Speaker 0 00:00:02 <inaudible>
Speaker 1 00:00:08 What's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
[email protected] let's. Jump into today's episode. What's up guys. Hope you're having a great day today. I'm especially excited. They were going on a little vacation next week. So I'm always good leading up to that point in time. So I drive a 2003 Avalon, so it's, I guess like say 18 years old. Now it's a pretty old car, but I think it's pretty nice. It's got a leather seats, heated seats. Actually. It's got a, uh, six, this CD changer, uh, big time. And, um, I think it might even have a cassette deck, a deck on it. Uh, it's definitely that old.
Speaker 1 00:01:01 So I have, I have the money to buy a nicer car, uh, and I'm often tempted to, to buy a nicer one, but so far I've not, I've not pulled the trigger on that and I feel really good about it. So today I wanted to talk to you about, about specifically that car buying decision and how that works. I think cars are definitely one of the most expensive things that people spend their money on. So it's definitely a big deal. It's a big part of a lot of people's monthly lifestyle and odds are you're going to spend a lot of on cars over your lifetime. And there's also a really big range in what people spend. First of all, I think it's completely fine to buy nice, fancy, expensive cars and be on the high range of spending. That's completely fine. More power to you if that's you.
Speaker 1 00:01:53 Um, I think the trick is as long as you're buying it for the right reasons and going in with a level head, I think that's the key. Uh, I think the problem is when people have, or make those decisions for the wrong reasons, or you have the blinders on, or, you know, you make a poor decision, that's not in alignment with your priorities. So that's what that's, what we're going to talk about today is, is going into that decision and, and, you know, making a good, solid level-headed decision as you approach your next car buy. So it seems like there's this trap that people fall into, and I think everyone is susceptible to it. Uh, you tend to tell yourself that it's going to be a practical decision on the front end. I think most people approach the car decision from a practical standpoint. It's like, you know, I need the car to get from point a to B or for safety reasons.
Speaker 1 00:02:44 That's typically kind of part of that initial mentality, but maybe you have your car and it's, you know, several years old and it's starting to have some mechanical issues. That's a lot of times what triggers the initial thought. Maybe I need to swap out cars. Uh, so maybe, you know, you have a small mechanical issue. You, you have to go get it fixed. It's kind of annoying. And like, eh, the car is starting to get a little older. Uh, and so you've all of a sudden started down the path of investigating alternative options for maybe upgrading your car. I think everybody's been there where they're at that point. So like I said, it typically starts out, you know, fairly practical, at least that's what gets you kind of at that point where you're looking for cars either online or, you know, you're maybe even going to car lots, but what a lot of times happens is as you start to go through the decision, there's all these other factors that get inserted into the equation.
Speaker 1 00:03:48 And a lot of times they kind of fly under the radar and you end up making the decision for other reasons than where you started in the practical frame of thought. I think the car companies really know this completely. I mean, look at their commercials. They really drill on the feel and the look of a car and how that, uh, conveys who you are as a person. I think they nail the whole like identity behind the car. So obviously it drives a car buying decisions because those car companies are really marketing to the fact of your identity and who you are as a person and what kind of car you drive and what people think of you and that sort of thing. So I think they know it's a huge factor and that it often drives your car buying decision. Where does that come into the equation?
Speaker 1 00:04:38 And how does that, how do you go from like, my car has mechanical issues to your car being part of your identity. That's, that's kind of where the, the, the psychology starts to, to kind of sneak into the equation. So cars are really expensive too, right? So like, just like an iPhone is really expensive, but these car companies kind of like Apple has they've figured out also how to blur the financial aspects of that car buying decision with things like 0% financing and monthly payment options and spreading that out. So it's just kind of that's. So this is where this psychology starts to get sprinkled in. I think everybody's susceptible to, as they start looking for the car, you say, you get on the car lot, you start looking online, you start to envision yourself in the car and you're like, man, I would look pretty cool in that car.
Speaker 1 00:05:31 Like I, or it would feel good to drive that car or maybe you take for a test drive and it does feel awesome. I mean, it's like this thing's got major pickup or it drives really nice. And so you you've already started to kind of emotionally connect to the car. Uh, and that's, that's the slippery slope. Um, it's not necessarily a bad thing, but, and I've, I've been down this path myself many times, but I think the happen when you have the blinders on, when you're not aware of it, that it's even really happening or you're telling yourself I'm doing it for practical reasons, you know, like you're, you're kind of going under the guise of I'm making a practical, economical decision. When in reality, you are making a decision about feeling good and, and driving a nice car, which is fine too. So I think the key though, we'll talk about is, is taking those blinders off and being aware of what's actually happening.
Speaker 1 00:06:27 So, like I said, I've had this, I've had this specific thing happened to me multiple times. Um, I'm still driving an old, old car, so what's, how's that shaken out. Um, I wrote a blog post a while ago about driving an old car. Um, I'll link to it in the show notes, but like I said, I've been tempted to buy or upgrade many, many times so not long ago, my wife was, um, you know, kind of bash kind of giving me crap out. My, my old car, which happens regularly and, uh, was saying, you know, you oughta get a, an SUV, we have three boys. She's like, you gotta, you know, a lot of stuff, you got to cart around, like you got the boys, you got their sports stuff. Like oughta probably start looking at getting an SUV now that they're getting older and, uh, upgrading.
Speaker 1 00:07:16 And so I'm like, yeah, maybe she's got a point. You know, that makes a lot of sense. Uh, I, you know, maybe I should start looking at cars. So, uh, so of course I start to go look online. I like to I'll look at cars online. So, um, I started looking and this is kinda how it goes for me. I start looking at, you know, maybe a Jeep SUV or something, and I'm like, you know, I need to be practical with this. I'm still kinda thinking about the practical side, but I'm like, I gotta be practical. So let's look at a use Jeep, but then I compare it to the newer version. And then I look at the options on the newer version and they're always more appealing. And then I compare it to maybe the year, even after that. And all of a sudden I'm looking at the brand new option and I'm like, man, that is way nicer than the older version.
Speaker 1 00:08:06 And so I have gotten, I've gotten myself in this situation where I'm like seriously considering buying a brand new SUV and it looks awesome. And I'm like, man, I would look good in that car. And it would drive nice. And it'd be much nicer than my current car. Maybe we can make this thing work. And so I, so literally I'm, at that point, I'm considering it, I'm going through the process, I'm doing the numbers, you know, I'm kind of going under that, still kind of going under the disguise of like, maybe this is a practical decision, but luckily I guess this is where my financial planner side kicks in. I'm like timeout, okay, let's take a time out. So I'm like, I need to be, I need to practice what I preach. So I tell clients this all the time, but I'm like, I need to take a time out and let's look at the numbers.
Speaker 1 00:08:52 Uh, and the priorities of this first, before I start go going too far down this road. And so that's when I pull out my old spreadsheet that I have. So I track the actual costs of driving of my car. I attract like the all-in costs and you can see it in the blog post that I wrote. But, um, basically the thing is like insanely inexpensive. I mean, it's, it's already fully depreciated pretty much. So it doesn't like decrease in value really at all. Um, I drive it. So, uh, so little that there's hardly any fuel costs. Insurance is extremely inexpensive, basically like all in and I'm talking like maintenance, repairs, insurance, fuel finance, all the taxes and fees and depreciation and everything all in it's. My car is less than a hundred, hundred dollars a month to drive. And so this thing is extremely inexpensive to drive.
Speaker 1 00:09:51 So when I start to look at the practical side and I'm like, okay, what is this are ultimately for like, what's the purpose of it for me? And so for me, when I really drill down on it, it's get from point a to point B. I drive very, very little, I drive like 2000 miles a year, so I don't spend a lot of time in my car. It's really literally just like, let's get, get me from point a to point B. And so when I start to get to this point, okay. Um, the numbers, if really it's just to get from point a to point B and you know, maybe drive my kids around, you know, from a practical standpoint, uh, the numbers are pretty important and I want to, I have a car that gets me from point a to point B and is as economical as possible.
Speaker 1 00:10:37 So, uh, in doing that, and so I can start to compare those, you know, a hundred dollars a month, all in costs of driving my current car to like a brand new SUV. And it's like, not even close, like the thing, these new cars, I mean, you're going to spend, um, you know, a thousand, a lot of times a thousand, right, or more per month, all in, you know, to drive the brand new car. So I'm thinking, well, shoot, you know, maybe my car is not so bad after all the thing runs. It's got, you know, it's got leather. Yeah. They're even heated. You know, I got, I got my CD player. I'm all good. And so, you know, it's, so that's the cycle I get in. Uh, whenever it seems like it comes up, I'm like, this seems cool. I want to get a new car cool in it.
Speaker 1 00:11:22 Like, Oh, hold on, time out, let's look at the numbers. Let's be practical. I actually really only need a car. You know, like 2000 miles a year, I drive it very little, uh, costs. This is very important because it's all, all it really is, is point a to point B. And the cost of driving my car is insanely low. Probably going to be impossible for me. As long as the things running, it's probably going to be impossible for me to ever find a car that's less expensive than my current car that I have right now. And so I end up where I'm like, I can't imagine buying a car, uh, after going through that exercise. But the key was to kind of take a step back, take that time out. That was the key. That's the key always for me is like, take a time out and say, okay, let's go through the priorities.
Speaker 1 00:12:07 And for me, if I do that, I kind of snapped back to it. And I'm like, my priorities are really not in alignment with buying a new car. And I typically decide on just keeping my car and feel really good about it. So how do you start to, how do you apply this to your situation? Like how do you, um, cause everybody's different. That's that's me, right. So I am not a car guy, like a, you know, and I drive very little in my car, so everybody's different. So I think the key, like I was saying is take the time out, uh, before, especially before you get into too far down the emotional side of buying, um, ask yourself, what is the true purpose of the car for you? And so there's a few big kind of key areas that come to mind of like maybe why you might have your car, like the key purposes of having a car.
Speaker 1 00:13:04 So I mentioned one of them getting from point a to point B, you know, everybody has that, some level of that, or how do you feel driving the car? Like there's a, a nice car, feels much nicer, drives, faster, comfortable, nice seats. There is a comfort level of having a nicer car or how do you look driving a nicer car? There is a, an added benefit to having a nicer car, like, or on the other hand, having an old crappy car, like, it can be embarrassing. Like you, you know, uh, my car made loud awkward noises for a while. Like it was a little embarrassing. I'm not going to lie. Um, so a new car at a minimum shouldn't have that problem and it might even make you look cool like that. And that's okay. Like, but how do you look driving a car? A lot of times that's varies by people.
Speaker 1 00:13:58 Like some people want to look good in a, in a nice car and that's okay. Other people are like, it doesn't, it doesn't bother me too much. You know, it's just, it's just to get me from point a to point B, reliability's often a big one for people like just having a safe and reliable car. That's a big deal. Um, that's important for me, or maybe you need four wheel drive. Like that's kind of a reliability thing too, is like, it's got to give me, um, where I need to go and not be breaking down or getting stuck also for a lot of people, especially lately, uh, environmental reasons. Um, people are, you know, electric
Speaker 2 00:14:33 Cars are a lot more popular
Speaker 1 00:14:36 Lately and some people have that as a high value priority is to have a car that's environmentally friendly and then fuel efficiency is kind of in that realm. But you can also start to bring in some economic reasons for buying a it's much more fuel efficient. A lot of times can come into play, especially for people that, uh, I drive a lot. So I think if you have, as you're going through the car buying decision, if you can take that time out and say, okay, let's think about each of these priorities and really like, you know, give it a hard look, how do I rank them? Like, how's that going? Change things. So for me, I'm like get from point a to point B is probably probably number one in my situation. That's really what it's about. How do you feel? I feel looking in driving in a car, how does it feel to drive and the car?
Speaker 1 00:15:29 What does it look like to other people? For me that's less important. And in fact, I feel like driving an old car has been kind of nice for me. It's like, I don't even care to the point where like, if you know, my kid throws a rock and accidentally hits my car, it really doesn't bother me at all. Like just, it's just not that big of a deal for me. And I kind of like that, but I guess that everybody's different. Maybe you enjoy the nice aspect of, of driving in a car. I have driven my wife's car is nice, slightly nicer than mine. I've driven nicer cars and it is, it does feel nice. It's a matter of how much time you spend in it and how much, how, how much importance that has for you. So kind of just go through those priorities.
Speaker 1 00:16:11 Think about it for your situation. Maybe think about it. Another thing I think is good is think about it from not only a dollars standpoint, like dollars and cents, but also like a house standpoint. So I could see, I mean, like, like I said, I drive 2000 miles a year. Like I hardly drive any. Uh, and if you're, if I was driving like 2000 a week, like, like my buddy, I was talking to the other day, he drives a 2000 miles a week. Um, her one to 2000 a week he's uh, in medical sales. And so in, if I'm in that situation, I'm thinking, well maybe, I mean the comfort B pro probably comes out much higher priority. I want a car. That's going to be like feeling good because I'm going to be spending a ton of time in it. Uh, also a fuel efficiency is going to become a bigger deal if I'm driving that many miles.
Speaker 1 00:17:01 Cause I'm like, you know, I can't have a gap. <inaudible>, you know, big, old truck, 10 miles a gallon driving a thousand miles a week. And then, and as you've gone after you've gone through all that, and you've kind of drilled down on the priorities, think about the alternatives. That's another thing before you buy the car. So in my situation, my car costs a hundred dollars a month, less than a hundred dollars a month all in. So if I'm apparently the new car say it is important for me to, to have a more fuel, efficient environmentally friendly car or something upgrading, and that car is going to cost a thousand dollars a month instead of a hundred dollars a month before you pull the trigger. I think about, you know, what alternatives could I spend? The $900 a month on that one? A lot of times gets me up too.
Speaker 1 00:17:50 I'm like, I'm always going to be like, well, I'd rather have a really sweet trip and spend the $900 a month then upgrade cars. So it's good. I think to think about the alternatives before you ultimately pull the trigger. Uh, but at the end of the day, uh, I think the big thing about going through this sort of exercise instead of just kind of going on a whim and buying and an emotional kind of trance. I think the key in going through this sort of process is that even if you do buy a nice fancy car, it's all good. Like you've gone through the exercise, you've thought it out really well. And you're buying it for the right reasons. And that's, that's not a problem. Like it's, it's actually, you know, it's great. You can enjoy the car. You, you know, you're buying it for the right reasons.
Speaker 1 00:18:34 You've considered the alternatives and that will help you sleep better at night and not worry so much and ultimately make, make better decisions. There's a couple of resources I'll link to in the show notes too. I think it's Edmonds yet. Edmunds has a five year cost of ownership calculator, which is really helpful for comparing, starting to get an idea of what the true all-in costs are of owning a car. Because a lot of times you don't quite realize what a car is actually cost. Especially if you buy a new car, like they depreciate so much in the very beginning, most cars do depreciate big time in early years. So this will help you to kind of get a sense of what the all-in costs are between depreciation and all the other, you know, fuel maintenance, all that other stuff. So I'll link to that, a tool or a resource in the show notes.
Speaker 1 00:19:30 Well, I hope this has been helpful. This is definitely something to kind of keep in your back pocket as you go about. Like, if you, if you start to get the itch, you're thinking about the car, you know, pull this out, kind of think through this exercise. That's the key is in your day to day is you're just kind of keeping this in your back pocket. All right. Well, I hope you have a great rest of your day and as always reach out with questions or let us know if there's specific areas you'd like us to dig into in the future. We'll see you next time
Speaker 3 00:19:59 As always, thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend. Also check out our
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