I’ve been taking frequent walks around our townhouse complex recently and I’ve noticed that there are a lot of pretty nice cars parked in the lots – sports cars, muscle cars, and some luxury brands. Two people just across the parking lot from us own an Audi and a sporty convertible. Beyond just the expensive models, many cars look close to brand new.
Another thing I’ve noticed on my walks throughout this year are townhouses up for sale. The price is almost always listed between $120,000 and $130,000. (When Kyle and I reached our recent retirement milestone, I remember saying to him “We could buy half of one of these if we wanted to!” But that would mean liquidating our Roth IRAs, which we wouldn’t do.)
Does something seem amiss to you? People owning cars that cost a third or half of what their house does?
Kyle grew up in sort of a bad neighborhood, and lots of people had expensive cars. Their status symbols were their cars instead of their homes. I also absorbed sometime in my childhood the observation/advice: ”Poor people buy nice cars; rich people buy nice houses. Buy the nicest house you can but drive the cheapest car.” I would probably rephrase that now to be something more along the lines of “Put excess money into appreciating assets (like your home) and buy cheap versions of depreciating assets.” In any case, we both came away with the impression that if you could ever afford a nice car, it would be after investing in a lot of other areas including your house.
So my instinct was to judge my current neighbors who own nice cars. Don’t they know they could put the money tied up in the car to work for them in a way that would help instead of hurt their net worths? Maybe they could even afford a single family home or a townhouse in the neighborhood down the street that was built just a few years ago instead of these 20-year-old units.
Then I remember I’m trying adopt a “My values may not be your values” approach when looking at other people’s PF choices. Obviously these nice-car-owners value having a fancy car a lot more than I do, but maybe they value it so highly that they make room for it in their overall balanced budget. Maybe their incomes/net worths are very high and they just live in this neighborhood because they have no need for more square footage. Maybe they even own a fancy house that they are choosing to rent out, but they stuck with their nice car!
Probably those scenarios aren’t true, but my point was just to check myself before I looked down too much on the owners of these nice cars. It’s not impossible that they’re not being dumb with their money – right? I’m sure there are areas of our budget that seem out of line with our income – how much we spend on domestic travel, for instance.
What do you think when you see a flashy car parked in front of an inexpensive house? Where would your income/net worth have to be before you bought an expensive car? What do you value spending money on that might raise others’ eyebrows?
photo from Free Digital Photos