It's okay to buy the car

Brandon and his wife are in good shape financially, but they're worried about retirement. They ask Dave if they should use $22,000 they saved for a newer car, or hang on to some of it for when they retire. Dave assesses their overall situation, and gives them his opinion.

QUESTION: Brandon and his wife are 31 years old. They have no debt except for their house, and they also have an emergency fund and college savings in place. They’re motivated to save for retirement, so they’re also investing 15% of their income. They make around $100,000 annually and have $50,000 in their nest egg. Now, they’ve saved $22,000 for a newer car. Brandon wonders if they should spend the entire $22,000 on a car.

ANSWER: At 31 years old, you’re going to be more than fine for retirement if you keep doing what you’re doing. A $22,000 car is not unreasonable. You have your emergency fund in addition to your nest egg and car savings, so I’d buy the car.

You’re doing all the right stuff. Your kids are going to school debt-free, and you’re going to have the house paid off in no time. Chances are you’re going to retire a multi-millionaire at the rate you’re going if nothing changes. If things get better, and most people’s incomes go up throughout their lives as a general trend, then you’re going to make and invest even more money. You could have $5 million to $10 million, dude. You’re going to be in great shape!

 

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