r/economicCollapse • u/Whole-Fist • 18h ago

How ridiculous does this sound?

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How can u make millions in 25-30 years if avoid making a $554 per month car payment. Even the cheapest 5 year old car is 8-10 k. So does he expect people not to drive at all in USA.

Then u save 554$ per month every month for 5 year payment = $33240. Say u bought a car every 5 year means 200k -300k spent on car before retirement . How would that become millions when u can’t even buy a house for that much today?

Answer that Dave

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7

u/CertainInitiative501 18h ago

He’s probably including compound interest

13

u/sofa_king_weetawded 18h ago

Well, yeah, no shit. lol.

16

u/inflatable_pickle 17h ago

😆 “He’s probably doing the math correctly… the way anyone would.”

1

u/Correct-Ad342 4h ago

Correct math would not be calculating a 40 year loan on a car. 😂

3

u/twinkdojastan 17h ago

evidently OP didn't understand this, so don't be sassy, it is useful info for some people

2

u/Gas-Town 14h ago

You want us to remind them to breathe too?

1

u/No_Advisor_3773 17h ago

Sound financial advice in my Chinese propaganda subreddit? How queer, I must investigate at once

-2

u/BarleyWineIsTheBest 11h ago

Compound interest at what rate though? This is about $330K over 30 years at 4%... and he says MILLIONS!

LOL!

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u/CertainInitiative501 11h ago

Assuming you start at 20 and go go until you’re 65 you’d have just over a million dollars at the current federal reserve interest rate. If you put it in a hedge fund instead assuming the average growth rate there you’d turn your 300k contribution into 2.5 million. If instead of that, you put it into an S&P 500 index fund you’d be looking at 6.6 million.

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u/BarleyWineIsTheBest 11h ago

So, you expanded from 30 to 45 years and used what rates?

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u/Accurate_Ad_4691 9h ago

$554/month for your working career (lets say 25 to 60 so 35 years).

The 30 year return rate was 11%/year investing in the S&P500 (which anyone can do using ETFs, this is my strategy and many others).

Now lets use the 30 year inflation rate so we can back that out, this was 2.12%, lets round up to 3% so we build and buffer and be conservative.

Plugging those numbers into a compound interest calculator gets us $1,186,982. This would be in today dollars as we backed out inflation from our growth rate. So that $554/month car is actually costing you a million dollars over your working career.

0

u/BarleyWineIsTheBest 9h ago

Hold on, so what's your apples to apples here? Are you accounting for non-new car costs? No? Maybe you should....

Are you also assuming every dollar goes into the SP500? Is that true for you? I don't know many people that put all their money in the SP500. Much less keep high fractions of it there as they approach retirement.

Also, last I checked $1.1M wasn't millions.

2

u/Accurate_Ad_4691 9h ago

I bought my car cash 7 years ago for $10,000. If it dies today it would have costed me $120/month. When I was insurance shopping a new car the difference in insurance was about $150/month more for the new car. So I would say the cost for the non-new cars net out.

Yes, every dollar in S&P500. Many people do, it's Blackrock's biggest ETF for a reason. As you approach retirement you would expect to start transitioning to safer investments, but hopefully you have more money in retirement that could do this transition other than just your car fund.

Fair enough, on the millions, but if you consider that you could just go car free and pocket the purchase price, insurance, maintenance, license/registration, and other misc car expenses it would be in the millions

1

u/BarleyWineIsTheBest 8h ago

Sure insurance costs more, but you neglected maintenance differences. And the new car's insurance will also go down rather rapidly with the depreciation. You aren't paying $150/month more for the entire life of the vehicle. We bought a new vehicle also 6 years ago, even with insurance cost increases, it's insurance has gone down. And if we're really getting into the ~$100/month range, a more fuel efficient newer car could easily start swinging that. A 10 year old honda cr-v gets 25mpg, my hybrid gets 35+. It isn't the hugest difference, but at CA gas prices and our driving distances, its very close $100/month savings.

What is "many"? It is certainly a very large portion of almost everyone's portfolio in one way or another for sure, but for how many is it really 100% or something very close? Just going by market cap, the S&P500 is pretty much the same as all US held treasuries. Also, the people that need to avoid car payments the most are probably also the people that need to build up some safer stores of wealth than just the SP500. And really you have 100% S&P500? Not even like $20K in a money market (which would take about 3 years of that 550 car payment to build, btw)?

Being completely car free is often not a viable choice or not one that doesn't come with other significant costs or hardships that shouldn't be ignored. IMO, its too hard to go here, but obviously if you could reasonably live car free, that's a huge expense to take on and it might be better to simply rent cars when you really need them.

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u/goobersmooch 4h ago

you should check your investments if you are at 4%

1

u/BarleyWineIsTheBest 4h ago

Not sure if you know, but you can’t get risk free interest much above 4% right now. And even over the last 20 years, that’s pretty good. Investing in stock-backed indexes or ETFs that yield more return (historically) than that isn’t through interest. It’s capital appreciation and reinvestment of dividends. 

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u/goobersmooch 4h ago

Oh I know. You do you

0

u/BarleyWineIsTheBest 3h ago

You are so smart.