[Financial Advice] - Buy an e30M or just keep on the road of debt free?

[bimmerman89]

As most of you here on r3v, i too have the dream to someday own an e30 M3.
My wife and I are doing the 7 baby steps of Dave Ramsey program.

http://www.daveramsey.com/new/baby-steps/

We virtually have no debt besides our mortgage, and are working towards paying the house early.

So i'm struggling with the idea of whether i should keep on the plan, or buy my dream car and end up paying more interest on my house. Mainly the struggle is due to the fact that the prices keep rising and good examples of these cars are hard to find before 30k mark.

Any advise from fellow r3vers that are financially responsible is appreciated.

Cheers,

Jon

[Farbin Kaiber]

If you have the wherewithal to do so without touching your emergency account, nor your six months of expenses, and can procure an e30m3 without a loan or interest, I'd say yes.

[bimmerman89]

If you have the wherewithal to do so without touching your emergency account, nor your six months of expenses, and can procure an e30m3 without a loan or interest, I'd say yes.

Since being on this program, i would never buy anything by getting a loan. So essentially that would put our early payments towards our home on hold for a year, and pay for the M3 in full.

Now here is where this decision gets interesting. According to the Amortization calculator, 1 year of 30k in extra payments would save us $31,016 in interest during the term of the loan.
Not sure if my head is playing tricks on me, but one way of looking at it; my investment in the m3 would be the $31,016(deferred interest) + $30k (purchase price of investment) = $61,016 theoretically invested...if you look at it from a net worth perspective.

Does my analogy make sense?

Jon

[Farbin Kaiber]

So, if the e30m3 you end up with ended up doubling in value in a third of the term of the loan, (Which it looks like it just might if we reference the Porsche market...) you'd still have what could be assumed as 20 more years of the term to take advantage of extra payments. Or, you could spend the remainder of the term trying to pull the funds together later via the savings on the loan to find an m3 later in hopes that the prices level out or drop, right?

[G-Man the Visionary]

Once you have enough saved to last 6-8 months in case of loss of income, the goal isn't to keep saving, the goal is to enjoy life while you're young... My philosophy has never been to save a lot, it's been to keep making more... Who wants to be 60 in the car they wanted at 24??? Good luck!

[bimmerman89]

So, if the e30m3 you end up with ended up doubling in value in a third of the term of the loan, (Which it looks like it just might if we reference the Porsche market...) you'd still have what could be assumed as 20 more years of the term to take advantage of extra payments. Or, you could spend the remainder of the term trying to pull the funds together later via the savings on the loan to find an m3 later in hopes that the prices level out or drop, right?

Correct. At the current rate we would have the house paid off in 5 years. So what it boils down to is this:

Wait 5 years, pay off home ASAP. Become truly debt free! Then save for an M3 and purchase at those rates.

or

Delay payoff plan by 1 year, accrue $31,016 more in interest fees, enjoy an e30 M3 for next 5 years to an unknown final value. (level, rise or drop...who knows)

Jon

[bimmerman89]

Once you have enough saved to last 6-8 months in case of loss of income, the goal isn't to keep saving, the goal is to enjoy life while you're young... My philosophy has never been to save a lot, it's been to keep making more... Who wants to be 60 in the car they wanted at 24??? Good luck!

G-man, maybe more info would help you understand the decision.
If staying true to this plan, my wife and i would be dept free at 34 (32 for her). Staying on this plan also saves us roughly 130k in interest being deferred.

Now imagine being 34 and have virtually no debt. Would you still stay beside your philosophy if this was the scenario?

Jon

[G-Man the Visionary]

If I wanted to live in the same house forever... If I wanted to have no fun with my life... If I wasn't able to make 10-25% more year after year to pay it off in the same amount of time and have more income to enjoy instead of penny pinching... Everyone has their own way of doing things, and I completely understand and respect yours... Maybe if your plan were to start a business in 5 years and wanted to be free of debt so it's easier, that would be totally kick ass... I guess the problem is, I don't know you personally, so it's hard to say what you want in the future vs what you want now... 34 is a great age to be debt free, but the follow up is, when do you plan to retire and what do you plan to do when you retire?

[G-Man the Visionary]

I apologize, not to say you HAVE to spend money to have fun in life... That may have come out wrong...

[mrsleeve]

op. I agree with farbin, but I also hate debt, if it were me I would finish paying off the house, I dont think a e30m will in decent shape will appreciate to 60k in the 5 years it will take you complete your primary goal. I will be 34 in 5 days, we have not a penny of debt in a while now

Once you have enough saved to last 6-8 months in case of loss of income, the goal isn't to keep saving, the goal is to enjoy life while you're young... My philosophy has never been to save a lot, it's been to keep making more... Who wants to be 60 in the car they wanted at 24??? Good luck!

while I understand this logic, I tend to disagree, you keep saving at your current rates but dumping that saved income into other things, like retirement accounts, or other real assets or income earning avenues... If one has any intention of a traditional retirement, they better keep sacking away every penny they can, as its only going to become more and more expensive...

Personally I like to keep about a years net income available and in liquid form on hand, but my situation is a little more unique than most when it comes to time between jobs and the boom and bust nature of my business.....

[bimmerman89]

If I wanted to live in the same house forever... If I wanted to have no fun with my life... If I wasn't able to make 10-25% more year after year to pay it off in the same amount of time and have more income to enjoy instead of penny pinching... Everyone has their own way of doing things, and I completely understand and respect yours... Maybe if your plan were to start a business in 5 years and wanted to be free of debt so it's easier, that would be totally kick ass... I guess the problem is, I don't know you personally, so it's hard to say what you want in the future vs what you want now... 34 is a great age to be debt free, but the follow up is, when do you plan to retire and what do you plan to do when you retire?

I apologize, not to say you HAVE to spend money to have fun in life... That may have come out wrong...

G-man, no apologizes necessary, i understood what you meant. And we budget ourselves in a way that we don't penny pinch either...what's the point of life then?

The dream retirement would be to manage a handful of paid off real estate that would be bringing me passive income, as well as having a decent stable with some of my dream cars---one of course, the e30 M3.

So from 34 years old, till retirement would be the goal to both acquire real estate and build a stable of dream cars that i would enjoy. All debt free.
How much of that will be realized? Time will tell. But at least that's the goal.

Jon

[G-Man the Visionary]

you keep saving at your current rates but dumping that saved income into other things, like retirement accounts, or other real assets or income earning avenues...

G-man, no apologizes necessary, i understood what you meant. And we budget ourselves in a way that we don't penny pinch either...what's the point of life then?

The dream retirement would be to manage a handful of paid off real estate that would be bringing me passive income, as well as having a decent stable with some of my dream cars---one of course, the e30 M3.

So from 34 years old, till retirement would be the goal to both acquire real estate and build a stable of dream cars that i would enjoy. All debt free.
How much of that will be realized? Time will tell. But at least that's the goal.

Jon

Word... Sleeve, putting it to other things that will be retirement income is what I was wondering... Sometimes my communication skills are bad, lol... OP, now I understand a bit better... I admire your goals and hope you stay strong enough to stick to them and reach them... Best of luck... And if it's possible to get a loan for that car, rates are super low right now so you wouldn't be losing much to interest...

[slaterd]

Like what was mentioned before. If you can do it without tapping into savings and emergency funds then go for it and enjoy. But if you tap in and something happens you may have to sell the M just to pay the bills an just wasted the money and opportunity of using it as a tool for fun and as a possible investment.

[markseven]

What is your interest rate and term of the loan?

I feel your wisdom and discipline has earned you the leeway to buy THE RIGHT M3. If you are patient, buy the right car and care for it well, it will appreciate. The economy will dictate the size of the market (down economy = lower number of buyers), but it will be an investment.

If you wanted a new 7 Series, that would be a different story. Hehe.

[rturbo 930]

If it's only a 1 year difference, I'd get the car. No point in saving money your entire life and putting off doing the things you enjoy... there's no guarantee you'll be around to enjoy it.