Budgets and New Cars

[Rustward]

We budget lumpy items on a per year basis -- car replacements $3600/year (probably a little high for us), home maintenance $5000/year -- ymmv. This is really just a SWAG. We don't actually take this lumpy item money out of the portfolio until we need it -- so it is in the budget, and is included in the withdrawal rate (currently 2.5% and projected to decrease as other income sources come online, unless we increase our spending, which is very likely). Right now we are sitting on about $75,000 of accrued home maintenance money, and the house needs all of it. Cars -- we are OK on for the next four or five years unless something catastrophic happens.

Edit to add: I just saw NW-Bound's post:

I would just take the hit to the portfolio total, and move on.

Not too different than a bad day in the market, in my view. In fact, you would buy a new car a lot less often than these bad market occurrences, right?

And this is a very valid, but different way to look at it -- if you normally see large day-to-day swings in your portfolio -- and who doesn't?

 

[foxfirev5]

We keep separate accounts for auto and what we call our HOA fees. The car fund gets a monthly $350 contribution and the house fund gets $750. This gives us enough for major repairs, property taxes, and eventual car replacement. Also, the two cars, two boats and two houses are not counted as assets. These are treated as lifestyle expenses and budjeted accordingly.

 

[Trawler]

We budgeted 500 month for car replacement in the projected retirement budget plan. Over the past six years of tracking expenses we have an operating expense/ budget and a capital/expense budget. Operating covers all reocurring expenses and the capital budget are one time or very low periodic for things like new car, computer, permanent home improvement projects, furniture etc. Last car we bought 2.5 years ago paid off over a period of 18 months as we had virtually no interest expense and took the expense as the checks were written. Our Current Operating expenses tend to be right at $45K and and Capital Expenses is $15K per year. We also tend to consider the Capital expenses descretionary as if thing got really bad when we are finally ERd that is what we could cut untill things turned around. We also think that if we spend less in capital budget we could spend more in operating expenses where travel and entertainment is.

 

[Walt34]

We just take the hit when replacement time comes, which isn't often. Prior to 2003, when we bought two new vehicles within six months, DW's 89' Olds Cierra was 14 years old and my '85 Chevy pickup was 18 years old. We planned for the replacement vehicles and saved ahead of time for those starting at about six years beforehand.

Now DW's '03 Buick is getting to 126k miles, the GMC pickup has 76k, and the '08 Suzuki C90T motorcycle is close to 20k miles. The bike is sorta half entertainment half transportation.

When maintenance/repair/reliability get to be issues we'll just buy a new vehicle outright as we saved the cash for that. I can see DW's Buick needing replacement in 5-10 years, the pickup I'll keep hopefully until I'm too old to drive, and the bike will be sold... I dunno, probably within the next three to five years. I'm 61 now so it's probably getting close to time to hang up the helmet.

 

[Midpack]

This is really just a SWAG. We don't actually take this lumpy item money out of the portfolio until we need it -- so it is in the budget, and is included in the withdrawal rate (currently 2.5% and projected to decrease as other income sources come online, unless we increase our spending, which is very likely). Right now we are sitting on about $75,000 of accrued home maintenance money, and the house needs all of it. Cars -- we are OK on for the next four or five years unless something catastrophic happens.

This is the key IMO, no matter how you attack it. I've projected what our required "lumpy item money" may be over the next 30-40 years and it's a considerable sum. Though we realize it's just our best guess, seems clear it's way too much to overlook WRT withdrawal rate over a 30-40 year period. YMMV

 

[rayvt]

the bike .... I'm 61 now so it's probably getting close to time to hang up the helmet.

You should visit Hot Springs, Arkansas in the summer. We have lots of biker bars and bike rally's. Never have quite figured out how we became a bikers mecca.

Anyway.....at 61 you'd be called a young whippersnapper. The average age of a hog rider & his old lady looks to be around 65.

 

[NW-Bound]

... seems clear it's too much to overlook WRT withdrawal rate. YMMV

True. So, I will be trying to stay with a lower SWR, like 3%. That extra margin, plus SS later on, should be enough, I think. Then, when the time comes to make the purchase, I may spend more if the market is doing well, or cut back if the market tanks.

 

[Texas Proud]

+1, what he said. I make sure that my budget is enough smaller than my income that sufficient money can be set aside for another car (should I ever decide to get one).

I will be in my 70's before I need to get another car, so I am thinking that this will be my last car - - but REWahoo has mentioned in previous threads that I may feel differently about that when I am in my 70's. I just don't want to be one of those old fogies who are a public menace when driving.

You might want a new one in your 70s.... my mom bought a new one when she was 90.... they do get old even if not driven a lot...

 

[REWahoo]

You might want a new one in your 70s.... my mom bought a new one when she was 90.... they do get old even if not driven a lot...

So do the cars.

My dad purchased his 'last' new car in his 60's, bought his second 'last' new car in his 70's and his final 'last' new car in his 80's.

 

[Midpack]

My parents are both approaching 90. They both drive, and Mom's car is about 2 years old, Dad's not much older. Fortunately they don't put many miles/year on them any more, they realize they're not safe on the roads anymore, and neither of them will drive at night. They increased their auto liability insurance drastically several years ago at the recommendation of an attorney.

 

[martyp]

Whenever I finish paying off a car loan I continue to put the same amount into our general joint savings account. After 3-4 years we generally have enough to put down about half the cost of the car and we take a 3-4yr loan on the rest. In our budget there is a car payment line item. So either I am paying off a loan or saving for the next car. The amount is about $450/month.

I recommend that you take the hit in the month/yr that you spend it and then keep track of paying yourself back. While psychologically it feels bad to see such a bit hit on your budget, you can compensate knowing that you are paying it back over time. If you can't afford to pay yourself back then you can't afford the car and then its a one time withdrawal from you retirement savings.

 

[Finance Dave]

I do the math like this....

Average car cost $28k
We keep a new car 7 years (84 months)
$28k/84 months = $333/month

I budget that amount.

Obviously there are other costs like insurance, gas, maintenance, but that's the same for any car and I figured you were trying to get the "lumpiness" out of your budget.

The very first time, you save $333/month until you can afford the new car....and after that the fund will always be replenished so long as you continue saving that amount.

 

[FinanceDude]

I had to touch a tad of buff this year...

My my...........

 

[bbbamI]

My my...........

Finally....a nibble!