Why Did This Frugal Man Spend $52,000 on Car?

Here is our new car on its initial camping adventure shortly after taking delivery of it.

As I type this article, I am in the throes of purchasing a 2023 Tesla Model Y crossover vehicle, an extremely pricey luxury vehicle packed with excess. From all-wheel drive capability and faster acceleration than any Lamborghini to space for seven people and enough computer devices that it could function as its own Google data center; every element seems outright excessive and extravagant.

Update: Looking for an ongoing tracker page of The Model Y Experiment? Check it out at “The Model Y Experiment.”

After taxes and credits*, my net cost will come in around $52,000 – quite an astonishing difference from my Honda van that it will replace! Twelve years ago on Craigslist, that old classic cost me $4500; over its lifetime of service it traversed mountains, deserts, as well as helping rebuild homes within my neighborhood.

Why am I buying a car when my financial blog specializes in frugal living and anti-car culture rhetoric? Why am I purchasing one now when there are plenty of more practical cars out there I could choose from?

From my opening three paragraphs, it is apparent I am feeling self-dism and incredulity over this purchase. If you too are naturally frugal and share my beliefs on being frugal with regards to purchases like this one, perhaps some may see my actions as outlandish – you probably agree with my assessment that something must have gone terribly wrong here!

Frugality and healthy self-mockery remain two cornerstones of my lifestyle today; indeed they helped pave the path toward my early retirement 18 years ago and give me all of the freedom that now characterizes my daily existence.

Philosophy was also responsible for my procrastinating on buying an expensive car for four years despite all of the encouragement from friends, relatives, and people online urging me to treat myself more freely and enjoy myself more fully.

But I find comfort and reflection in revisiting a timeless motto every now and then:

“What brought you here won’t get you there.

How does that piece of wisdom translate to frugal living and enjoying early retirement?

One such story from my recent trip to the grocery store will provide context:

As I was strolling down the bakery aisle of a regular grocery store instead of my preferred Costco location for purchases like this, Dave’s Killer Bread prices seemed unreasonable: $6.99 instead of the $4.50 I usually pay (even at bulk stores this stuff costs roughly double!). I wasn’t even used to seeing such prices!

“DAMN YOU, KING SOOPERS!”

“Who are You to Believe You Are Selling Bread for $7!!!?” Was my response.

At first I engaged in what I called Grocery Shopping With Your Middle Finger: an inward battle within me.

Should I just avoid this scam?” “Should I ignore what they’re telling me and stay away?”

“Hmm… I wonder which other competing brands might offer any additional solutions?”

“What else could make an ideal breakfast alternative to bread?”

Thank goodness I eventually chose the correct option:

“Just buy some bread!” was his reply to him.

“Simply put, because no matter where life leads you in the future, there will never come a day where you look back upon your bank account and think to yourself “Hmmmm if only there were an extra $2.49 available… that would make my day!”.

That evening, when I returned from my shopping expedition and shared this humorous tale with one of my guests, he understood immediately; just like me he too had earned his retirement through hard work and disciplined frugality, and although his net worth far outshone mine he admitted having similar battles over spending.

This same friend regularly supports charitable causes and local schools with donations; when trouble hits or they need an investor for business ventures they are among the first ones to open their wallet.

Still he struggles with convincing himself to use an Uber instead of the bus which takes an additional hour longer to arrive at his airport destination.

Both of us came to realize we were being too frugal with ourselves and needed to come up with solutions, and came up with three plans which, hopefully, should allow us to have more enjoyment out of life savings while we still can:

Budget Plan. (Minimum Spending Budget.

Money Saving Account, is available.

Splurge Accountability Buddy.

Principle 1: Adherence to a Minimum Spending Budget:

Imagine that over time you’ve done well enough financially to amass an impressive fortune of approximately two million dollars through investing. For most people this would seem to be an enormous sum; that is exactly why this hypothetical person appears so wealthy! They seem like the picture-perfect success.

As it happens, most Mustachians I know with this level of wealth live very frugally despite this abundance. Their annual spending average is usually well under $40,000. Furthermore, most reside in mortgage-free houses while still enjoying side income from small businesses or multiple streams of revenue from multiple streams of revenue.

The 4% rule suggests that this individual would likely be safe spending up to approximately $80,000 annually from their nest egg, even without making further contributions or earning other forms of income.

Even with such an excessively conservative spending rate of just 3% per year, that still leaves roughly $60,000 of extra spending money each year – plus any side income, inheritances or social security income that adds up.

Therefore, an appropriate minimum spending level might be $60,000 annually for this person.

Most individuals know this fact but still claim they live comfortably while earning $40k or less annually.

But, if you watch carefully, you’ll still catch them smirking at things such as $6.99 Dave’s bread or the $14.00 Cabernet at the restaurant or driving around in an antiquated gas guzzler even when they would much rather own an electric vehicle instead.

And whenever they receive extra funds, their first instinct is to add it to an already excessive pile. Their money flow could look something like this:

Notably, while this person excels at amassing money through that big red arrow shooting money back into their bank accounts, their “fun stuff” arrow seems rather flaccid and without ambition.

Which makes for the perfect segue to….

Principle #2 – Create A Saving Account for Long Term Planning

Longstanding habits can be hard to shake, making it challenging to forsake their comfort zones even though intellectually you know there’s more money than will ever need spent.

Have you noticed how spending someone else’s money, particularly through an anonymous corporation, feels very different?

On a business trip, for example, when dining and drinking without seeing the bill might make you less worried about prices?

Make your money feel like someone else’s by following these steps:

Rebrand Your Main Bank Account as FREE FUN MONEY Money

Establish an auto-deposit of your minimum spending budget every month (if you feel as though you might currently be too frugal, make this at least $1000 more than what your current spending level might be)

Your sole permissible use for this new account’s funds is to spend or give away. These funds should be used both to cover necessities, like groceries and utility bills, but also indulgences like travel and dining expenses and generosity. One key rule should be observed here – no longstanding habit of diverting surplus to index funds can continue unchecked; once free fun money starts building up due to your out of practice spending habits it should become evident that something must change! Plus this could and should be fun! Now you can afford organic groceries even when their price seems exorbitant, dining out for dinner and ordering delivery when desired, surprising your loved ones with concert tickets or joining friends on snowboarding or beach excursions, even covering an entire group vacation so people who wouldn’t normally afford such an expense could come along too easily!

Technical Note: Some individuals have income or wealth levels so great that spending at a 3% rate would be absurd; an example being spending $25,000 monthly off an inheritance of $10M! You should still reinvest dividends while setting yourself a larger, no-saving-allowed budget so as to learn to be more generous – after all, life should be fun! It is more important that this process stops being so time consuming! The key here is just having more fun while being less stressed!

Principle #3 – Splurge Accountability Buddy

Many frugal people tend to gravitate toward one another. We share similar issues: while financially speaking we know there’s plenty available today, emotional attachments keep us stuck in old patterns of optimizing too heavily.

As soon as I enlist local friends who share similar habits to combat my own, we can collaborate in challenging each other’s decisions, calling out cheapness when we observe it, and cheering splurges when we know someone would appreciate them.

My wealthy friend from above is now much better at treating himself and his family to quality goods for the home, incredible vacations together and overall reducing his financial stress.

My friend Carl (Mr. 1500 Days) is thrilled with his decision to upgrade from his worn out minivan with an exciting Chevrolet Bolt electric vehicle – and is taking great pleasure from this bold step into the future!

And Mr. Money Mustache, after taking one final mountain road trip in his 23-year-old Honda van, will finally allow himself to purchase the Tesla vehicle that has been his dream for half a decade now.

Sunrise at our new “Friends Mountain Resort.”

Recent life changes (such as becoming co-owner of a fixer-upper vacation rental compound in Salida Colorado) has reignited my travel lust and made me realize just how much I enjoy exploring distant lands for visiting, mountain biking and group gatherings or my all time favorite activity of Carpentourism!

Calculation: How ridiculously costly is this car?

My experiment in spending more is now underway! With an annual cost estimate for my $50,000 car being around $10,000 higher than my former van was costing, its greatest expenses will likely include:

Subtracting approximately an 8% annual investment return: $4000

Depreciation on a car: an estimated average annual loss is $3000 over 10 years.

Increased premiums: $1000 annually.

Replacing those enormous performance tires when they wear out and possibly fixing up Colorado’s gravel mountain roads: this should add up to approximately $2000 more in expenses.

Since my spending deficit spanned multiples of $10k yearly, this decision represents an excellent first step toward rectifying my deficits. Furthermore, since primarily use my car for camping trips and long adventures around the country – its primary use will enable more experiences like camping trips, dream dates and traveling more frequently – this purchase should help me increase spending on experiences, hotels and dining out more regularly as well.

“These Wealthy Folk Are Driving Me Crazy – Why don’t They Donate Some of their Wealth To Charity or Me??”

Overall, I agree: our world has plenty of problems and the more fortunate you are, the greater should be your consideration of giving generously.

But, to be fair, people who frequently issue complaints like these online need to find something productive to do with themselves. While encouraging philanthropy through positive examples is great, but making people feel bad for not following your personal value system with attacks like this one are truly unproductive – we have seen enough.

One-sided thinking can also be counterproductive; two of my friends had given generously throughout their lives and over $500,000 had been donated in my case since starting this blog – yet still refused to allow myself the luxury of replacing that 23-year-old van!

Overthinking was contributing to my lack of spending power compared to donations made, leading me down an additional path of scarcity thinking: What will my meager expenditure compare with these larger numbers and do?, prompting thoughts like,

“Damn, this $100 dinner date seems extravagant but last year I donated 1 KILLING OF DONATIONS more, making the total expenditure 1 1000X MORE.” And then my fearful side would illogically jump in: “Nope and that means we will run out of money and end up as poor forever! Waaah waah!” If that happened I knew to reduce costs as much as possible in order to conserve.

There’s probably a happy medium here.

Yes – be a superbly responsible manager of your life savings!

And yes, be generous when giving to charity.

Yes, it is okay to save some of the money you earn for discretionary purchases such as buying yourself something nice or giving gifts to family and friends. No one views having some nice things as negative.

Spend that extra $100.00 and sit closer to the front of the plane instead of in its back if that makes your vacation experience better. Take full advantage of having free reign of walking FREE upon reaching your destination while the 49 rows behind you fidget with their luggage infuriatingly in overhead bins!

Even if it costs eight times more, purchasing frozen berries at Whole Foods might save an unpleasant second trip through parking lot hell.

As for me, it feels right to double flip the Autopilot stalk in my new Tesla and lean back as it effortlessly navigates even the highest mountain passes – never again having to endure wheezing engines, gear shifting noise or engine malfunction. *That era can never return.

Rest In Peace Vanna. 1999-2023.

Bonus details and links —

* How to dispose of an older vehicle:

Peddle* was recommended to me, so I took their advice. Within five minutes of entering details about my old Honda, their system provided me with an offer for $715 that day; later that same day a towtruck came and collected my old ride and handed over payment in cash – making for quite the entertaining experience! In keeping with the theme of this article I used that money towards dining out or treating myself to new clothing purchases – spending some of it even on myself!

* I later signed this blog up for Peddle’s affiliate program so if anyone clicks the link provided here it will benefit MMM.

* Here’s one useful strategy for more effective spending: Identify any negative aspects in your life that require improvements and focus spending to address those. It may sound simple enough but this delicate art form requires practice if it brings lasting joy.

Not simply alleviating hardship or challenge by hiring someone else to manage every aspect of your house; life satisfaction lies in facing daily obstacles head on and realizing significant accomplishments.

No need to upgrade things that already work well; for instance, one of my gourmet coffee expert friends suggested upgrading my setup at home so as to include on-the-spot roasting as well as fancy grinding and brewing equipment; yet since I already enjoy good-quality Costco-purchased coffee it would not make much sense investing time or money in changing it further.

But when something – whether a leaky roof that makes rain unpleasant, an extended commute that causes daily traffic congestion, or your body being less-than-ideal in shape – is regularly creating anxiety or stress for you, those things should likely be targeted as opportunities for change and improvement.

My car situation involved having two Nissan Leafs; both were great fun to drive but lacked enough range for travel outside the Denver metropolitan area. On top of this was my van; although not ideal in terms of handling or performance it made for great road tripping experiences because I could bring along any passengers I wanted; unfortunately however it had become increasingly unreliable, making long distance travel increasingly daunting and forcing me to skip out on certain opportunities altogether – missing out on life experiences along the way!

My lack of a long-range car was thus an ongoing source of negative stress.

Vanna gave me just what I needed – an unexpected transmission failure on a mountain pass during my return drive from Salida! Now, instead of feeling intimidated about road travel in coming decades, it actually excites me!

* Total Cost for This Tesla: $107,000.00

Model Y with options and Tesla fees: $53,630.

Subtract $7500 federal electric vehicle (EV) tax credit

Subtract $2000 Colorado Electric Vehicle tax credit

Note that this corresponds to an equivalent list price of $44,150 when cross shopping other cars).

Add $4674 of sales tax back into the amount due.

Add up Colorado new-car registration fees over three years: $3000

Net Cost: About $52,000 Referral Program: It’s back! By sharing a referral code (such as mine!) you can now earn $1000 off any Tesla purchase while gifting points that your counterparty can redeem against Tesla freebies as well.

As part of my article on Teslas and Model Y ownership experience, I created “The Model Y Experiment”. Here, I can share ongoing findings and answer Q&A about ownership experiences as they unfold. Although much will likely remain familiar from driving or renting Teslas before, as an owner I will get the opportunity to evaluate reliability, customer service quality as well as any quirks, modifications and upgrades I make myself.