Are you driving an expensive car or saving money?

I would like to introduce you to two old childhood friends, Bob and Jack, both are 25 years old and have been working on their newly founded careers for less than two years. They both got similar paying jobs after college, the question is who is going to have a more satisfying life? The decisions you make today will have a lasting impression on your future.

Jack wants to celebrate his successful career by buying a $ 50,000 luxury vehicle, he has worked hard all his life and feels that he deserves to buy something luxurious for himself. You will do this by putting in the $ 10,000 you have saved and financing the balance of $ 40,000. Bob, on the other hand, has decided to buy a $ 7,000 used car and save the rest of his earnings.

Now Jack can drive around town looking like a big shot, then to all his friends’ houses to show off his new purchase, where everyone tells him it’s a safe trip. Bob watches as Jack receives all the praise for his shiny new vehicle, while Bob receives little, if any, praise for his older used vehicle. The fact is, Jack feels like a success and wants to show his success, at least for the first few years. However, let me break down this scenario …

Jack will spend the next five years paying for this vehicle, putting another $ 45,000 payment on it with interest. Once you’ve paid for it, you’ll probably get another 5 years off your vehicle until you decide it’s too old and you want to buy another luxury car so you can show off one more time. At this point, you sell your 10-year-old car for about $ 9,000.

So Jack, who was a big shot for the first few years, invested $ 55,000 and 10 years later he was left with just $ 9,000. I hope Jack had fun because it was a loss of $ 46,000. OH!

Bob, on the other hand, took whatever money he could afford and bought a modest $ 7,000 vehicle and over the same period of time invested the same money that Jack had used to make his car payments. This means that Bob started his investment account with $ 3,000 and made monthly deposits of $ 800 for five years. Of course, actually, Bob was smart and continued to make payments of $ 800 a month after the 5 years passed, but I just want to compare the same years that Jack was investing in his car until he decided to sell, this makes the comparison. just.

We know how Jack’s decision was. He came to look like the man for a couple of years, until his car, which was once brand new, is now just another older vehicle on the road. Your investment of $ 55,000 has been reduced to just $ 9,000.

But what about Bob? Well luckily Bob is doing a little better. Bobs’ initial investment of $ 3,000 along with $ 800 a month at a 10% annual rate of return has brought him $ 66,885 after just five years. But Bob isn’t done yet. It will allow that $ 66,885 to compose for another 5 years at a 10% annual rate until Jack sells his car.

Ten years after the initial purchase, Jack is happy, he just sold his 10-year-old car for $ 9,000 and heads to the bank while thinking about what kind of luxury vehicle he wants to finance next. However, what Jack doesn’t know is that Bob’s same investment during the same time period is now worth $ 109,137. Bobs made the decision to invest his money and used it cheaper because it has led him to have a net worth of more than $ 100,000 more than his friend Jack at the age of 35.

Fortunately for Bob, he kept saving and making good decisions beyond this example and is already thinking about retiring in the next few years.

Oh yeah, Bob was also able to sell his car for $ 900 at the end of the 10 years. Adding this to your previous total, you can now splurge and buy your next car for $ 10,000 in cash and keep $ 100,000 in the bank.

So, going back to the original question, who is going to live a more fulfilling life? If Jack answered, then this site is not for you. If you answered Bob, then you are in the right place and I have many more examples of how you can be assured for a better life.