Submitted by ThrowawaySF__ t3_10q5wim in personalfinance
My household has fairly high income but also very high expenses so I'm not sure the typical 15% of income that I see posted around here really works for us. We have one fully paid off car already but really need a second one.
Our post-tax income per month is 24.5k. However our fixed expenses (mortgage, utilities, childcare, property taxes, insurance, and student loans are 16.1k per month). We live in a very high cost of living city.
Truthfully, I'd like to get the nicest SUV I can.
Well price it out, see if you have cash on hand to afford it.
If not, see what your monthly payment estimate would be, does it fit within your budget?
Yes? --> cool
No? --> consider something cheaper
I doubt you'll find anything outside of your budget, tbh but that doesn't necessarily mean it's a financially wise decision.
You do you though.
You shouldn’t be spending any money per month on a car with that income. You should be able to save up and pay cash for a car in a very short time.
And why are we considering financing a car when you have student loan debt? The math rules of money and finances apply the same to you as anybody else. You may have a bigger shovel than others with that income but that isn’t a free pass to have debt and accrue more debt
Are you asking for permission to buy a $175k car or wondering if you can afford a $35k car?
>However our fixed expenses (mortgage, utilities, childcare, property taxes, insurance, and student loans are 16.1k per month).
You fixed expenses don't matter if you're spending 100% of the delta, what are your total monthly expenses?
Somewhere between the two options. I would never spend 175k but I guess I'm wondering exactly how nice of a car I can get without being irresponsible.
Our total monthly varies but I would say that we average about 1k per month leftover. We just purchased a house about year ago so a lot of our expenses (maybe 2k) are going to one-time costs though, things like furniture, home repairs, etc. I would estimate that by June this year, we'll probably be able to save around 3k per month.
How do you only average $1000 left over a month? Your math in the OP shows you should have more like $8400 a month left. OR were you giving us gross income?
Respectfully it doesn't sound like you guys really know where your money is going currently. That's step one of figuring out what you can comfortably afford.
Personally, I wouldn't try to use all your remaining money, I would want a buffer. It's never a great approach to buying a new car or house by looking at what's the maximum amount of car/house can I afford. Given your username, income, and description of where you are, go buy a Model Y and call it good, you an very easily afford it and should fit right in. I'm unsure why your model 3 doesn't work from your thread 5 months ago. Lots of people in history have gotten by with a sedan and 1 kid.
Totally agree with you and sorry I wasn't clear.
The 8400 per month is after fixed expenses but doesn't include the unfixed expenses: groceries, kid stuff, restaurants, travel, vacations, gifts for family/friends, weddings, clothing, etc.
Re: one car vs 2, we used to be able to be on a WFH/hybrid work schedule but now I have to go back into the office.
Sounds like you should add a high end suv payment into that list of optional (I would out groceries on the necessity side) priorities and see where it falls.
We have don't have a very complete financial picture to really assess how much you can afford. IMHO part of having a higher income to me means less financial stress when things come up that might give a family with a more average income cause for great stress and concern. I think the easiest way to do that is to live under your means and have a more than adequate emergency fund.
Agreed (again).
My wife and I had a bunch of things happen all at once. We used to be renters in a much lower COL city with somewhat comparable income. Then, we had a layoff + a new job, so we moved, rented for a bit and then bought a house, and had kids basically all in the span of around 18 months. We used to live with essentially zero financial stress and while I'm fully aware that we still have it pretty good, we have never had to pay as much attention to personal finances as we do now.
15% is a "rule of thumb" now? I thought it was an horror statistic, like most people not having $400 in savings.
You're talking about monthly payments, right? Otherwise, I assume you would've reported annual income.
Yes, I was talking about monthly payments, sorry. And perhaps it's not a rule, I just did a search in the reddit task bar and saw it repeated in all the "how much car can I afford" posts.
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I didn't think that was an applicable rule for me because 15% of 24k is 3k+. Don't think I can actually afford that.
Yeah, that sounds insane. Are you sure it isn't full retail price of the car vs. gross annual income?
Do you have enough cash on hand to pay cash? Or are you looking to finance the full amount?
If you only have $1k left over, you don't have room in the budget for much. I live near you (I assume, based on your username) but make about $10k less in take home per month. I bought a new Toyota Highlander Hybrid 2 years ago right before the supply chain issues and interest rates skyrocketed, and my payment is $775/month at 0.9%. Nowadays the same car will cost $5-10k more at 5-6% interest. Add in gas, insurance and maintenance and you've already eaten up your extra $1k.
I would spend a couple months tracking your budget on exactly where the extra $8400/month is going (I know it goes quickly, probably $2-3k on groceries and eating out, $2-3k on furniture/stuff for the house, etc.) and what you are comfortable dialing back on to make a new car fit in the budget.
You nailed it. Those data points are very useful too. I think we would have to do financing. We have around 40k in a savings account that we could use but that's essentially our emergency fund.
Advice on the budget tracking is heard. I think that's a good idea. I'm not sure how much longer we can go without a second car but at least 2 more months of shared use isn't going to kill us. It's a huge pain to do 3 stops on certain days (daycare, parent 1, and then parent 2) but probably not as much of a pain as overspending on accident.
And whoa, 0.9%.
time_wasting_student t1_j6o0ijy wrote
Your remaining income per month is more than 90%+ of others in the US have as pre-tax income per month.
You can afford just about anything. The question is, should you? Would a $25k sedan from Toyota that will last 15+ years meet your needs? If so, would it be worth saving the rest of your money instead of using it for a more expensive car