That New Car Smell !!!!!

New Car Face

I have seen and read a lot of tweets and blog posts lately that say the key to being financially independent is never buy a new car. These posts are mostly filled with the typical writer talking about mistakes they made in the past. Although that is good, it is misleading and incorrect to attribute reaching or not reaching financial independence.

Assumptions:

Our hypothetical person for the sake of this post is 30 years old and is a college graduate. This person is single and makes just a tad bit more than the LA median salary of $62,000 LA Median Salary

I will list different scenarios. Some of them will be detailed and others will be self-explanatory.

Scenario A: Renting, credit card debt, student loan debt, and no financial strategy.

Do not buy a new car. Do not buy a car if you don’t need it. If you do need a car, buy a used junker that successfully gets you from point A to B. Self-explanatory that financing any sort of car, new or used, is absolutely not in your best interest.

Scenario B: Renting, no debt, contributing enough to get company match in 401k, 3 months emergency fund.

Do not buy a new car. Same answer as scenario A. Work on saving money to increase emergency fund to 6 months and contributing more to tax deferred investment accounts. Real Estate is tricky and we won’t get into that but decide at this stage what is more important, owning property or purchasing a new car. Either way save money for that goal.

 Scenario C: Renting, maxed out 401k, 6 month emergency fund, no debt.

Bi-weekly Gross Pay $2,500.00

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