Driving Me Crazy — Cool It On The Cars!

What’s crazier—this shirt or how much many young people are spending on cars?

Dave Chilton, The Wealthy Barber and former Dragon on CBC’s Dragons’ Den, talks about a mistake he sees many young Canadians making when it comes to their spending.

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I’m writing the updated version of “The Wealthy Barber” right now and to make it as impactful as possible, I’m studying a lot of younger people’s finances. I’m looking at all the plans that that group sends us, their budgets, their spending summaries, all of it. It helps me to see what people are doing well. What they’re struggling with. What they clearly don’t understand. What productive techniques they’re currently not using, et cetera.

People are very graciously letting me into a very private part of their lives. They’re placing their trust in me. And I never judge. Except now. What the heck are some people doing on the car front? Crazy what I’m seeing spent by a good number of folk on their vehicles relative to their incomes. Two weeks ago, a couple contacts at the office, Mo passes it on, and their careers are going very well—family income of just over $11,000 a month after tax—wow—but they argue they can’t save at all with a big mortgage, higher rates and the elevated cost of living. Hey, those are all very fair points. But when they share their mortgage payment, my response is: “Hey, yeah that stings but it’s not so high that, with your income, it should completely block your saving efforts.

Let me look at the rest of your spending summary.” I kid you not. $2,650 a month for two car leases. $2,650 a month! What?? I’m seeing this way too often. Not always to that extreme, but silly numbers. And remember, expensive cars, expensive insurance. Look it, I advocate “Pay Yourself First.” Take the money off the top and spend it any way you want after that.

How? None of my business. But c’mon, there has to be some level of common sense. You know, it’s so weird when I say to these people, “You’re spending too much on cars.” They almost always respond with, “Yeah, I know. You’re right. So dumb—we gotta stop doing that. It’s killing our finances.” I don’t even get pushback.

They freely admit that habituation also sets in quickly and the excitement of owning the car dissipates. Look it. Signaling. Ego. Competitive consumption. That’s what’s driving the purchase decision. And it’s not even subconscious. People are aware of it and they still do it. You know nowadays the inexpensive cars are really good.

So are two-to-three-year-old used cars. Geez. Look it, and I know a lot of you are being responsible here, but the others—you know who you are—COOL IT ON THE CARS.