Inexpensive House, Expensive Car

lamborghiniI’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


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68 Responses to "Inexpensive House, Expensive Car"

  1. Mr PoP and I have a deal since he wants an expensive (read $25-$30K) car. He can get it and own it for a year if he works an extra year after we reach FI to pay for it and all the ongoing costs associated with it during that year. =)
    Mrs. Pop @ Planting Our Pennies recently posted..Home Value Update – How To Use Market Comps

    1. Emily says:

      That’s a bit of a different range than what I was considering fancy/expensive in this post! But still quite a significant outlay. That’s really smart to put it into “real” terms like time so he can truly decide how much he values that vehicle. But isn’t a year of work for him worth a lot more than that car??

  2. Cash Rebel says:

    I walk past the same thing every day in my neighborhood. Most of the buildings are middle income appartmenta. Not super fancy but not crappy. And I see some brand new mercadez (sp?). I always judge them even though I know I shouldn’t… just imagine how different their life might be!
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    1. Emily says:

      I saw several Mercedes in our complex as well. Yes, their lives must be very different – but it’s not the commuting experience in that car vs. ours that makes it different, I think!

  3. I totally accept with you that we need to invest in things which can appreciate and put less money which depreciates. Cars are the ones which gets depreciated very early and investing so much hard earned money on brand new fancy cars may not be justified
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    1. Emily says:

      IMO not until your income/net worth are VERY high. I’m honestly very happy with our cheap, older cars and our Roth IRA balances!

  4. Lucas says:

    I do tend to feel sorry for people when I see that. I can’t say I never judge their intentions (I try not to), but in general I just feel bad that they are trapped by their posessions.

    1. Emily says:

      I didn’t think about it that way but that may very well be the case, especially if the cars are financed (which is likely). But even ongoing costs like insurance I’m sure are high for cars like this.

  5. When I lived in a mobile home, I saw people whose cars cost MORE than their home!

    My thoughts on the issue:
    Housing prices varies by area but car prices are pretty stable throughout the country. Your $120,000 townhouse might cost half a million dollars in California.
    I don’t like treating housing as an investment. Home values don’t always go up. Homes DO wear out. It’s the land that gets more valuable over time because you can build a new house, but there is only so much more land you can develop.
    Meanwhile, auto values don’t always go down. If you keep a car for 20 years, it starts getting more valuable again. Even adjusting for inflation, a VW from the 60’s costs more now than when it was new.
    Only you and your friends/family will see and judge you for your home. The car you drive could impact your ability to do business or get promotions.
    The other problem of treating a home as an investment is that it could cause you to over-buy. What does a DINK family need a McMansion for? Capital gains on the home value will be largely eaten up by increased maintence and repair costs.
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    1. Emily says:

      Great thoughts! I considered a few of these but wanted to keep the post short.

      I brought the property values-vary-with-geography issue up with Kyle and I’m just not sure which I think is better/worse. On the one hand, if you have an expensive car in a crappy neighborhood in Los Angeles (like Kyle’s childhood observation), maybe that’s OK because the ratio of the value of your car to the value of your home isn’t crazy. On the other hand, if you have an expensive car in a lower cost-of-living area (or median, like where we are) maybe that’s OK because you don’t have that burden of paying a lot for your home. Either way it’s not great, though!

      I tried to avoid directly calling your home an investment – and I agree it’s not an investment, it’s where you live. But it is an asset, and over a long timeframe most homes will appreciate – like you said, for the land if nothing else.

      I didn’t think about how a car might be relevant for your business success, although I’ve of course heard people justify it for that reason. I think it kind of doesn’t make sense! If you are directly driving clients or your coworkers or whatever around occasionally, it would be cheaper to just rent a nice car for those times. If you’re just concerned about passive, daily observation, I think a better house or better location might go further because people may very well judge you by your address more than what they see you drive.

      I totally agree that there is a danger in overbuying, which is the big reason why I was trying to give my neighbors a pass. These townhouses are the perfect size for a single person, couple, or small family. There are lots of retired people who live there who may have quite good net worths!

  6. Sara says:

    For me, it depends on who lives in your complex. If it’s young, upwardly-mobile folk who seem to be doing well for themselves, I would assume that they just didn’t want to deal with moving even though they could afford to. Your complex sounds far from dumpy, so people are probably content to stay and enjoy having their low housing costs. If the owners seem to barely be able to afford your complex, then I would feel differently.

    As a city kid I wouldn’t buy an expensive car like that until I had a covered garage. When you park on the street, who wants to have the nicest car on the block!?

    1. Emily says:

      You are right and it’s very hard for me to discern who can afford to be there and who can’t. If I were young and upwardly-mobile and was enjoying low housing costs (and, aren’t I?) I wouldn’t go for an expensive car, though – I would ramp up savings for the future so I can have a new car later in life! But that’s a values difference, I guess.

      I was thinking the same about the garage issue! Our complex doesn’t have garages or even driveways, so all these nice cars are parked in parking lots – probably getting dinged often by the next car over!

  7. I wouldn’t consider a $120K house to be inexpensive. But then again, not knowing the real estate values in your area, I can’t judge.
    I do see people with tons of awesome cars. I live in an apartment complex where people drive Mercedes Benz, BMWs, Audis, Big Ford Trucks, well….really nice, shiny, expensive cars. Their all renters, just like me.
    SavvyFinancialLatina recently posted..Home Buying Tips for First Timers

    1. Emily says:

      Hm, in our area $120k would be the least I would spend if I were to buy a home. It’s starter-home/townhouse level – but that’s in the good, safe areas. There are probably older homes in the less safe areas of Durham that would be less expensive.

      It’s funny because in our last apartment complex, where everyone was renters and most were students, I never noticed these fancy brands of cars (although there were some new ones). Where we live now there probably aren’t many students. Do you think your neighbors are making okay choices with their cars?

  8. Matt Becker says:

    You went through the exact same thought process I was going through as I was reading. I think you’re probably right that many of these people have unnecessarily nice cars. But that isn’t definitely the case. It would also be perfectly reasonable to spend less on a home so that you could spend more on a car. Like you say, I doubt that’s the case most of the time, but you never know.
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    1. Emily says:

      I definitely value my home more than what I drive because we want to be safe and we love having friends over and our commute is like 5 mins each way. But I can see others having other values, especially if they have a long commute and never have people over.

  9. I always laugh when I see this. I grew up in Des Moines, Iowa and some years we would go to the Iowa State Fair which is in a not so nice part of the city. The houses are run down, but you can always guarantee that there are some nice cars in the driveway (or yard) that have expensive rims.
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    1. Emily says:

      Yep, that’s basically exactly what the situation was where Kyle grew up. Tricked out cars but not the best place for kids.

  10. I see this in my neighborhood too— I live near public housing that has parking lots and you will see some EXPENSIVE cars in the lots. I can’t be quick to judge either because you never know how they got it: a) the cars may belong to visitors; b) they actually are high in wealth and prefer the lower living expenses where they are; or c) they could have won the car so you never really know. I like your attitude that it’s better to just think the positive thought about them as opposed to getting cynical.

    In order to buy an expensive car, I would have to be able to afford the car in cash and it not make a dent in my savings and even then, I would still buy used and wouldn’t go for a flashy brand. I’d get a loaded Hyundai or Toyota (possibly a Lincoln with my mom’s connections as a Ford retiree) with all the gadgets and gizmos.
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    1. Emily says:

      I really struggle to imagine myself ever buying a brand-new car. I think we would scale back earning before getting to the level of wealth that could support a new car. My parents never had luxury car brands and we currently own a Toyota and a Chevy so I just have no experience in that area!

  11. krantcents says:

    My students come from low socioeconomic backgrounds and they tend to spend their money on the wrong things. The cars that pick them up are much newer than the teachers and more expensive. It is typical of the “poor” mentality. They may live with 10 relatives in a cramped apartment, but a own a new(er) car. They also have all the electronics such as iPod, iPhone etc. It doesn’t stop there, they also have expensive sneakers or name brand sweatshirts. The real twist is they are also eligible for Federal funding (Title 1) for breakfast and lunch. This is what keeps por people poor!
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    1. Emily says:

      Your description fits very well Kyle’s peers growing up, although not his family in particular. They all need to read The Millionaire Next Door!

    2. Joey says:

      Well I think they just want to enjoy themselves just like higher income people do… I’m not saying go out and spend all your money but everyone likes to spend some money on things they don’t need, low income keeps people poor that is all but everyone spends some money.. Nobody wants to sit in a corner of their house spending no money just to then die with a pile of cash. There are some higher income people who are only 2 weeks away from being homeless because the more they make the more they spend… It’s tough I know we all want to enjoy life. Live below our means but we will spend some and enjoy.. I like for example if I get the chance I will spend money and go back to Europe for a trip… But I don’t need too,…

      1. Emily says:

        You are right on! Live within our means and spend on the things we really enjoy!

  12. SarahN says:

    Wow, your ideas are so similar to mine! Interestingly, I think the BF’s are a little different. He used to live in an ok (say 10 year old) apartment building, with countless expensive cars – Mercedes, BMWs etc. In my opinion, a ‘cheap’ real estate area with pricey cars. Where we’ve moved together, it’s a much more expensive area to own an apartment (it’s inner city) but there’s next to no luxury cars in the car park. I should disclose the BF has a luxury car – thankfully, to me, he bought it cash, so no loan, all proper savings. He’d also sell it, for a house deposit, but he feels the market isn’t steady amongst other things. I don’t own a car. I don’t own a car as I have chosen not to (and some lucky circumstances, like having a work vehicle, and a shared use of my grandma’s old car, which is garaged 15 mins from my house by train). Without a car, I’ve put my money towards travel, and of course, my house. Everyone makes different decisions, but I think our (you and me) values do match, and I totally can see where you’re coming from!
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    1. Emily says:

      That’s so strange that it’s different even neighborhood to neighborhood. There is so much savings to be had if you can live car-free, as well as a lot less stress.

  13. I’d never much thought about it. But I guess my first thought would be that some people prefer small houses or the location etc. and they might be able to spend that windfall on a nice car. Or maybe they lease the car, I dunno. Some people really like nice cars… I’ve never driven one so I can’t judge the difference, which is probably a good thing.
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    1. Emily says:

      There are definitely good reasons to live in our neighborhood – we like it a lot! I guess the money is going to be spent somewhere on something so if a car is important and everything else is in line, why not?

  14. This is a great lesson for all of us, Emily. It’s easy to make sweeping judgments based off of limited data…it’s tough to get a full picture just from one purchase. And besides, it’s always a good approach to give others the benefit of the doubt.

    Thanks for the insight!
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    1. Emily says:

      Haha, yes there is very limited data – a car and a house! Rented vs. owned, financed vs. paid for. There are a lot of factors.

  15. I’m with you. I would never buy a super fancy car. However, I have some friends who are in sales, and they tell me their clients are more impressed with a nicer car and it’s a whole part of their image. So, in that case it would work but not for me.:)

    1. Emily says:

      Shouldn’t there be a company car in the picture if clients are seeing a car?? That’s what I would hope!

  16. I think everybody has their own individual priorities. The thing that scares me for many of these people is how much cars depreciate. Then again, to each their own.
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    1. Emily says:

      If they are fully cognizant of the depreciation then yeah it’s their choice, but I’m afraid so many people don’t understand the implications of financing a new car every 5 years.

  17. I’ve noticed that at a few places I’ve lived before as well – your neighbors could be spending more than they should on their cars, but they could also be EXTREMELY frugal with their housing choices, right, and their car purchases reflect their true purchasing power.

    To each his/her own. 🙂
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    1. Emily says:

      I ran into another couple recently who gave me an impression that either they are VERY good with money – like, become my guru good – or their income is way higher than it should be, or they are in major consumer debt. It’s so funny that those different situations can all look the same to an outsider!

  18. I really tend to think the way you do on this. When I see really expensive vehicles outside of homes that cost only 2 to 3 times more than the vehicles, then I start to wonder why they’re doing that. Seems like a bad choice to me.

    But, like you, I also have to check myself from applying my value system to them. Maybe they really value cars more than a home. Or, maybe they just don’t worry about financial security at all and don’t care?

    Always interesting how there are different approaches to things.

    Good point on spending only a modest amount on depreciable items. I think that many people want to buy a “dream home”, and have a big brand name fun/luxury car. Why not buy a home that’s good enough but one to be proud of, a car that’s safe and economical regardless of brand name, while saving money for more important life needs. Such as retirement, future educational needs of family, health care, generosity, etc. And then splurge.

    But again, I catch myself to realize those people that highly value cars probably don’t get my way of thinking either 🙂
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    1. Emily says:

      I think spending on a house is more forgivable than on a car or other lifestyle stuff, though, because over the long term it should appreciate instead of depreciate. But values will come into it for sure as well and could sway things around.

  19. eemusings says:

    The amount of money some people pour into their cars is insane. T’s little bro has probably spent 30k customising his and there are plenty of other similar stories in our area – young people blowing tons on their vehicles. I would definitely rather put that kind of money into a downpayment since cars always die but houses last… but hey, some people would rather rent a crap place and show off their wheels instead.

    1. Emily says:

      That is so much money! I see are cars as incredibly functional and not a status symbol. However, I do see a house as both, potentially.

  20. I would rather to have inexpensive house than purchasing an expensive car. It will save me a lot of money buying a second-hand car than splurging on a sleek car.
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    1. Emily says:

      I agree – used cars FTW!

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  26. Barbara says:

    I think you are making a LOT of assumptions based on little or no data! Hubby and I live in a quite modest neighborhood in a single family home that we bought for cash about eight years ago. We bought this house because of the location as it is walkable to things we value and to a great grocery store. We have no debt and haven’t had for 15+ years. We also have high incomes along with minimalist tendencies. In my garage you will see a new 2013 car that I bought earlier this year for about $28,000. I paid cash and I don’t buy comprehensive insurance (self-insure). What you might be seeing in your neighborhood are folks who have already built their “nest egg” and have more than enough resources to have a nice car (or two!). Could my $28,000 earn money for me if it was invested instead of sitting in my garage? Of course. But I already have more than enough money to last my lifetime AND I still work at a job that I like so why deny myself the car I want? Plus, the car that I traded in was 10 years old as I drive cars a long time. Open your mind to the possibility that some of us choose to live modest lifestyles in modest homes not out of necessity but because of personal preference.

    1. Emily says:

      Thanks for illustrating the point I made in the second half of the post!

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  28. When I see a nice car in a not so nice complex, I immediately think that the car is a lease and people are overextending themselves to show off in public. Then my second thought is they do not understand the value of a dollar. When I see a car parked in a single family house that’s when it gets complicated, because it can go both ways as either they can afford the car or not.
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    1. Emily says:

      I’m not familiar with car leases so that thought pretty much never crosses my mind, but you are right that it’s a possibility.

  29. dana says:

    What do i think when i see an expensive car outside an inexpensive house? On our street there are only rentals. It means they have family visiting or the landlord has come to collect.

    1. Emily says:

      I would hope that would be the case, but perhaps they are owned by the renters!

  30. Sara says:

    I am one of those people with a nice car and inexpensive home! I live in a townhouse that is worth $120k-130k, and I drive a Mercedes worth over $40k. I have my reasons for both.

    I make about $120k/year, so I could afford a bigger/nicer home, but I am honestly happy with my townhouse. I bought it as new construction, so it is in good condition, and it’s also in a beautiful, upscale, safe neighborhood. I live alone, and even my 1800-square foot townhouse is more space than I need. I like the low-maintenance lifestyle.

    I am a pretty frugal person, and my car is sort of my one guilty pleasure. I got a great deal on it, so it costs less than most people probably think, but they are still impressed because they see me driving a Mercedes. It is well within my means; I save about 45% of my gross income every year. I work hard at my job to earn as much money as I do, and it’s nice to have a status symbol.

    1. Emily says:

      Thanks for letting me know your reasoning for your housing and car choices! It sounds like housing must be pretty inexpensive in your area in general if your new 1800 sq. ft. townhouse is in that price range. Great job on your savings rate, too.

  31. Joey says:

    I never cared about a fancy car… Just something to get where I need to go… Now I live car free which sucks where I live so I may go somewhere with better transit cause I like that sort of thing.

    1. Emily says:

      I love me some good public transport. It’s not so good where we are now, either, but at least we can get by with one car.

      1. Laura says:

        Public transportation (subways are fantastic, buses-so so)are time killers, but I hear ya. If we were urbanites (FT) it might be cool, but we live north of Los Angeles, and use the LA subway system a lot. Fun adventures for the weekend, but we’re older, and don’t want to burn too much time up waiting around. Love walkable areas.

  32. Laura says:

    We own a new Volvo and a Vette. We bought my former Volvo new and it went over 325,000 miles. My husband bought his Vette new a decade ago. We live in a somewhat marginal neighborhood, in a nice home we paid CASH for. We bought a fixer, and we are adding another nicely done home to the neighborhood.

    We have always bought in upscale view lot McMansion neighborhoods, but needed a one-story and cut our sq ft in half. There are more “ghetto luxury cars” in this neighborhood than our former $M home neighborhood. Commute cars weren’t important, the luxury home was. Cars are depreciating consumables. I get it. My husband now does.

    1. Emily says:

      Thanks for sharing your situation! Hey, if you’re going to buy a new car, you definitely have the right approach of driving it forever. Very interesting that you’ve lived in different types of neighborhoods and made opposite observations – yet you are the same people.

  33. jay says:

    why the hell does anyone on this thread feed care what anyone else needs to drive and what not. at the end of today its all opinion alot of traditional talk pass through generation. all that matters is what you want in life THATS IT. do better do better, want more try.Stop worrying about what other people need if its not harming you shut your mouth. people live life for what they want and how they want their travels to be.this whole thread is pointless.

  34. Beb says:

    yaaaay public comments.
    Anyways, there’s a lot more sociology involved, here, than simply “don’t they know??” Some people DO know they aren’t spending “wisely” but they are just not interested in saving up $100,000 for 10 years all just to “invest wisely”… and that’s assuming they have a job that pays them enough to do that. Instead, I could spend $3,000 on a depreciating “asset” and put in some elbow-grease and it will look like someone’s $30,000 depreciating “asset”. For example, I could spend $7,000 on a 2006 Land Rover D̶i̶s̶c̶o̶v̶e̶r̶y LR3 that’s clearly quite old, then with a little of my mechanic expertise and some used parts I can give it a “facelift” and a paintjob and it will look EXACTLY like a 2016 Land Rover D̶i̶s̶c̶o̶v̶e̶r̶y LR4.
    So maybe all those “new looking” cars aren’t as new as you think. A lot of people enjoy working on cars, and hell, we’re a car-obsessed culture. But also keep in mind that we’re obsessed with homes, too. That’s why the housing “market” crashed, too much hype around the true value of homes. Furthermore, I could argue that “cars” are not necessarily “depreciating assets”. Cookie cutter cars are, they always are, because they are built poorly and will eventually degrade into thermite. However, buy a new Nissan GT-R and don’t drive and see if it devalues. You should notice that it doesn’t. Rare cars do not devalue the way normal cars do.. although people will say they do because you’re driving them! Do you drive a home? Of course not. Rarely do homes experience degradation the way that cars do, and when you fix them, like cars, they increase in value! Interesting. Yes, a car that’s 20 years old, rusted out, with a 200,000 mi engine, can be revitalized to be worth close to its original selling price.

    But I’m rambling about pointless stuff. The real point, here, is that you are overlooking your privilege and legitimately wondering why people do things differently than you do. First, as I said above, priorities. People want to live and enjoy life, not spend their lives worrying about having enough money when they are 80 years old. Second, people like you DO exist as “poor” and “underprivileged” and they simply cannot do the things you do. Notice how marijuana is becoming legal? Notice how “legal marijuana” isn’t sold by “Black Americans”? Wonder why? Privilege. The banks will legitimately give a loan for a marijuana selling business to a white person because they have the clear capabilities. A black medical doctor walks into the same bank trying to get a home loan and its interest rate is twice as much as his white neighbors. Oh, and he would never be able to get a marijuana-growing business. Ever. Now just apply this to job applications.

    “Why do they live like that?”

  35. Josh says:

    I work in and around Dallas for a utilities company and I’ve seen the same pattern. I can be in a Section 8 housing project in the morning and then outside a celebrities house in the afternoon. What I’ve noticed is that you see many of the same cars in the Section 8 area as you would in an upper middle class neighborhood. In my neighborhood houses range from about 180,000.00 for a 1500 square foot house to around 290,000.00 for a larger house. You occasionally see a more expensive car but generally everyone drives a Toyota, Honda, Ford, Chevy, or Hyundai. I went to a Section 8 townhouse today that had a brand new BMW parked out front but a front door with a missing door handle, a window that was boarded up and a gutter that was hanging loose.

  36. Marty says:

    In San Francisco the houses in my neighborhood sell for $1,500,000 on average. There are new cars in every driveway. The average household income in my neighborhood is approximately $250,000-$300,000. Most people are in their 30-40’s and have an average net worth of $2-$3 million. There are decent cars in my neighborhood. Most of the cars are Hondas and Toyotas though. There are a few Mercedes and BMW’s around the block. Most people are financially literate and live within their means. A large part of the demographic is made up of Asian neighbors and all appear to be very frugal in nature. About a mile away where there are apartment buildings and not single family residences the cars are much nicer. I think the extra expenses that come with home ownership dissuade them from purchasing impractical vehicles.

  37. Michael G says:

    I am a single guy with a decent income in my late 20’s and contribute 10% of my income to a Roth 401k plus 15% to an ESPP. I worked my ass off through college to get through engineering and had literally no social life (still mostly true to this day :)) My house/property costs $150k in a rural area. I purchased a Lamborghini Huracan in cash for the same price last year and am sitting just fine on my way to retirement at age 60. Don’t judge a book by it’s cover. Looks can be deceiving. Not everybody has the same values.

    I use my house for sleeping and spend 90% of my free time in the garage or on my recreational property in the woods. The home is a glorified sleeping shack. I would have bought my house for less but couldn’t find a cheaper one anywhere.

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