A rule of thumb I was taught over the years was if you planned to buy a car - especially a luxury car - you should set aside anywhere between 1 1/5 to three times the value of the automobile. For example, if a car is worth $50 000, you should have $75 000 to $150 000 dollars in the bank account or be earning a salary worth more than the car you're purchasing.
Of course, these "rules of thumbs" are arbitrary. Nonetheless, these notions seem to be gone these days. Granted, once upon a time leasing and loose credit were not popular as cash was king.
These days you have people earning $50 000 a year leasing a $60 000 vehicle. Between you and me, this is fiscally illogical. But with credit set up as it is, the temptation is all too great to feel entitled to that BMW or Audi.
Few people "save" up to buy anything anymore. It's a lost noble art and value depending on discipline that's killing our ability to make sound fiscal decisions.
Spend, spend, spend.
Recall, spendthrifts had a place in Dante's Inferno.
Part of the problem is that saving is not rewarded. That then creates a culture where spending (and spending more than you earn) becomes the norm. We live in sick society ruled by those who promote consumer spending as the cure-all for a weak economy, when the real way to prosperity is to save, and spend less than you produce.
ReplyDeleteBut we have central banks that create inflation and also keep interest rates artificially low. This rewards spending now (before your dollars lose their purchasing power) and buying on credit, and punishes savers, who get little or no return on their money if they simply sock in away in the bank.
Interest on savings accounts is less than the rate of inflation. Until we as a society return to sound money and abolish the evil of central banks, this trend will not be reversed, not matter how morally upright saving as opposed to profligate spending may be.
I would add people need to stop off-loading responsibilities onto the government. That costs money and takes money out of your pocket. That "free" post-secondary education is now the new cause is not surprising. All this makes you subservient to the state.
ReplyDeleteYou just didn't see that many high-end cars on the road once upon a time. When you did, you could make a reasonable connection that the person was in fact wealthy.
Today, there are many of them on the road so as to cloud whether these people are living on credit or actually can afford it. In fact, the perception of what you can afford has chenged since entitlement thinking seems to have taken over. "Yeah, it's a little expensive but I deserve it!"
I agree with everything you've said, T.C. On luxury carss, my guess is that the majority of their owners can't really afford them, or are not rich. A fancy car is no longer an indication of how much money someone really has. Rich people (of the ordinary sort, not billionaires) don't tend to even bother with expensive cars. they're more likely to be driving a Ford or a Toyota than a BMW or Audi.
DeleteHell, though, ALL brand new cars are too expensive. And that too can be blamed on government rules and regulations. The best bet is to buy used, unless you can really justify a new vehicle purchase.
Cars are a necessary evil. They are indeed insanely expensive and of course part of that is because of regulations. But hey, without them we die, right?
ReplyDeleteBrand cars - to each his own I guess. And I'm a big propopent of buying demos or used.
A client of mine earns probably well above $300k per year and he drives a Honda.