How to Pay $276,000 for a Honda Accord

accident automobile automotive buildings
Photo by Will Wu on

U.S. automobile sales in 2018 are expected to reach about 17.5 million vehicles this year, roughly flat year over year. At the same time, U.S. household debt is back at an all-time high of $13.2 trillion. Despite a few years of belt tightening by consumers, they are back spending – and racking up plenty of debt to do it.

The same person that is financially in neutral, at best, still manages to trade in their lightly used car for a shiny new thing every few years.  The justification being that they can afford the $300-600 monthly car payment.

There’s probably not much analysis at all at the time of purchase, but little thought is given to the total cost of the purchase, interest paid on the loan, depreciating asset, and most importantly: opportunity cost of that money.  Instead, the usual scenario includes trading out of the used car into a newer car every few years and effectively locking into a big car payment in perpetuity.

But what’s that car really costing you? At a reasonable going forward equity return of 7.5% annualized over 20 years (hopefully do better, but who knows), investing $500 per month into a diversified stock mutual fund would compound to over $276,000.

A quarter of a million dollars for a mid-sized sedan.

Rate 7.5%
Periods 20
Payment $500
Future Value $276,865

But what about the cost of the used car, repairs, and maintenance?!

I’ve been driving used cars for years. Yes, there is periodic maintenance costs, but never have they exceeded a few months car payments if I had been driving a new car year in and year out.

This is simply to show you what you’re potentially missing out on. It’s not a car payment. It’s a quarter of a million dollars over time.

Your used car will cost money, of course, but keeping it as low as possible will pay off in the future.

There’s a cost to that new car feeling. And its a big hit to your net worth over time.


12 Rules for Money: An Antidote to Financial Chaos

man and woman holding check signage

I’ve been listening to lots of podcasts lately and came across Jordan Peterson, a Canadian Professor of Psychology and Clinical Psychologist, and involved in the so called intellectual dark web. Look it up if you haven’t heard about it yet; it is quite interesting.

Mr. Peterson’s recent book is called ’12 Rules for Life: An Antidote to Chaos.’  I haven’t read it yet and am not endorsing Mr. Peterson, though I have found the first few interviews quite interesting.  However, the book did give me the idea on what are the 12 Rules of a Financially Literate Life?

So, here they are:

12 Rules of Financial Freedom: An Antidote to Financial Chaos

1. Invest in yourself (get educated). You don’t get rich by saving nickels and dimes. You need to earn money over time. This doesn’t have to be $100,000 per year. There are plenty of stories of people earning $50K per year accumulating wealth with the right habits over time. But you will reach your financial goals a whole lot quicker if you focus on growing your income.

2. Monitor your spending habits (don’t spend more than you earn). Enough said.

3. Prioritize saving over spending. Develop a mindset for getting satisfaction out of saving as much as or more than buying things.

4. Understand compound interest. Not enough people understand the basics of compound interest and the impact it has on your investments over time.

5. Setup an automated bi-weekly investment plan. Setup a plan and stick to it. Remove the manual effort of saving and your future self will thank you.

6. Learn the basics of low-cost diversified stock mutual funds. Stop picking stocks. Select low-cost, diversified stock index funds. If you are older and want to reduce risk with some blend of bonds, go for it. Don’t complicate things. Stick with a few broadly diversified index funds.

7. Pay off your credit cards every month. Never, ever, ever consider leaving a balance on your credit cards. 16% or more interest is outrageous.

8. Don’t ever spend your year-end bonus. It’s your found money. You don’t even need it to get by month to month, so just sock it away.

9. Don’t buy more house than you can afford. This is tough for people in high cost of living areas (like many areas these days), but the less house you can reasonably buy, the better for your financial picture. Since you’re living here, there is understandably a bit more that impacts this decision (spouse, kids, schools, etc.)

10. Drive a used car. The difference in cost between a new and used car is enough to pay attention.  Even worse is trading up for a new car every three years and just keeping a drag of the big car payment into perpetuity. Buy used.

11. Max out your 401(k). Hit the limit. $18,500 in 2018.  10% is a rule of thumb but is not putting you above average. Save more, invest more.

12. Pay off your debts. Student loans, car loans, personal loans. Pay them off. There are differing views on what’s the best route to do this, but pick one and do it. Your debt is killing your financial freedom.


Those are 12 Rules that I just came up with. Let me know what your top few would be to move along the path towards financial freedom.