How much Debt to income do you feel is a safe amount

[Astephens94]

Here's a thought - if you went from spending 35 - 38% of your after tax income buying an M5, chances are you can financially handle it.

Congrats on the car by the way!

[jokergerm]

Originally Posted by Astephens94

Here's a thought - if you went from spending 35 - 38% of your after tax income buying an M5, chances are you can financially handle it.

Congrats on the car by the way!

Yea 38% after all bills and food and all nessesary life costs, like cell phones, health insurnace, power, hay for the 4 horses, house payment, car insurance etc etc

[John 070]

Anybody with a pulse can get 1.49% from his credit union, even for 72 mos. 1.49% is 1.49% more than some folks would like to pay.

Sure, we have xx,xxx in an Ally account earning 0.009, sure, we may even have 6 or 7 figures in a retirement account. That still does not mean you take discretionary income, "invest it," and borrow money to get what you were supposed to spend your discretionary income on.

What happened by early 2009? Sometimes I wonder if it's the 7, 66, and 24 crowd that gives this advice, or is it even worse, the CFP crowd. This is rhetorical, not necessarily directed at anybody.

[Greatdane84]

I think low rate loans are great. I feel a lot better "seeing my cash" and "seeing my BMW" And knowing I could have paid all cash. But if it ever came to it... I'd rather have both while I'm speeding away

[nogard13]

Originally Posted by Diablo335

I'm a financial advisor...

After taxes...

First set aside $ for all medical expenses for the year (co-pays, deductibles, premiums, etc.)

Second set aside at least 15% into long-term savings (IRA, etc.). More if you are saving for a house or to pay for kids' college.

Live off the rest.

I agree with this statement. We live comfortably on my salary and here are our number (After Taxes):

Monthly Fixed Expenses: 39% of Net Income
Savings (including retirement): 19% of Net Income

That leaves us 42% of our net income to play with. Of course, this doesn't include food, clothes, taking the wife on a date, etc...But my bank account grows every month so we're not spending all of our 42%.

IMHO: go for the M5. You can't take it with you and as long as you can meet your obligations and retirement goals then you're in the clear.

[N55]

60% of my income goes straight into my savings/investments. Other 40% pays for everyday living expenses and self desires.



I would say NOT to go with the M5. You said it yourself, you really do not need a new car, but rather WANT a new car. Everybody knows cars are generally a terrible investment, especially buying new off the lot. Wait it out and pick it up used in a couple years. Cars depreciate the most within the first 2 years, far greater than year 3-4 of ownership. Let someone else take the hit for the first 2 years.

[Drrncour]

Originally Posted by 335dFan

Pay cash. Forget about debt.

Same here, only debt I have is mortgage. Save and pay everything else off in cash.

[ericfox11]

Originally Posted by kfriceman

I love the comments about the financial advisers "skimming 1-2% off the top"..........that's how they get paid....sheesh....financial planning is not amateur hour.....I'm not interested in doing it myself, so I have "my guy" do it for me and pay him accordingly....this has served me quite well.....and yes I know just how much his services cost me and I'm OK with it.

-Kevin

You love the comments stating the truth that financial advisors take some off the top and that each individual needs to weigh whether or not they need a financial advisor and know the fees before they get started? And I even clearly stated that for most people a financial advisor makes sense.

If you really knew what all your financial advisor does, you probably wouldn't agree that it is worth the potential 100s of thousands of dollars you pay him.

Thanks for calling me out for giving fair advise though.

It's like changing your own oil vs taking it to a shop. If you want to learn to change the oil yourself you can save money doing it. I fall in the other category on this one though, and have someone else do it. It is up to each person to shop different shops and check their prices and weigh whether or not they think the extra $50-70 or so is worth it.

[dreamingat30fps]

Originally Posted by jokergerm

Ya i do ok, but yet i manage to spent it all. The more you make the more you spend, its a fact of life

So, um, don't buy the car.

[ericfox11]

Originally Posted by mike-y

a CPO bmw, lol. and keep your car for as long as you can after it's paid off. Just because you don't make over 6 figures, doesn't mean that you don't have enough funds to start investing/saving. You just have to be smart with what you have, and stay out of debt as best you can. $70k can go a long way if you don't have a bunch of monthly bills eating it up.

get out of debt, start investing/saving every month. Use an automatic withdraw, so you don't have to think about it. I started doing this 10 years ago, making less than 70k at the time, and was able to save over 10k each year without impacting my lifestyle. A little goes a long way, especially if you are young. Talk to an invester, there is always something you can do.

Agree on both points. I just bought the platinum warranty on mine so I wasn't hit with any huge repair bills (hopefully...)

[Diablo335]

Again, I'm an advisor ...

Don't pay an advisor/broker until you have enough money saved that you don't mind outsourcing portfolio decisions. Somewhere around 500k. In the meantime go to vanguard.com and stay away from advisors.

[jokergerm]

Well I leave tommorow to go check out the car. Took a week off
Should be fun

[Joekerr]

Originally Posted by fravel

My loan on my car is only 15% of post-tax income. Factor in insurance and it is 22%

You must be either a terrible driver, or a terribly unlucky driver to have been caught so many times?

So if insurance increases your payment from 15% to 22% then that must mean you are paying almost half your car payment per month in insurance?

If you have an 06 330i...my guess is the loan per month is $600-$700? Just a guess. That must mean you are paying about $3,600 a year in insurance?

Edit: Or your car is much cheaper. But if you are paying that much in insurance I feel for you!

[bplewis24]

Originally Posted by Artmasterx

I am not 100% sure, but I think he means how much you expect the car to depreciate in actual value. Probably not the depreciation an accountant would use for tax purposes. More like looking at the resale values in 1, 2, 3, ... years to determine how much money would be forfeit by reselling.

Right, that's kinda what I was getting at. I realize it's not a traditional depreciation schedule, but I'm wondering if there's a reasonable way of determining how much our cars lose value each year AND by each mile driven?

Side note, if you are forgoing any matching to your 401k, you should rethink the 30% allocation and put some towards your 401k to get the matching. If you don't get matching, some may suggest still upping your 401k portion unless you are saving all out for a house.

Good point. Maybe I'll look into putting more into my 401k. I've only been here for 1.5 years so the matching is very small (I think 3%) right now. I guess I just like the idea of a savings because there are no real penalties for withdrawing the money and changing my plans during any given month.

[KingOfJericho]

Most of my income comes in the form of annual bonuses so I'm easily at 100%.

[badazzm]

Rent, car, food and partying. Comes out to 65% of my income. 25% goes in savings. 10% sitting in checking. No debt. I should buy a house but I like where I live.

[Diablo335]

Originally Posted by bplewis24

How do you determine or estimate depreciation yourself? Do you use a schedule?
...The one thing I can't get a good hold on is how to determine car depreciation. It's nothing like fixed assets, building improvements and other things. Any ideas?

Just estimate. If it's a lease, it's easy. Difference between "cap cost" and "lease buyout at end." In fact, for any new car, use the lease analysis even if you're paying cash.

For a used purchase, you've gotta guestimate what you could sell the car for at the end of your planned holding period.

I just bought a 08 335i with 32k miles for $22k. Maybe I can get $10k for it in five years (I'm a low-mileage driver). That gives me a $12k capital cost over 60 months, or $200 per month. That, by my way of thinking, is the core cost of owning my car.

My actual ownership cost is more, of course (sales tax, maintenance, etc.). But the capital cost is the most important starting point.

[Malibu1]

Why do so many of you use advisors? I do not trust anybody with my money but myself. If they are so good at advisiz'n then why are they still work'n? Its easy to play with someone elses money.

[bplewis24]

Originally Posted by Diablo335

Just estimate. If it's a lease, it's easy. Difference between "cap cost" and "lease buyout at end." In fact, for any new car, use the lease analysis even if you're paying cash.

For a used purchase, you've gotta guestimate what you could sell the car for at the end of your planned holding period.

I just bought a 08 335i with 32k miles for $22k. Maybe I can get $10k for it in five years (I'm a low-mileage driver). That gives me a $12k capital cost over 60 months, or $200 per month. That, by my way of thinking, is the core cost of owning my car.

My actual ownership cost is more, of course (sales tax, maintenance, etc.). But the capital cost is the most important starting point.

Thanks man, useful info.

[ScreaM]

Don't belive in debt..I'm liquid.

[Mr. Liu]

yolo amigo. you work hard to enjoy the things you want.

[fravel]

Originally Posted by Joekerr

You must be either a terrible driver, or a terribly unlucky driver to have been caught so many times?

So if insurance increases your payment from 15% to 22% then that must mean you are paying almost half your car payment per month in insurance?

If you have an 06 330i...my guess is the loan per month is $600-$700? Just a guess. That must mean you are paying about $3,600 a year in insurance?

Edit: Or your car is much cheaper. But if you are paying that much in insurance I feel for you!

Haha, no, montly loan is $355. I'm paying $1200/yr for insurance for full coverage with a $50 deductible.