When To Buy A Better Car
Alan asks when it's all right to buy a new car. Does he have to wait until Baby Step 7?
QUESTION: Alan on My Total Money Makeover asks when it's all right to buy a new car. Does he have to wait until Baby Step 7? Dave says no, and explains what a new car is defined as and when it should be bought.
ANSWER: You don't have to drive a beater car until you pay off your house. You would drive the minimum car that you can drive until you get past Baby Step 3, which is a fully funded emergency fund of three to six months of expenses. You take care of that after Baby Step 1, which is getting $1,000 in the bank as a starter emergency fund. Then comes Baby Step 2, where you pay off debt using the debt snowball. After that is Baby Step 3.
Once you've done that, then you move up in car. Don't move up to a new car, but save and pay cash for a better car. Don't buy a new car until you have a million-dollar net worth. Until then drive a used car, because that's what the typical millionaire does. We are going to model our behaviors after people who are in a position that we want to be in.