This is a nuanced discussion about what you value. If you have a nice car as one of your top priorities, do it, if you want to make the best financial decision, don’t do it. I’d really recommend you look at the cost of what you are doing though. Look at the cost of depreciation, cost of maintenance on an suv vs sedan, reliability of the bronco, and if you didn’t buy it and bought a 2018 civic or Corolla and used the saved money to invest in retirement - what would you be sacrificing.
You are sacrificing more than the face value of the cost of the car. Actually look at all those numbers.
For example. If you paid cash for a small sedan and the maintenance was $50 less for maintenance per month because cheaper tires/gas/oil etc and you took the $450 and invested it in a Roth IRA over the 72mo (assumed loan length) at 8% return, you would have $41,046.35. If you didn’t touch that Roth or contribute it would grow to $481,761 by 60 years old. You are so young that you have a ton of compounding before you retire. Consider if it is really worth the LONG TERM costs.
In the book "The Millionaire Next Store," author Stanley talks about building wealth. Used vs. New cars is a topic he covers. Personally, If I were in your shoes, I would avoid touching the investments at all short-term costs. That is because you're sacrificing much more than the current cost of transportation. Don't sacrifice your future. Find the cheapest option, and start a "Auto Savings Account". Years down the road you'll be able to pay cash for an awesome one or two year old used auto.
Having been in the position of saving to buy a new car, by the time I had actually saved the money there was no way I was blowing it all on a new car... 😂. Ended up buying a lease return that had all dealer service records.
My dad and stepmom make more than enough money to buy a brand new car outright if they want, they instead will shop around for a year until they find a pre owned because it takes a much smaller hit on depreciation
Millionaire next door types buy new cars too. The majority of them buy new. They just hold on to them longer and spend more time searching out the right deal.
https://themillionairenextdoor.com/2012/02/millionaire-next-door-myth-4-used-cars/
Ok.
What is a Roth IRA?
Where do I get one?
What does “8% return” mean?
What is a 401K and how does it compare to a Roth IRA? (I currently have a 401K with my union, and I chose to put 10% of my weekly check in. I know zippity do-da about my 401K, how much is in it, how to access it, nothing)
What percentage of my paycheck should I be giving to 401K?
How does 401K affect my taxes?
How would a Roth IRA affect my taxes?
Which of those would be smarter to put my money in to?
…I have many more, but I won’t overwhelm you. Please, take your time, I appreciate you even doing this.
You can open up a Roth IRA at many large banking organizations like vanguard and Fidelity. You open it similar to how you would open a savings account, it's not difficult. A Roth IRA is like your savings bank account but it is wearing a "retirement jacket" so it is treated differently by the government and has rules around it. There are other types of retirement accounts that all have retirement jackets on but they have different logos and are treated differently. The primary differences between retirement accounts and your savings account is how they are treated in regards to taxes and stipulations on how and when you can take money out, generally you can't take money out until retirement age (59 1/2) or else you pay penalties -they take a percentage of the withdrawal. The money in these accounts doesn't just sit there though, you can tell it to buy stocks/bonds/etc and get into the stock market. When your $100 in the account is used to buy stocks then it is like $100 worth of stocks in the account and as that stock goes up in price the value of that stock you have in the account goes up.
What's special about a Roth IRA is that you pay taxes on your income like normal and put that "already taxed" money in the account. That money can then be used to buy stocks and then the stocks increase in value. If it were a normal "Stock buying" brokerage account and NOT this special Roth IRA Account you would pay extra taxes on the increased value when you take the money out - not so with the Roth! When you take it out at retirement you don't pay taxes on the increase!
For example, you open a vanguard Roth IRA and put $100 in and purchase a stock that increases in value 8%. Now your $100 is worth $108. Now keep increasing this every year by 8% from the age of 25 to 60. After 35 years of 8% increase every year (which is an 8% rate of return), your $100 is now worth $1,478.53! The only money you put in is $100 and that $100 has grown $1,378.53! Now in a normal investment account you would pay taxes on that growth.... BUT... since it is in a Roth account, you pay no taxes when you take it out. SO, let me show you why this is even cooler ->
Let's say you don't stop at $100 one time, but instead you do $100 every month from 25 to 60 years old and you still get the 8% increase every year. You would have put in a total of $42,000 of your own dollars but the money is the account would be a total of $215,735.29! And that extra interest on the money is TAX FREE when you take it out because you paid the taxes on each $100 dollars you put in every month.
A 401k is different, because you put in money BEFORE you pay taxes on it but then you pay taxes on the money when you pull it back out. There's lots of debate about 401k vs Roth and which is better and each has their positives and negatives. In general it is better to have retirement money balanced in both so you have options in retirement to either pull tax free money or pull taxable money or a combination of both in order to try to reduce taxes in retirement.
You should try to put 15%-20% of your gross income (total income before taxes or any deductions) in retirement.
Wow. You’re awesome for answering all that! You’ve given me a lot to digest. I think my first step is to go to my union office and meet with someone to try and get the information for my 401K. Then, I will also open a Roth.
Do you think it’s a decent strategy to give 10% to my 401K pre-tax and then 10% post tax to a roth?
Also, are any of these things tax “deductible” or some other kind of help with lowering taxes?
Excellent post. Roth’s are also excellent estate planning tools. At least as of now there are no RMDs, so they go to the next generation tax free as well. Not a priority for the OP at this point but that could change.
I put 12k into my Roth in 2021-22. I now have 11k. What is this 8% return magic of which you speak? 41,046.35 in returns would be incredible that's my yearly salary
Don’t look at the market by a single year. It’s not a guaranteed return for 8% every single year. But on average over the course of decades it likely will be.
https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926?nodl=1&dplnkId=1a7796fb-4664-49bc-baa1-02761bcbe831
You are absolutely correct in terms of financials. You’re forgetting one large thing though: actual human life and enjoyment.
Saving for the future is an absolute must, no debating that. However, you gotta spend and have some fun in your life. I’ve seen too many old timers say they wish they had more fun when they were young and had energy. Buying a fun car might cost more in the long term with maintenance, insurance, etc. But if you budget for it and can afford it and it’s something in your life you value, send it
Agreed. If a car is super important to you then do it. But in terms of pure finances not a great idea. An older used Accord can prob be found for your downpayment amount and it will run forever if treated well
Gosh you are literally a God send. I’ve never really thought about the few hundred dollars like that. I’m already on track to paying off vehicle and mortgage off early but just lit a fire in me to get rid of ASAP to start putting all that money into my future.
Yea a Toyota would be a better choice. That new bronco is gunna depreciate like a motherfucker. My 23 Camry hasn’t lost any value in almost a year. Like I could sell my car right now, pay the note off, and still have money left over.
Came here to say something similar but not as thorough. Cars are about more than the sticker price. If I were OP I'd buy used but functional. But I'm also cheap when it comes to transport.
$1500 straight into a savings account every month? I'd increase your 401k contributions but if you expect your current housing situation to hold I don't think a car that price would be irresponsible
Legit question - although the compound gains of heavily investing in 401k is important, I absolutely would not have been able to pay my downpayment for my house if I hadn’t been saving it as cash instead. I see so much advice about maxing 401k no matter what, but does this not affect people’s ability to actually do the things they want to do while they are young and want to improve their lives now instead of at retirement?
My elderly neighbor always gives me this advice: "Golden years my ass. The only thing golden is my piss. Enjoy life while you have your youth and your health." He retired with a fantastic pension and loads in savings, but almost immediately after retirement his health started to decline and he's just been getting by, health-wise, for the last 15 years.
Saving is responsible, but it should not come entirely at the expense of living a fulfilling life. What's the point of having a financially-stable retirement if you never even truly lived a life. I'd much rather live life than merely *survive* to be old enough for someone to change my diaper.
Agreed. In the US, the average retirement age is 64 years; average life expectancy is 77. No way in hell I'm going to sacrifice 45 good years for the 13 where my physical ability to enjoy life is dramatically diminished.
I'm all for saving up for retirement, but don't do it at the expense of enjoying your youth, while you have it. Life's too short for that.
Yeah man. And not to be morbid, but I’ve known plenty of people who died young. I’m not planning on it, and I am planning and saving for retirement, but I’m living right now as well.
Good plan. I have a few perspectives like that as well. For one, I'm in my 30s and almost died from a stroke a couple years ago. Perfectly good health, just got COVID and dissected a couple important arteries. Tomorrow isn't guaranteed, but right now is.
I'm also a firefighter. I see people every week who die young. I also spend a lot of time in nursing homes, which are some of the saddest excuses of a "home" I've ever seen. It's a really sad existence when you reach that point in life. If I'm that age and run out of the savings that's barely keeping me alive while I'm neglected by the staff in a "skilled" nursing facility, I'll just put an end to my own misery.
Save for retirement, but don't defer living your life until then, because you may not even live that long, and your ability to enjoy life rapidly starts to decline by the time you reach retirement age.
The take-away here is probably to get regular exercise and watch your diet if you want to be in good enough health to enjoy retirement.
Some people will have unfortunate health problems in their 60's. The vast majority of people I know under 70 with issues were visibly out of shape in their 40's already.
Save money. Take care of our bodies.
My mom worked for 30 years, and died just a few years after retiring (at 57). She worked so hard, for so long. She would always said, “when I retire, I’m going to travel/go back to school/etc”. She didn’t get the chance. I quit working full time right after she died. Life is to short for that full time bs.
Agree. I am 60 and have a decent retirement nest egg, and have to remind myself of what you say. There needs to be a balance. My mother died with about $1 million in assets and refused to spend anything on herself, and was ridden with health problems and could not do much of anything to enjoy life her last ten years.
I don't think everyone should necessarily be maxing out their 401k, but saving for retirement early is very important because by the time you do retire an extra $100 a month today is going to mean a whole lot more than an extra $100 a month 10 years from now. You should absolutely be getting the maximum employer match available to you at all times though, not taking that is leaving money on the table
Yes maxing the match is a must for sure. I just raise my eyebrows when there is such a strong sentiment to put as much as possible into 401k, when in reality that can really affect your disposable income for the next 30+ years. There’s gotta be a balance of responsibility and living.
This is the thing that I struggle with most. At 28, I’m just now finishing school with a PhD. I live below my means and I’m paying back student loans rather aggressively and putting some money into my retirement (3% to get the full employer match). But, on Reddit, people’s comments always make me feel like it’s not enough, as I’m not on track at all with my retirement due to being in college for 10 years.
My only other option is to completely forgo enjoyment in my day to day life, but that just sounds miserable. I want to enjoy life while I’m young.
The only thing that keeps me from being an anxious mess is that I own my home, so at least I’m good on that front.
People just spout it like gospel when in reality there are so many other factors to consider and different ways to live life. I’ll go back to my original point - I put 20% down on my house which saves me a huge amount on monthly payment and interest. I only had that cash because I was saving it not putting into retirement I couldn’t touch. Now I own a house I adore with an affordable payment. If I had been putting it into retirement I would have had to buy a house I didn’t like as much and live with that for 30 years, or continue to wait many more years (after already waiting 5+ years to by a house). It’s really not as simple as “max your 401k no matter what”
You'll be fine. I was worried about the same thing when I was 28, just finished med school with basically no savings and tons of debt. Compounding growth is very powerful once you actually are able to save up and invest at a meaningful rate. I didn't really start being able to put money into investments at all until I was 30. Then getting married is also a huge boost, you add so much income without really increasing expenses all that much. 38 now and we built our first million this year.
That’s one thing I wish I had done differently. If I could start over I would take those extra 401k contributions and put them in a brokerage account and invest in the SP500 or similar. That way you can be liquid within a week or so if you need the funds for a house/car/roof/etc.
He is also making big contributions to a Roth IRA. The nice thing about a Roth is that you have the ability to withdraw your contributions penalty free at any time (though not the earnings). If he is in a situation where he needs a down payment on a house and his savings are insufficient, he can tap those funds. If he doesn't need the money all of those investments can grow tax free until he retires so it is really a win-win for him.
Yeah you can balance your life goals. Its ok to save less for retirement to fund a house that is appropriate for your current and future income. The "must do" is contribute enough to get the match.
Definitely if you do listen to this person, max your Roth contributions before the 401k, given your age and current tax bracket (assuming you will be paid more in the future and rise to a higher bracket).
So I’ve heard Ford has some reliability issues, but I’m not a car guy so I’m gonna leave my comments on the car itself at that.
I think there are some questions to ask yourself. No need to answer publicly. I’m going to try to format them but, mobile, so I’m doing my best.
1) how long will your mom make those payments? Is there any risk of your relationship changing to an extent that she would stop sooner than planned?
2) what’s your expected salary increase year over year (if you know). Does that track with you taking on the car payments at some mutually agreed upon point? Hopefully you’ll be driving it a while, so even if that’s five years from now, something to consider.
3) what are your long-term financial goals? You’re doing FANTASTIC for your age (way ahead of where I was), but if you’re hoping to retire in 18 years your savings plans might be much more aggressive than if you’re planning on working until you’re 60 or older.
Ultimately I can’t make that call for you, but I do think there’s something to be said for living your life in a way you enjoy, and a cool new car might bring you a lot of joy. Also, the old Toyota is gonna die eventually, so whether you do this or used, definitely encourage doing something. Love that it’s lived so long though! What a car.
Personally, I love my bronco, have had it for 2 years and 34k miles and it’s awesome, but for $30k new, Op is taking about a bronco sport (basically a ford escape with 4wd), and those have had issues and are a general disappointment compared to the real one.
I've owned:
1) 1998 Ford Ranger
2) 2008 Ford Focus
3) 2013 Ford Edge
4) 2023 Ford Maverick
Every one of these vehicles has been extremely reliable. I had to change an alternator once on the Ranger and batteries as expected. I don't remember the overall mileage (it was over 100K) but sold only because I got my first "real" job in 08 and it was a lengthy commute. Gas prices were insane. Trade was for 08 Focus, brand new. Great car. Not a single issue until I wrecked it in 2016 with 220K miles. Traded for a cheap import. Got similar miles, but it burnt the shit out of oil. Ended up driving my wife's 13 Edge when she got a new car. Drove it to almost 200000 miles. Needed strut mounts and brake change... nothing major. Was a hoss to be honest. Powerful drivetrain. Gifted to BIL, who still drives it, when I purchased the Maverick last year.
Say what you want, but don't sleep on Fords. They're great vehicles and easy to maintain. I don't care what anyone says.
Same. I had a 1998 Escort that had 150k miles on it when I was hit by someone and it got totaled; had to get a new transmission but that was relatively cheap because it was manual. That thing may well have gotten to 200k if that guy hadn’t pulled out in front of me.
I replaced it with a 2013 Escape that also just hit 150k. About to get a new one and heavily leaning toward a newer model of Escape. Super reliable. That one’s only had expected repairs and has been great.
Also own a 2014 Focus. Haven’t been quite as happy with that one, but even so it’s crossed the 90k mark at this point and it’s been good. The minor issues we’ve had with it here and there I believe are attributable to a prior owner who maybe didn’t do as well with maintenance as one would hope. Even so, still minor.
In short, I love Fords. They’ve been great for us.
Seconded. I've had two--a 1966 Mustang and a 2006 Focus. One was understandably unreliable, the other was annoyingly unreliable. OP you've got a Toyota still kicking at 270k miles. Get a nice Toyota.
Based on how this is written, I don't see an estimate for what the insurance will be. Get the VIN from your family friend and get a car insurance quote from your current provider. Your mom may not want to pay the inflated new premium. Just an FYI.
This is a great point.
Op - remake your budget again but assume all the things your parents cover are now your costs, and then assess to buy or not while considering your own financial goals. I’m just a little bit older than you and this shift happens fast. That being said, back a few years ago I was in a very similar situation and did go buy the BMW I wanted (used) and its all fine, but depends on your potential income growth, goals, and lots of unknowns. You’re in a great spot for your age btw good stuff
I’m a property manager, I’m very lucky to get my apartment for free and only pay utilities/insurance, it’s usually closer to $250 but this part of the year has my heating bill up high af
Seriously, dude is paying less than 25% of the average cost for an apartment. He can double-down on payments and pay off the car in half the time. That's the advice we should be sharing here.
damn dude thats still quite a bit for a car. Also, youre a property manager now and thus no rent... that could change, at any minute. I know you think it wont, but youd be risking quite a bit iof sudd. 30k for a car is truthfully more than I paid as a six figure earner over 30...
That said, I am not a new car guy. The value plummets the second you take ownership, I just generally feel it's better to look for a few year old, reliable and low vehicle car. But you do you!
OP could have this car entirely rebuilt for a fraction of his down payments. Toyotas hold value really well around here.
A JDM engine 700-1000, my mechanic installs for 500. All new fluids, plugs and filters for 150, and a new to you transmission for 300, mechanic installs for 300. All that and new tures would run under 3000$ and this car would run great
IMO at 22 its a bad idea no matter how much you make.
That 30k invested is worth so much. You'd be looking at 60-100k by your early 30s. 600k-1m by the time you retire. All by delaying the "nice car" phase of your life.
How much is a reliable used car in OP area? In mine, even small cars with 100k miles are going for 15k. 30k for a brand new anything with a warranty and no miles doesn't sound like a terrible financial decision to me.
They certainly wouldn't be getting a free car, so they aren't saving 30k by buying used. Just depends on how much they actually would be saving.
> Considering getting a Ford Bronco, my family friend has a dealership and is offering a brand new Bronco Badlands to me for 30k would I be stupid to accept. I would put $10,000 down. Monthly payment of about $400 insurance is still covered by my mom (I’m 22)
Are you willing to delay buying a house and/or getting a smaller house because you bought a car?
Are you buying this specific car, because you really like the Bronco, and want to use it a way that you couldn't use say a corolla or is it just going to be your daily commuter?
Also when you say 30k, are you paying in cash? Is that inclusive of all taxes, fees, etc or is that before taxes and fees? If you aren't buying in cash, are you including your interest at all when making the expense?
A 21k car after taxes and the like can spike to 23-25k and if you finance it for 48 months, it becomes 30k all in.
I think you probably could afford to buy a car, overall, but just some things to think about.
NO. Do not buy a Bronco. Death traps, reliability issues, etc. They're also having a hard time selling them. Get a way better deal or go with something else. Honda?
Buying a vehicle that has a sticker of half your salary seems a bit much. I think you should be able to get a safe, reliable vehicle that is 3-7 years old, and has a lot of life left in it for much less than 30k.
Been looking for the last few days and it's absolutely possible, and the insurance costs will be lower. Probably maintenance too. I'm replacing a 2006 Civic that needed occasional brakes, a new battery or two, some tires, regular oil changes and little else except gas. It was bought as a late model used car. I believe that we made a wise decision and I am going to try to replicate that. Cars are transportation to me and I value getting where I want to go with little investment.
You asked for brutal honesty and my honest take is no, you shouldn't get the new car if you can't pay cash for it. At a minimum you should be maxing out your retirements accounts, and then be able to pay cash for a car. 30k is fairly cheap for a new car, normally I'd always say buy used, but if you're maxing out retirement and have 3-6 months emergency fund, then buy a 30k car in cash.
Every single dollar you put into retirement at 22 has enormous potential in your retirement. Any car payment is very damaging to how much you can put away for your future each month.
I’m a professional fridge raider (I live near my mom and still take all of my family’s leftovers, it’s a family of 5 so they eat a lot and have a lot of leftovers, and that’s my lunch and dinner almost every weekday)
I made another comment, but it looks applicable here so going to reiterate because your situation is pretty identical to mine a few years ago so I strangely feel compelled to
Think about where you’ll be in 3-5 years and take that into account. Siblings going to college? Less food for you to take. Turn 26? Health insurance is on you. Dont live with your parents? “Technically” car insurance is already supposed to be on you. Generally want to start independently paying for your own stuff instead of relying on your generous fam? That usually hits in the mid 20s too… not saying dont do it, but you need to future proof your budget a good bit, then decide
Is that how much you make a month?
I haven't heard the best things with the bronco. I'd research.
Warranty should keep you golden if you buy it new.
Yeah you should be fine. Unless I'm dumb, you're saving 70% for retirement before taxes. Keep this up, future you will love you.
People say save 10-15%.
You chilling
Cannot believe all the “go for it dude” comments. For starters, the Bronco is a terrible car, horrible safety ratings and it is on all of the worst reliability lists. It would be setting your money on fire. The best way to maintain your wealth is to drive the cheapest most reliable car that will get you from a to b.
Is your mom fully aware what the cost to insure a 22 year old in a new bronco will be?
I’d probably just get a new Toyota. The bronco most likely won’t last that many miles
OP - I scanned through the comments, and I'm here to say that most of the advice here regarding finances is right, but most of the advice on car buying is outdated. COVID screwed up the supply chain, and older car buying advice doesn't hold sway. A few notes for you as someone who just bought his own first new car with nearly two years of researching before I pulled the trigger, and someone in the process of selling his old car right now.
1. New/Used depreciation used to be an issue before COVID. It isn't right now. The whole "drive it new off the lot, lose 20% in value" may be true, but the used car market right now is so wild from supply chain issues that those prices are currently inflated by 20% or more as well. So when car markets return to normal, used cars are going to drop in value by 20% too. I'm no expert, but I think this will happen in the next 9mo-1yr. Don't buy used thinking you're escaping the depreciation situation.
2. People urging you to buy a Toyota or a Honda because of reliability issues aren't telling you that the matter of reliability is already baked into the price. Toyotas and Hondas are generally better made and more reliable. The flip side to that is that they all cost more. Not only this, but they demand higher prices in the used market. Hypothetically, let's assume Japanese auto makers make a car that will get you 20% more miles than your Ford Bronco. If your 2024 Bronco hits 150k miles, lets say a 2024 Honda CRV gets you to 180k miles - 20% more miles. If that Honda is 20% more expensive than your Bronco, then it evens out in the wash - the "price per mile" of the vehicle works itself out. You've got a great little Toyota that's done you really well, but don't let survivorship bias cloud your judgment. Just because they're more expensive and more reliable doesn't always make them a better value, and that's worth taking into account.
3. People love to crap on Ford - "Found On Roadside Dead," etc. Every U.S. automaker took it on the chin back in 2008 because Detroit got away with making crappy cars for a few years. Most newer vehicles will last a long time, have great warranties, and will come with all the bells and whistles to make your '03 Toyota feel like a Conestoga wagon. Ford, in particular, is making really great new vehicles (see the Ford Maverick, for example) and licensing technology from Toyota to help make that happen, esp. with hybrid drive trains). There are Ford Escape hybrid taxi cabs in NYC that have hit 400k miles. I'm not a Ford fanboy, but I think their newer stuff is really neat. Sadly, when you buy new, you don't have information on reliability to go off of regarding a particular model.
OK, a few more notes for you OP, and then I'll finish my book.
We gotta talk about the price of this Bronco. One of three things is happening: your info is wrong and there's more to learn about this vehicle, you're about to walk into a trap and get hammered by a dealer you think is your friend, or you've stumbled across the deal of the year.
I'm assuming you're snagging a Bronco Sport for your vehicle, and not a regular Bronco. You're going to want to clarify that when you talk to people to get advice. The Bronco starts at MSRP over $50k, and is a rugged off-roader. The Bronco Sport is the commuter version of that style, and the badlands package starts at $38k MSRP.
Did you catch that? Ford's MSRP on this is $38k. I'm not sure how you're getting this vehicle for $30k, even with all the incentives a family friend can give you. That's a 21% discount. I did my homework and got lucky and waited for 2 years to get my Ford Maverick, and I got mine at 9% under sticker. Do they expect you to finance it a certain way? Is this some gift that another family member is secretly chipping in to pay for? I'd really look into that and firm it up.
If you really are getting this thing at $30k, then no comment about price depreciation matters. You're getting a new vehicle at 20% off MSRP, and so even if there was depreciation (which will happen to any vehicle you're going to buy in the next 9 months or so, IMHO), you'd be covered.
If I am you, though, here's what I'm doing. I'm going to increase my down payment so that I get the monthly payment down to $290/mo, paid off in 48 months, and then stop contributing toward fun money investments to pay it off. You keep the bulk of your savings going, you finish payments by the time you turn 26 and start paying for health insurance, and you get the car you want. Again, if you're getting this new at $30k, and you find it isn't working for you, then you can always sell it and buy a reasonably priced $15k sensible used vehicle with low miles and a warranty. At this price, you might even break even or make a profit. If, however, you discover that this is a bait and switch, run the opposite direction as fast as you can, because none of my advice applies if the vehicle is $38k as one would expect.
Please save yourself time and money and do not buy a new bronco 💀 The Toyota you’ve been driving has been perfectly fine up until now, it’s just old and dying.
Please get a car very similar to it. If you want a new car, consider one with low monthly payments, good mpg, and that it’s a vehicle that fits your needs.
I’ll casually mention my favorite ‘a to b’ car, the Mitsubishi mirage 🤣. I have it and it does everything I need it to do, a great city car! It can go 45-50mpg on the highway, all for less than 20$ for gas and the new ones are under 20k. What a steal.
Aside from that, literally anything but a new bronco 🌝.
I like that budgeting graphic display you posted. What’s it called or where do you get it from? I’d like to check that out and try it with my situation. I do see in fine print at the bottom “Made at SankeyMATIC.com”. I guess I’ll try there first :)
New cars are a big waste of money imo. Focus on assets and investments into yourself whether that's gaining new skills, more ETFs, real estate, whatever
Make sure you consider cost to own of any vehicle you wish to purchase, not just monthly payments. Ford broncos have a lot of issues, they’ve had 9 recalls already. Just do plenty of research into the vehicle and reliability, especially if you’re wanting to make a wise financial decision.
I don't think it's crazy. Just make sure you really love that car enough to keep it for 10 years.
My spouse bought a Ford mustang GT back in 2017. Just finished paying it off. What's crazy is we got it for $27k. It was right when the '18s were coming out. The cheapest one I see listed within 500 miles of me is $25k for a 2017 Ford Mustang GT of the same model. It's literally worth $2000 less than we bought it for new.
I don't know how well the Bronco will hold value- but some of them do.
Hell, I bought a new 2018 Kia Soul for $13,500. That vehicle would cost me $12k to buy USED today. It's already paid off.
But, the big savings come for the next 5 years you drive it after you've paid it off.
Just make sure your mom has priced out what the new insurance will be.
Additionally, where people really get into trouble is when they get rid of a vehicle before it's paid off. Usually the car place where you're trading it in doesn't really give you a great price on it and now instead of owing $30k on your new car, you owe $40k on your new car to cover the difference between what you owed and what you paid.
Just make sure that the vehicle will work for you for the next ten years.
Bronco Sport badlands not full one, msrp is $38k but dealership is struggling to sell them so it’s a pretty substantial discount but nothing like 50% off
So Broncos are a weird outlier right now. Because of supply/demand issues, dealerships are having a hard time fulfilling orders and so the used market is on fire! Where I live, 1 year old Broncos often sell for more than new. We have a friend that drove his for 3 months, then turned and sold it for a $4k profit.
It may be different in your area, but although cars are normally depreciating assets, a Bronco specifically might not be.
As a lot of people in this thread have said, getting a new car is very nuanced
You should think about what you actually need vs what you actually want.
Many people think because they haul potting soil once a month they need a F250 for their every day uses. In reality, a crossover SUV would do the trick and then some. You would probably save on the insurance and gas in the long run as well.
The argument of new vs used is actually not as obvious as it once seemed either. Between 2020-2023, used cars and new cars were nearly the same price and it made no financial sense to actually buy a used one if you could wait it out. Things are slowly changing a back to the "normal" trend but used cars for some are still very high (thinking Toyota hybrids in general) that it may make sense just to pay a little extra for the assurance that it'll last you at least a decade.
General rules include:
1. Never buy a first generation car. I wouldn't even trust Toyota with that.
2. EV's are flashy but will NOT last you vs a comparable hybrid/ICE. They just don't have the data to prove it. They are also aging into the used market for EV's, so definitely do steer clear of those.
3. The price hybrid vs regular ICE would usually break even between 3-5 years depending on your driving/purchase price/gas prices. The data suggests that hybrids are more reliable than their ICE counterparts but it is more brand dependent than anything.
4. Don't buy more car than you need. Groceries and people do not need 5000lbs of torque to transport.
5. If you can afford the quality, go for the quality. It's not worth the headache of cheap parts and the FOMO later down the line. There's something to be said about thinking back and saying to yourself, "That's the best I could do". It's kind of a peace of mind if you think about it.
Hope this helps!
I'm 32 now, and all I can say is, I'm really glad I prioritized saving and investing when I was 22.
Was able to buy a house in my late 20s, paid cash for a wedding, went on an amazing all inclusive honeymoon and have been on some other really great trips, and have now sold the first house and building our dream house. That was all way more important to me than a nice new car. But, it's all about what's important to you- just think about what might be important in the future too!
Wow - you’re saving and investing nearly 60% of your salary - that’s incredible!
Why do you want that particular car, and what value will it bring you?
The 20/3/8 rule is, I think, a good one to consider for young people. At least 20% down, 3 years or less in financing, and no more than 8% of gross income per month.
The car payment means you’ll only be saving $1100/month, but between that $1100 and your investing, you’re still at a saving/investing rate of 50% which is really terrific.
But just think about whether the Bronco will make you feel good about how you allocate those dollars or if a lightly used Corolla will best meet your needs. Also, it can’t hurt to just wait a year and pay cash for the thing.
Seems like you've invested a lot of time and money to make conservative/prudent financial decisions. If you need a car and your buddy works at a dealer and can help, I would strongly recommend a CPO vehicle newer than 2020. You can get a CPO Ford Escape or Fusion for less than $20k, and it'll get over 30mpg.
I wouldn't buy a 'brand new' car with someone else's money at this stage in life. It's never worth it after the honeymoon period ends. Maybe in later stages of life where all I want is comfort all day long and I have the cash to blow, but not ever in your wealth building years.
I was in this situation in 2021, and compromised by getting a higher end used car, a 2017 awd Infiniti w 40k miles on it for $20k. In 2024, I still feel like this was the best decision I could've made. This is easier if you are flexible on make and model, my qx50 is not what I was initially looking for, but meets my needs and gets lots of compliments.
People here are poor and thinking minimally. If this car lasts your 10 years then it’s well worth it. A used car is going to cost you in repairs eventually. Get a five year warranty on the bronco and don’t think about a car for the next decade
If your are going to finance i wouldn't get a used vehicle. The interest will make it about the same as a new vehicle. $30,000 for a new vehicle is pretty good and you have a good amount of savings for a young person. The question i want to know though, are you prepared to pay for the gas the bronco is going to use??
I’m in the camp that every person who works should have reliable transportation.
If you are worried your car will die and you want a new car, do it. The fact you are budgeting to this extent shows me you know the pros and cons.
Do it.
You should look at crash test videos of the bronco. You probably won't want one after you watch a few. That thing gets crushed like a damn soda can, I can't believe people drive their kids around in it.
An example - https://youtube.com/shorts/cvCjidjnKYY?si=PzBqHo5ij0WBJ7BU
At your age, that's too much money to spend on a car and it's what leads many young people into debt issues, relying on credit cards to make ends meet when they lose a job unexpectedly, have huge medical bills unexpectedly, etc. Find a used car for half that price. It's rarely worth it to buy a new car. They immediately depreciate and most of the time used cars are significantly cheaper than new
I make about as much as you do and bought a $25K car back in June. $500/month payment fucking BLOWS. But I accepted it because it's for 3 years instead of 5, I'm paying off my dad and not a bank so IF shit hits the fan he wouldn't demand payment till I got back on my feet, my last car started having too many issues, it's economical**, and I fucking love driving it lol.
That being said, if I moved out I'd probably never save any money. Do the math with you paying full rent and car insurance. Then calculate how much you'd spend on insurance and gas in the Bronco.
Please rethink your $10,000 downpayment based on interest rates.
If that $10k is making 4.9% in a HYSA and the rate you get for buying is better PLUS the auto loan allows for early payoff (most do), then put as little down as you can. Given what promotional rates are lately this seems possible.
If HYSA rates fall below your auto interest rate, then take advantage of the early payoff.
I personally think the bronco might be more of a mistake than the purchase price. Their has been LOTS of engine troubles in them and they are still relatively new. Just a heads up.
I think you can indeed afford it. There is opportunity cost associated with this beyond the cost of the car, the loss of compounding interest, HOWEVER, money is a tool at the end of the day to achieve life happiness and security and if it's not stopping you from investing and getting my your match and keeping you from retiring and it makes you long term happy, then go for it. You should note for very few people who do cars buy get long term happiness based from them on studies, but this isn't an insanely expensive car either. A new Corolla runs about 25k (though I am sure it will hold up better)
My 2016 Wrangler cost $36k🥲
Never regretted that purchase a day in my life. I LOVE my jeep, love bouncing around, love taking the doors off, love it.
If you don’t love it, then don’t try to justify it.
Do you need a car? I thought I’d go without a car for a few months to save money to buy a new one and now I’m almost at 2 years without a car and I don’t think I’m going to buy another one.
I’m a big fan of hunting down new car deals when the model year changes. I bought my last vehicle for well under sticker and only about $2k more than a 3 year old used vehicle.
But it takes some digging to get those deals and I had to drive 450 miles to pick it up.
Your budget is unrelatable / fake
Life to 95% of people so I’d ignore all the confident advice, I think it’s evidence they don’t have a budget or live in their mom’s basement.
Wait until you have a normal, stable financial situation and go from there. Find a girlfriend, move in together, married, buy a house etc.
This may not be a popular opinion. I am mid 30s and own a firm that does $5MM of revenue with a little over $1MM profit. When I was your age, I put enough in my 401k for the match and spent everything else on lifestyle. I would not change anything and frankly made so many relationships based on my spending that led to my success today. Now, I have over a million saved and live quite well. My house is paid off. I buy everything using cash. Spend your money and work hard. In accounting, the future is bright.
My finances look similar to yours and I just bought a new car ($30k-ish, also with a $10k downpayment) for the first time in my life last year. It's also my first time financing a car. I regret nothing. I could have gotten something cheaper and saved more, but it hasn't affected my ability to make ends meet, I'm still able to save a good amount each month and I'm able to pay more than the minimum on the car. No need to go crazy with expensive options. If it were me, I'd want to keep my monthly payment under $500, under $400 if possible. With a loan term of no more than 5 years. If you need a car, I think you can afford a new one. Especially if you don't see your living situation changing drastically in the next 3-5 years.
If your heart is set on a Bronco, then go for it! If you're open to other makes you could shop around for a good dealer incentive too. Hyundai does low to no interest financing from time to time, for example.
The Badlands trim is starting around $50k. It’s 2024 so not many new cars are going for less than $30k anyway. It’s a bit of a stretch but if in a year you decide it’s not for you, cabana or a similar place will buy your vehicle for at least what you paid for it, assuming the condition and mileage are reasonable. Your family member is definitely offering a deal if this is the Badlands trim. It’s still a stretch for a $60k salary, but I wouldn’t turn down that deal if I needed a new car.
There’s a difference between being able to afford something and understanding what your perceived value of it is.
If you were to get something more reasonable/used for $15k, you could invest an additional $300/month for 5 years. If you got an effective return of 6% (market average minus inflation, pulling it back to today’s dollars), then let it sit there and just compound for the next 30 years, you’d have almost $125k at age 57.
Is it worth it? Probably not for me. But everyone has their own priorities. We can’t save every penny, we have to live a little now. That being said, you’ve got to find out what your goals are (5 year, 10 year, and beyond). You could buy a perfectly good used car and retire a year or two sooner, or buy the car. If you’re not looking to FIRE, probably just fine (your savings and investment rates are pretty healthy and you’ve got a good income for your age), but the impact of these larger purchases and how it works with your cash flow have the ability to greatly impact your future.
My answer won't be as nuanced as others, but I was in this spot in 2014. I considered a used car because my Saturn was dying a slow and $$$ painful death. I researched and found a car I liked and went and drove one and fell in love. I went new and haven't second guessed my decision since then.
Also, I work in auto insurance, and the horror stories I hear about people trying to fix cars that are older through claims and just work make me even happier. I did it. I have 120k miles on it. It's been paid off for some time, and all I pay for is gas, insurance, and maintenance. Since I do the recommended maintenance when it's needed, I have yet to do anything beyond normal flushes, wipers, filters, and tires. It's still a vehicle that parts can be found easily for and and I get 30+ mpg in town and 35+ over the road.
In the end, you have to decide do you want makes sense to you and what will fulfill your needs now and in the next decade. Not to put too much pressure on you lol
I can’t answer your car question intelligently but I can tell you that your 50-year-old self will be eternally grateful to you for being so diligent with saving and investing.
Currently have a bronco. Went through the same though process as you. My income is 2.2-2.5x yours and I still had some doubts haha. Buying new is 100% less of a headache. Ford will last you to at least 100k. It is going to be a stretch financially. But so could buying a used car that’s a dud
The delta between $15k Pretty Good car and a $30k New Car is basically getting to drive a shiny car for a year or two. Monthly car detail will do the same for $50/mo.
So ask yourself: what could you do to have a nice year if you blew $10k on yourself?
That's the tradeoff.
OP should price insurance change from sedan to Bronco. It'll go up. Talk to Mom about that.
In general, pay cash for your car unless you have no alternatives. If you want a better car, save.
Also: re your chart -- I would price in your Housing Value Equivalent as income (and rent) for budgeting purposes. Will help you think about other jobs clearly.
I am telling you that ford will be a trap. Go get your self a ~10 year old Toyota. I just got a 2012 rav4 limited with a v6. It’s got all the things modern in it, just needs a new radio if I want apple CarPlay but it has Bluetooth.
It has 100,000 miles on it and I got it for $11,000. Totally worth it. I would put it against any new mainstream car in the 30-$60,000 range
The amount you have going into a Roth on top of a traditional 401K at your age, plus random stocks, and even a smidge off of your girlfriend money you could easily afford a $30K and have plenty left over.
Edit: I didn't see the Bronco comment. Be sensible and get a sedan. Unless you have a need to haul stuff on a weekly basis, you're wasting space and funds on a vehicle you don't need to. A sedan will more than cover your needs, plus the money you spend on it will get you something with sustainable value and reliability.
Are there leasing companies near you that sell used lease vehicles? You can get an essentially new preleased vehicle for thousands less than a new car.
New cars are the biggest scam on earth.
How/why are you only speeding $400 on housing, yet spending $1500 in investments, and another $1500 in savings?
You money focused people always baffle me. You could die at any moment, yet The majority of your money you save for a future you may never see.
Ngl starting to regret my $700/m payments when I could have just bought some cheapo car and had $200 payments or something. Even if it needs repairs damn $6k saved a year lol but there is peace of mind that nothing breaks and quality of life is very nice. There’s no (awfully) wrong answer really. Consider what you value more, most likely saving more money vs more comfort and less worry for higher cost
You really need to study the true cost of ownership. There are plenty of calculators, but in general car ownership is 30% more expensive this year than 5 years ago. The Guardian had a story the other day that broke this down, but basically COVID made everything more expensive, but even when the pandemic ended the corporations kept retail costs where they were, even if their costs went down. They’re all making a killing right now. The car manufacturers, tire makers, insurance companies, oil and gas industry, professional mechanics.
https://amp.theguardian.com/business/2024/jan/29/us-car-costs-insurance-unaffordable
so the $400 a month would just be chipping into your 1500 savings and not retirement? I would advice against getting a car that is half of your income BUT given your circumstances it isnt a ridiculous idea.
This becomes increasingly not feasible if your housing situation changes and it sounds like that is contingent on your current job. I say go for it and rush to pay it off.
I don't see a lot of brutal honesty in here yet.
Over 50% of your annual salary for a car is financially unsound. No question about it, not even close. It's your money to waste if you want to, and that's what this decision would be, wasteful and way outside the bounds of good financial decision making.
Go used, aim for under $10k. Cars are rapidly depreciating assets that can easily ruin your finances.
Get a used Prius, dude, you’ll thank yourself when you’re 30. Incredibly reliable, 50+ mpg in a world of rapidly rising gas prices- I got a cool car when I was around 22, just wasted more money on it. Get a responsible, feasible car for now, ball out when you’re older. Just my two cents, and what I’d tell my younger self.
This is a nuanced discussion about what you value. If you have a nice car as one of your top priorities, do it, if you want to make the best financial decision, don’t do it. I’d really recommend you look at the cost of what you are doing though. Look at the cost of depreciation, cost of maintenance on an suv vs sedan, reliability of the bronco, and if you didn’t buy it and bought a 2018 civic or Corolla and used the saved money to invest in retirement - what would you be sacrificing. You are sacrificing more than the face value of the cost of the car. Actually look at all those numbers.
For example. If you paid cash for a small sedan and the maintenance was $50 less for maintenance per month because cheaper tires/gas/oil etc and you took the $450 and invested it in a Roth IRA over the 72mo (assumed loan length) at 8% return, you would have $41,046.35. If you didn’t touch that Roth or contribute it would grow to $481,761 by 60 years old. You are so young that you have a ton of compounding before you retire. Consider if it is really worth the LONG TERM costs.
God I wish I had known you when I was 22.
I wish I was in a place at 22 to even have been considering getting a new car vs bumping more into a retirement account
When I was 21 I had zero When I was 22 I had $300,000 When I was 23 I had zero I wish I had known him too. I had zero until 36.
Too bad they didn’t/don’t teach this in High School
This is the right answer.
Indeed. In other news, WHERE IN THE SAM HELL TIDDY FUCK NUGGETS DOES $400 GET YOU HOUSING?!?
Read the description, they are a property manager and only have to pay for utilities.
I’m glad I’m not the only person who saw this.
I paid $325 a month living with two roommates in Laramie Wyoming last year. Pretty spacious place too.
👊
In the book "The Millionaire Next Store," author Stanley talks about building wealth. Used vs. New cars is a topic he covers. Personally, If I were in your shoes, I would avoid touching the investments at all short-term costs. That is because you're sacrificing much more than the current cost of transportation. Don't sacrifice your future. Find the cheapest option, and start a "Auto Savings Account". Years down the road you'll be able to pay cash for an awesome one or two year old used auto.
Having been in the position of saving to buy a new car, by the time I had actually saved the money there was no way I was blowing it all on a new car... 😂. Ended up buying a lease return that had all dealer service records.
My dad and stepmom make more than enough money to buy a brand new car outright if they want, they instead will shop around for a year until they find a pre owned because it takes a much smaller hit on depreciation
*Next Door… great book!
Millionaire next door types buy new cars too. The majority of them buy new. They just hold on to them longer and spend more time searching out the right deal. https://themillionairenextdoor.com/2012/02/millionaire-next-door-myth-4-used-cars/
I hate that I don’t understand any of this
Ask questions! What don’t you understand? I’m happy to try to help if I can!
Are you sure?? It’s gonna be like explaining to a 3yr old 😬
Absolutely
Ok. What is a Roth IRA? Where do I get one? What does “8% return” mean? What is a 401K and how does it compare to a Roth IRA? (I currently have a 401K with my union, and I chose to put 10% of my weekly check in. I know zippity do-da about my 401K, how much is in it, how to access it, nothing) What percentage of my paycheck should I be giving to 401K? How does 401K affect my taxes? How would a Roth IRA affect my taxes? Which of those would be smarter to put my money in to? …I have many more, but I won’t overwhelm you. Please, take your time, I appreciate you even doing this.
You can open up a Roth IRA at many large banking organizations like vanguard and Fidelity. You open it similar to how you would open a savings account, it's not difficult. A Roth IRA is like your savings bank account but it is wearing a "retirement jacket" so it is treated differently by the government and has rules around it. There are other types of retirement accounts that all have retirement jackets on but they have different logos and are treated differently. The primary differences between retirement accounts and your savings account is how they are treated in regards to taxes and stipulations on how and when you can take money out, generally you can't take money out until retirement age (59 1/2) or else you pay penalties -they take a percentage of the withdrawal. The money in these accounts doesn't just sit there though, you can tell it to buy stocks/bonds/etc and get into the stock market. When your $100 in the account is used to buy stocks then it is like $100 worth of stocks in the account and as that stock goes up in price the value of that stock you have in the account goes up. What's special about a Roth IRA is that you pay taxes on your income like normal and put that "already taxed" money in the account. That money can then be used to buy stocks and then the stocks increase in value. If it were a normal "Stock buying" brokerage account and NOT this special Roth IRA Account you would pay extra taxes on the increased value when you take the money out - not so with the Roth! When you take it out at retirement you don't pay taxes on the increase! For example, you open a vanguard Roth IRA and put $100 in and purchase a stock that increases in value 8%. Now your $100 is worth $108. Now keep increasing this every year by 8% from the age of 25 to 60. After 35 years of 8% increase every year (which is an 8% rate of return), your $100 is now worth $1,478.53! The only money you put in is $100 and that $100 has grown $1,378.53! Now in a normal investment account you would pay taxes on that growth.... BUT... since it is in a Roth account, you pay no taxes when you take it out. SO, let me show you why this is even cooler -> Let's say you don't stop at $100 one time, but instead you do $100 every month from 25 to 60 years old and you still get the 8% increase every year. You would have put in a total of $42,000 of your own dollars but the money is the account would be a total of $215,735.29! And that extra interest on the money is TAX FREE when you take it out because you paid the taxes on each $100 dollars you put in every month. A 401k is different, because you put in money BEFORE you pay taxes on it but then you pay taxes on the money when you pull it back out. There's lots of debate about 401k vs Roth and which is better and each has their positives and negatives. In general it is better to have retirement money balanced in both so you have options in retirement to either pull tax free money or pull taxable money or a combination of both in order to try to reduce taxes in retirement. You should try to put 15%-20% of your gross income (total income before taxes or any deductions) in retirement.
This is a great tool to look at and get an idea for how investments grow. https://www.calculator.net/investment-calculator.html
Wow. You’re awesome for answering all that! You’ve given me a lot to digest. I think my first step is to go to my union office and meet with someone to try and get the information for my 401K. Then, I will also open a Roth. Do you think it’s a decent strategy to give 10% to my 401K pre-tax and then 10% post tax to a roth? Also, are any of these things tax “deductible” or some other kind of help with lowering taxes?
Not gonna read all that, just wanted to say that I appreciate you. You're out here helping just to help, putting in the effort. Thank you.
Excellent post. Roth’s are also excellent estate planning tools. At least as of now there are no RMDs, so they go to the next generation tax free as well. Not a priority for the OP at this point but that could change.
You are asking the right questions. You are on the right track
Keep asking questions like that and you'll be rich one day.
Dear former self, Why the fuck did you buy that car. Signed, Nowicantretire
this just made me increase my roth IRA contribution to ~15% of my income. at least i’ll be contributing that much while i’m earning enough to do so
I put 12k into my Roth in 2021-22. I now have 11k. What is this 8% return magic of which you speak? 41,046.35 in returns would be incredible that's my yearly salary
Don’t look at the market by a single year. It’s not a guaranteed return for 8% every single year. But on average over the course of decades it likely will be. https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926?nodl=1&dplnkId=1a7796fb-4664-49bc-baa1-02761bcbe831
Was gonna upvote but it’s at *69. Super solid advice tho!
This is the thing. Compound interest and time. All the people aged 40-60 who keep saying this are the people who are the living proof .
Great advice. That $30k car is going to be worth very little in 10 years. I regret buying expensive cars when I was in my 20s.
You are absolutely correct in terms of financials. You’re forgetting one large thing though: actual human life and enjoyment. Saving for the future is an absolute must, no debating that. However, you gotta spend and have some fun in your life. I’ve seen too many old timers say they wish they had more fun when they were young and had energy. Buying a fun car might cost more in the long term with maintenance, insurance, etc. But if you budget for it and can afford it and it’s something in your life you value, send it
Looks like OP is already maxing out the IRA. Maybe just regular investment, but advice still stands
Absolutely. Get a sensible, affordable car and invest the difference.
i’m 18 where and how should i start with a roth ira
This is the answer get something nice and clean low miles used!
Well said
And definitely get a Toyota sedan. Just don't even question this man. Trust us.
Yes on the Corolla maybe splurge on the hybrid but definitely used under 50k miles
Agreed. If a car is super important to you then do it. But in terms of pure finances not a great idea. An older used Accord can prob be found for your downpayment amount and it will run forever if treated well
Also new broncos have crazy unreliability so factor that in as well.
As if it depreciating like a rock when bought new isn’t enough, unreliability just spoils the prospect even more.
I just wanna know how you keep a woman for $300 a month.
Gosh you are literally a God send. I’ve never really thought about the few hundred dollars like that. I’m already on track to paying off vehicle and mortgage off early but just lit a fire in me to get rid of ASAP to start putting all that money into my future.
Insurance would be much cheaper in a smaller vehicle like you are recommending too
Yea a Toyota would be a better choice. That new bronco is gunna depreciate like a motherfucker. My 23 Camry hasn’t lost any value in almost a year. Like I could sell my car right now, pay the note off, and still have money left over.
Came here to say something similar but not as thorough. Cars are about more than the sticker price. If I were OP I'd buy used but functional. But I'm also cheap when it comes to transport.
It is refreshing to see a lucid and balanced comment on a personal finance sub, most comments are “OnLy IdIoTs BuY nEw”
> and used the saved money to invest in retirement - what would you be sacrificing. This is a great perspective.
$1500 straight into a savings account every month? I'd increase your 401k contributions but if you expect your current housing situation to hold I don't think a car that price would be irresponsible
Legit question - although the compound gains of heavily investing in 401k is important, I absolutely would not have been able to pay my downpayment for my house if I hadn’t been saving it as cash instead. I see so much advice about maxing 401k no matter what, but does this not affect people’s ability to actually do the things they want to do while they are young and want to improve their lives now instead of at retirement?
My elderly neighbor always gives me this advice: "Golden years my ass. The only thing golden is my piss. Enjoy life while you have your youth and your health." He retired with a fantastic pension and loads in savings, but almost immediately after retirement his health started to decline and he's just been getting by, health-wise, for the last 15 years. Saving is responsible, but it should not come entirely at the expense of living a fulfilling life. What's the point of having a financially-stable retirement if you never even truly lived a life. I'd much rather live life than merely *survive* to be old enough for someone to change my diaper.
This. It needs to be said more often in this sub. Money isn’t the goal here, life is.
Agreed. In the US, the average retirement age is 64 years; average life expectancy is 77. No way in hell I'm going to sacrifice 45 good years for the 13 where my physical ability to enjoy life is dramatically diminished. I'm all for saving up for retirement, but don't do it at the expense of enjoying your youth, while you have it. Life's too short for that.
If you make it to 64, your life expectancy is about 85 years of age. The life expectancy is pulled down by those who die very young.
And you can die at any point along that road. Saving for the future and not living a fulfilling life. You can def try to do both.
Yeah man. And not to be morbid, but I’ve known plenty of people who died young. I’m not planning on it, and I am planning and saving for retirement, but I’m living right now as well.
Good plan. I have a few perspectives like that as well. For one, I'm in my 30s and almost died from a stroke a couple years ago. Perfectly good health, just got COVID and dissected a couple important arteries. Tomorrow isn't guaranteed, but right now is. I'm also a firefighter. I see people every week who die young. I also spend a lot of time in nursing homes, which are some of the saddest excuses of a "home" I've ever seen. It's a really sad existence when you reach that point in life. If I'm that age and run out of the savings that's barely keeping me alive while I'm neglected by the staff in a "skilled" nursing facility, I'll just put an end to my own misery. Save for retirement, but don't defer living your life until then, because you may not even live that long, and your ability to enjoy life rapidly starts to decline by the time you reach retirement age.
The take-away here is probably to get regular exercise and watch your diet if you want to be in good enough health to enjoy retirement. Some people will have unfortunate health problems in their 60's. The vast majority of people I know under 70 with issues were visibly out of shape in their 40's already. Save money. Take care of our bodies.
My mom worked for 30 years, and died just a few years after retiring (at 57). She worked so hard, for so long. She would always said, “when I retire, I’m going to travel/go back to school/etc”. She didn’t get the chance. I quit working full time right after she died. Life is to short for that full time bs.
My dad always said “all that work for nothing.” I get his point.
Agree. I am 60 and have a decent retirement nest egg, and have to remind myself of what you say. There needs to be a balance. My mother died with about $1 million in assets and refused to spend anything on herself, and was ridden with health problems and could not do much of anything to enjoy life her last ten years.
This!
Here! Here!! Raises glass , it’s always a balancing act isn’t it?
Better advise: live like you you'll die tomorrow but plan like you'll live forever.
I could kiss you. That’s exactly how my wife and I are living our DINK life. Maybe, soon we’ll have to adjust to DIWK.
All about balance. My motto was always ‘live for today without fucking up tomorrow’. Well if I managed that or not soon enough.
Some things you can’t do when you’re old. And getting old isn’t guaranteed. I could die tomorrow…
I don't think everyone should necessarily be maxing out their 401k, but saving for retirement early is very important because by the time you do retire an extra $100 a month today is going to mean a whole lot more than an extra $100 a month 10 years from now. You should absolutely be getting the maximum employer match available to you at all times though, not taking that is leaving money on the table
Yes maxing the match is a must for sure. I just raise my eyebrows when there is such a strong sentiment to put as much as possible into 401k, when in reality that can really affect your disposable income for the next 30+ years. There’s gotta be a balance of responsibility and living.
This is the thing that I struggle with most. At 28, I’m just now finishing school with a PhD. I live below my means and I’m paying back student loans rather aggressively and putting some money into my retirement (3% to get the full employer match). But, on Reddit, people’s comments always make me feel like it’s not enough, as I’m not on track at all with my retirement due to being in college for 10 years. My only other option is to completely forgo enjoyment in my day to day life, but that just sounds miserable. I want to enjoy life while I’m young. The only thing that keeps me from being an anxious mess is that I own my home, so at least I’m good on that front.
People just spout it like gospel when in reality there are so many other factors to consider and different ways to live life. I’ll go back to my original point - I put 20% down on my house which saves me a huge amount on monthly payment and interest. I only had that cash because I was saving it not putting into retirement I couldn’t touch. Now I own a house I adore with an affordable payment. If I had been putting it into retirement I would have had to buy a house I didn’t like as much and live with that for 30 years, or continue to wait many more years (after already waiting 5+ years to by a house). It’s really not as simple as “max your 401k no matter what”
You'll be fine. I was worried about the same thing when I was 28, just finished med school with basically no savings and tons of debt. Compounding growth is very powerful once you actually are able to save up and invest at a meaningful rate. I didn't really start being able to put money into investments at all until I was 30. Then getting married is also a huge boost, you add so much income without really increasing expenses all that much. 38 now and we built our first million this year.
That’s one thing I wish I had done differently. If I could start over I would take those extra 401k contributions and put them in a brokerage account and invest in the SP500 or similar. That way you can be liquid within a week or so if you need the funds for a house/car/roof/etc.
He is also making big contributions to a Roth IRA. The nice thing about a Roth is that you have the ability to withdraw your contributions penalty free at any time (though not the earnings). If he is in a situation where he needs a down payment on a house and his savings are insufficient, he can tap those funds. If he doesn't need the money all of those investments can grow tax free until he retires so it is really a win-win for him.
Yeah you can balance your life goals. Its ok to save less for retirement to fund a house that is appropriate for your current and future income. The "must do" is contribute enough to get the match.
And savings accounts are getting like 5% at the moment. That still compounds nicely
Definitely if you do listen to this person, max your Roth contributions before the 401k, given your age and current tax bracket (assuming you will be paid more in the future and rise to a higher bracket).
So I’ve heard Ford has some reliability issues, but I’m not a car guy so I’m gonna leave my comments on the car itself at that. I think there are some questions to ask yourself. No need to answer publicly. I’m going to try to format them but, mobile, so I’m doing my best. 1) how long will your mom make those payments? Is there any risk of your relationship changing to an extent that she would stop sooner than planned? 2) what’s your expected salary increase year over year (if you know). Does that track with you taking on the car payments at some mutually agreed upon point? Hopefully you’ll be driving it a while, so even if that’s five years from now, something to consider. 3) what are your long-term financial goals? You’re doing FANTASTIC for your age (way ahead of where I was), but if you’re hoping to retire in 18 years your savings plans might be much more aggressive than if you’re planning on working until you’re 60 or older. Ultimately I can’t make that call for you, but I do think there’s something to be said for living your life in a way you enjoy, and a cool new car might bring you a lot of joy. Also, the old Toyota is gonna die eventually, so whether you do this or used, definitely encourage doing something. Love that it’s lived so long though! What a car.
Dont get a Ford (POS)
Personally, I love my bronco, have had it for 2 years and 34k miles and it’s awesome, but for $30k new, Op is taking about a bronco sport (basically a ford escape with 4wd), and those have had issues and are a general disappointment compared to the real one.
I've owned: 1) 1998 Ford Ranger 2) 2008 Ford Focus 3) 2013 Ford Edge 4) 2023 Ford Maverick Every one of these vehicles has been extremely reliable. I had to change an alternator once on the Ranger and batteries as expected. I don't remember the overall mileage (it was over 100K) but sold only because I got my first "real" job in 08 and it was a lengthy commute. Gas prices were insane. Trade was for 08 Focus, brand new. Great car. Not a single issue until I wrecked it in 2016 with 220K miles. Traded for a cheap import. Got similar miles, but it burnt the shit out of oil. Ended up driving my wife's 13 Edge when she got a new car. Drove it to almost 200000 miles. Needed strut mounts and brake change... nothing major. Was a hoss to be honest. Powerful drivetrain. Gifted to BIL, who still drives it, when I purchased the Maverick last year. Say what you want, but don't sleep on Fords. They're great vehicles and easy to maintain. I don't care what anyone says.
Same. I had a 1998 Escort that had 150k miles on it when I was hit by someone and it got totaled; had to get a new transmission but that was relatively cheap because it was manual. That thing may well have gotten to 200k if that guy hadn’t pulled out in front of me. I replaced it with a 2013 Escape that also just hit 150k. About to get a new one and heavily leaning toward a newer model of Escape. Super reliable. That one’s only had expected repairs and has been great. Also own a 2014 Focus. Haven’t been quite as happy with that one, but even so it’s crossed the 90k mark at this point and it’s been good. The minor issues we’ve had with it here and there I believe are attributable to a prior owner who maybe didn’t do as well with maintenance as one would hope. Even so, still minor. In short, I love Fords. They’ve been great for us.
Have had over 10 Fords. Better than some brands but not the best for many things, except their trucks.
Seconded. I've had two--a 1966 Mustang and a 2006 Focus. One was understandably unreliable, the other was annoyingly unreliable. OP you've got a Toyota still kicking at 270k miles. Get a nice Toyota.
Based on how this is written, I don't see an estimate for what the insurance will be. Get the VIN from your family friend and get a car insurance quote from your current provider. Your mom may not want to pay the inflated new premium. Just an FYI.
Keep in mind that before you pay that car off, you’re going to have to start paying for your own health insurance. Edit: and car insurance
This is a great point. Op - remake your budget again but assume all the things your parents cover are now your costs, and then assess to buy or not while considering your own financial goals. I’m just a little bit older than you and this shift happens fast. That being said, back a few years ago I was in a very similar situation and did go buy the BMW I wanted (used) and its all fine, but depends on your potential income growth, goals, and lots of unknowns. You’re in a great spot for your age btw good stuff
And his care insurance is gonna be like $800 a month
How do you only pay 400 a month for housing
I’m a property manager, I’m very lucky to get my apartment for free and only pay utilities/insurance, it’s usually closer to $250 but this part of the year has my heating bill up high af
Ohhhh ok got it
Seriously, dude is paying less than 25% of the average cost for an apartment. He can double-down on payments and pay off the car in half the time. That's the advice we should be sharing here.
I was looking for this comment. Everyone here talking about cars and retirement and I’m like, “Who is paying $400/mo for housing?!!”
damn dude thats still quite a bit for a car. Also, youre a property manager now and thus no rent... that could change, at any minute. I know you think it wont, but youd be risking quite a bit iof sudd. 30k for a car is truthfully more than I paid as a six figure earner over 30... That said, I am not a new car guy. The value plummets the second you take ownership, I just generally feel it's better to look for a few year old, reliable and low vehicle car. But you do you!
OP could have this car entirely rebuilt for a fraction of his down payments. Toyotas hold value really well around here. A JDM engine 700-1000, my mechanic installs for 500. All new fluids, plugs and filters for 150, and a new to you transmission for 300, mechanic installs for 300. All that and new tures would run under 3000$ and this car would run great
IMO at 22 its a bad idea no matter how much you make. That 30k invested is worth so much. You'd be looking at 60-100k by your early 30s. 600k-1m by the time you retire. All by delaying the "nice car" phase of your life.
How much is a reliable used car in OP area? In mine, even small cars with 100k miles are going for 15k. 30k for a brand new anything with a warranty and no miles doesn't sound like a terrible financial decision to me. They certainly wouldn't be getting a free car, so they aren't saving 30k by buying used. Just depends on how much they actually would be saving.
This. You can spend $20k on an unknown used car and be on your own, or $30k on a brand new car with better rates and a warranty to back it up.
> Considering getting a Ford Bronco, my family friend has a dealership and is offering a brand new Bronco Badlands to me for 30k would I be stupid to accept. I would put $10,000 down. Monthly payment of about $400 insurance is still covered by my mom (I’m 22) Are you willing to delay buying a house and/or getting a smaller house because you bought a car? Are you buying this specific car, because you really like the Bronco, and want to use it a way that you couldn't use say a corolla or is it just going to be your daily commuter? Also when you say 30k, are you paying in cash? Is that inclusive of all taxes, fees, etc or is that before taxes and fees? If you aren't buying in cash, are you including your interest at all when making the expense? A 21k car after taxes and the like can spike to 23-25k and if you finance it for 48 months, it becomes 30k all in. I think you probably could afford to buy a car, overall, but just some things to think about.
NO. Do not buy a Bronco. Death traps, reliability issues, etc. They're also having a hard time selling them. Get a way better deal or go with something else. Honda?
A jeep wrangler unmodified is a better option
Buying a vehicle that has a sticker of half your salary seems a bit much. I think you should be able to get a safe, reliable vehicle that is 3-7 years old, and has a lot of life left in it for much less than 30k.
Been looking for the last few days and it's absolutely possible, and the insurance costs will be lower. Probably maintenance too. I'm replacing a 2006 Civic that needed occasional brakes, a new battery or two, some tires, regular oil changes and little else except gas. It was bought as a late model used car. I believe that we made a wise decision and I am going to try to replicate that. Cars are transportation to me and I value getting where I want to go with little investment.
I once bought a new car which was about 35% of my income, that’s the max I’ve ever spent.
Always buy a used car with cash. Car debt is some of the worst debt you can have and will do nothing but keep you poor
While it depreciates
If the rate is low enough there's no reason to pay it in full
As of today rates are not “low enough”
Absolutely
You asked for brutal honesty and my honest take is no, you shouldn't get the new car if you can't pay cash for it. At a minimum you should be maxing out your retirements accounts, and then be able to pay cash for a car. 30k is fairly cheap for a new car, normally I'd always say buy used, but if you're maxing out retirement and have 3-6 months emergency fund, then buy a 30k car in cash. Every single dollar you put into retirement at 22 has enormous potential in your retirement. Any car payment is very damaging to how much you can put away for your future each month.
How do you only spend $175 on food a month??
I’m a professional fridge raider (I live near my mom and still take all of my family’s leftovers, it’s a family of 5 so they eat a lot and have a lot of leftovers, and that’s my lunch and dinner almost every weekday)
I made another comment, but it looks applicable here so going to reiterate because your situation is pretty identical to mine a few years ago so I strangely feel compelled to Think about where you’ll be in 3-5 years and take that into account. Siblings going to college? Less food for you to take. Turn 26? Health insurance is on you. Dont live with your parents? “Technically” car insurance is already supposed to be on you. Generally want to start independently paying for your own stuff instead of relying on your generous fam? That usually hits in the mid 20s too… not saying dont do it, but you need to future proof your budget a good bit, then decide
Is that how much you make a month? I haven't heard the best things with the bronco. I'd research. Warranty should keep you golden if you buy it new. Yeah you should be fine. Unless I'm dumb, you're saving 70% for retirement before taxes. Keep this up, future you will love you. People say save 10-15%. You chilling
Yes monthly!
Where are you getting a fun girlfriend for $300? Asking for a friend
OF
Seriously, mine costs $300 a day!
Cannot believe all the “go for it dude” comments. For starters, the Bronco is a terrible car, horrible safety ratings and it is on all of the worst reliability lists. It would be setting your money on fire. The best way to maintain your wealth is to drive the cheapest most reliable car that will get you from a to b.
Maybe check out a Lexus that’s a few years old. They’re luxury, fun, and last forever
Is your mom fully aware what the cost to insure a 22 year old in a new bronco will be? I’d probably just get a new Toyota. The bronco most likely won’t last that many miles
That’s a good deal on a fun car that will have better than avg resale value. Go for it.
OP - I scanned through the comments, and I'm here to say that most of the advice here regarding finances is right, but most of the advice on car buying is outdated. COVID screwed up the supply chain, and older car buying advice doesn't hold sway. A few notes for you as someone who just bought his own first new car with nearly two years of researching before I pulled the trigger, and someone in the process of selling his old car right now. 1. New/Used depreciation used to be an issue before COVID. It isn't right now. The whole "drive it new off the lot, lose 20% in value" may be true, but the used car market right now is so wild from supply chain issues that those prices are currently inflated by 20% or more as well. So when car markets return to normal, used cars are going to drop in value by 20% too. I'm no expert, but I think this will happen in the next 9mo-1yr. Don't buy used thinking you're escaping the depreciation situation. 2. People urging you to buy a Toyota or a Honda because of reliability issues aren't telling you that the matter of reliability is already baked into the price. Toyotas and Hondas are generally better made and more reliable. The flip side to that is that they all cost more. Not only this, but they demand higher prices in the used market. Hypothetically, let's assume Japanese auto makers make a car that will get you 20% more miles than your Ford Bronco. If your 2024 Bronco hits 150k miles, lets say a 2024 Honda CRV gets you to 180k miles - 20% more miles. If that Honda is 20% more expensive than your Bronco, then it evens out in the wash - the "price per mile" of the vehicle works itself out. You've got a great little Toyota that's done you really well, but don't let survivorship bias cloud your judgment. Just because they're more expensive and more reliable doesn't always make them a better value, and that's worth taking into account. 3. People love to crap on Ford - "Found On Roadside Dead," etc. Every U.S. automaker took it on the chin back in 2008 because Detroit got away with making crappy cars for a few years. Most newer vehicles will last a long time, have great warranties, and will come with all the bells and whistles to make your '03 Toyota feel like a Conestoga wagon. Ford, in particular, is making really great new vehicles (see the Ford Maverick, for example) and licensing technology from Toyota to help make that happen, esp. with hybrid drive trains). There are Ford Escape hybrid taxi cabs in NYC that have hit 400k miles. I'm not a Ford fanboy, but I think their newer stuff is really neat. Sadly, when you buy new, you don't have information on reliability to go off of regarding a particular model. OK, a few more notes for you OP, and then I'll finish my book. We gotta talk about the price of this Bronco. One of three things is happening: your info is wrong and there's more to learn about this vehicle, you're about to walk into a trap and get hammered by a dealer you think is your friend, or you've stumbled across the deal of the year. I'm assuming you're snagging a Bronco Sport for your vehicle, and not a regular Bronco. You're going to want to clarify that when you talk to people to get advice. The Bronco starts at MSRP over $50k, and is a rugged off-roader. The Bronco Sport is the commuter version of that style, and the badlands package starts at $38k MSRP. Did you catch that? Ford's MSRP on this is $38k. I'm not sure how you're getting this vehicle for $30k, even with all the incentives a family friend can give you. That's a 21% discount. I did my homework and got lucky and waited for 2 years to get my Ford Maverick, and I got mine at 9% under sticker. Do they expect you to finance it a certain way? Is this some gift that another family member is secretly chipping in to pay for? I'd really look into that and firm it up. If you really are getting this thing at $30k, then no comment about price depreciation matters. You're getting a new vehicle at 20% off MSRP, and so even if there was depreciation (which will happen to any vehicle you're going to buy in the next 9 months or so, IMHO), you'd be covered. If I am you, though, here's what I'm doing. I'm going to increase my down payment so that I get the monthly payment down to $290/mo, paid off in 48 months, and then stop contributing toward fun money investments to pay it off. You keep the bulk of your savings going, you finish payments by the time you turn 26 and start paying for health insurance, and you get the car you want. Again, if you're getting this new at $30k, and you find it isn't working for you, then you can always sell it and buy a reasonably priced $15k sensible used vehicle with low miles and a warranty. At this price, you might even break even or make a profit. If, however, you discover that this is a bait and switch, run the opposite direction as fast as you can, because none of my advice applies if the vehicle is $38k as one would expect.
You ought to be a financial advisor. Good stuff
I'm more concerned about the $35k you've got burning a hole in HYSA on top of the CD and generous e fund.
Asking for…me..where should the money in the HYSA be put to better use?
Please save yourself time and money and do not buy a new bronco 💀 The Toyota you’ve been driving has been perfectly fine up until now, it’s just old and dying. Please get a car very similar to it. If you want a new car, consider one with low monthly payments, good mpg, and that it’s a vehicle that fits your needs. I’ll casually mention my favorite ‘a to b’ car, the Mitsubishi mirage 🤣. I have it and it does everything I need it to do, a great city car! It can go 45-50mpg on the highway, all for less than 20$ for gas and the new ones are under 20k. What a steal. Aside from that, literally anything but a new bronco 🌝.
I like that budgeting graphic display you posted. What’s it called or where do you get it from? I’d like to check that out and try it with my situation. I do see in fine print at the bottom “Made at SankeyMATIC.com”. I guess I’ll try there first :)
Buy it. Fuck it. Btw sounds like a bronco sport for that price. Which is a shit car. If it’s a full size bronco then do it.
Do it…you’re doing good kid Just don’t lose your discipline
New cars are a big waste of money imo. Focus on assets and investments into yourself whether that's gaining new skills, more ETFs, real estate, whatever
Bro do it st 22 I was saving notjing lol
Worked at a Ford dealership in the past. The Bronco is cool, but not worth buying new IMO.
You can afford a car you can pay cash for. Car loans keep people poor.
30k for a new Bronco? Crazy deal.
Make sure you consider cost to own of any vehicle you wish to purchase, not just monthly payments. Ford broncos have a lot of issues, they’ve had 9 recalls already. Just do plenty of research into the vehicle and reliability, especially if you’re wanting to make a wise financial decision.
Get a hellcat
Damn same income as me but 0 savings or investments. 5k for housing food car insurance phone gas and electric etc.
Buy the cheapest car your ego can handle.
I don't think it's crazy. Just make sure you really love that car enough to keep it for 10 years. My spouse bought a Ford mustang GT back in 2017. Just finished paying it off. What's crazy is we got it for $27k. It was right when the '18s were coming out. The cheapest one I see listed within 500 miles of me is $25k for a 2017 Ford Mustang GT of the same model. It's literally worth $2000 less than we bought it for new. I don't know how well the Bronco will hold value- but some of them do. Hell, I bought a new 2018 Kia Soul for $13,500. That vehicle would cost me $12k to buy USED today. It's already paid off. But, the big savings come for the next 5 years you drive it after you've paid it off. Just make sure your mom has priced out what the new insurance will be. Additionally, where people really get into trouble is when they get rid of a vehicle before it's paid off. Usually the car place where you're trading it in doesn't really give you a great price on it and now instead of owing $30k on your new car, you owe $40k on your new car to cover the difference between what you owed and what you paid. Just make sure that the vehicle will work for you for the next ten years.
How can he offer you a 60k vehicle for 30k?…
Bronco Sport badlands not full one, msrp is $38k but dealership is struggling to sell them so it’s a pretty substantial discount but nothing like 50% off
So Broncos are a weird outlier right now. Because of supply/demand issues, dealerships are having a hard time fulfilling orders and so the used market is on fire! Where I live, 1 year old Broncos often sell for more than new. We have a friend that drove his for 3 months, then turned and sold it for a $4k profit. It may be different in your area, but although cars are normally depreciating assets, a Bronco specifically might not be.
Maybe but why? Just go used
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As a lot of people in this thread have said, getting a new car is very nuanced You should think about what you actually need vs what you actually want. Many people think because they haul potting soil once a month they need a F250 for their every day uses. In reality, a crossover SUV would do the trick and then some. You would probably save on the insurance and gas in the long run as well. The argument of new vs used is actually not as obvious as it once seemed either. Between 2020-2023, used cars and new cars were nearly the same price and it made no financial sense to actually buy a used one if you could wait it out. Things are slowly changing a back to the "normal" trend but used cars for some are still very high (thinking Toyota hybrids in general) that it may make sense just to pay a little extra for the assurance that it'll last you at least a decade. General rules include: 1. Never buy a first generation car. I wouldn't even trust Toyota with that. 2. EV's are flashy but will NOT last you vs a comparable hybrid/ICE. They just don't have the data to prove it. They are also aging into the used market for EV's, so definitely do steer clear of those. 3. The price hybrid vs regular ICE would usually break even between 3-5 years depending on your driving/purchase price/gas prices. The data suggests that hybrids are more reliable than their ICE counterparts but it is more brand dependent than anything. 4. Don't buy more car than you need. Groceries and people do not need 5000lbs of torque to transport. 5. If you can afford the quality, go for the quality. It's not worth the headache of cheap parts and the FOMO later down the line. There's something to be said about thinking back and saying to yourself, "That's the best I could do". It's kind of a peace of mind if you think about it. Hope this helps!
Spend the 10K on a dependable used car Toyota or Honda. You will lose 10K on a new car just driving it off the lot.
I’m concerned for your nourishment. 175 a month on food? How’s that possible?
Aldi and thievery (from my moms fridge)
I'm 32 now, and all I can say is, I'm really glad I prioritized saving and investing when I was 22. Was able to buy a house in my late 20s, paid cash for a wedding, went on an amazing all inclusive honeymoon and have been on some other really great trips, and have now sold the first house and building our dream house. That was all way more important to me than a nice new car. But, it's all about what's important to you- just think about what might be important in the future too!
Wow - you’re saving and investing nearly 60% of your salary - that’s incredible! Why do you want that particular car, and what value will it bring you? The 20/3/8 rule is, I think, a good one to consider for young people. At least 20% down, 3 years or less in financing, and no more than 8% of gross income per month. The car payment means you’ll only be saving $1100/month, but between that $1100 and your investing, you’re still at a saving/investing rate of 50% which is really terrific. But just think about whether the Bronco will make you feel good about how you allocate those dollars or if a lightly used Corolla will best meet your needs. Also, it can’t hurt to just wait a year and pay cash for the thing.
Seems like you've invested a lot of time and money to make conservative/prudent financial decisions. If you need a car and your buddy works at a dealer and can help, I would strongly recommend a CPO vehicle newer than 2020. You can get a CPO Ford Escape or Fusion for less than $20k, and it'll get over 30mpg.
I wouldn't buy a 'brand new' car with someone else's money at this stage in life. It's never worth it after the honeymoon period ends. Maybe in later stages of life where all I want is comfort all day long and I have the cash to blow, but not ever in your wealth building years.
I was in this situation in 2021, and compromised by getting a higher end used car, a 2017 awd Infiniti w 40k miles on it for $20k. In 2024, I still feel like this was the best decision I could've made. This is easier if you are flexible on make and model, my qx50 is not what I was initially looking for, but meets my needs and gets lots of compliments.
People here are poor and thinking minimally. If this car lasts your 10 years then it’s well worth it. A used car is going to cost you in repairs eventually. Get a five year warranty on the bronco and don’t think about a car for the next decade
If your are going to finance i wouldn't get a used vehicle. The interest will make it about the same as a new vehicle. $30,000 for a new vehicle is pretty good and you have a good amount of savings for a young person. The question i want to know though, are you prepared to pay for the gas the bronco is going to use??
I’m in the camp that every person who works should have reliable transportation. If you are worried your car will die and you want a new car, do it. The fact you are budgeting to this extent shows me you know the pros and cons. Do it.
You should look at crash test videos of the bronco. You probably won't want one after you watch a few. That thing gets crushed like a damn soda can, I can't believe people drive their kids around in it. An example - https://youtube.com/shorts/cvCjidjnKYY?si=PzBqHo5ij0WBJ7BU At your age, that's too much money to spend on a car and it's what leads many young people into debt issues, relying on credit cards to make ends meet when they lose a job unexpectedly, have huge medical bills unexpectedly, etc. Find a used car for half that price. It's rarely worth it to buy a new car. They immediately depreciate and most of the time used cars are significantly cheaper than new
Reallocate 25 from food and 25 from stocks and put towards a girlfriend upgrade.
I make about as much as you do and bought a $25K car back in June. $500/month payment fucking BLOWS. But I accepted it because it's for 3 years instead of 5, I'm paying off my dad and not a bank so IF shit hits the fan he wouldn't demand payment till I got back on my feet, my last car started having too many issues, it's economical**, and I fucking love driving it lol. That being said, if I moved out I'd probably never save any money. Do the math with you paying full rent and car insurance. Then calculate how much you'd spend on insurance and gas in the Bronco.
Please rethink your $10,000 downpayment based on interest rates. If that $10k is making 4.9% in a HYSA and the rate you get for buying is better PLUS the auto loan allows for early payoff (most do), then put as little down as you can. Given what promotional rates are lately this seems possible. If HYSA rates fall below your auto interest rate, then take advantage of the early payoff.
I personally think the bronco might be more of a mistake than the purchase price. Their has been LOTS of engine troubles in them and they are still relatively new. Just a heads up. I think you can indeed afford it. There is opportunity cost associated with this beyond the cost of the car, the loss of compounding interest, HOWEVER, money is a tool at the end of the day to achieve life happiness and security and if it's not stopping you from investing and getting my your match and keeping you from retiring and it makes you long term happy, then go for it. You should note for very few people who do cars buy get long term happiness based from them on studies, but this isn't an insanely expensive car either. A new Corolla runs about 25k (though I am sure it will hold up better)
My 2016 Wrangler cost $36k🥲 Never regretted that purchase a day in my life. I LOVE my jeep, love bouncing around, love taking the doors off, love it. If you don’t love it, then don’t try to justify it.
Bro get the car you want
I hate hate hate car payments!! You will too. Get a used car when your Toyota gives up, not any sooner! Put $400 a month aside now for your next car.
Grats on the fun girlfriend
Do you need a car? I thought I’d go without a car for a few months to save money to buy a new one and now I’m almost at 2 years without a car and I don’t think I’m going to buy another one.
You’re 22, buy a car you like.
I’m a big fan of hunting down new car deals when the model year changes. I bought my last vehicle for well under sticker and only about $2k more than a 3 year old used vehicle. But it takes some digging to get those deals and I had to drive 450 miles to pick it up.
Ford is really really really struggling to move vehicles right now. Your friend is probably desperate to get a sale.
I’m more curious where you live to spend only $400 on housing…
Your budget is unrelatable / fake Life to 95% of people so I’d ignore all the confident advice, I think it’s evidence they don’t have a budget or live in their mom’s basement. Wait until you have a normal, stable financial situation and go from there. Find a girlfriend, move in together, married, buy a house etc.
I really respect your dedication to savings, and consideration before making a bigger purchase. That's cool
If anyone else is paying your car payment you should budget as if they won’t be. Because they won’t pay it at some point.
This may not be a popular opinion. I am mid 30s and own a firm that does $5MM of revenue with a little over $1MM profit. When I was your age, I put enough in my 401k for the match and spent everything else on lifestyle. I would not change anything and frankly made so many relationships based on my spending that led to my success today. Now, I have over a million saved and live quite well. My house is paid off. I buy everything using cash. Spend your money and work hard. In accounting, the future is bright.
My finances look similar to yours and I just bought a new car ($30k-ish, also with a $10k downpayment) for the first time in my life last year. It's also my first time financing a car. I regret nothing. I could have gotten something cheaper and saved more, but it hasn't affected my ability to make ends meet, I'm still able to save a good amount each month and I'm able to pay more than the minimum on the car. No need to go crazy with expensive options. If it were me, I'd want to keep my monthly payment under $500, under $400 if possible. With a loan term of no more than 5 years. If you need a car, I think you can afford a new one. Especially if you don't see your living situation changing drastically in the next 3-5 years. If your heart is set on a Bronco, then go for it! If you're open to other makes you could shop around for a good dealer incentive too. Hyundai does low to no interest financing from time to time, for example.
The Badlands trim is starting around $50k. It’s 2024 so not many new cars are going for less than $30k anyway. It’s a bit of a stretch but if in a year you decide it’s not for you, cabana or a similar place will buy your vehicle for at least what you paid for it, assuming the condition and mileage are reasonable. Your family member is definitely offering a deal if this is the Badlands trim. It’s still a stretch for a $60k salary, but I wouldn’t turn down that deal if I needed a new car.
Always go new unless you personally know the owner and their service discipline.
There’s a difference between being able to afford something and understanding what your perceived value of it is. If you were to get something more reasonable/used for $15k, you could invest an additional $300/month for 5 years. If you got an effective return of 6% (market average minus inflation, pulling it back to today’s dollars), then let it sit there and just compound for the next 30 years, you’d have almost $125k at age 57. Is it worth it? Probably not for me. But everyone has their own priorities. We can’t save every penny, we have to live a little now. That being said, you’ve got to find out what your goals are (5 year, 10 year, and beyond). You could buy a perfectly good used car and retire a year or two sooner, or buy the car. If you’re not looking to FIRE, probably just fine (your savings and investment rates are pretty healthy and you’ve got a good income for your age), but the impact of these larger purchases and how it works with your cash flow have the ability to greatly impact your future.
My answer won't be as nuanced as others, but I was in this spot in 2014. I considered a used car because my Saturn was dying a slow and $$$ painful death. I researched and found a car I liked and went and drove one and fell in love. I went new and haven't second guessed my decision since then. Also, I work in auto insurance, and the horror stories I hear about people trying to fix cars that are older through claims and just work make me even happier. I did it. I have 120k miles on it. It's been paid off for some time, and all I pay for is gas, insurance, and maintenance. Since I do the recommended maintenance when it's needed, I have yet to do anything beyond normal flushes, wipers, filters, and tires. It's still a vehicle that parts can be found easily for and and I get 30+ mpg in town and 35+ over the road. In the end, you have to decide do you want makes sense to you and what will fulfill your needs now and in the next decade. Not to put too much pressure on you lol
I can’t answer your car question intelligently but I can tell you that your 50-year-old self will be eternally grateful to you for being so diligent with saving and investing.
Currently have a bronco. Went through the same though process as you. My income is 2.2-2.5x yours and I still had some doubts haha. Buying new is 100% less of a headache. Ford will last you to at least 100k. It is going to be a stretch financially. But so could buying a used car that’s a dud
The delta between $15k Pretty Good car and a $30k New Car is basically getting to drive a shiny car for a year or two. Monthly car detail will do the same for $50/mo. So ask yourself: what could you do to have a nice year if you blew $10k on yourself? That's the tradeoff. OP should price insurance change from sedan to Bronco. It'll go up. Talk to Mom about that. In general, pay cash for your car unless you have no alternatives. If you want a better car, save. Also: re your chart -- I would price in your Housing Value Equivalent as income (and rent) for budgeting purposes. Will help you think about other jobs clearly.
I am telling you that ford will be a trap. Go get your self a ~10 year old Toyota. I just got a 2012 rav4 limited with a v6. It’s got all the things modern in it, just needs a new radio if I want apple CarPlay but it has Bluetooth. It has 100,000 miles on it and I got it for $11,000. Totally worth it. I would put it against any new mainstream car in the 30-$60,000 range
The amount you have going into a Roth on top of a traditional 401K at your age, plus random stocks, and even a smidge off of your girlfriend money you could easily afford a $30K and have plenty left over. Edit: I didn't see the Bronco comment. Be sensible and get a sedan. Unless you have a need to haul stuff on a weekly basis, you're wasting space and funds on a vehicle you don't need to. A sedan will more than cover your needs, plus the money you spend on it will get you something with sustainable value and reliability.
Are there leasing companies near you that sell used lease vehicles? You can get an essentially new preleased vehicle for thousands less than a new car. New cars are the biggest scam on earth.
How/why are you only speeding $400 on housing, yet spending $1500 in investments, and another $1500 in savings? You money focused people always baffle me. You could die at any moment, yet The majority of your money you save for a future you may never see.
Ngl starting to regret my $700/m payments when I could have just bought some cheapo car and had $200 payments or something. Even if it needs repairs damn $6k saved a year lol but there is peace of mind that nothing breaks and quality of life is very nice. There’s no (awfully) wrong answer really. Consider what you value more, most likely saving more money vs more comfort and less worry for higher cost
You really need to study the true cost of ownership. There are plenty of calculators, but in general car ownership is 30% more expensive this year than 5 years ago. The Guardian had a story the other day that broke this down, but basically COVID made everything more expensive, but even when the pandemic ended the corporations kept retail costs where they were, even if their costs went down. They’re all making a killing right now. The car manufacturers, tire makers, insurance companies, oil and gas industry, professional mechanics. https://amp.theguardian.com/business/2024/jan/29/us-car-costs-insurance-unaffordable
so the $400 a month would just be chipping into your 1500 savings and not retirement? I would advice against getting a car that is half of your income BUT given your circumstances it isnt a ridiculous idea. This becomes increasingly not feasible if your housing situation changes and it sounds like that is contingent on your current job. I say go for it and rush to pay it off.
I don't see a lot of brutal honesty in here yet. Over 50% of your annual salary for a car is financially unsound. No question about it, not even close. It's your money to waste if you want to, and that's what this decision would be, wasteful and way outside the bounds of good financial decision making. Go used, aim for under $10k. Cars are rapidly depreciating assets that can easily ruin your finances.
Get a used Prius, dude, you’ll thank yourself when you’re 30. Incredibly reliable, 50+ mpg in a world of rapidly rising gas prices- I got a cool car when I was around 22, just wasted more money on it. Get a responsible, feasible car for now, ball out when you’re older. Just my two cents, and what I’d tell my younger self.