Alright, a question from Tay is up next. If I'm 30 years old and I'm making over 100K a year, but I bought a truck for 65K and owe 47K, but the best I can sell it for is 45K. So that was a lot of numbers, let me know if you need a refresh.
Yeah, read those back to me one more time. So, he's making 100K, mhm, the truck cost 65K, and he owes 47K on it, but he can only sell it for 45K. So the big question, that's kind of the setup. The question is, should I get rid of the truck, taking that $2,000 hit, and get something cheaper, because he's out of the rule. What do you think?
When I hear that you bought a $65,000 truck and you got a $47,000 loan, I don't know how long you borrowed money on it, but I do know that right now if you're following our 20/3/8
principle, you've got to put 20% down. You can't finance for any more than 3 years, and the total car payment can't be more than 8% of your gross income. If you finance $47,000 over three years at present interest rates, I'm not going to do the public math on that, but I bet that's a pretty cumbersome car payment.
Well, I mean, just take $47,000. That, if you divide that by 36, you can see that the payment is well over $1,000 a month. That's a big cut. Now, look, it sounds like you could only sell this vehicle, and this is, by the way, this is why we have rules like this, so you can see cars, despite what social media told you for the last two years, cars depreciate. They go down rather quickly, and probably the nicer the car, the more depreciation there is. I'm not going to go on a luxury car rant like I did in the past, but it is true. Between the high fuel costs, between the high maintenance costs, people finally reach their point, they get the heck away from this.
So, I know you probably put out there that you owe 47, the car is only worth 45, thinking that we're going to say that the $2,000 spread, that negative equity is enough to not want to sell it. But no, I think sometimes you have to take it on the chin, because if your payment is over $1,000 a month and you're already well over our 20/3/8
, without doing the public math, you could correct this within a month or two. I mean, because I think about the affordability of cars. You can go out there and get yourself a Toyota, Honda, you know, I'm thinking Corolla, Civic, CRV, RAV4, all those things depending on what your needs are. And you can do that for $25,000 or less.
Yep, I mean, you notice I didn't say $10,000. I didn't say a $5,000 car. I still gave you a very reasonable budget because you have a reasonable enough income that you should be able to afford something that's under $25,000 and make it work. And then the reason you want to do this, Tay, is because I want as much money. You're 30 years of age. If you want to know the money multiplier for a 30-year-old, it's 23 times. Meaning every dollar that you either save and invest or spend has the potential to become $23 at retirement. Now, realize, when you were 20, 10 years earlier, it was 88 times. So you can see that this is quickly on the descent. If you look at a 40-year-old, that number, that money multiplier only has the potential to become 7 times. So you, you, you could have another, you cut it by a third again down to a third. Don't waste another day. You want as much money working for you in your army of dollars, because you eventually want to own your life.
And you do not want to have this situation where you have a great income, that's a checkbox. You make, I think you said, 100 grand or greater than 100 grand. You've got the hardest part. You've got a big enough shovel to accomplish all your financial goals. So now it's on you to make the right decisions so that you don't shoot yourself in the foot from creating the abundant life that you should have. Right now, you're a servant to all the obligations for yourself that you've created.
You've created yourself a servant situation where you bought this car, and I don't know if it was a need or if it was just trying to look really cool to impress others or just a lapse in the moment. You've got to get away from that and recognize if you can just devote the next 15 to 20 years, not living like a miser, I'm not saying that, but just be devoted to the discipline so that you can actually let your money work harder than you can with your back, your brain, and your hands. You're going to have that great big beautiful tomorrow that I talk about. And look, I love that you're watching our content today, and I think this will just be a moment in time. And I look forward to you giving us feedback after you get rid of the monster truck and get into something a little more reasonable so that you actually feel really happy as you're driving down the road, because a paid-for car does drive great. For more information, check out our free resources