Road Warrior Rule of Thumb
Chantel does consulting for a living and puts 4,000 miles a month on her car. Dave explains how she should analyze her vehicle situation.
QUESTION: Chantel in Tampa does consulting for a living and puts 4,000 miles a month on her car. She has a 2008 vehicle, and she owes way more on it than it’s worth. She is considering selling it, but she’s concerned about reliability since she’s on the road so much. Dave explains how they should analyze the vehicle situation.
ANSWER: Rule of thumb number-one is you don’t want too much of your financial picture tied up in things that go down in value. In addition to that, no one needs to have more than half of their annual income in things that go down in value. Otherwise, you have too much going down in value to try to get ahead.
When you wake up and decide you’re going to have a Total Money Makeover, can you be debt-free not including the house in two years or less? I think you can. Unless you have an expensive boat, you probably could also meet the other guideline.
The third thing is for you and people like you. You’re a road warrior. Whatever you drive, you’re destroying its value. From a business perspective, you need a car that’s reliable and a car that’s safe. You also want a car that’s reasonably comfortable. Having said that, I’m going to get the least car that will do all of those things, because whatever you drive is going to be worth nothing in about 20 minutes. You just budget—as a part of your world—car replacement every 12 months.