Would Your Rather Have a BMW or Two Years of Your Life?

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by Ryan

In my previous job (the one I recently quit) there was a secretary who drove a BMW M3. The picture above is of a BMW M3. She would often make digs at me for riding my bike to work and absolutely loooovvveeedd to talk about that car. I began to resent her and her annoying affair with her car along with her narrow mindedness about my bike. However, in my head I had the last laugh because I had two more years of my life… here’s why.

The car that imprisoned the secretary

The secretary was making anywhere from $12-$15 an hour. Let’s give her the benefit of the doubt and say that she make $15 an hour, which comes out to a yearly wage of approximately $31,200. Lop off uncle Sam’s portion and you’re looking at around the $25,000 mark (rough estimate).

The sticker price on a new BMW M3 today is $58,400 (source). This means that the car is nearly twice as much as her gross income. Of course this is assuming she bought new and also didn’t lease, but the principle still applies.

She laughed at me when I told her I rode a bike to work. However, I laughed at her knowing she’d have to come to work everyday for at least two years to pay for her car that she probably used mostly to simply drive back and forth to her wage slave job. It’s not like you can take too many road trips when you live on an Island.

How much should the secretary have spent on her car?

This is a perfect time to mention a rule of thumb that Financial Samurai like’s to use. That is the 1/10th rule which goes something like this:

Spend no more than 1/10th your annual gross income on a car. If you make $50,000, buy yourself a nice second hand Honda Civic for $5,000. Multi-millionaires don’t spend more than 1/10th their annual gross income on cars, neither should you.

Now her ratio is about 20 times the recommended limit at about 2/1. Her car is nearly double her gross income and according to the 1/10th rule she should be driving around a $3,000 car, not a $58,400 car.

In the end time is money and the secretary decided her car was worth two years of her time or approximately 4,160 hours of work. I think I’ll be okay with being considered weird and ride my bike while enjoying my two additional years of freedom.

What do you think – Are “cool” cars really worth this much?

How much did you spend on your car and how much is it in relation to your yearly income?

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{ 22 comments… read them below or add one }

Financial Samurai February 13, 2010 at 4:42 am

Hmmmm…. a female who drives a BMW M3… that’s hot! 🙂

Well, it’s safe to say that if her income really was only $25-30,000, then she’s kinda screwed financially if that’s all that’s coming in.

I just went to the Benzo dealer a month a go to see how much I could get for Moose my beloved 10 year old SUV, and they said $1,500. So I said “up yours!” but test drove one of their new M3’s anyway. 🙂

Moose is probably worth $4-5,000 by private party, which is less than 1/10th my annual income. I love my full suspension mountain bike, particularly living close to Marin Headlands, which is supposedly the birth of the mountain biking movement!

Best, Sam

Tracy February 13, 2010 at 8:01 am

I drive a truck. It was 35k new and I put 10k down. The remainder amounts to less that one fifth of my annual pay. And I bought it with a no interest loan. The truck will last a looooong time and it’s job is to haul my horses around as well as getting me to and from work. When it is paid off, and I have saved a bit more, I will get a commuter car that gets better mileage and leave the truck just for the livestock.

It’s a plan with present and future benefit that I can afford. This has become the formula I apply to most things in my life.
.-= Tracy´s last blog ..Eco Fraud Friday: Please Don’t Poison The One’s You Love =-.

Ryan February 13, 2010 at 2:33 pm

I think in your situation it’s more of a necessity with your horses. I realize I only looked at this article from a black and white perspective (absolute values), but just wanted to make the point about the secretary and the out of whack ratio.

How’d you get an interest free loan?
.-= Ryan´s last blog ..Hiking Diamond Head and Snorkeling In Waikiki =-.

LeanLifeCoach February 13, 2010 at 2:41 pm

You know Samurai is a fan of Beemers so he would likely break his 1/10 rule for this lady.

I like the idea of a 1/10 rule of thumb but what if you only buy a new (new to you) car every 15 years? Or every 5 years? Seems to me that if you are paying cash, the longer you drive a car the more you can justify.

We paid cash for our current car over 12 years ago and broke the 1/10 rule by almost 50%. We will probably do about the same when we replace this car someday in the future.
.-= LeanLifeCoach´s last blog ..The Space Pencil =-.

JoeTaxpayer February 13, 2010 at 2:57 pm

Priorities, my friend.
When we bought our house our mortgage was just about 2X our income. My car was about 1/4 and should last 10 years easily. I bought it with cash, but I suppose if you look at it as 1/10, it took less than 3 years to save for it. Elsewhere someone asked what kind of windfall it would take to prompt one to buy a new car. You can drop any sum of money on me, a car wouldn’t come to mind.

Monevator February 14, 2010 at 4:11 am

I think the lord above that I never got into cars as anything as a route from A-B. It’s one of those temptations that looked kind of cool from an early age and always impressed a certain kind of lady, but you’re going to cough it up in the end and pay a huge price on the way. Like smoking!

Agree with Sam though – hot if I don’t have to pay for it/her! 😉
.-= Monevator´s last blog ..Weekend reading: Real estate realities =-.

Monevator February 14, 2010 at 4:12 am

Right, that comment was a mess. I *thank* the lord, not think him up – I’m not that egotistical – and I mean cars for me are just a way to get from A-B. Never post on a full stomach! Especially when it’s not just food you’ve been tucking away!
.-= Monevator´s last blog ..Weekend reading: Real estate realities =-.

drK February 14, 2010 at 8:36 am

I have no intention of “slamming” the secretary. However, from a psychological perspective, fancy cars and other expensive things are often a means to achieve some sense of social status. You can never really tell if you don’t know someone, but deep down she may not think much of herself. There are many possible reasons for this. In the end, those who seek affluence through material things are trying to boost their own ego and feel some sense of worth. As a psychologist, I tend to see things more along the lines of underlying motives and drives (no pun intended) than only the financial realities. Her behavior is both common and interesting. Riding your bike displays a much healtier ego, by the way. 8=) Visit me at http://www.dr-wekelly.com if you like. I don’t have a blog, but am considering it.

Frugal Babe February 15, 2010 at 1:30 pm

I drive a 1991 Honda Civic that we bought in 2003 for $2300. We’ve put about $500 into it over the last seven years, and it’s still cruising along. I only drive it about 300o miles a year (I ride my bike or walk anywhere within five miles of our home, which is most of the places I go), so it should last for a good long while. I would absolutely rather have the extra years of life – and I’ll spend them happily riding my bike!
.-= Frugal Babe´s last blog ..Getting Started In Bulk Food Buying =-.

Jeremy Johnson February 16, 2010 at 11:38 am

Wish I would have been taught financial sense like this when I was younger.

Unfortunately, my entire family (siblings), excluding my twin brother and I, struggle with credit card debt and paying much more than they should for their homes, cars, and food. It almost seems that they expect heavy debt and stress as a normal part of life because that’s all they’ve ever known.

I’m seeking the formula to help them see that if their spending would just get curbed they’d have so much extra money – think I will show them this article.

When I was in college, I didn’t even know the balance in my bank account. I just bought stuff and hoped the card worked. When I switched banks at age 23, it turns out I was $500 in the hole! The teller said you need $500 to close this account. I was able to eventually do so, but not after having my eyes opened to my stupidity. And even then, it’s taken me much later in life, my early 30’s now, to come up with a plan – actually putting money in my 401K, getting my savings account padded, etc…
.-= Jeremy Johnson´s last blog ..How To Be A Hot Nerd =-.

Lisa Irby February 16, 2010 at 1:26 pm

People get into so much trouble trying to keep up with the Jones’ and buying cars they can’t afford just to impress people they don’t even know or like. I have a nicer car now but before this one, I drove a VW Jetta (while I was making 6 figures). My friends used to ask me why and I told them because it was paid for and it works fine! LOL My personal rule is if I can’t pay cash for the car, I don’t need it. Great post Ryan!
.-= Lisa Irby´s last blog ..Making The Most of Your Free AdWords Credit =-.

Lisa Irby February 17, 2010 at 7:23 am

Yes, that’s exactly what I have Ryan! How did you know? LOL
.-= Lisa Irby´s last blog ..Making The Most of Your Free AdWords Credit =-.

LenciB February 19, 2010 at 9:56 am

Wow! I just posted about my need for a car yesterday and Well-Heeled has a link to this article posted on her site. I needed this, to say the least! Thankfully the car I plan on getting is not over 1/10 of our income. But I still wish I can just pay cash but 1) I’ve been without a car for 5 months (and saving!) and really is in my best interest to not continue without a car 2) I had a nightmare with a used car before and don’t see myself going that route again. Still debating though…

Moneymonk February 19, 2010 at 11:22 am

Acura paid for! not big on car debt
.-= Moneymonk´s last blog ..Friday Quote =-.

moneyhoneysf February 19, 2010 at 11:26 am

I too have a BMW of which I bought on an entry level salary right off from college. You can’t really blame her for spending that much on a BMW. But what probably annoyed you was her constant bragging about the car she has. I personally don’t tell anyone at work that I drive a BMW. Only to a few. But now that I make much more money, and this car is paid off, I think I can justified for my purchase many years ago.

And yes, for a secretary to show off her car knowing her salary is probably the lowest in the company is foolish. Not only are her monthly payments eating up her paycheck, the insurance on this car is pricey as well. And factor in gas fuel consumption, it can easily eat up 70% of her paycheck.

But yes, I love BMW and im a girl. I plan to buy another one in years to come. They are great cars to drive and saftey ratings are high.


Meg February 20, 2010 at 5:25 pm

IF I got that M3, I’ll take the BMW. In fact, I plan on having an M3 and, eventually, an M5 for myself…. Something about standing next to those cars just is intoxicating. The factory ITB set-up has always intrigued me, too. So much they can do, yet they’re so refined. And I can’t get an Audi RS4 in the States, so….

For me, cars ARE my priority. And no, I don’t care about social status, and it’s really damn annoying having people think we’re “rich” with three sports cars. They’re for us to enjoy, because we enjoy them. (I mean, I don’t question anyone’s decision to have kids, those are fiscally irresponsible, right? Not trying to be mean or whatever, just drawing a comparison.) I can only imagine what we’ll have to put up with when the first 911 comes home.

Now, though, if this lady’s trying to talk it up, she’s dumb… An M3 is not the be-all-end-all, let alone a stock one. And probably an auto too? Ugh, let alone that it sounds like she’s trying too hard to afford it. Color’s nice, though, I dig it. Car’s not to blame for her owner’s stupidity…

Kevin February 24, 2010 at 6:32 pm

I’ll quote Dave Ramsey “The paid off mortgage has taken the place of the BMW as the status symbol of choice”. Love that quote!!!!

Search Engine Viking March 1, 2010 at 9:39 am

I drive a BMW… of course it’s not exactly the high-priced roadster your secretary bought. Mine is circa 1790 (you can tell by the roof liner that’s falling down – that was an expensive factory option back then).
.-= Search Engine Viking´s last blog ..What Is SEO? =-.

Optimistic J March 15, 2010 at 6:05 am

Great post!

I agree, the secretary is most definitely enslaved to her car. I agree that, implementing the rule of thumb of spending no more than 1/10 of your income is a wise decision to take. Most don’t understand this! I drive a dodge stratus, it’s no BMW (of course) but it gets me around. I think you are smart for riding your bike and don’t let anyone tell you otherwise. It may be challenging on a rainy day but for the most part, it saves you money and that’s commendable.

harvestwages March 23, 2010 at 2:15 am

hi Ryan,
I agree with the “Financial Samurai’s” 1/10 rule. Most successful millionaire practice such. Yet, i would like to know if frugal living is all about pursuing dreams and financial stability, not happiness. What if she is aware of the consequences of spending more on a BMW. But yet she gets more satisfied having that BMW, being in debts, and starving to survive?
.-= harvestwages´s last blog ..5 traps that seducess great minds =-.

jim@Contract Hire October 27, 2010 at 10:48 pm

Though it looks that secretary is paying more in financial terms,but what about the psychological returns she is getting in terms of peer admiration,constant ego massage and sense of belonging to executive class. On the other hand ,you don’t have any such pressures so you are living your simple cash rich life ,which is good for you.So i guess,you both are right in your own domain .

ElleX February 19, 2011 at 10:59 am

I would rather have the two years of my life! I have never purchased a brand new car. I learned from my father to buy good used cars. I presently own a used car that I paid $2,100 for. It has 152K on it. And I still ride the bus or walk when needed. I am in the market for a bike or Vespa and eventually an RV. Once I get the RV, I want to sell the house cause I am tired of working for it. LOL

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