Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. My name is Josh Rasheeds, I'm your host, and today I'm going to explain to you how to buy a car.

This question will be answered in a series of episodes. We'll talk first today about whether you should buy a car. We'll talk about ways to think about the kind of car you should buy. Then we'll move on to systems of negotiation, how to finance a car or not finance a car, how to get a good deal on a new car, how to get a good deal on a used car, how to decide whether you should lease a car, buy a car, etc.

But today we begin with the foundational question in how to buy a car, which is simply ask yourself, should I buy a car? One of the thinking tools that is best cultivated in our lives is always, is this even necessary? For example, in productivity training, one of the first lessons that you learn in productivity training is to ask the question, is this necessary?

Before you set up a system to do something efficiently, ask yourself if it's even necessary or useful. Many many people confuse efficiency with effectiveness and their personal productivity. They go through life doing things with excellence that don't need to be done at all. So when you're sitting and looking at a list of tasks, things to do, one of the first things you should ask yourself is, which of these can I simply eliminate?

Before I go through and figure out how to delegate this task to another person, before I go through my list and try to create a system for handling this task in a more efficient way or with more advanced tools, can I simply eliminate the task? What are the consequences for eliminating the task?

And this level of addressing or thinking about the consequences is important. And we're going to talk about the consequences of owning or not owning a car in a moment. Many tasks can be eliminated from someone's to-do list with zero negative consequences. But we usually eliminate those things fairly automatically.

We naturally procrastinate on those tasks. There are other tasks that we can eliminate, but there's going to be a cost. And one of the skills of personal productivity has to do with learning to understand the actual costs of eliminating a task and being willing to accept the cost if it's low enough.

Back to cars. The question to ask in how to buy a car is, at the very beginning, do I need to buy a car or do I want to buy a car? I want to talk about this from a financial perspective and also from a lifestyle perspective. There's no question that for most people, the answer to these questions is automatically yes.

For example, I both need and want to own a car. I have not established my lifestyle in such a way that I live easily without a car. This is due to simply my family. When you have children, cars are way better than virtually every other option. It's also simply due to the lifestyle that I want to live and the kind of freedom that I like to have.

Having ready transportation where I'm not dependent upon a chauffeur, where I'm not dependent upon a commercial service of some kind is for me a great advantage. I like the lifestyle benefits of having a vehicle and of being able to use a vehicle whenever I want to. However, there are a lot of lifestyle benefits that could be accrued by someone in a different situation than my own where the lifestyle benefits of not owning a car are much more substantial.

Let's begin, of course, on a personal finance podcast with a brief discussion of the financial impact of owning a car. There's no question that cars are a financial hassle. Cars are a financial hassle. Depending on where you are in your wealth-building journey, you will want to consider the car and whether it will add to your life and your lifestyle and your finances and your enjoyment of life or not.

For many people who are at the beginning stage of their career, who are just starting their process of earning money, establishing themselves and their lifestyle and their career, cars will be the biggest expense both up front and also the biggest expense on an ongoing basis. For the, say, 20-year-old young man or woman who's going out to buy his or her first car or 16-year-old or 24-year-old, whatever age you want to use, most likely that first car purchase will be the first big expense that that individual will make.

I remember for me, my first car cost me $2,000 and it was the largest single expense that I had made at that point in time. As your lifestyle grows, cars will usually be the biggest regular expense that you'll face. They're really dwarfed only by house purchases. But it's not uncommon for someone to go and purchase a $50,000 car, $100,000 car and to do that every few years.

Unless you're running a business where you regularly have large business expenses or unless you're purchasing real estate, for most normal financial households, that will be the biggest expense that you make on an ongoing basis. So cars are expensive to buy. You have to put together the cash or put together the credit to make the up front payments necessary to acquire the vehicle.

Cars are also expensive to own. Usually the biggest expense of a car is its depreciation. Depreciation is a word that we use to describe how much something will decline in value due to its ongoing use. And with cars, in normal markets, that number is pretty significant. Traditionally, I have to give these caveats because the last few years in the vehicle market have not been anything like what we understand to be normal due to the microchip shortage and the global supply line disruptions, etc.

But traditionally we say that cars normally lose about 20% of their value in the first year of ownership, assuming that you purchase one new. And they also then lose about 15% of their value on an annual basis. This has not been true over the last few years. I've worked with many people who've gotten offers for their two or three year old car where people and businesses have offered to pay them more than they paid for the vehicle when it was brand new.

But I think this is a temporary condition that in most places will diminish and is already showing significant signs of diminishing. So let's put this into context for a moment. Let's assume that you go and today you purchase a fairly ordinary new car. Could be a new middle of the road minivan, new pickup truck, new car.

This number would be applicable for most cars except kind of an entry level economy car. Let's say you spend about $40,000. Well, in the first year that you spend $40,000, you can expect that car to decline in value by about $8,000. That would be the first year depreciation. It would decline in value from $40,000 to $32,000 and you would have $8,000 of depreciation.

Why? Why does this exist? Well, most people who are going to buy a $32,000 car could go out and buy a $40,000 car if they wanted one. And so they're not willing to pay you as much for your car that they can go and get the same car from the dealer.

Why would somebody pay you $38,000 for your one year old car when they could go pay a dealer $40,000 for a brand new car and get all of the goods and guarantees that go with the new car? Everything from perfect warranty coverage, knowing the full service history of the vehicle, having the dealer protection plans and all of the special sales packages that you can get with a dealer.

Everything to even the new car smell and the thrill of having a shiny new car that you know no one has driven except you. So a used car is in most people's lives much less valuable than a new car. That's why we have depreciation. The reason this has changed over the last couple of years is that there was a wide shortage of new cars and there was a wide shortage of new cars with the features and options that people wanted, especially due to the microchip shortage.

And so they wanted a car with certain features and the only way to get that car was to go and buy one that was a little bit older. But again, this is not a permanent condition. So in the first year of your $40,000 car purchase, you'll have $8,000 of depreciation.

I want you to imagine the kind of person who will often go out and purchase a $40,000 car. Frequently that will be somebody who is just getting established in his lifestyle, somebody who's just building his savings. $8,000 of depreciation can be a pretty heavy cost for someone who doesn't have a lot of money to bear.

After all, there are many households where the people involved struggled to even fill up a Roth IRA. Well $8,000 is more than an annual contribution to a Roth IRA. And so if you recognize that some people are scrimping and saving to go and put $6,000 in a Roth IRA, but you're having $6,000 in depreciation on your car, you're basically not actually making any forward financial progress.

For every payment into your Roth IRA, you then have the exact same amount fly out the door in terms of depreciation. This immaterial expense that we can't really see but is actually there. In the next year, it continues. So now if we depreciate our $32,000 car by 15%, that would be a cost of depreciation in the second year of ownership of $4,800.

Almost $5,000. Once again, we might be scrimping and saving to put $5,000 in our Roth IRA and here goes $5,000 depreciation out the window. So that car can be an expensive thing. And the biggest expense is depreciation. There are of course other expenses to be accounted for. On your purchase expenses, you have taxes in addition to the purchase price, taxes, registration fees.

On an annual basis, you have fees of insurance. You have fees not only, you have costs not only of depreciation but also of direct mechanical repairs, insurance expenses, fuel to fund the thing, to make the thing go down the road, and then just all of the other ancillary things, accessories, ways that you want to get your car just how you want it, accessories to make it more useful to you, to make it appropriate, et cetera.

So cars suck up quite a bit of money. They also suck up quite a bit of time. For me, I don't worry too much about the money that a car costs, but I often get annoyed with the time that a car entails. Time to go and get your registration done.

Time to go and take it to the mechanic when it needs to be fixed. Time to have it washed and wash it yourself or time to have it washed and vacuumed, et cetera. I often find myself annoyed with the time required to maintain a vehicle. Now certainly those are pretty ordinary things.

It's not that big a deal, but there are some downsides. In addition, owning a car can be a significant source of personal liability. There can be first of all a sense of liability of worrying about the thing. If you have a thing that is big and expensive, then if it represents an overly large amount of your budget or an overly large amount of your finances, the actual ownership can come with a significant psychological cost.

Somebody who scrimps and saves and buys a car that's outside of his financial resources, it gets very worried when a new scratch appears or gets very worried when there's a shopping cart headed for it. So that's one consideration. It's also consideration even from the perspective of liability, personal liability.

It's interesting as somebody who practices a little bit of coaching and planning with regard to asset protection planning, I frequently speak to people about asset protection planning and the first thing I ask them is, "What is the source of liability that you face?" Many people dramatically overestimate the actual liabilities that exist in their life and in their financial world.

When we talk through it, if you're somebody who works at a job, goes to work every day, comes home, isn't managing a company, doesn't have employees, doesn't have trucks driving all around town with your name on the side of them, generally the only liabilities you face are liabilities for either personal actions such as wronging someone, harassing someone, etc.

or something related to your car or your home. Those things can be controlled. Your home of course has less liability where you can protect it quite a bit. People talk about, "Oh, there's a slip and fall on my front sidewalk," but that's one thing to talk about. It's another thing to actually have somebody bring a successful lawsuit against you, at least if your sidewalk is in proper working condition.

But your car on the other hand is frequently the biggest source of personal liability. Your car because you can't often control the circumstances that you're in. You can't control the roads, you can't control what people do or don't do, how other drivers drive or don't drive. You can't control all of those aspects of it and frequently you might even commit a wrong in being negligent for a moment, sending a text message in your car while you're driving that distracts you.

So that automobile itself is often a source of significant personal liability. Now you can handle that with a quality liability policy as part of your car insurance and then you can link that with an umbrella liability policy in your home and you can handle the liability pretty well. There's a reason most people have cars.

But pointing out that cars do have downsides. The longer you own a car, the more those downsides increase. It seems that no matter what you do on the front end, the longer you own a car, the more you have to go and change out the tires, the more you have to take to the mechanic, the more you have to go and do inspections and registrations, etc.

and the time and the money continues forever. We'll get to the positives in a moment. But if these negatives are significant, you know I didn't even talk about other hassles because I don't live in the city and I don't think much about this. First of all, if you live in the city also, think about things like parking expense or think about things like the hassle of even keeping the car safely parked and keeping the car moved so that you don't get excessive tickets.

Where are you going to park the thing? It takes up a lot of space. That's to say nothing of even the lifestyle impact of designing cities around cars. I'm a fan of the designs of cities that don't involve cars because I think they make for more pleasant housing for people, more pleasant towns.

And when we design most of our modern cities around car ownership, they make very unpleasant cities. And so there are environmental impacts that people can consider. There are many other reasons that you can fill in. So could you avoid owning a car in the first place? I think undoubtedly many people can.

And in the future, more and more people will be able to avoid owning a car. Let's begin with the old-fashioned ways of handling this problem. First, people who have little need to commute can generally avoid owning a car. If you work from home, either in the modern sense of being a knowledge worker who works from your home office, in a traditional sense of being a homemaker, your need for a vehicle on a daily basis is pretty diminished.

If you are at home and if you're living in a home where you like to be, and if you're living in a home where you can access the things around you that are nice for you and for your family, then there's little reason for you to need a car on a regular basis other than an occasional Costco run, etc.

And so if you can build a lifestyle for yourself that doesn't revolve around car ownership, that can be a major improvement. Years ago, my wife and I, after we've been married a little bit, we bought a house. And one of the things that I prioritized in the purchase of that house was to purchase a house that was less dependent on needing a car.

We didn't go car-free, but we went car-light at the time, dropping from two cars to one car. And it was not only a savings of finances, it was not only a savings of hassle, but it was genuinely a significant lifestyle improvement. I purchased a house that was about a third of a mile from my office.

I did work in an office and I needed to go to an office, but I would simply walk or ride a bicycle to my office. That was wonderful. When you think about the lifestyle benefits of not having to rely on a vehicle, not having to sit in traffic, not having to sit on the road, not having to deal with the time suck of commuting, it's a major, major benefit to be within walking or bicycling distance to your office.

But more importantly, we bought a house that had good access to a lot of the things that our family benefited from. We were similarly about a quarter of a mile from a grocery store. A good, excellent grocery store where we could go, we would take our bikes and our bike trailer and do our grocery shopping and bring our groceries home in our bicycle trailer.

We were slightly more, a quarter, half a mile from a library. So we would do regular library outings and that was the primary focus of outings with the children, go for library story time, go and get books, et cetera. We were close to several parks, several municipal parks, so we could easily walk and ride bicycles to those parks.

So most of the things that we needed on a daily or weekly basis were within striking distance of our home, easily achievable with a pleasant walk and/or a pleasant bicycle ride. That was not, again, that was a lifestyle improvement. And so if you have little need to commute because you can arrange that kind of lifestyle with telework, that's kind of an old-fashioned term, with just modern working from home, that's a phenomenal improvement in lifestyle to not have to deal with the hassle of a car.

Now of course, another way to accomplish this is by living somewhere where there's a strong public transportation system. And if you live in a place where public transportation is convenient, where it's reasonably priced, where it's useful to you, then obviously this becomes much more achievable. Many of the biggest cities in the world have great public transport systems, and having a car is just—or sorry, not having a car is considered the normal affair.

If you live in the suburbs or you live in an American city that's sprawled out all over the place, then the public transportation system is probably so inconvenient that once you scrape together a few shekels, you're ready to go ahead and get a car for the convenience factor. But you can make an intentional decision to live in a place where there is a strong public transportation system.

And you can even do this by thinking about, for example, living on a hub, somewhere where you're conveniently located to the transportation system. You might be a little bit out of the city, but you live near a train terminal or near a bus stop or near some form of transportation system that makes it convenient enough for you to go, get on the train, put that time to productive use so you don't have to spend it sitting in your car yourself.

Living on a hub or a spur like that makes life better. One of the—then of course the classic solution has been to simply take taxis or arrange for private driver services. There's been a dramatic improvement over the last decade in the convenience of these services, where now that you can order a car with any number of excellent apps on your phone, and you can pre-schedule the car to be there at a certain time and to take you where you want to go, you can have those fees easily billed to your card.

Everything just works. It's so convenient to order your transportation in that way that it makes a lot of sense for people to do that instead of owning or using a car on a regular basis. A couple of stories to drive this point home. Number one, for people who are elderly or for people who are poor, I think that this is a really, really good solution.

Let's begin with the elderly. As a standard part of Joshua's speech to elderly people or people who are approaching elderliness, I routinely encourage them to be technically competent and experienced enough where they can learn how to use transportation apps. Because one of the classic problems of growing older has been the loss of independence.

That traditionally as you've gotten older and it became unsafe for you to drive or you didn't want to drive anymore, then you became completely dependent on your friends, your loved ones, your family for taking you around. But with the modern ride sharing applications that are available, it no longer has to be that way.

And so one of the things that I try to do is encourage older people to become comfortable and accustomed to using those services. Because it makes it so that instead of sitting around and waiting for your daughter or your son or somebody who's busy to come and take you once a week or once every two weeks on grocery outings, you can reliably and independently get yourself transported to where you want to go for your other two or three outings a week that will help you to really enjoy your life and your lifestyle.

So I encourage you, if you're interacting with elderly people who may not be able to maintain a car, then go ahead and talk to them about that and see if you can help them to learn how to be comfortable using ride sharing apps so that they can be independent.

In addition, for people who are poor, owning a car can be a significant expense, even if the car is paid off. There was a friend of mine that I worked with for a number of years trying to help, and he was living on a very modest social security income.

And yet he was addicted to owning his car. He had a very modest rent. He lived in a location that was quite convenient and where he could have easily walked to most of the things that he needed to do, such as grocery shopping, etc. But his entire life he had owned a car.

His financial situation no longer permitted him to keep his car in as good a situation as he wanted to keep it. And when I sat down and did the numbers, the amount of money that he was spending on his car was literally hundreds of dollars per month of maintenance for an old car.

And he didn't have the capital necessary to purchase a new car. And I urged him to sell the car, get rid of the car, and simply use a ride-sharing app. Because he had enough resources of friends that he could borrow a car from on occasion. If a ride-sharing app was unavailable, enough friends and people to rely on, that it would have been a good situation for him.

In his situation, he couldn't conceive of it because culturally it didn't fit. His entire life he had a car. He couldn't conceive of not having a car. But even though he wasn't in a downtown environment, the financial benefit of just paying for the ride that you need, instead of paying for this ongoing maintenance and expenses of maintaining a car that was increasingly unreliable and showed no signs of reducing its monthly outflows (or I guess the car's monthly inflows, how much was necessary to support it), it would have been a lot better financially.

It was just this block in his mind about the lifestyle perspective and the freedom perspective. Then finally, we get to the concept of at a higher end, just simply using ride-sharing services instead of a private car service. Years ago when I was a financial planner, I would go see a lot of people in their offices.

I drove a lot. I sat down and I realized I was driving so much and I thought this time really could be better put to better use. At the time, I seriously considered hiring a driver to drive me around. It was something that wealthier, more productive financial advisors, a few of them did, and they used their car time much more productively if they had a driver.

At the time, it didn't make sense. Today though, number one, I solved a lot of that by simply stopping going to seeing people and sitting in my office having people come to me instead. And then of course this was prior to the widespread acceptance of Zoom meetings, etc. Today with Zoom, you could get by even better.

But then today, by simply using a ride-sharing service regularly, you can get very close to what was formerly kind of a rich man's lifestyle choice to have a full-time driver. You can get there pretty well, pretty close to that at a fraction of the cost simply using ride-sharing services.

I have a friend of mine who had his driver's license suspended, and yet this guy had a job where he needed to go all over town for meetings, and so he had no option but to use ride-sharing services. And when we sat down and looked at the amount he was spending, his ride-sharing services, even for regular meetings all around town, come out to about $1,000 a month.

And $1,000 a month for having a driver take you where you want to go whenever you want to, while there is in some cases a decrease in convenience, that's a pretty reasonable cost to have what formerly you could really only have with a full-time chauffeur and all of the car expenses associated with it.

So if you're somebody who spends a couple thousand dollars a month on vehicle expenses, and if you would like to have that time to yourself where you just get into the car and go, seriously consider that. It's not perfect in all situations. The biggest problem is if you're doing business in a place where you can't get rides quickly and conveniently, but if you're in a place where the ride-sharing services come quickly, you can schedule them when you want to, and you have enough flexibility that that could work for you, that can be a better solution.

And it can allow you to avoid owning a car. And then we get to the alternatives that involve you transporting yourself instead of being transported by a vehicle. You can establish a lifestyle for yourself where you have an alternative to either walk or bicycle to the places that you want to go.

And if you'll think carefully about the choices that you make, you can do this in comfort with excellence, and it doesn't have to be a sense of deprivation. First, consider carefully where you live. There are cities that are very unpleasant to be in without a car, and there are cities that are very pleasant to be in without a car.

And you can choose intentionally to live in one of the cities that is pleasant to be in. Remember that cities, states, and countries are all competing for your presence and for your business. In order for a city or a state or a country to be effective and successful, it needs population.

And you can choose to simply pull up roots where you are and go to a place that has the kinds of amenities that you desire. And these lifestyle amenities can be a big factor of it. Just last week I was talking with a Dutch friend about Amsterdam. The Amsterdam bicycle culture is truly incredible.

If you're not familiar with it, just go on YouTube and grab a few things and let the algorithm send you all kinds of videos extolling the virtues of the bicycle culture in the Netherlands. But it truly is remarkable that you can choose to live in a city where you can get along quite well and very comfortably with a bicycle rather than a car.

And you can do that in many places all around the world, in many places in your state, your country, where you already are. You can do it in even many neighborhoods. So choose to think about where you locate yourself. In addition, most cities actually have interesting ways that if you'll sit down and look at a map or figure out what's there in the city, you can figure out something that would allow you to attend to most of what you need to attend to with a bicycle or with walking.

I think of course here bicycling is the normal way because walking, maybe you have a distance of say five miles. Five miles is traditionally considered walking distance throughout most of the history of humanity. In the modern world, most of us would not consider that to be walking distance, but you certainly can walk comfortably a couple of miles.

But bicycling really is comfortable. And what I would encourage you is not only consider if there is a suitable bike route for you to get from your home to your office or to the kinds of events that you care about, but think about if there's something that would be accessible to you with an e-bike.

One of the technologies that I'm so excited about in the modern world is battery powered electric bicycles. If you haven't ever ridden an electric bicycle, I would urge you to find what place where you can rent one, ride a friend, et cetera, and try it out. Because an electric bicycle, as far as I'm concerned, solves all of those kind of lingering reasons why people don't bicycle.

There are times when riding a bicycle where you're tired, you don't want to pedal, or you have to go up hills, or it's hot outside, et cetera. But if you get a high powered, good quality electric bicycle, it basically gives you the equivalent of a small motorcycle with all of the convenience of a bicycle.

Motorcycles are certainly one reasonable transportation option in places where you can ride them safely. But because of their noise, because of their size, and because of their clear classification as a motor vehicle, you have all of the limitations and restrictions of a motor vehicle. But a bicycle has few of those restrictions.

Motorcycles can generally, in some places, ignore some of the transportation laws. You don't feel bad about going up on the sidewalk where appropriate. You don't feel bad cutting across a parking lot to shave a corner, et cetera. If you pair the bicycle with a good electric motor, it really gives you the best of both worlds, where you have the ease and the joy of a motorcycle with a bicycle, with the convenience, lightness, ease, and just joy of a bicycle.

There are many people, I think that certainly there are people who could easily handle a 10 mile commute on a regular bicycle. But there are many more people who, if they tried out an electric bicycle, could embrace easily a 10 mile commute on an electric bicycle without worrying about being fatigued, without worrying about being excessively sweaty, et cetera.

So if you chose a house, let's say you needed to work in a downtown area, but you chose a house that was along a green corridor, or a place where you had great bike paths, or just a really beautiful place to ride your bicycle on a daily commute, that could allow you to diminish your need for a car.

So these are some of the reasons to avoid buying a car, and here are some of the alternatives. And I believe that with appropriate texture for individual situations, these alternatives offer enough positive features that make them a genuinely better lifestyle. If you live in a town where you could bicycle to the things that matter to you, to your work, to your grocery store, to your social engagements, to all the places that you want to do, and you could dispense with the car without suffering a lifestyle subtraction, that can be a major improvement in lifestyle.

And it's not just financial. The finances can be simply the icing on the cake. By the way, let me point out, I think here, from a financial perspective, if a move is required, for example, let's say you're living in a house in the middle of nowhere, but you could move to another house that was closer to town.

If a move is required, and if the move requires you to spend more money on real estate to accomplish it, as your financial planner, I would urge you to consider it. Because from a financial perspective, you need to remember that cars go down in value, and commuting expenses are not deductible.

Cars go down in value very quickly, and commuting expenses are not deductible. On the other hand, houses generally go up in value, and the expenses associated with housing are very highly deductible. Looking at that, if you had the choice, and you said, "I've got to move from a $500,000 house in the suburbs to a $1,000,000 house in that great neighborhood in town, but it's going to cause me to come out of pocket another half a million dollars," while that's a significant amount that I'm not sure you're going to get rid of with saving on car expenses, it's probably the best financial move.

As your resources grow, one of the best investments you can make is to purchase increasingly expensive personal residences, because those generally go up in value. As you move from the suburbs to the better neighborhoods in town, your houses become more and more and more attractive. If it's necessary for you to justify that increase in real estate cost by getting rid of a car, and going from a two-car family to a one-car family, or going to a zero-car family, financially, that's a better move.

If you can get rid of all those non-deductible commuting expenses and convert them into deductible expenses for real estate taxes and mortgage interest, et cetera, that will generally be a better move. Better for you to own a $1,000,000 house in the middle of the city in a highly desirable, walkable, bike-sickable neighborhood, and be without a car, and without the financial albatross that that thing can be hanging around your neck, than for you to be in your $500,000 house out on the periphery, spending $20,000 to $30,000 a year maintaining your car.

Better to put the $20,000 to $30,000 a year into mortgage payments that are reducing your principal and allowing you to own a more expensive, more attractive house, and live a better lifestyle, saving time, et cetera. That's my argument against owning a car. Now let's assume that you've considered that, and you're like, "Well, I think I do want to own a car, and I think I need to own a car, or I want to own a car." So what are the reasons why you would need or want to own a car?

By the way, I don't think you need to justify it as need or want. So I'm going to use these terms synonymously. At the end of the day, remember, it's always your money. You spend it on whatever you want. And if you go into a spending decision with your eyes wide open, and you choose what you value personally, and you spend your money on that, go for it.

But the first obvious reason to own a car is that, especially from a financial planning perspective, is if that car allows you to earn money. If a car allows you to earn money, then you can easily justify its expense. If you live 25 miles away from your job, and you couldn't go and have the job without being able to get there back and forth every day, then your obvious thing you need is a car to get you to the job.

And this is one thing that if you study the very poor, one of the best lifestyle and financial investments that those who are very poor can make, especially if they're living in communities with poor public transportation, is to get a car. Because then that allows them to reliably get to work, to get jobs they ordinarily wouldn't be able to get because they were depending on public transportation, and to be better, more consistent workers.

And so the same thing can apply whether you're 18 or whether you're 58. If the car allows you to get to work, then it can be a wonderful solution. Say all you want about complaining about sitting in traffic, but it's one thing to be making $300,000 a year and then be annoyed with sitting in traffic for an hour each way.

That's very different than making $30,000 a year and looking around trying to figure out how to improve your situation in life and realizing that there's no possibility for me to make more living where I'm living, working in this area where I'm working. The car can allow you to access a different market.

The car can allow you to access a different job. And so a car can in many ways be a really important tool that allows you to go and earn a great living. Related to that, the car can be, even if it's not strictly a transportation necessity, the car can be part of your overall presentation, part of your professional image, and thus an important thing for you to spend money on, even if you don't technically need it.

When I was younger, I underestimated the importance of this. When I was a financial advisor and I was riding my bicycle to work, I was feeling quite smug and self-satisfied about myself because I was making smart decisions of riding my bicycle. Today I look back and I realize a little bit more detachment that it was a foolish thing for me to do because while me being the weirdo who rides a bicycle to work works very well in the world of a podcast where I can call a podcast radical personal finance, in the normal everyday kind of systems of life, it marked me as being excessively weird and excessively strange.

And people don't generally like hanging out with people or even doing business with people who are excessively weird and excessively strange. So if you work in a place where it's totally normal for people to ride bicycles, great, go for it. But if you work in an office where it's totally normal for everyone to drive BMWs, then almost certainly you should be getting a BMW because it's part of your overall image, it's part of your overall presentation.

And you will make your co-workers much more comfortable with you if you fit in to their preconceived ideas, to their stereotypes, and to their biases. You'll get farther in the world if you recognize that the person that you're signaling yourself to be needs to be somebody who fits in.

And to use another example, we'll talk about this quite a lot in the episode coming up where we talk about what kind of car to get. So I'm going to just short circuit it here, but you need to be very conscious of signaling theory. You need to be very conscious of the kind of person that you're signaling yourself to be.

Again, I can talk freely here on a podcast called radical personal finance about being the weirdo who would ride his bicycle to work. And that's fine in this context because it's part of a congruent image of my signaling myself to be a radical free thinker to a certain measure.

And while there are many listeners who will listen and say, "I would never do that," they kind of chuckle and say, "Well, that's just Joshua. He does that." But if I'm working in an attorney office or a financial planning office, it's just a totally different world. And so in hindsight, I see that I was too immature and I didn't perceive that I was causing people to feel uncomfortable with my eccentricity.

And it would have been better if I had simply gone out, purchased a BMW, fit into the mold that everyone expected of me, and simply signaled that I belonged. Now, that's less damaging in a profession like financial planning where you basically bring in your own business and all that matters is the business.

But if you are dependent on coworkers for their approval, that you're an attorney and you want to be on a track to make partner or you're working in a professional office, then it's very important that while certainly you can have your eccentricities, they need to be fairly muted if you desire for your career advancement to flow along smoothly.

And so this has to do with how you dress, the car that you drive, the way that you speak, et cetera. You want to make it as easy as possible for people to accept you as part of the group. And unless there is a personal career advantage to your being a free thinker of some kind, then make it easy for people to accept you.

Don't make it hard for them to accept you. And so this applies to, again, to all those factors. It applies to your car, it applies to the way your hair cut, it applies to everything. You want to make it easy for people to accept you so that they don't feel like it's a big risk to promote you, to pass you on, et cetera.

There's an old cliche that no one ever got fired for choosing IBM. But that cliche portrays a truth, meaning in people's careers, they're generally looking to reduce risk. So when you're choosing someone to promote, you want to choose the person who is the least risky. When you're choosing someone to support politically, you're generally choosing someone that's the least risky for your perspective.

And in companies and things like that, if you just say, "Oh, I'm the guy who comes in and rides a bicycle," then it paints you as an iconoclast, somebody who might be kind of a risky guy to promote. And so that's something that you should be very, very careful and thoughtful about doing.

So reason number one to get a car is clearly if you need a car to earn money. Reason number two to get a car is if you want a car or need a car to enhance your lifestyle. Cars can be powerful, powerful lifestyle tools in so many ways. So I mentioned at the beginning of the show, why don't I live car-free?

It's because I have four children. And with children, my lifestyle is so much better having a car than not having a car. Maybe if I lived in downtown Amsterdam, we'd all do bicycles, right? I'd have a back-feet bicycle and I'd trundle all my children around, maybe. But I don't live in downtown Amsterdam and I don't want to do that.

So having the ability to come and go as I like, to take trips, to stop when I want to, to be able to load up my children and go and get groceries and things like that, a car is a really, really important and valuable lifestyle tool. If I were single, I would avoid, generally, with one more caveat coming, I would avoid having a car.

But in the modern world, with having children, having a car is a great lifestyle tool. A car can also enhance your lifestyle in many, many other ways. So you can say all you want about saying, "I'm going to live in downtown New York City and I'm just going to rent a car when I want to go out of the city," or, "I'm going to live in a downtown city wherever." And that is true.

You can rent a car whenever you want to go out of the city. In my experience, having tried that, you wind up renting the car less frequently because of even the hassle of renting it. And you wind up saying no to some of the trips that you would take if it were your own car.

So having a car might mean that you travel more frequently, that you go up to the ski slope more frequently, et cetera. Yeah, you can rent a car, but often even the times that you want to rent a car are the times that everyone else wants to rent a car.

The selection is lower, the prices are higher, et cetera. And so just having your own wheels and transportation is really, really valuable. In addition, there are many lifestyle things that you can enjoy with a car that you wouldn't otherwise enjoy. So whether it's going to the grocery store, which I have done, especially in global travels with my family.

I've gone many times, taken all my children, we've ridden the bus from our rental house to the grocery store, and then get all the groceries and come back. And usually it turns a grocery store trip into something that's exhausting. Even in places with good public transportation, it's just tiring and annoying compared to doing it yourself.

But then there are many hobbies and things that you could otherwise do with a car, whether it's taking your pickup truck with a camper in the back out to the lake, going out and overlanding in the woods, going out to your favorite surf spot, just driving out on a whim out of the city and going and looking at the stars, doing whatever the things are that you like to do.

Having the ability, again, take your children to the things that they want to do. Having a car can be a tremendous lifestyle enhancement. It increases your fun. It increases the things that you can do and allows you to do those things and access those things regularly. Then of course there are longer term scenarios, right?

The freedom to come and go as you like. I was particularly aware of this during the COVID pandemic when being on public transportation became very, very unpleasant. Many places the public transportation was cut due to the decrease in demand and so you had fewer routes. Then they reduced capacity and then they imposed all kinds of onerous rules about how close you could sit to people, what you had to wear over your face, et cetera, to get on public transportation.

Having a car can eliminate all those things. For me, having a car is even just a symbol of personal freedom. The classic idea of I can go where I want to go, when I want to go, I can do what I want to do is really, really important for personal freedom.

Or part of my emergency measures, right? I talk about emergency planning. If I ever need to get out of the town where I live for whatever reason, I want to make sure that I have a car, that I'm not trying to go and rent a car last minute to get out of the city, but I have a car.

I can load up my family and I can leave from a place that's unsafe for them and go to a place that is better and is safer. There are many good reasons to have a car. Secondly, the secret is simply if you can afford a car and you think it enhances your lifestyle, get one, get several, get whatever you want.

Just make sure that you can easily and comfortably afford the car. So most of this discourse is directed at those who are just getting started. Whether you're just getting started because you are young, whether you're just getting started because you suffered a setback and you're kind of starting all over again.

Well, if you're just getting started, then the car is a big decision. One of your goals should be to quickly get your finances to the point where the car is not really a decision, where it just really doesn't matter. That as far as I'm concerned is one of the great secrets in life, is make your expenses at a level where they don't really matter to you.

So if you'll do that, your life can be very low stress and a lot of it comes down to some of these basic decisions of thinking about what's going to happen. I'll give you just a simple example. I remember when I've tried to imagine, maybe someday I'll give you my 10 of them, but I'll just give you a couple now of the milestones that matter to me in my wealth building stage.

When I was younger, I thought certain numbers mattered. Okay, if I can only have $100,000, if I can only have a million dollars, if I can only have this number, then that would matter. Those numbers aren't really meaningful. The human brain doesn't grasp these intangible things called numbers. So what I've found is I've tried to put those numbers or goals into things that are more tangible.

So there was a point in my life in which I would never order a glass of wine with dinner because I wanted to save the money. And then I reached a point in time in which I said, "I'm always going to order the glass of wine. If I want to have a glass of wine, I'm not going to worry about this expense." That was a tangible one.

Another tangible one was when I reached the point where I didn't care about the price of gas. And there was a time in my life in which the price of gas was the single biggest impact for me. I remember I would go to the gas station, I put $8 in, $13 in, and I would sweat about the price of gas because I had no money.

Then I reached the point in my life where the price of gas didn't matter. And part of it didn't matter because I built a lifestyle that didn't depend a lot on gas, and then part of it just didn't matter because it's just not a big factor in my overall budget.

And I remember, "Wow, that was great." Similar stage of getting to the point where the price of a car is no big deal. For one guy, he'll go out and sweat and sweat and sweat when thinking about buying a $30,000 car and do all his research. Another guy would just go buy a car.

Another guy would go buy a $130,000 car and it's no big deal. So that's a big kind of benchmark. I haven't gotten to the point where buying a $130,000 car is no big deal, but I'm working hard. And that's the goal, to get to the point where even just the purchase of a car or the ownership of a car, all this stuff, no big deal.

And then you reach another stage where it's even with houses, where, "Get another house, no big deal." But along the way, you can't really short-circuit the process. If you don't pay attention to the glass of wine or you don't pay attention to the cost of the car at a certain phase of your life, there's a very good chance that you won't be able to get to the point where you don't need to worry about the cost of the car or the cost of the house.

You can't short-circuit the wealth-building process. Sometimes you can turbocharge your income so quickly that you can go there, but you can make it fast, but you can't short-circuit the wealth-building process. You have to get enough money growing for you in order for you to genuinely have compound interest and other people working for you and your investments working for you for your wealth-building to grow.

So recognize that this matters, this subject of how to buy a car, this really does matter, but it matters at a certain time in your life. You want to focus on figuring out where you are in the process of wealth-building. And if you're at the beginning stage of wealth-building, again, either because you're young, because you've suffered a setback, et cetera, then the car decision is a very important thing to get right, very important.

Then later, at a later stage, the car will cease to be a factor at all in your budget. So identify where you are. If you're in the getting started stage, then think seriously, can I avoid the car? Think seriously, can I avoid it completely? And then if I have to get a car, we'll talk about how much to spend on a car, et cetera, but if I have to get a car, how can I minimize the expense and minimize the hassle of this so that I can maximize my lifestyle?

The strange thing about it is this. When you're very, very broke or very, very poor, then probably the best solution is not to have a car. Then you reach this middle stage of wealth where undoubtedly the car is probably the best solution. Then you reach a point in wealth in which probably the best solution is not to have a car again.

I again, I get so annoyed by the time and the hassle associated with buying cars. It's not the money, it's the hassle. And so you reach a time where I love renting cars. I love it. You fly in. I have the gold status with a bunch of the rental car agencies.

And so if you have a good gold status or platinum status with a rental car agency, you fly in, in the airport, you walk over to the rental car place. Usually it's in the airport or whatever. You're right there. You walk up to your car. The keys are in it.

They tell you what space it is. You get in, you start the car, you drive out. You drive out, you know the car is in good working condition. You know it's clean, it's fresh, it's ready to go. You drive out, you use it, right? Go use it for a week, a month, whatever you want to do.

Then when you're done with the car, you drive back to the airport, you pull in the spot, you leave the keys in it and you go get on your airplane. Everything gets billed to your credit card. It's the best thing in the world. It is so, so nice now.

Again, the car rental experience, especially in the United States, it happens internationally, but especially in the United States, the car rental experience, if you have a premier level of membership in one of the agencies, is just wonderful. That's the best way to use a car, in my opinion. You get all of the good, someone else takes care of all the bad.

That's not the most cost efficient way to handle a vehicle on the ongoing basis, but that's the best way to have a car. It's just not own it at all. You go through this curve when you're beginning and broke. The car expenses are a big deal. You want to minimize those and you especially want to minimize those by eliminating them if you can.

Then you get to the point where the car ownership is no big deal. Even though you could drive to work, or sorry, ride your bicycle to work, you do that most days, but you keep an extra car just for the rainy days. Or you have a car just because you want a car and it allows you to go to the mountains on the weekend.

Then you reach a point in time where you're really rich and yeah, you'll probably still keep some cars around, but it becomes a hassle to keep a car in every house and who's going to take it and who's going to keep the stuff done and you wind up just renting the car because it's a simpler, easier thing for you to do.

Consider carefully your decision to buy a car because the decision to buy a car will make a big difference for you on a long-term basis. Adorama, the creator's trusted source for photo, video, and audio gear is bringing you the best prices, fast shipping, easy returns, and special financing this holiday season.

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