When I got out of college, I thought I’d made it. I managed to get through an engineering degree and secured a good job. At the time, that was as far as my plans went. This was a career I planned to be in for a long, long time. So now, what do I do with all that money? I did start saving to buy a house, because that’s what a responsible adult does. And I would need a nice car, one that would show everyone I am no longer just a college student.
I made a huge mistake
I had a nice cheap Honda Civic that I bought in college, and after a minor fender bender, I made a huge mistake. Rather than fixing my car, I went out shopping. I considered cheaper options, then I test drove what was my dream car at the time – an Acura RSX Type S. At $25,000 it was nearly $10,000 more than the other cars I looked at, and it showed in the test drive. It handled like a dream. So without much consideration, I plopped down my $5000 deposit.
The car was everything I had wanted and in some ways, an affirmation to myself that I really had made it. I could drive this car around for another few years, then I would be making even more money, and I would get an even better car. I could have an awesome car all the time!
It only took a few months before I realized this car wasn’t much different from my Honda Civic. I drove it to work, usually in traffic, not on a test track. All that extra handling and power were just going to waste. Oh, and it took premium unleaded only…
Turning things around
A few years later, I was married, had a house, and started to realize I wasn’t saving as much as I wanted. I also started to realize that maybe I didn’t want to keep going to work forever. So the car went on the market.
I took a hit and sold the car for $15,000. After paying off the remaining loan balance, I was left with $5,000, a portion of which ($3,000) went to buying another old Honda Civic on Craigslist. The funny thing was, this new-to-me car was just as exciting to me as the brand new Acura. The same rush of excitement, and some nostalgia, for $22,000 less!
What also made having a $3000 car exciting was that it allowed me to drop my collision and comprehensive insurance. That alone saved $100 a month, not to mention the car payments that would have kept coming at $400 a month. So that’s $500 I was saving in expenses every month compared to my original plan of growing my cars with my salary.
Investing the money instead
Over the last 8 years, the Vanguard Total Stock Market fund has returned ~9% on average. So investing that $500 a month over the last 8 years yielded me around $70,000! That is not even accounting for the money I would have spent on extra expenses like premium unleaded gas and fancy tires.
Well, if I had $70,000 less saved up, and additional $6000 in expenses a year, I would not be sitting in my board shorts, outside on my deck, writing this article for fun. I would be very seriously wrestling in the mud with a bunch of engineers and program managers over the details of how some safety critical software would work.
Selling that car was truly life changing for me, and now I have to thank my past self for doing me such a huge favor. I still cannot believe I am doing whatever I want everyday and it’s because of decisions like this that my past self made. Thanks buddy!
Now we only drive cheap cars
I drove the Honda Civic for 2 years and decided that I wanted a hatchback. Whether it’s renovating a home or mountain biking, that extra space with the RSX’s hatchback was really nice.
I started looking around and ended up finding a used base model RSX for $6500. The car needed a little more TLC than I expected, but seeing as how I already went to meet the guy, I made an offer anyway. I had cash and offered $5000 for the car. The owner declined and we parted ways. The next morning however, he called me back to ask if the offer was still on the table. I ended up getting the car for the $5000 and sold the Civic for $2700.
So in the end, I sold my RSX Type S, and was able to save $70k toward early retirement. To top it off, a few years later, I was able to buy a much cheaper used RSX with the spare money from selling my first one. This one has less horsepower, but also uses regular gas rather than premium, and gets better mileage, saving even more money.
Sure it didn’t have leather interior or a premium sound system, and came with a few dents and scratches, but now I don’t have to stress out about getting a dent or worrying about where I park. The best part is that I don’t have to keep working to pay for this car.
I had some excuses that almost kept me from selling the fancy car, like the possibility of break downs, or being held back because of the used car. But I never broke down, and that can happen with a new car too anyway.
You can find nice used cars for less than $5000, and taking care of them, like waxing and detailing twice a year, will not only protect the paint, but also allow you to enjoy the car as if it were off the dealer’s lot. So get yourself a cheap ass car, and keep it nice and shiny. Your future self will thank you for the gift!