One of the best ways to put more money in your pocket in retirement – or at any other time for that matter, it’s just more crucial for most retirees to be more mindful of their cash flow – is to be realistic about what you’re driving and what it’s costing you.

If your self-image is still attached to the kind of car you’re driving (and, for virtually all of us, it is or was), you’re paying a ton of money to maintain that image. Money, which in most cases, could be put to better use.

The second you drive a new car off the lot, you give away anywhere from 25% to as much as 35% of your money.

Look at the depreciation chart on your screen now.

That’s 72% gone in four years.

Add interest, insurance, maintenance, gas and repairs, and the cost of a new car are ridiculous.

[ad#Google Adsense 336×280-IA]If you spend $30,000 on a new car, in the first three years you give away 64% of it just to the magic of depreciation.

And if compound interest is one of the miracles of the world, depreciation is its curse.

Replace that car every three years over a 10-year period, which for car lovers is not unusual, and you just gave away $57,600.

If you have a $1 million portfolio and you draw 5% a year for it, $50,000, you just gave away an entire year’s income just in depreciation.

Most of us would rather die than give away a year’s earnings, but we throw it out the window every day for our cars.

My father’s advice to me about cars: Let the other guy pay the big depreciation. Buy used in the three- to five-year range and beat as much as 65% to 75% of the big loss.

It took a few years in the real world to realize he was right again. I didn’t own a new car between 1987 and 2012. I paid $5,500 for my last one, a 1994 Volvo 850, and I drove it from 2004 to 2012.

My total average annual cost for that car was around $1.73… I’m kidding, I don’t know the actual number, but it was pretty cheap.

And that is the point of this segment: cheap transportation – or at least a lot more reasonable than what I see most folks spending.

In case you’re wondering, 65% of $30,000 is $19,500. That’s $6,500 a year over three years, and I know you can think of more to do with $6,500 every year than boost your image.

And I have news for you. If your friends judge you by the car you drive, they aren’t your friends. Ignore them and keep your cash.

Good investing,



Source: Wealthy Retirement