Your Wallet Has A Flat

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"Investing in a bear market looks dumb, until it turns into a bull market." - Your boy, Cade.

Your Wallet Has A Flat

In case you missed it, the biggest tweet of the Cade Invests era happened last week (linked at the end of this email). Since it was such a hit, I figured it was worth dedicating an entire email to show why cars are the #1 wealth killer.

Here is a recap of the thread, followed by some additional cost of ownership tips at the end.

Choosing to drive a $30k car vs a $60k car is a $400,000 decision.

Let me explain.

Meet our two characters, Mike and Shaun. Both have $12k set aside for a down payment. Mike goes out and starts shopping for a brand new whip. Shaun decides he is going to get something nice, but used.

Mike's car:

• Monthly payment: $880

• New off lot

• Purchase price: $60,000

• Down payment: $12,000

• Loan details:

  • $48,000

  • 60 months

  • 4.0%

Shaun's car:

• Monthly payment: $530

• Used

• Down payment: $12,000

• Load details:

  • $18,000

  • 36 months

  • 4.0%

First 3 years:

Mike makes his $880 payment. Shaun makes his payment of $530, and invests the $350 difference every month.

Next 2 years:

Mike continues to make his $880 payment. Shaun now has a paid-off car and invests the entire $880 these two years.

At the end of 5 years (assuming an 8% annual investing return):

Mike: $0

Shaun: $39,490

But here's where it gets crazy. Over the next 30 years, the $39,920 Shaun invested will grow to $397,000. That new car Mike wanted cost him over a quarter million dollars and likely years of retirement.

In the last 5 days, this thread has been seen by over 2,000,000 people. The comments were an interesting place let me tell ya.

Extra Car Tips

Depreciation:

New cars lose approximately 10% of their value the minute they leave the lot. So if you bought a brand new Mercedes Benz C Class for $50k, the moment that bad boy hit the pavement under your name it's value dropped to $45k.

One way to avoid this instant loss is to buy used. Below is a chart that shows the depreciation of cars based on their years of possession. By purchasing a car somewhere along the middle of the curve you save yourself from some of the rapid losses in value a new car experiences.

Financing

Introducing the 20-3-8 rule.

This is something I first heard about on The Money Guy Podcast. Here's how it works.

• 20% down

• Payoff the car in 3 years

• Monthly payment shouldn't be more than 8% of your gross monthly income.

This rule is a great way of determining what kind of vehicle you can afford to finance.

Car Insurance

Once a year make it a habit to negotiate your monthly insurance payment.

It's as simple as calling other providers and asking if they can beat your current rate. Now don't get on a call and say "GIVE ME A LOWER RATE!" Be polite, flex your good driving record, and mention another company is giving you a competitive offer.

This will put the ball in their court, though it doesn't always work.

Repairs & Maintenance

Learning how to make some basic repairs on your car will save you a ton of money.

Changing your oil, replacing tail lights/headlights, installing new belts, and recharging your AC, are just a few basic maintenance tasks that can be performed in under an hour.

Even for bigger problems, consider typing it into Google or searching it on Youtube. Chances are some gearhead has made a video showing exactly how to do it.

For example, I was having an issue where after filling up my truck it would have a hard time starting. After 15 minutes of researching the issue, I ordered a $12 part and shipped it to my door. Sure enough, there was a Youtube video on how to install this piece which took all of 90 seconds. I haven't had an issue with it since.

Now if something is seriously wrong, please, take it to a mechanic.

Cost To Own

In case you are curious, here's a link to a cool calculator which shows the true cost of car ownership.

Conclusion

Avoid letting your car payment be the reason you don't save/invest. Next time you are in the market for a vehicle remember this email, and the tips for reducing your cost to own.

Hopefully, you are now more aware of the opportunity cost associated with purchasing a new whip.

(PS this applies to more than cars)

Till next time, Cade.

Best Memes Of The Week

Enjoy this post? I'd appreciate it if you share it with friend. Thanks, you're the best.

What I liked this week:

Article - Moonlighting In The Spotlight - Why employers should embrace entrepreneurship and give more freedom to retain the best talent.

Podcast - My First Million - Mr. Beast on how to win, finding your creativity, and measuring success.

Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you soon!