Buying The $40,000 Toy
Paul wants to know when it's okay to spend $40,000 on a toy. Paul makes $130,000 a year and has other cars worth $5,000 and $15,000 each. Dave thinks he can buy the toy, but it's on the heavy side.
QUESTION: Paul in Grand Rapids wants to know when it’s okay to spend $40,000 on a toy. Paul makes $130,000 a year and has other cars worth $5,000 and $15,000 each. Dave thinks he can buy the toy, but it’s on the heavy side.
ANSWER: The maximum I think people ought to own on vehicles of any kind is about half your annual income because they go down in value, and you’ve got too much of your life tied up in things going the wrong way otherwise.
I think you’re at a point you can buy that toy when the house is paid off. It’s a little heavy considering what you make and the fact that you’ve got a paid-for home and you’re driving a $5,000 car as your daily driver. It’s kind of a weird balance, but that’s just a personal choice. It’s not destroying your wealth, so I’m not going to gripe about it one way or another. I personally would rather have a little better daily driver, but that’s just a personal opinion. That’s not a thing that I’m saying you’re doing something wrong financially. You’re tying up a lot of money in a weekender.
You’re within the guidelines, and you’ve done a great job with your money, so you’re in a position to be able to pay cash for it, and it’s not a big percentage of your whole life. That’s what we’re after here—that it doesn’t do damage to your family.