Net Worth
01-26-2017, 11:44 AM
#16
Rocky Mountain High
Rennlist Member
Rennlist Member
I think you need to consider net worth, income, cash flow and overall investment and retirement goals. Generally speaking, I don't think net worth impacts your ability to buy a Porsche as much as income or cash flow requirements. I do think it should factor into the decision though. If you have a high income but nothing invested or saved for the future, then perhaps saving and investing should take priority over a Porsche purchase. I think you also need to consider where you are in life and in your career. My wife and I had our kids young, because we wanted them out of the house before we turned 50. We achieved that goal. I'm in a position where I've paid for college for my kids, and they are gainfully employed. I've saved and invested over the years. I consider myself to be in a good position to buy a Porsche. Even so, I didn't buy a new Turbo S. Could I afford it? Yes. Was I more comfortable saving ~$70K and buying a used Turbo S? Yes!
Everyone has a different tolerance for risk and for debt. What seems like an easy decision for one person may be very difficult for another.
Everyone has a different tolerance for risk and for debt. What seems like an easy decision for one person may be very difficult for another.
01-26-2017, 11:49 AM
#17
Registered User
If you can afford to pay cash, then you are wealthy enough...
Its a depreciating asset.
The real question is, can you take a $100k hit in value and not blink. If so, buy one.
I can think of a lot of other cars to buy for that price that are appreciating.
Its a depreciating asset.
The real question is, can you take a $100k hit in value and not blink. If so, buy one.
I can think of a lot of other cars to buy for that price that are appreciating.
01-26-2017, 01:36 PM
#18
Drifting
That's the problem with rules of thumb. There are too many exceptions.
I know you didn't mean to make an absolute statement there, but to be fair, <5% of total net worth is awfully restrictive for most situations. A person with million dollar net worth earning $500,000 a year would only allow himself and his wife to drive used Hondas.
Similarly, a million dollar home in New York is a totally different animal than a million dollar home in flyover country. There are parts of this country where there are literally NO homes worth over a million dollars.
There is the old 20/4/10 rule -- Down payment of at least 20%, finance no more than 4 years and make sure cumulative monthly car expenses do not exceed 10% of your income.
My garage exceeds the <5% net worth rule by a large margin. But, on the other hand, I could pay off my house and cars tomorrow if I had to. Money is cheap nowadays, it doesn't make sense to not live with some debt.
I know you didn't mean to make an absolute statement there, but to be fair, <5% of total net worth is awfully restrictive for most situations. A person with million dollar net worth earning $500,000 a year would only allow himself and his wife to drive used Hondas.
Similarly, a million dollar home in New York is a totally different animal than a million dollar home in flyover country. There are parts of this country where there are literally NO homes worth over a million dollars.
There is the old 20/4/10 rule -- Down payment of at least 20%, finance no more than 4 years and make sure cumulative monthly car expenses do not exceed 10% of your income.
My garage exceeds the <5% net worth rule by a large margin. But, on the other hand, I could pay off my house and cars tomorrow if I had to. Money is cheap nowadays, it doesn't make sense to not live with some debt.
01-26-2017, 03:06 PM
#19
Rennlist Member
01-26-2017, 03:33 PM
#20
Burning Brakes
Ya'll are making this all too complex.
Bottom line is, can you afford this car? More specifically, do you have the disposable income/$$$ to afford it (payment, pay cash, insurance, gas, maintenance, mods, etc.)? A toy, whether it's a exotic car, airplane, RV, boat, and the list goes on, cannot ever be justified and rarely will it be a positive return investment.
My personal rule of thumb has always been, never spend money that we don't have. I've lived by a few set of rules and so far, they've worked for me.:
When it's time for me to buy my dream TT/TTS, I plan on paying cash; I'm in the process of saving towards this goal. For others, cheap money may work as the rates are still very low. I know that I'll take a big hit in depreciation on this $200K toy but to me, it'll be well worth it. My wife and I are fairly frugal but sometimes, you have to enjoy life while we have the health to do so. As we all know, the good Lord won't let us bring cash into his house.
It's good to have first world problems. lol
Bottom line is, can you afford this car? More specifically, do you have the disposable income/$$$ to afford it (payment, pay cash, insurance, gas, maintenance, mods, etc.)? A toy, whether it's a exotic car, airplane, RV, boat, and the list goes on, cannot ever be justified and rarely will it be a positive return investment.My personal rule of thumb has always been, never spend money that we don't have. I've lived by a few set of rules and so far, they've worked for me.:
When it's time for me to buy my dream TT/TTS, I plan on paying cash; I'm in the process of saving towards this goal. For others, cheap money may work as the rates are still very low. I know that I'll take a big hit in depreciation on this $200K toy but to me, it'll be well worth it. My wife and I are fairly frugal but sometimes, you have to enjoy life while we have the health to do so. As we all know, the good Lord won't let us bring cash into his house. It's good to have first world problems. lol
01-26-2017, 03:35 PM
#21
Like I said, to each his own. Using your number, if you earn $500,000 a year, you take home approximately 300K (depending on which state you live in). That's not a whole lot of money to be spread between living expenses, traveling, holidays and etc. In most European and Asian countries, people who make 300K a year probably drive a Mercedes C class.
01-26-2017, 04:04 PM
#22
Rennlist Member
Two other things:
1. Can you scale your earnings easily? Even if the answer is no, putting the cost of the car in terms like how much extra time you might spend working to offset it could offer you another way to size up the opportunity cost of the car in your discussions with your wife. Talking in terms of sacrificing time to get things can bring up a lot that is usually good to communicate anyway.
2. Being completely honest with yourself, how important of a priority is a nice car to you relative to alternative luxury purchases or investment returns? What are your priorities and how do they rank?
What I mean there is most of my neighbors and most sensible people like to have a number of toys and luxuries, and all of them compete for resources. High end up to exotic cars, boats of any type, ATVs/snowmobiles/jet skis/dirt bikes, RVs, exotic or frequent vacations, bringing many people along on those vacations, owning vacation and second homes, the impact of reducing work to gain or restore leisure time, major home upgrades/renovations, high end watches/shoes/purses/clothing, etc.... how they all rank varies hugely person to person.
I really like to own a nice car but don't care about a whole lot else, so I'm happiest allocating a lot of resources to a nice car and being more modest in other areas to balance it out. I've always been that way. And obviously my wife is different so we figure that in.
1. Can you scale your earnings easily? Even if the answer is no, putting the cost of the car in terms like how much extra time you might spend working to offset it could offer you another way to size up the opportunity cost of the car in your discussions with your wife. Talking in terms of sacrificing time to get things can bring up a lot that is usually good to communicate anyway.
2. Being completely honest with yourself, how important of a priority is a nice car to you relative to alternative luxury purchases or investment returns? What are your priorities and how do they rank?
What I mean there is most of my neighbors and most sensible people like to have a number of toys and luxuries, and all of them compete for resources. High end up to exotic cars, boats of any type, ATVs/snowmobiles/jet skis/dirt bikes, RVs, exotic or frequent vacations, bringing many people along on those vacations, owning vacation and second homes, the impact of reducing work to gain or restore leisure time, major home upgrades/renovations, high end watches/shoes/purses/clothing, etc.... how they all rank varies hugely person to person.
I really like to own a nice car but don't care about a whole lot else, so I'm happiest allocating a lot of resources to a nice car and being more modest in other areas to balance it out. I've always been that way. And obviously my wife is different so we figure that in.
01-26-2017, 05:06 PM
#24
Advanced
Thread Starter
I think we got a little off track. Affording it is not really the question. I'm sure many of us have or could just write a check. Personally I can't see a 200k purchase with a million dollar net worth. I just couldn't justify that purchase without knowing how the next 20 years would play out.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
01-26-2017, 05:54 PM
#25
Burning Brakes
I think we got a little off track. Affording it is not really the question. I'm sure many of us have or could just write a check. Personally I can't see a 200k purchase with a million dollar net worth. I just couldn't justify that purchase without knowing how the next 20 years would play out.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
01-26-2017, 08:26 PM
#26
I think we got a little off track. Affording it is not really the question. I'm sure many of us have or could just write a check. Personally I can't see a 200k purchase with a million dollar net worth. I just couldn't justify that purchase without knowing how the next 20 years would play out.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
Does your wife buy tons of jewels and handbags and expensive clothes? Do you go on frequent, expensive trips? Do you own a vacation home? How many kids do you have? Are you divorced? Is your income stable?
The guy with 3 million net worth, 4 kids, previously divorced living in LA is a lot different than the guy with 1 million, one kid, minimal discretionary spending and a stable high income living in the sticks.
It's so subjective, that it's impossible to answer. But if forced -- I'd say ~$2million net worth, high income, low debt load, decent liquidity, not too many kids and one wife.
01-27-2017, 12:38 AM
#27
Burning Brakes
Like I said, to each his own. Using your number, if you earn $500,000 a year, you take home approximately 300K (depending on which state you live in). That's not a whole lot of money to be spread between living expenses, traveling, holidays and etc. In most European and Asian countries, people who make 300K a year probably drive a Mercedes C class.
01-27-2017, 01:11 AM
#28
Originally Posted by Karl911
THERE IS NO LUGGAGE RACK ON HEARST
01-27-2017, 03:00 AM
#29
Drifting
01-27-2017, 03:03 AM
#30
Drifting
I think we got a little off track. Affording it is not really the question. I'm sure many of us have or could just write a check. Personally I can't see a 200k purchase with a million dollar net worth. I just couldn't justify that purchase without knowing how the next 20 years would play out.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
Now once you get into the 3-4 range it would only be 5% of your net worth while you are still earning. At that point, I think it is justifiable purchase.
Money on average doubles every 8.5 years. That's almost another million in 15 years but you can't take it with you.
No more than 5% of net worth. But we live in America, so most people don't follow this rule.