Spending: The FI Way

​So we are on the path to financial independence and we’re stoked about it. We’re socking away money in our investments while reading and listening to tons of great content in books and on the interwebs. But there’s one burning question in the back of our minds.. Can we spend money while on our journey to FI? Absolutely yes we can. One of the great things about your own journey is that it’s not identical to mine. When it comes to your journey, you make the rules. You decide on what’s important enough to spend your hard earned dollars and what’s not. Let’s fire up an example and see where we land on the topic.

Say you’re sitting on your front porch sipping on a cold beer and you see a shiny red sports car drive by. You think nothing of it at the time, but then coincidentally, you see an identical one drive by five minutes later. Let’s look a little bit deeper into the driver of car one and the driver of car two and see if we can spot any differences, shall we? So it turns out that the driver of car one paid $35,000 financed over five years at 2% interest from a local car dealer. He took a look at his budget and realized he could afford to pay the note on his car, he just wouldn’t deposit as much money in his savings account each month as he normally does. He enjoys driving a newer car and because he goes through the buying and selling process every couple of years, he has paid what he believes is a fair price. That’s his thought process, done and done. Now let’s examine the driver of car two. He took a different path to obtain his ride.  After researching the make and model of the car he wanted on ebay and craigslist, he found a car that fit what he was looking for. He contacted the seller of the car directly and asked if he would take $25,000 for it (the seller also had a sticker price of $35,000, just like driver one’s car). The seller didn’t take kindly to this offer and responded with “no way.” This is when being on the path to FI really pays off. Driver two wasn’t in any rush to buy the vehicle and he planned on paying for the car in cash, as he is a very diligent saver. So he waited patiently as the opportunity to buy the car he wanted at the price he felt comfortable with hadn’t arisen yet. Well, interestingly enough after two weeks the seller of car two got antsy. He reached out to driver two with an email that got right to the point. “If you’re still interested, I’ll take $30,000 for it.” Still not in any rush, the buyer of car two responded and said “I can come up to $28,000 but that’s the end of it.” They struck a deal at $28K. Driver two paid cash, just like he had planned, no financing needed. He will keep the car for the next 10 years and will maintain it himself because he enjoys it.
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Some members of the FI community wouldn’t have purchased the car because it brings no value to them. That makes perfect sense. Driver two bought the car because he values it and the joy that comes along with being behind the wheel. Which also, makes perfect sense. Spending money on what makes you happy while on the path to financial independence is far from forbidden. What’s important is the practice of mindful spending. Have you researched the purchase and thought about how much value it brings to you? The two drivers in our example are completely different. However to the outsider’s eye, they both look the same. Mindful spending is a concept we talk a lot about here at DadBodFI because where we choose to spend our money matters to us. Don’t be afraid to invest in your passion be it cars or otherwise, just think it through.