A car is a depreciating asset that loses value the moment you take it out of the dealer's lot. While some people view a car as nothing more than a method of transportation, others want to spend some extra money on a fun vehicle.
A 27-year-old is considering making this type of purchase and posted in the HENRY Finance Reddit community. The guy has a $500,000 net worth and maxes out his 401(k) and Roth accounts. He's got $2,400 in monthly expenses, which include rent, and he makes $350,000 per year. That salary does not include his bonus.
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"Feel free to talk me out of this," the 27-year-old suggested while having some reservations about the idea.
Fellow Redditors shared their thoughts in the comments.
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A Fun Car Can Give You More Motivation
One commenter has bought fun, expensive cars and encouraged the Redditor to do the same. The commenter stated that buying these types of cars serves as extra motivation. Riding an exotic vehicle can put you in a different mindset. If you want to collect these types of cars, you have to earn more money and be smarter about how you spend the rest of your money.
Buying the car can also make you feel like you are on top of the world. Having that feeling as a 27-year-old and knowing that you have your entire life ahead of you is a great feeling. You will realize you can accomplish a lot in your life and that there is still much for you to do.
Another commenter said they made that type of purchase in their mid-20s and felt empowered by it. However, this same individual is in their 40s and doesn't want a luxury car anymore, despite being out of the "High Earner, Not Rich Yet" category.
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It's Easier To Buy A Sports Car When You Don't Have Kids
The 27-year-old doesn't have many expenses right now. Some people questioned how he's only spending $2,400 per month, including rent. That means he's keeping most of his money, and since he earns a lot, it's much easier to buy an exotic car.
The Redditor could buy this car with cash instead of taking out a loan. That way, interest and regular monthly payments don't eat away at his finances. It looks like he can still max out his retirement accounts and make regular investments in his brokerage account.
However, it gets much harder to buy one of these cars as a parent. You will have other responsibilities and expenses to cover. The Redditor won't always be making $350,000 per year and spending $2,400 per month. The expenses will go up a lot in the future, so if the luxury car is a bucket list item, going for it now may make sense.
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You Can Afford Anything, But Not Everything
One Redditor proposed the "afford anything" mentality that Paula Pant recommends. The idea is that you can afford anything, but not everything. If the 27-year-old is all set on a luxury car and doesn't have any other discretionary spending categories, it makes sense to get the car. However, if the Redditor wants to travel more often, he may want to wait before buying a nice car.
It's still good to gauge how much you can afford. One commenter suggested purchasing an $80,000 vehicle instead of a $120,000 vehicle. Cutting down the maximum purchase price can still result in a nice car while allowing the Redditor to save more money.
The luxury car is doable if the 27-year-old maintains low expenses. He may not have this type of opportunity when he starts his family. Buying the car and aggressively saving the rest of his annual salary can still set him up for long-term wealth.
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