Time to Test Ourselves!

March 10, 2014 — 10 Comments

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

Time to test ourselves

This is what happens when you buy a Subaru, you pick up hitch hiking dogs…

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!

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10 responses to Time to Test Ourselves!

  1. I don’t own a car, so I have to say that I don’t follow this rule. In fact, I had never heard of it until today. I’ve heard of the 80/20 for sharing on Twitter, though! LOL

    Good luck with your new car.

  2. You don’t like my Subaru Outback? If I told you it’s a Legacy and is now over 6 years old and looks brand new?… would that change your mind? BIG LAUGH!!! When you have one and I know you will, you’ll fall in love with it. No?, I’ll take bets on that. It must be quite the adjustment to go from traveling the world to going back to a job and a promotion no less. Congrats (I think) by the way. So where will you land? Dallas or Austin? I can’t wait to see how it all goes with your plan. 🙂

    • Hi Susan – well, we looked at Outbacks this weekend, but I think we’re going to go with a Volvo after all! I’m sure we’ll end up with one at some point, but we really liked the used Volvo we found. We’ll probably land in Austin… and yes, I’ll take a “congrats” on the promotion 🙂

  3. Dan — You must be really good at what you do for your company to let you roam the world for 9 months and then promote you when you return. Good luck with your move. Look forward to what advice you offer to potential homeowners about how to finance a house. I’m downsizing myself in the next few months to extract some equity from my apartment and to lower my monthly expenses in a smaller place. When I tell people I’m downsizing, they look at me as if I had just told them I had a fatal illness. How could I live in a smaller space? Easy. I’d rather have the money and peace of mind.

    • Jeannette – the timing worked out every well on the promotion, and interestingly enough, I’m not sure it would’ve happened if I didn’t travel! Isn’t it incredible how people react when you talk about downsizing?? I guess they’re afraid it looks like you’re “falling down” the social ladder… but in the end, you’ll be much better off than them!

  4. Pick Austin! Though I’ve never been to Dallas, I have been to Austin. It’s definitely a cool city, and on the liberal side for Texas. It’s great you can stick to your guns about buying an affordable car. I think it differs depending on numerous factors. In Idaho, our house payment is ridiculously affordable, so that means we can splurge a bit more on car payments. Congrats on the promotion.

    • I think the only people who are telling us to move to Dallas or the one’s who live there! Austin definitely looks like a better fit for us, but it’s much more expensive and we have many more friends in Dallas… we only have a few more weeks to decide, so we’ll know soon!

  5. Congrats on the promotion! You may not be to keen on the car choice yet, but trust me it will grow on you. Now then Mr Money Guru – show us how managing money is done as we follow your updates. 🙂 So far you have done well. Traveled the world and not in debt!

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