Whatâ€™s your rule of thumb about how much your car should be worth in comparison with your income?
Great question! My rule of thumb is that all of your vehiclesâ€”Iâ€™m talking about cars, trucks, boats and their Sea-Doo sisters, motorcycles, and anything else like thisâ€”should not total more than half your annual income.
Why? Itâ€™s because all of these kinds of things go down in value. You never want half of your income going into things whose value is dropping like a rock. You donâ€™t need a $20,000 car if youâ€™re making $30,000 a year. Thatâ€™s just stupid. Think about it this way. If youâ€™re making that kind of money, and I walk up and tell you Iâ€™ve got an investment opportunity that will turn $20,000 of your hard-earned income into $12,000 in just three or four years, are you going to take me up on the offer? If youâ€™ve got a brain in your head, the answerâ€™s no!
Now, Iâ€™m okay with it if you make $300,000 a year and buy a $20,000 car if you pay cash. Thatâ€™s like most people running out and buying a Happy Meal. Itâ€™s just not a big deal!
Do you ever reach a point in your plan where you stop budgeting or using the envelope system?
Iâ€™ve been fortunate enough to build a net worth of several million dollars, and my wife and I never stopped doing either one. We still sit down together every month and plan out a written budget. Every dollar is spent on paper before the next month begins, and we follow it exactly. And I can promise that were you to look in my wifeâ€™s purse, youâ€™d find one of our deluxe envelope systems, just like we sell in our office bookstore. She carries it with her everywhere!
We do these things because weâ€™re responsible spiritually for handling that money well. Those of us who are Christians call that â€śstewardship.â€ť We feel like weâ€™re called to be good stewards-good managers-of Godâ€™s money. Itâ€™s not a freaky thing. Itâ€™s just a matter of following Godâ€™s good advice and common sense.
I want that money to behave, and these things are some of the best ways Iâ€™ve found to make it do what itâ€™s supposed to do!
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