Dream Car Or Investment: Where Should Your Money Go?

Whether you should buy your dream car or invest depends on your financial situation, priorities, and goals. Some people may choose to buy their dream car because they value the experience and enjoyment it brings, while others may choose to invest their money for the future.

If you are considering buying your dream car, it is important to weigh the pros and cons and ensure that you can afford it without compromising your financial stability. It is generally not advisable to go into debt for a depreciating asset like a car.

On the other hand, investing your money can provide opportunities for growth and help you build wealth over time. However, it is important to remember that investing also comes with risks and there are no guarantees of returns.

Ultimately, the decision to buy your dream car or invest depends on your personal circumstances and what you value most.

Pay off debt first

Before you buy your dream car, it is important to pay off any existing debt. This includes credit card debt and student loans. Credit cards especially can have high interest rates, and it is in your best interest to pay these off as soon as possible.

Create an Emergency Fund

It is also a good idea to have an emergency fund in place before you start making payments on a dream car. This will ensure that you have some savings to fall back on in case of unexpected expenses or financial difficulties. A common guideline is to have three to six months' worth of living expenses saved up.

Save and Invest for the Long Run

When it comes to saving for your dream car, it is important to take a long-term view. This means setting clear goals and staying disciplined in your savings and investment strategy. Think of this process like investing for retirement, where you need to consistently put aside money over an extended period.

Buy Within Your Means

Ensure that you are buying a car that is within your financial means. This means having enough capital to make the purchase without dipping into your retirement savings or investment portfolio. It is crucial to have some investable capital left over for emergency expenses and to continue building your retirement nest egg.

Be Patient and Wait for the Right Opportunity

Lastly, be patient and don't rush into a purchase. Just as with investing, it is important to wait for the right opportunity. This may mean taking the time to find the specific model, colour, or features that you desire, rather than settling for something that doesn't fully meet your dream car criteria.

Remember, while it is exciting to consider purchasing your dream car, it is essential to prioritise financial stability and ensure that you are not taking on excessive debt or compromising your long-term financial goals.

Save and invest for the long run

Saving for your dream car might seem out of reach, but it is possible if you follow these steps:

Set goals

Set a goal, and remind yourself of it constantly. Saving for your dream car is similar to saving for your first home, your children's college fund, or your retirement. You need to sit down and figure out a game plan that will keep you on track to achieving your goal of dream-car ownership.

Saving enough to purchase the car of your dreams takes time. Think of this like Warren Buffett managing Berkshire Hathaway's investment portfolio. Buffett has a pretty concrete set of criteria that he looks for when purchasing a stock. You might see some small divergences from this model, but you'll find that the vast majority of Buffett's investments are founded on brand-name businesses. It's OK to deviate a bit because, as mentioned above, wants and needs can and will come up. However, you need to always have your long-term goal in focus so you can stay motivated to invest toward and save for your future car.

Buy within your means

Before you buy your dream car, make sure that you have adequate capital to make your purchase as well as handle other unexpected expenses that may come your way. You should always be prepared to expect the unexpected. You should have emergency cash on hand, and you shouldn't have to dip into your retirement savings or stock investment portfolio to fund the purchase of your dream car.

Understand that it's an investment in fun

Buying your dream car is an investment in fun. It is a chance to make a financial decision based on emotion. It is an opportunity to treat yourself and do something that your future self might be proud of.

Your dream car is a chance to make a statement about who you are and what you value. It is a chance to be impulsive and live in the moment. It is a chance to be bold and take a risk.

Your dream car can be therapeutic. It can be a stress reliever. It can be a source of joy and happiness. It can be an expression of your personality and your interests. It can be an extension of your identity.

Your dream car can be a reward for your hard work and dedication. It can be a symbol of your success and your achievements. It can be a testament to your commitment and your perseverance. It can be a reminder of how far you have come and how much you have accomplished.

Your dream car can be a source of comfort and security. It can be a familiar presence in your life. It can be a reliable companion on your journeys. It can be a trusted partner in your adventures. It can be a haven of relaxation and tranquility.

Your dream car can bring you closer to your family and friends. It can be a means of creating memories and sharing experiences. It can be a catalyst for social connections and building relationships. It can be an opportunity to spend quality time with your loved ones and create lasting bonds.

Your dream car can be an investment in yourself and your well-being. It can be a way to prioritize your happiness and your enjoyment. It can be a reminder to live in the present and make the most of every moment. It can be an encouragement to follow your passions and pursue your dreams.

Set goals

Setting goals is an important step in achieving your dream of buying a car. It requires conviction and constant reminders, as there will be numerous distractions and other financial priorities competing for your attention. Here are some tips to help you stay focused and achieve your dream:

• Understand your "why": Remind yourself why you want to buy your dream car. Is it the thrill of driving a high-performance vehicle? The sense of freedom it brings? Or perhaps it's a car you've admired since childhood. Understanding your motivation will help you stay focused when challenges arise.
• Set clear, measurable goals: Define what your dream car is and how much it will cost. Is it a vintage sports car or the latest model from your favourite brand? Be specific about the make, model, colour, and any additional features you desire. Knowing exactly what you want will help you create a realistic plan to achieve your goal.
• Create a timeline: Determine how long it will take to save for your dream car. Be realistic about how much you can save each month and set milestones to track your progress. This will help you stay motivated and adjust your plan if needed.
• Prioritise your goal: Your dream car may be a significant financial commitment, so it's important to prioritise it accordingly. This may involve cutting back on non-essential expenses, finding ways to increase your income, or setting aside a fixed amount each month specifically for this goal.
• Stay disciplined: It's easy to get distracted or lose motivation along the way. Stay disciplined by surrounding yourself with reminders of your dream car. Create a vision board, follow car enthusiasts' blogs or social media accounts, or attend car shows to keep your goal at the forefront of your mind.
• Celebrate milestones: Breaking your goal into smaller milestones will make it feel more achievable. Celebrate each milestone you reach to acknowledge your progress and maintain your motivation. For example, you could treat yourself to a test drive of your dream car or buy a die-cast model of it to display in your room.
• Be flexible: Life is unpredictable, and your plans may need to adjust along the way. Be open to alternative options or timelines if unexpected expenses or opportunities arise. For example, you may find a great deal on a slightly different model or decide to save for a little longer to afford additional features.

Don't buy your dream car if it means dipping into your retirement savings

You've worked hard for your money, and now you want to enjoy it. But before you go spending your savings on a new set of wheels, there are some important things to consider.

Understand that it's an investment in fun, not your future wealth

Unless your dream car is a vintage automobile or an extremely rare vehicle, it's probably going to lose value over time. So, if you're buying your dream car, do it for the fun and enjoyment you'll get from driving it, not as a way to make money.

Set goals

Buying your dream car is a lot like buying your first home or saving for retirement. It takes conviction and constant reminders to stay on track because there will always be other wants and needs that creep in. So, set a goal and make a plan to keep yourself motivated.

Save and invest for the long run

Just like investing for retirement, saving for your dream car takes time and discipline. Think of it like this: you wouldn't dip into your retirement savings to buy a car, so why not show the same restraint when it comes to your dream car?

Buy within your means

Before you buy your dream car, make sure you have enough capital to cover the purchase and any other unexpected expenses that may come your way. Don't dip into your retirement savings or investment portfolio to fund this purchase. Make sure you have enough left over to cover emergencies and continue building your retirement nest egg.

Don't swing at every offer

Be patient and wait for the right car at the right price. By taking your time and doing your research, you can find a car that meets your specific requirements without having to compromise or spend more than you intended.

In conclusion, while it's tempting to buy your dream car, especially if you've been saving for a while, it's important to remember that your financial future is just as important. So, before you take the plunge, make sure you've considered all your options and are confident that you're making the best decision for your long-term goals.

Frequently asked questions