 | Living on a hub or a spur like that makes life better.
00:19:55.980 | One of the—then of course the classic solution has been to simply take taxis or arrange for
00:20:00.740 | private driver services.
00:20:02.620 | There's been a dramatic improvement over the last decade in the convenience of these services,
00:20:07.900 | where now that you can order a car with any number of excellent apps on your phone, and
00:20:13.420 | you can pre-schedule the car to be there at a certain time and to take you where you want
00:20:17.060 | to go, you can have those fees easily billed to your card.
00:20:23.020 | Everything just works.
00:20:24.020 | It's so convenient to order your transportation in that way that it makes a lot of sense for
00:20:30.220 | people to do that instead of owning or using a car on a regular basis.
00:20:34.740 | A couple of stories to drive this point home.
00:20:38.420 | Number one, for people who are elderly or for people who are poor, I think that this
00:20:44.200 | is a really, really good solution.
00:20:46.800 | Let's begin with the elderly.
00:20:48.820 | As a standard part of Joshua's speech to elderly people or people who are approaching
00:20:53.660 | elderliness, I routinely encourage them to be technically competent and experienced enough
00:21:00.700 | where they can learn how to use transportation apps.
00:21:03.940 | Because one of the classic problems of growing older has been the loss of independence.
00:21:09.780 | That traditionally as you've gotten older and it became unsafe for you to drive or you
00:21:13.380 | didn't want to drive anymore, then you became completely dependent on your friends, your
00:21:17.300 | loved ones, your family for taking you around.
00:21:20.140 | But with the modern ride sharing applications that are available, it no longer has to be
00:21:25.380 | that way.
00:21:26.380 | And so one of the things that I try to do is encourage older people to become comfortable
00:21:31.300 | and accustomed to using those services.
00:21:34.660 | Because it makes it so that instead of sitting around and waiting for your daughter or your
00:21:39.300 | son or somebody who's busy to come and take you once a week or once every two weeks on
00:21:43.500 | grocery outings, you can reliably and independently get yourself transported to where you want
00:21:50.100 | to go for your other two or three outings a week that will help you to really enjoy
00:21:53.820 | your life and your lifestyle.
00:21:55.720 | So I encourage you, if you're interacting with elderly people who may not be able to
00:21:59.380 | maintain a car, then go ahead and talk to them about that and see if you can help them
00:22:06.100 | to learn how to be comfortable using ride sharing apps so that they can be independent.
00:22:11.020 | In addition, for people who are poor, owning a car can be a significant expense, even if
00:22:17.300 | the car is paid off.
00:22:18.700 | There was a friend of mine that I worked with for a number of years trying to help, and
00:22:22.980 | he was living on a very modest social security income.
00:22:26.620 | And yet he was addicted to owning his car.
00:22:29.500 | He had a very modest rent.
00:22:30.940 | He lived in a location that was quite convenient and where he could have easily walked to most
00:22:36.060 | of the things that he needed to do, such as grocery shopping, etc.
00:22:40.140 | But his entire life he had owned a car.
00:22:42.940 | His financial situation no longer permitted him to keep his car in as good a situation
00:22:47.260 | as he wanted to keep it.
00:22:50.260 | And when I sat down and did the numbers, the amount of money that he was spending on his
00:22:53.260 | car was literally hundreds of dollars per month of maintenance for an old car.
00:22:56.620 | And he didn't have the capital necessary to purchase a new car.
00:23:00.340 | And I urged him to sell the car, get rid of the car, and simply use a ride-sharing app.
00:23:06.660 | Because he had enough resources of friends that he could borrow a car from on occasion.
00:23:11.560 | If a ride-sharing app was unavailable, enough friends and people to rely on, that it would
00:23:16.340 | have been a good situation for him.
00:23:18.300 | In his situation, he couldn't conceive of it because culturally it didn't fit.
00:23:22.220 | His entire life he had a car.
00:23:23.780 | He couldn't conceive of not having a car.
00:23:26.160 | But even though he wasn't in a downtown environment, the financial benefit of just paying for the
00:23:31.860 | ride that you need, instead of paying for this ongoing maintenance and expenses of maintaining
00:23:36.460 | a car that was increasingly unreliable and showed no signs of reducing its monthly outflows
00:23:42.860 | (or I guess the car's monthly inflows, how much was necessary to support it), it would
00:23:47.980 | have been a lot better financially.
00:23:49.820 | It was just this block in his mind about the lifestyle perspective and the freedom perspective.
00:23:54.900 | Then finally, we get to the concept of at a higher end, just simply using ride-sharing
00:24:01.100 | services instead of a private car service.
00:24:03.460 | Years ago when I was a financial planner, I would go see a lot of people in their offices.
00:24:07.220 | I drove a lot.
00:24:09.500 | I sat down and I realized I was driving so much and I thought this time really could
00:24:13.620 | be better put to better use.
00:24:17.060 | At the time, I seriously considered hiring a driver to drive me around.
00:24:22.380 | It was something that wealthier, more productive financial advisors, a few of them did, and
00:24:28.620 | they used their car time much more productively if they had a driver.
00:24:32.660 | At the time, it didn't make sense.
00:24:38.660 | Today though, number one, I solved a lot of that by simply stopping going to seeing people
00:24:42.980 | and sitting in my office having people come to me instead.
00:24:46.380 | And then of course this was prior to the widespread acceptance of Zoom meetings, etc.
00:24:50.260 | Today with Zoom, you could get by even better.
00:24:53.380 | But then today, by simply using a ride-sharing service regularly, you can get very close
00:25:00.920 | to what was formerly kind of a rich man's lifestyle choice to have a full-time driver.
00:25:06.560 | You can get there pretty well, pretty close to that at a fraction of the cost simply using
00:25:12.440 | ride-sharing services.
00:25:13.440 | I have a friend of mine who had his driver's license suspended, and yet this guy had a
00:25:20.680 | job where he needed to go all over town for meetings, and so he had no option but to use
00:25:24.000 | ride-sharing services.
00:25:25.000 | And when we sat down and looked at the amount he was spending, his ride-sharing services,
00:25:30.520 | even for regular meetings all around town, come out to about $1,000 a month.
00:25:35.520 | And $1,000 a month for having a driver take you where you want to go whenever you want
00:25:39.880 | to, while there is in some cases a decrease in convenience, that's a pretty reasonable
00:25:45.320 | cost to have what formerly you could really only have with a full-time chauffeur and all
00:25:49.880 | of the car expenses associated with it.
00:25:52.240 | So if you're somebody who spends a couple thousand dollars a month on vehicle expenses,
00:25:59.720 | and if you would like to have that time to yourself where you just get into the car and
00:26:03.520 | go, seriously consider that.
00:26:05.760 | It's not perfect in all situations.
00:26:07.520 | The biggest problem is if you're doing business in a place where you can't get rides quickly
00:26:11.320 | and conveniently, but if you're in a place where the ride-sharing services come quickly,
00:26:15.160 | you can schedule them when you want to, and you have enough flexibility that that could
00:26:17.960 | work for you, that can be a better solution.
00:26:21.480 | And it can allow you to avoid owning a car.
00:26:24.440 | And then we get to the alternatives that involve you transporting yourself instead of being
00:26:29.800 | transported by a vehicle.
00:26:33.000 | You can establish a lifestyle for yourself where you have an alternative to either walk
00:26:37.960 | or bicycle to the places that you want to go.
00:26:41.240 | And if you'll think carefully about the choices that you make, you can do this in comfort
00:26:46.720 | with excellence, and it doesn't have to be a sense of deprivation.
00:26:50.280 | First, consider carefully where you live.
00:26:53.800 | There are cities that are very unpleasant to be in without a car, and there are cities
00:26:59.180 | that are very pleasant to be in without a car.
00:27:04.320 | And you can choose intentionally to live in one of the cities that is pleasant to be in.
00:27:10.360 | Remember that cities, states, and countries are all competing for your presence and for
00:27:16.340 | your business.
00:27:18.160 | In order for a city or a state or a country to be effective and successful, it needs population.
00:27:25.660 | And you can choose to simply pull up roots where you are and go to a place that has the
00:27:30.840 | kinds of amenities that you desire.
00:27:33.560 | And these lifestyle amenities can be a big factor of it.
00:27:38.000 | Just last week I was talking with a Dutch friend about Amsterdam.
00:27:42.080 | The Amsterdam bicycle culture is truly incredible.
00:27:44.320 | If you're not familiar with it, just go on YouTube and grab a few things and let the
00:27:48.420 | algorithm send you all kinds of videos extolling the virtues of the bicycle culture in the
00:27:54.000 | Netherlands.
00:27:55.120 | But it truly is remarkable that you can choose to live in a city where you can get along
00:28:00.080 | quite well and very comfortably with a bicycle rather than a car.
00:28:05.440 | And you can do that in many places all around the world, in many places in your state, your
00:28:11.320 | country, where you already are.
00:28:13.520 | You can do it in even many neighborhoods.
00:28:15.340 | So choose to think about where you locate yourself.
00:28:18.560 | In addition, most cities actually have interesting ways that if you'll sit down and look at a
00:28:23.800 | map or figure out what's there in the city, you can figure out something that would allow
00:28:28.160 | you to attend to most of what you need to attend to with a bicycle or with walking.
00:28:34.000 | I think of course here bicycling is the normal way because walking, maybe you have a distance
00:28:38.520 | of say five miles.
00:28:42.000 | Five miles is traditionally considered walking distance throughout most of the history of
00:28:45.080 | humanity.
00:28:46.080 | In the modern world, most of us would not consider that to be walking distance, but
00:28:49.960 | you certainly can walk comfortably a couple of miles.
00:28:53.620 | But bicycling really is comfortable.
00:28:55.400 | And what I would encourage you is not only consider if there is a suitable bike route
00:28:59.840 | for you to get from your home to your office or to the kinds of events that you care about,
00:29:04.960 | but think about if there's something that would be accessible to you with an e-bike.
00:29:09.400 | One of the technologies that I'm so excited about in the modern world is battery powered
00:29:14.360 | electric bicycles.
00:29:16.240 | If you haven't ever ridden an electric bicycle, I would urge you to find what place where
00:29:20.920 | you can rent one, ride a friend, et cetera, and try it out.
00:29:24.640 | Because an electric bicycle, as far as I'm concerned, solves all of those kind of lingering
00:29:31.940 | reasons why people don't bicycle.
00:29:34.640 | There are times when riding a bicycle where you're tired, you don't want to pedal, or
00:29:37.960 | you have to go up hills, or it's hot outside, et cetera.
00:29:41.040 | But if you get a high powered, good quality electric bicycle, it basically gives you the
00:29:48.600 | equivalent of a small motorcycle with all of the convenience of a bicycle.
00:29:57.000 | Motorcycles are certainly one reasonable transportation option in places where you can ride them safely.
00:30:01.960 | But because of their noise, because of their size, and because of their clear classification
00:30:06.260 | as a motor vehicle, you have all of the limitations and restrictions of a motor vehicle.
00:30:11.600 | But a bicycle has few of those restrictions.
00:30:14.360 | Motorcycles can generally, in some places, ignore some of the transportation laws.
00:30:20.480 | You don't feel bad about going up on the sidewalk where appropriate.
00:30:24.280 | You don't feel bad cutting across a parking lot to shave a corner, et cetera.
00:30:28.960 | If you pair the bicycle with a good electric motor, it really gives you the best of both
00:30:33.720 | worlds, where you have the ease and the joy of a motorcycle with a bicycle, with the convenience,
00:30:39.800 | lightness, ease, and just joy of a bicycle.
00:30:44.240 | There are many people, I think that certainly there are people who could easily handle a
00:30:48.400 | 10 mile commute on a regular bicycle.
00:30:51.320 | But there are many more people who, if they tried out an electric bicycle, could embrace
00:30:57.040 | easily a 10 mile commute on an electric bicycle without worrying about being fatigued, without
00:31:02.200 | worrying about being excessively sweaty, et cetera.
00:31:05.160 | So if you chose a house, let's say you needed to work in a downtown area, but you chose
00:31:09.120 | a house that was along a green corridor, or a place where you had great bike paths, or
00:31:12.960 | just a really beautiful place to ride your bicycle on a daily commute, that could allow
00:31:16.920 | you to diminish your need for a car.
00:31:20.040 | So these are some of the reasons to avoid buying a car, and here are some of the alternatives.
00:31:25.920 | And I believe that with appropriate texture for individual situations, these alternatives
00:31:34.000 | offer enough positive features that make them a genuinely better lifestyle.
00:31:40.840 | If you live in a town where you could bicycle to the things that matter to you, to your
00:31:47.200 | work, to your grocery store, to your social engagements, to all the places that you want
00:31:51.060 | to do, and you could dispense with the car without suffering a lifestyle subtraction,
00:31:59.080 | that can be a major improvement in lifestyle.
00:32:02.280 | And it's not just financial.
00:32:04.040 | The finances can be simply the icing on the cake.
00:32:07.560 | By the way, let me point out, I think here, from a financial perspective, if a move is
00:32:14.120 | required, for example, let's say you're living in a house in the middle of nowhere, but you
00:32:17.800 | could move to another house that was closer to town.
00:32:20.680 | If a move is required, and if the move requires you to spend more money on real estate to
00:32:25.080 | accomplish it, as your financial planner, I would urge you to consider it.
00:32:30.520 | Because from a financial perspective, you need to remember that cars go down in value,
00:32:36.400 | and commuting expenses are not deductible.
00:32:40.680 | Cars go down in value very quickly, and commuting expenses are not deductible.
00:32:46.280 | On the other hand, houses generally go up in value, and the expenses associated with
00:32:52.700 | housing are very highly deductible.
00:32:58.840 | Looking at that, if you had the choice, and you said, "I've got to move from a $500,000
00:33:03.640 | house in the suburbs to a $1,000,000 house in that great neighborhood in town, but it's
00:33:08.600 | going to cause me to come out of pocket another half a million dollars," while that's a significant
00:33:15.360 | amount that I'm not sure you're going to get rid of with saving on car expenses, it's probably
00:33:21.560 | the best financial move.
00:33:23.680 | As your resources grow, one of the best investments you can make is to purchase increasingly expensive
00:33:29.840 | personal residences, because those generally go up in value.
00:33:34.160 | As you move from the suburbs to the better neighborhoods in town, your houses become
00:33:39.000 | more and more and more attractive.
00:33:42.060 | If it's necessary for you to justify that increase in real estate cost by getting rid
00:33:47.760 | of a car, and going from a two-car family to a one-car family, or going to a zero-car
00:33:51.960 | family, financially, that's a better move.
00:33:56.400 | If you can get rid of all those non-deductible commuting expenses and convert them into deductible
00:34:02.680 | expenses for real estate taxes and mortgage interest, et cetera, that will generally be
00:34:08.220 | a better move.
00:34:09.680 | Better for you to own a $1,000,000 house in the middle of the city in a highly desirable,
00:34:13.280 | walkable, bike-sickable neighborhood, and be without a car, and without the financial
00:34:18.040 | albatross that that thing can be hanging around your neck, than for you to be in your $500,000
00:34:22.760 | house out on the periphery, spending $20,000 to $30,000 a year maintaining your car.
00:34:28.800 | Better to put the $20,000 to $30,000 a year into mortgage payments that are reducing your
00:34:32.600 | principal and allowing you to own a more expensive, more attractive house, and live a better lifestyle,
00:34:37.920 | saving time, et cetera.
00:34:40.840 | That's my argument against owning a car.
00:34:43.320 | Now let's assume that you've considered that, and you're like, "Well, I think I do want
00:34:46.760 | to own a car, and I think I need to own a car, or I want to own a car."
00:34:51.160 | So what are the reasons why you would need or want to own a car?
00:34:56.320 | By the way, I don't think you need to justify it as need or want.
00:34:59.960 | So I'm going to use these terms synonymously.
00:35:01.520 | At the end of the day, remember, it's always your money.
00:35:03.520 | You spend it on whatever you want.
00:35:05.280 | And if you go into a spending decision with your eyes wide open, and you choose what you
00:35:08.600 | value personally, and you spend your money on that, go for it.
00:35:11.440 | But the first obvious reason to own a car is that, especially from a financial planning
00:35:17.920 | perspective, is if that car allows you to earn money.
00:35:23.040 | If a car allows you to earn money, then you can easily justify its expense.
00:35:29.640 | If you live 25 miles away from your job, and you couldn't go and have the job without being
00:35:35.280 | able to get there back and forth every day, then your obvious thing you need is a car
00:35:41.480 | to get you to the job.
00:35:42.480 | And this is one thing that if you study the very poor, one of the best lifestyle and financial
00:35:47.840 | investments that those who are very poor can make, especially if they're living in communities
00:35:51.320 | with poor public transportation, is to get a car.
00:35:55.660 | Because then that allows them to reliably get to work, to get jobs they ordinarily wouldn't
00:35:59.960 | be able to get because they were depending on public transportation, and to be better,
00:36:04.120 | more consistent workers.
00:36:05.720 | And so the same thing can apply whether you're 18 or whether you're 58.
00:36:08.880 | If the car allows you to get to work, then it can be a wonderful solution.
00:36:13.760 | Say all you want about complaining about sitting in traffic, but it's one thing to be making
00:36:19.640 | $300,000 a year and then be annoyed with sitting in traffic for an hour each way.
00:36:25.000 | That's very different than making $30,000 a year and looking around trying to figure
00:36:29.360 | out how to improve your situation in life and realizing that there's no possibility
00:36:33.120 | for me to make more living where I'm living, working in this area where I'm working.
00:36:36.580 | The car can allow you to access a different market.
00:36:38.840 | The car can allow you to access a different job.
00:36:41.220 | And so a car can in many ways be a really important tool that allows you to go and earn
00:36:48.000 | a great living.
00:36:50.560 | Related to that, the car can be, even if it's not strictly a transportation necessity, the
00:36:55.880 | car can be part of your overall presentation, part of your professional image, and thus
00:37:01.680 | an important thing for you to spend money on, even if you don't technically need it.
00:37:06.720 | When I was younger, I underestimated the importance of this.
00:37:10.220 | When I was a financial advisor and I was riding my bicycle to work, I was feeling quite smug
00:37:15.040 | and self-satisfied about myself because I was making smart decisions of riding my bicycle.
00:37:19.800 | Today I look back and I realize a little bit more detachment that it was a foolish thing
00:37:23.800 | for me to do because while me being the weirdo who rides a bicycle to work works very well
00:37:29.200 | in the world of a podcast where I can call a podcast radical personal finance, in the
00:37:33.200 | normal everyday kind of systems of life, it marked me as being excessively weird and excessively
00:37:40.880 | strange.
00:37:41.980 | And people don't generally like hanging out with people or even doing business with people
00:37:46.040 | who are excessively weird and excessively strange.
00:37:48.740 | So if you work in a place where it's totally normal for people to ride bicycles, great,
00:37:52.040 | go for it.
00:37:53.040 | But if you work in an office where it's totally normal for everyone to drive BMWs, then almost
00:37:58.080 | certainly you should be getting a BMW because it's part of your overall image, it's part
00:38:02.240 | of your overall presentation.
00:38:04.440 | And you will make your co-workers much more comfortable with you if you fit in to their
00:38:10.880 | preconceived ideas, to their stereotypes, and to their biases.
00:38:18.920 | You'll get farther in the world if you recognize that the person that you're signaling yourself
00:38:23.900 | to be needs to be somebody who fits in.
00:38:29.200 | And to use another example, we'll talk about this quite a lot in the episode coming up
00:38:33.520 | where we talk about what kind of car to get.
00:38:36.680 | So I'm going to just short circuit it here, but you need to be very conscious of signaling
00:38:40.280 | theory.
00:38:41.280 | You need to be very conscious of the kind of person that you're signaling yourself to
00:38:44.320 | be.
00:38:45.320 | Again, I can talk freely here on a podcast called radical personal finance about being
00:38:50.240 | the weirdo who would ride his bicycle to work.
00:38:53.160 | And that's fine in this context because it's part of a congruent image of my signaling
00:38:59.680 | myself to be a radical free thinker to a certain measure.
00:39:04.520 | And while there are many listeners who will listen and say, "I would never do that," they
00:39:08.920 | kind of chuckle and say, "Well, that's just Joshua.
00:39:10.680 | He does that."
00:39:11.960 | But if I'm working in an attorney office or a financial planning office, it's just a totally
00:39:18.000 | different world.
00:39:19.160 | And so in hindsight, I see that I was too immature and I didn't perceive that I was
00:39:24.040 | causing people to feel uncomfortable with my eccentricity.
00:39:29.120 | And it would have been better if I had simply gone out, purchased a BMW, fit into the mold
00:39:33.600 | that everyone expected of me, and simply signaled that I belonged.
00:39:37.320 | Now, that's less damaging in a profession like financial planning where you basically
00:39:45.880 | bring in your own business and all that matters is the business.
00:39:48.720 | But if you are dependent on coworkers for their approval, that you're an attorney and
00:39:56.200 | you want to be on a track to make partner or you're working in a professional office,
00:40:00.320 | then it's very important that while certainly you can have your eccentricities, they need
00:40:05.080 | to be fairly muted if you desire for your career advancement to flow along smoothly.
00:40:11.120 | And so this has to do with how you dress, the car that you drive, the way that you speak,
00:40:15.200 | et cetera.
00:40:16.200 | You want to make it as easy as possible for people to accept you as part of the group.
00:40:21.800 | And unless there is a personal career advantage to your being a free thinker of some kind,
00:40:27.120 | then make it easy for people to accept you.
00:40:29.680 | Don't make it hard for them to accept you.
00:40:32.520 | And so this applies to, again, to all those factors.
00:40:37.040 | It applies to your car, it applies to the way your hair cut, it applies to everything.
00:40:42.360 | You want to make it easy for people to accept you so that they don't feel like it's a big
00:40:47.040 | risk to promote you, to pass you on, et cetera.
00:40:51.040 | There's an old cliche that no one ever got fired for choosing IBM.
00:40:55.320 | But that cliche portrays a truth, meaning in people's careers, they're generally looking
00:41:03.520 | to reduce risk.
00:41:06.160 | So when you're choosing someone to promote, you want to choose the person who is the least
00:41:13.840 | risky.
00:41:14.840 | When you're choosing someone to support politically, you're generally choosing someone that's the
00:41:19.360 | least risky for your perspective.
00:41:22.160 | And in companies and things like that, if you just say, "Oh, I'm the guy who comes in
00:41:26.160 | and rides a bicycle," then it paints you as an iconoclast, somebody who might be kind
00:41:33.020 | of a risky guy to promote.
00:41:34.880 | And so that's something that you should be very, very careful and thoughtful about doing.
00:41:39.580 | So reason number one to get a car is clearly if you need a car to earn money.
00:41:46.000 | Reason number two to get a car is if you want a car or need a car to enhance your lifestyle.
00:41:52.440 | Cars can be powerful, powerful lifestyle tools in so many ways.
00:41:59.160 | So I mentioned at the beginning of the show, why don't I live car-free?
00:42:02.280 | It's because I have four children.
00:42:04.840 | And with children, my lifestyle is so much better having a car than not having a car.
00:42:12.200 | Maybe if I lived in downtown Amsterdam, we'd all do bicycles, right?
00:42:15.440 | I'd have a back-feet bicycle and I'd trundle all my children around, maybe.
00:42:19.360 | But I don't live in downtown Amsterdam and I don't want to do that.
00:42:23.720 | So having the ability to come and go as I like, to take trips, to stop when I want to,
00:42:28.860 | to be able to load up my children and go and get groceries and things like that, a car
00:42:32.920 | is a really, really important and valuable lifestyle tool.
00:42:36.720 | If I were single, I would avoid, generally, with one more caveat coming, I would avoid
00:42:42.080 | having a car.
00:42:43.480 | But in the modern world, with having children, having a car is a great lifestyle tool.
00:42:48.400 | A car can also enhance your lifestyle in many, many other ways.
00:42:52.920 | So you can say all you want about saying, "I'm going to live in downtown New York City
00:42:57.320 | and I'm just going to rent a car when I want to go out of the city," or, "I'm going to
00:42:59.760 | live in a downtown city wherever."
00:43:01.600 | And that is true.
00:43:02.600 | You can rent a car whenever you want to go out of the city.
00:43:05.080 | In my experience, having tried that, you wind up renting the car less frequently because
00:43:10.040 | of even the hassle of renting it.
00:43:12.000 | And you wind up saying no to some of the trips that you would take if it were your own car.
00:43:16.000 | So having a car might mean that you travel more frequently, that you go up to the ski
00:43:19.340 | slope more frequently, et cetera.
00:43:20.600 | Yeah, you can rent a car, but often even the times that you want to rent a car are the
00:43:24.240 | times that everyone else wants to rent a car.
00:43:25.960 | The selection is lower, the prices are higher, et cetera.
00:43:30.440 | And so just having your own wheels and transportation is really, really valuable.
00:43:35.200 | In addition, there are many lifestyle things that you can enjoy with a car that you wouldn't
00:43:39.600 | otherwise enjoy.
00:43:41.380 | So whether it's going to the grocery store, which I have done, especially in global travels
00:43:46.620 | with my family.
00:43:47.620 | I've gone many times, taken all my children, we've ridden the bus from our rental house
00:43:52.020 | to the grocery store, and then get all the groceries and come back.
00:43:54.480 | And usually it turns a grocery store trip into something that's exhausting.
00:43:58.680 | Even in places with good public transportation, it's just tiring and annoying compared to
00:44:03.440 | doing it yourself.
00:44:04.440 | But then there are many hobbies and things that you could otherwise do with a car, whether
00:44:08.320 | it's taking your pickup truck with a camper in the back out to the lake, going out and
00:44:12.420 | overlanding in the woods, going out to your favorite surf spot, just driving out on a
00:44:16.820 | whim out of the city and going and looking at the stars, doing whatever the things are
00:44:21.840 | that you like to do.
00:44:23.240 | Having the ability, again, take your children to the things that they want to do.
00:44:26.880 | Having a car can be a tremendous lifestyle enhancement.
00:44:30.520 | It increases your fun.
00:44:32.080 | It increases the things that you can do and allows you to do those things and access those
00:44:35.500 | things regularly.
00:44:37.560 | Then of course there are longer term scenarios, right?
00:44:40.620 | The freedom to come and go as you like.
00:44:42.760 | I was particularly aware of this during the COVID pandemic when being on public transportation
00:44:50.320 | became very, very unpleasant.
00:44:52.560 | Many places the public transportation was cut due to the decrease in demand and so you
00:44:58.120 | had fewer routes.
00:44:59.320 | Then they reduced capacity and then they imposed all kinds of onerous rules about how close
00:45:05.100 | you could sit to people, what you had to wear over your face, et cetera, to get on public
00:45:08.600 | transportation.
00:45:10.080 | Having a car can eliminate all those things.
00:45:12.320 | For me, having a car is even just a symbol of personal freedom.
00:45:16.440 | The classic idea of I can go where I want to go, when I want to go, I can do what I
00:45:19.760 | want to do is really, really important for personal freedom.
00:45:24.000 | Or part of my emergency measures, right?
00:45:26.520 | I talk about emergency planning.
00:45:29.360 | If I ever need to get out of the town where I live for whatever reason, I want to make
00:45:33.260 | sure that I have a car, that I'm not trying to go and rent a car last minute to get out
00:45:37.040 | of the city, but I have a car.
00:45:39.160 | I can load up my family and I can leave from a place that's unsafe for them and go to a
00:45:42.880 | place that is better and is safer.
00:45:45.680 | There are many good reasons to have a car.
00:45:48.720 | Secondly, the secret is simply if you can afford a car and you think it enhances your
00:45:54.480 | lifestyle, get one, get several, get whatever you want.
00:45:58.720 | Just make sure that you can easily and comfortably afford the car.
00:46:02.720 | So most of this discourse is directed at those who are just getting started.
00:46:07.600 | Whether you're just getting started because you are young, whether you're just getting
00:46:11.880 | started because you suffered a setback and you're kind of starting all over again.
00:46:16.480 | Well, if you're just getting started, then the car is a big decision.
00:46:21.760 | One of your goals should be to quickly get your finances to the point where the car is
00:46:25.560 | not really a decision, where it just really doesn't matter.
00:46:29.240 | That as far as I'm concerned is one of the great secrets in life, is make your expenses
00:46:34.220 | at a level where they don't really matter to you.
00:46:37.560 | So if you'll do that, your life can be very low stress and a lot of it comes down to some
00:46:44.200 | of these basic decisions of thinking about what's going to happen.
00:46:47.320 | I'll give you just a simple example.
00:46:50.040 | I remember when I've tried to imagine, maybe someday I'll give you my 10 of them, but I'll
00:46:54.760 | just give you a couple now of the milestones that matter to me in my wealth building stage.
00:47:03.440 | When I was younger, I thought certain numbers mattered.
00:47:05.640 | Okay, if I can only have $100,000, if I can only have a million dollars, if I can only
00:47:09.960 | have this number, then that would matter.
00:47:12.140 | Those numbers aren't really meaningful.
00:47:14.800 | The human brain doesn't grasp these intangible things called numbers.
00:47:19.900 | So what I've found is I've tried to put those numbers or goals into things that are more
00:47:24.760 | tangible.
00:47:26.140 | So there was a point in my life in which I would never order a glass of wine with dinner
00:47:30.080 | because I wanted to save the money.
00:47:32.040 | And then I reached a point in time in which I said, "I'm always going to order the glass
00:47:34.600 | of wine.
00:47:35.600 | If I want to have a glass of wine, I'm not going to worry about this expense."
00:47:39.680 | That was a tangible one.
00:47:41.160 | Another tangible one was when I reached the point where I didn't care about the price
00:47:45.600 | of gas.
00:47:47.480 | And there was a time in my life in which the price of gas was the single biggest impact
00:47:52.260 | for me.
00:47:53.260 | I remember I would go to the gas station, I put $8 in, $13 in, and I would sweat about
00:47:56.760 | the price of gas because I had no money.
00:47:59.120 | Then I reached the point in my life where the price of gas didn't matter.
00:48:03.080 | And part of it didn't matter because I built a lifestyle that didn't depend a lot on gas,
00:48:06.200 | and then part of it just didn't matter because it's just not a big factor in my overall budget.
00:48:10.680 | And I remember, "Wow, that was great."
00:48:13.600 | Similar stage of getting to the point where the price of a car is no big deal.
00:48:17.540 | For one guy, he'll go out and sweat and sweat and sweat when thinking about buying a $30,000
00:48:22.080 | car and do all his research.
00:48:23.800 | Another guy would just go buy a car.
00:48:26.240 | Another guy would go buy a $130,000 car and it's no big deal.
00:48:29.960 | So that's a big kind of benchmark.
00:48:34.520 | I haven't gotten to the point where buying a $130,000 car is no big deal, but I'm working
00:48:38.440 | hard.
00:48:39.440 | And that's the goal, to get to the point where even just the purchase of a car or the ownership
00:48:42.800 | of a car, all this stuff, no big deal.
00:48:45.000 | And then you reach another stage where it's even with houses, where, "Get another house,
00:48:49.280 | no big deal."
00:48:52.480 | But along the way, you can't really short-circuit the process.
00:48:59.120 | If you don't pay attention to the glass of wine or you don't pay attention to the cost
00:49:03.720 | of the car at a certain phase of your life, there's a very good chance that you won't
00:49:07.920 | be able to get to the point where you don't need to worry about the cost of the car or
00:49:11.800 | the cost of the house.
00:49:13.480 | You can't short-circuit the wealth-building process.
00:49:17.080 | Sometimes you can turbocharge your income so quickly that you can go there, but you
00:49:21.760 | can make it fast, but you can't short-circuit the wealth-building process.
00:49:25.440 | You have to get enough money growing for you in order for you to genuinely have compound
00:49:30.560 | interest and other people working for you and your investments working for you for your
00:49:34.360 | wealth-building to grow.
00:49:36.040 | So recognize that this matters, this subject of how to buy a car, this really does matter,
00:49:40.960 | but it matters at a certain time in your life.
00:49:44.160 | You want to focus on figuring out where you are in the process of wealth-building.
00:49:48.440 | And if you're at the beginning stage of wealth-building, again, either because you're young, because
00:49:53.180 | you've suffered a setback, et cetera, then the car decision is a very important thing
00:49:58.000 | to get right, very important.
00:50:01.560 | Then later, at a later stage, the car will cease to be a factor at all in your budget.
00:50:07.920 | So identify where you are.
00:50:09.520 | If you're in the getting started stage, then think seriously, can I avoid the car?
00:50:15.440 | Think seriously, can I avoid it completely?
00:50:18.000 | And then if I have to get a car, we'll talk about how much to spend on a car, et cetera,
00:50:22.800 | but if I have to get a car, how can I minimize the expense and minimize the hassle of this
00:50:28.320 | so that I can maximize my lifestyle?
00:50:30.560 | The strange thing about it is this.
00:50:33.400 | When you're very, very broke or very, very poor, then probably the best solution is not
00:50:39.760 | to have a car.
00:50:41.480 | Then you reach this middle stage of wealth where undoubtedly the car is probably the
00:50:44.720 | best solution.
00:50:46.020 | Then you reach a point in wealth in which probably the best solution is not to have
00:50:49.280 | a car again.
00:50:51.440 | I again, I get so annoyed by the time and the hassle associated with buying cars.
00:50:56.720 | It's not the money, it's the hassle.
00:50:59.280 | And so you reach a time where I love renting cars.
00:51:04.120 | I love it.
00:51:05.120 | You fly in.
00:51:06.120 | I have the gold status with a bunch of the rental car agencies.
00:51:11.240 | And so if you have a good gold status or platinum status with a rental car agency, you fly in,
00:51:19.400 | in the airport, you walk over to the rental car place.
00:51:22.680 | Usually it's in the airport or whatever.
00:51:24.200 | You're right there.
00:51:25.360 | You walk up to your car.
00:51:26.360 | The keys are in it.
00:51:27.360 | They tell you what space it is.
00:51:29.200 | You get in, you start the car, you drive out.
00:51:31.840 | You drive out, you know the car is in good working condition.
00:51:33.960 | You know it's clean, it's fresh, it's ready to go.
00:51:36.320 | You drive out, you use it, right?
00:51:38.000 | Go use it for a week, a month, whatever you want to do.
00:51:41.120 | Then when you're done with the car, you drive back to the airport, you pull in the spot,
00:51:44.800 | you leave the keys in it and you go get on your airplane.
00:51:47.080 | Everything gets billed to your credit card.
00:51:48.480 | It's the best thing in the world.
00:51:49.840 | It is so, so nice now.
00:51:51.880 | Again, the car rental experience, especially in the United States, it happens internationally,
00:51:59.800 | but especially in the United States, the car rental experience, if you have a premier level
00:52:03.680 | of membership in one of the agencies, is just wonderful.
00:52:09.840 | That's the best way to use a car, in my opinion.
00:52:12.240 | You get all of the good, someone else takes care of all the bad.
00:52:16.000 | That's not the most cost efficient way to handle a vehicle on the ongoing basis, but
00:52:21.480 | that's the best way to have a car.
00:52:22.920 | It's just not own it at all.
00:52:25.080 | You go through this curve when you're beginning and broke.
00:52:28.320 | The car expenses are a big deal.
00:52:29.640 | You want to minimize those and you especially want to minimize those by eliminating them
00:52:32.920 | if you can.
00:52:34.040 | Then you get to the point where the car ownership is no big deal.
00:52:36.920 | Even though you could drive to work, or sorry, ride your bicycle to work, you do that most
00:52:40.440 | days, but you keep an extra car just for the rainy days.
00:52:42.840 | Or you have a car just because you want a car and it allows you to go to the mountains
00:52:45.880 | on the weekend.
00:52:47.040 | Then you reach a point in time where you're really rich and yeah, you'll probably still
00:52:50.160 | keep some cars around, but it becomes a hassle to keep a car in every house and who's going
00:52:54.600 | to take it and who's going to keep the stuff done and you wind up just renting the car
00:52:59.320 | because it's a simpler, easier thing for you to do.
00:53:05.600 | Consider carefully your decision to buy a car because the decision to buy a car will
00:53:09.680 | make a big difference for you on a long-term basis.
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