I should start by saying that I am not financially independent. I’m happily on my way, but not there yet. I thought this post might be an interesting insight into how something generally considered to be amongst the worst uses of money… a new (gasp!) luxury (cringe!) vehicle (faint!) actually wound up being a good thing for me.
So how on earth did something so universally vilified within FIRE circles actually work out in my favor?
First, a little background. I grew up in a “wealthy” middle class family but had relatively little financial education. My parents made sure to educate us on the perils of things like credit card debt (“if you pay it off in full each month, it’s a free loan. If you don’t, it’s tremendously expensive”), but beyond that, there wasn’t much (no investing/budgeting/tracking spending). If we’re being totally honest, I would classify my family as “big income, big spenders” as typified in The Millionaire Next Door. (I am by no means trying to disparage my parents or my otherwise exceptionally privileged upbringing, just making an observation about how money was treated growing up.)
I attended the US Air Force Academy for college, which was an excellent financial decision as luck would have it. I got a world-class education for no money (though you do pay in other ways). I had a stable, guaranteed income for the next 10 years of my life (after pilot training). No debt. Various tax-free allowances. Free socialized healthcare. And a less-known perk of the military called a “career starter loan”–a 5 year loan of ~$30k at a low interest rate (usually ~1%). I invested some of mine (haphazardly at the advice of some USAA financial advisors), used some for a down payment on a new car (no, not the car referenced in the title…just wait), and loaned some to my siblings to help them through college. This is all relevant because…
Once I graduated, had my incredibly stable income via the military, and monthly payments to make on both my car and paying off the loan, I realized that I hated having monthly payments. I paid both off ahead of schedule. Even though the loan *on paper* is something I should not have paid off ahead of time (it’s pretty easy to beat 1% interest in the stock market)…but I just hated knowing that bill was due.
Fast forward another year and I find myself developing a mild interest in “affordable” sports cars (mustangs and the like). I’m a pilot, so I like to think I have an appreciation for high-performance things, even if I’m not particularly a “gear head.” So 25 year old me is researching these cars, and there’s one catch. Fuel. Efficiency. I’m very much an environmentalist and the prospect of getting a coupe or sedan with less than 30 miles/gallon fuel economy was just unacceptable, regardless of how nice the car is.
Enter this comic by The Oatmeal. That was it. Game over. Checkmate. You’re telling me I can have the acceleration of a sports car, the practicality of a 4 door family sedan, the safety of a tank, all with a pittance of the pollution produced by a gas guzzler? Count me in. There was just one little catch…those things are expensive. Real expensive. And remember the part about me hating to have monthly payments for things? I was not about to have a monthly car payment equivalent to a mortgage.
So there was only one thing to do: start saving. My Tesla goal, in conjunction with a hatred of debt, got me to start saving quite early in my career. I started with $500/month…enough to buy a Model S in cash after just 10 years. But 10 years is a long time, and I found that I really didn’t notice my extra savings impacting my lifestyle. So $500/month became $500/paycheck, which became $750/paycheck and continued to grow from there. I intended to pay cash for that thing when I finally had enough. So, the first thing that car did was get me to start saving early in my career and at a much higher rate than I would have otherwise, because I had a goal. Not the most financially savvy goal, but I was saving quite a bit anyway.
Next, somewhat fortunately, I had a general intuition that my .01% interest savings account wasn’t a great place to keep my money, and I had gleaned some basic knowledge of the stock market through coworkers. I knew that with a long enough time horizon market risk was lower, and that there was at least an opportunity to make some extra cash. I also figured that even if I did poorly, it would just mean a little be more time driving my perfectly serviceable Hyundai Elantra (great car, btw). So I started throwing my monthly savings into an individual brokerage account. I didn’t have the knowledge about index funds I do now, but fortunately my stock picks weren’t bad either. In the end, I essentially matched the S&P 500. The takeaway here, however, is that my ridiculous car goal also got me started investing my money. because I was already saving and my time horizon was long enough to stomach market variance.
A byproduct of my investing was that I also had regular conversations with coworkers about investing/personal finance. I wasn’t confident enough to dispense advice, but I enjoyed banter about what stocks people liked, how company X was doing on a given day, etc. Enter a man named John, who mentioned that I should check out a blog called Mr. Money Mustache. I must admit I dismissed it at first, strictly based on the name…but his stance on bicycles (ironic, given overarching subject of this post) was what sucked me in. Then I read The Shockingly Simple Math Behind Early Retirement and my whole world paradigm changed. I suddenly gained direction in my life. Instead of some nebulous concept of working until 65 and then figuring out some form of retirement, I had concrete dollar amount to strive for. I cut my spending way back, generally grew happier, and greatly accelerated my savings (no longer with the solitary goal of affording that Tesla model S). And thus I landed on the path to FI, all from the humble beginnings of trying to buy a car.
Some of you, especially those familiar with MMM, may now be wondering if I wound up following through with buying that new, expensive, luxury depreciation-mobile. The remainder of that story goes like this: my goal swapped from a model S to a model 3, as it met my expectations at a more moderate price point than the S. I put down a day 1 reservation around the time I started reading MMM. When I was finally notified that I could order one (about 2 years later), I had read quite a number of blog posts from reputable sources vilifying such purchases. Was I really willing to throw 1/5 of my net worth into something that frivolous? Could I delay my retirement timeline by about 1 year of savings? Conversely, was I willing to let go of a goal I’d worked toward for over half a decade? And a chance to support a company doing incredible good for the environment and climate change? Ultimately…
I did it. Some things are worth more than cutting a little bit of time off of my retirement timeline. Like occasionally supporting good companies, decreasing my carbon footprint, and the most utterly absurd and wonderful car I could ever imagine. I don’t regret it (though I’ll definitely look to the used electric car market in the future, once enough time has passed for that to be a thing.)
TL;DR: Young adult starts saving for a Tesla early in his career and happens to stumble into FI circles.
Edit: Thanks to everyone for taking the time to read and comment (especially with how long this was)!