I saw this commercial where this good-looking guy brings his equally attractive wife down in front of their mini mansion. He has bought her a red upscale suburban type vehicle and bought a black truck for himself (Have you seen it?). And then she runs over by the truck and says, “I love it”. As she steals his truck, the reality of the situation hits me. How can she be so selfish? Obviously, the truck is for him! And by the way- what does this guy do anyway. Who can afford $120,000 worth of car for Christmas? I wonder what they were driving before- that both vehicles need to be replaced at the same time. But I digress in my envy.
Most of us are not in a income bracket where we can afford two new vehicles, but if you look at how much families are spending on vehicles these day, you would assume that many of us think we are living in the lap of luxury. That is till the bill comes due. Everyday I see families who have sabotaged their finances by buying too much car.
In a previous article we talked about how much of your budget to spend on housing and today we are talking about your transportation category. Our recommendation is 14% of your net spendable income (Gross minus Taxes minus Giving minus Childcare/child support cost). This 14% needs to cover
- Auto Payment
- Auto Maintenance
- Tags and Property Tax
I see way too many financial clients who have allowed their transportation budget to get way out of line. Two high car payment and all the trimmings put them in a category of stealing from the rest of the budget and they become what we call “car poor”. Meaning they can barely afford the gas to use the vehicle on a trip or worse they have to make drastic cuts in other critical areas of their lives to survive.
Our recommendation: Next time you are thinking about making a car purchase make sure and run the numbers before you make the purchase. Starry eyed spouses come with driving cars that your family can actually afford. Merry Christmas!