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Author: Eldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5056  
Subject: Re: The Millionare Next Door Date: 8/15/2003 3:09 PM
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I do have a disagreement with one of the points however. I've always made it a habit (maybe mistakenly so) of buying the best vehicle I could afford then driving it forever. Now were not talking Mercedes here but Nissans and the like. I'm not sure I'd put my trust in a vehicle that was purchased from a private individual though these people sem to think it's a good way to do things.

I would never call this a mistake.

You mention you don't put trust in a vehicle you would purchase from a private individual. Yes, one can mitigate the risk by searching for the vehicle's history with an outfit like Carfax, and getting it checked out by your own mechanic before purchasing, but there's still a risk.

One point I always try to keep in mind... there is almost no such thing as a universal financial mistake. What might be a mistake for some may not be a mistake for others. If you get peace of mind from the way you buy cars, then that's certainly worth a lot.

What really matters is funding those things that are most important to us, and perhaps not funding those things that are not most important. If buying a nicer car and driving it for a long time is more important to you than other uses for your money, then by all means, do so.

Can a Lexus or a Cadillac Escalade by LBYM and fit within a FIRE philosophy? You bet. It all depends on the individual circumstances.

I like to think of this in terms of opportunity cost. Every time we spend money, even a dollar, we are in fact saying that this expenditure is the most important thing I can do with this dollar.

When I buy a cup of coffee at Starbucks (which I almost never do by the way) I am saying, "I'd rather have this cup of coffee than put this dollar into my retirement fund".

Can a cup of coffee be more important? You bet.

Maybe my e-fund is sufficiently funded, maybe I'm contributing enough to my retirement or FIRE fund, and I'm on track to meet my goals... and maybe I really like coffee, it helps me ease into my day, and improves my mood when I get to work.

Or maybe I don't have a big enough e-fund, am behind plan on my retirement savings - and that cup of coffee isn't nearly as important as its other alternative uses.

So... a cup of coffee can be consistent with LBYM and FIRE for some people under some circumstances, and not be for others and other circumstances... but my ultimate piont here is this.

With every dollar you spend (or save), you are saying "This is the most important thing, the thing I'll get the most benefit from, that I can do with this dollar". If the most important thing is that latte, by all means, it's your money... do what's important to you. If the most important thing is a new Lexus, or putting that dollar in your retirement fund, it's your money, by all means, do it.

Just realize that that's indeed what you are doing.

So many people plunk down their money at Starbucks without asking the question, "Is this the best use for my money?" In fact, they are making a financial decision, they are saying that the latte is more important than advancing their FIRE goals, without even thinking about it - that is the real shame.

It doesn't matter whether you buy the latte, the Lexus, or anything else. If you want that latte, and make a concious decision - and come to the conclusion that it's more important than anything else, enjoy your latte!

Just so long as you are doing so with your eyes wide open - too many of us, every day, decide that latte is more important than FIRE without even realizing that that's what we are doing.

And that's the biggest financial mistake of all.

Regards,

Eldrehad

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