THIS Is What Keeps People Middle Class

[Music] brought to you by the every dooll app start budgeting for free today Micah is in Washington DC he hi Michael what's up hey Dave hey George thanks for taking my call sure what's up hey so a little bit about me I'm uh 24 I'm currently debt free um I make $80,000 a year I am currently maxing out my 401k and Ira I want to buy a car that cost $30,000 um however I'm I don't want to get rid of my current car it would just be a you know a play car it's it's a

sports car my question is is I have 30,000 in cash that I'm prepared to pay for this car um I'm not sure if it's better to put this in a different sort of Investment Portfolio or if it would be okay you know to to splurge and buy this car oh I see I thought you were calling the car an investment my face was turning inside out okay um so what's what the car I'm a car guy I love gears so it's a Nissan 370Z a sweet nice car okay and what your model uh 2019 okay

all right cool and what's the car you're currently driving worth um it's $133,000 okay all right um what's your income trajectory uh when would you be making 90 uh potentially maybe five years from now whoa so I'm you're gonna get $10,000 raise over five years uh well I'm I'm I'm projecting a promotion and then um how the military works when I move oh you're in the military okay correct okay now I understand okay yeah that would be more reasonable in the military most people are going to make a lot more in five years than a

$10,000 race I'm just that's why I went right right yeah okay well I mean here's the thing I love cars okay I drove here today in my Raptor I I I love big engines uh I like things that make noise I'm redneck I want a loud Muffler um all that right uh but the stupid things go down in value Like a Rock that's where Chevy got that like a rock okay they go down in value and that includes that sweet Nissan you're talking about and that includes my sweet Raptor they go down in value so

if you're going to build wealth you have to keep as small an amount and as possible going into things that go down in value so consequently we find millionaires driving very conservative used cars until they until they've got you know substantial money um and the one of the guidelines that George that we've developed here is to not have more than half your annual income tied up in things that have motor and wheels so adding up all of your little toys with motors and wheels uh do does it add up to more than half your annual

income because if it does you probably got too much in things going down in value while you're trying to build wealth does that make sense to you mathematically yeah yes like I mean it'd be like $45,000 total yeah and you make 80 and so you're over half yeah okay so um sweet car sweet car and you got the cash if you do it you can do it I mean you can afford it obviously but the warning is that you're putting money in the wrong places if you want to be wealthy got it I mean the

way you know someone's going to stay middle class is when they have two very nice cars that are obvious five6 $700 payments sitting in front of a middle class house exactly 100% those people are going to stay middle class until they break that habit it's just a it's a huge indicator yeah and the other thing to think about Micah is you got another set of insurance premiums to pay more maintenance and repair and so right now as you're in the military I don't know how much driving you're doing on these vehicles but I would consider

those because it is a toy and so this is not going to crush you if you do it but we're just saying it may not be the time yeah I I as much as I completely grasp what you're doing and I I and you know that's a great car I I as the guy on the radio that tells you to do things to become wealthy I'm going to tell you don't do it I'm gonna tell you wait a later when you've got more money and you're in a better financial position to do it you've got

the money to pay cash if you do it's not going to bankrupt you that is not what we're saying we're not being melodramatic I just wanted when I went broke when I was younger older slightly older than you I I I made the decision I'm going to do things that cause me not to be broke anymore and I'm going to identify what broke people do I'm not going to do that I'm going to identify what rich people do and I am going to do that and you know what we discover Tom Stanley found it first

in 1992 when he did did a book called Millionaire Next Door we discovered it again when we did the largest study of millionaires ever done in North America 10,167 of them we interviewed we did not find fancy cars it was Honda Toyota four-year-old used cars nothing that's going to turn heads at the stoplight yeah if they're millionaires now if you're a billionaire it's different you can drive whatever you want right but a billion is a thousand million it's a different thing scales yeah millionaires don't have that they don't have Jets millionaires don't have seven cars

uh millionaires don't you know that millionaires just have some money is all and and they have generally speaking conservative but reasonable Lifestyles and so we tell folks not to buy a brand new car until you have a net worth of of a million dollars if you do have a car you should sell it if it violates those things and or if you can't get it and all your Consumer Debt paid off within two years because of the stupid car and so if you got like a $50,000 car you make $60,000 a year you need to

sell it and you need to you know get rid of this $1,100 payment it just choking you to death it loses 60% of the value in 5 years these new cars it's brutal we went through a period of time on this show about a decade ago where the answer to every question was sell the car sell the car it was the sell the car show create your free every doll budget today the simplest way to budget for your life