Now that we’re getting back into the swing of things with jobs and not vacationing nine months a year (poor us), it’s time to really test ourselves against the money rules I always push. Primarily, how much car can you afford and how much house you can afford.
That’s right, we’re about to experience two major “reintegration” expenses as we buy a second car and eventually buy our next house. Before we left for the trip, we sold my car so we only have my wife’s Toyota 4Runner which now has 170,000 miles on it. We also sold our house in New Orleans, and we’re currently posting up at a relative’s old house in a small town in Oklahoma. As much as we actually enjoy the simple life, we’re quickly getting pushed back into the real world as my recent promotion requires us to move to Austin or Dallas.
Our Next Car Purchase
We have some basic requirements for our next car based on the things we like to do. Basically, we want a great road tripping car with good gas mileage. It needs to be big enough for our large dog to ride around with us (Lucy), and we want an all wheel drive to handle Colorado winters (for visiting and someday living there).
If you knew that my wife’s from Boulder, you can probably guess what car she wants… just think about it, what’s the state car of Colorado… that hippies drive (no offense, Susan)… and that you always see dogs in… Oh yes, she wants a Subaru Outback! I fought it for a long time because I considered driving around in a station wagon as “giving up on life”, but I think she has actually convinced me that it’s the right direction.
You know, they look pretty cool now, they have great gas mileage (21 city, 29 highway), and they’re perfect for pets. That’s right, I’m justifying it now because she’ll win in the end.
How Much We’ll Spend On a Car
Although we may not be in agreement on which car to get, we are in agreement to follow the 20% rule. If you haven’t seen the rule before, you basically calculate 20% of your annual gross income and use that as your top spending limit. For example, if you make $50,000 annually, you shouldn’t spend more than $10,000 on a car. In addition, you should also buy with cash because it will further control how much you’re willing to spend. Let’s see how we’re doing on the rules:
1. Spend less than 20% of your annual income
Check, we’ll probably end up spending around 12-14% of our annual income.
2. Pay with cash
Check. As painful as it can be, we’ll purchase our next car with cash.
We’re excited about getting our next car, even if it is one that will have to grow on me. We’ve also worked hard to stay debt free and save money so we can make the purchase with cash. It’s a great feeling knowing that we’ll be able to do this.
As we finalize our decision on where to live, I’ll let you know if we follow the rule of how much house we can afford. Until then, we’ll continue to enjoy the big skies and wide open spaces in small town Oklahoma!