European Car or Europe? Where does your budget take you?
European Car or Europe?
There are a few things we’ve learned in this business that almost always hold true. One is that tenants will drive a newer, nicer car than we do. To the point that after one of us shows a home to a prospective tenant without the other, the one of us who wasn’t there will ask “did they have a nicer car than us”? If the answer is “yes” then we always joke that they’ll be a perfect fit. And we later see many of their financials with their application. We see when their car payment is literally higher than the mortgage on the home they are renting. And the rent is higher than the mortgage payment too!
We watch those we admire and we emulate them. This is how we learn. I see investors who are pretty frugal. We used to joke that the more successful an investor was, the more “homeless” they would look. While this isn’t completely true, when I find a hole in a pair of pants, I sometimes secretly hope that maybe “IT” is happening to me! But alas, I haven’t yet earned the right to dress like a homeless person (at least intentionally-keep your comments to yourselves).
The things we learn from these different groups of people are about priorities, values, and choices. I watch them to see where they are headed and how they are getting there. I prefer the route the investors are taking by and large. But I have an admission. I like vans. I feel better just saying it. I mean, not like kinda like them; I am slightly obsessed by them. Particularly the Mercedes Sprinter Vans that are super expensive. I’ll save my rationale for another post but I think they are super cool and functional and I don’t care that it’s uber nerdy. But these things are expensive. I also like travel and time with my family. We have chosen to put travel above most “things”. In fact, most of the things we spend money on are in support of travel. But those are just our priorities. We have decided to defer buying some cool things like European cars (or vans) so that we can go to Europe. We actually sold a nice, new Japanese SUV recently in support of getting our priorities back in line. I bought back an older Japanese SUV from a family member and we got rid of a big car payment. And I really like this thing. It’s a perfect commuter car. It’s no Sprinter van but it’ll certainly do for now. In fact, this post was going to be called Japanese Car or Japan but it wasn’t as catchy. In fact, we are planning to head to Japan next year and it helps to visualize what we are gaining for what we gave up. We literally sold a Japanese car and that decision will help us to take a trip to Japan and Europe will certainly follow. A blogger and podcaster that I like named Paula Pant has a podcast called The Afford Anything Podcast. She states that “you can afford anything but not everything”. This is so true.
Everything carries with it a cost. Often times we see it in monetary terms but it is actually an opportunity cost. If I have five dollars in my pocket and left my debit cards at home and I choose to stop at Starbucks, I’m not going to be able to afford lunch. That is the opportunity cost. And if I love coffee more than lunch, that is perfectly okay. We go through life making thousands of these decisions without conscious thought. We just do these things because they are what we do. I suggest we take inventory and make sure we are making the choices that line up with where we want to go. My wife was asked recently by someone who expressed interest in what we do, “but you still have Netflix, right”? I find this to be a perfect example. We don’t have Netflix now and we never have. We just don’t watch much TV. I have a tent I spent over 500 dollars on and that must seem absolutely absurd to another person. I am not here to judge, nor do I want to be judged. I’ve often thought that frugality can go too far when the person can never back off and enjoy the fruits of their labor a little. We are all battling extremes and trying to find our perfect balance. I certainly am. We took a loss on the newer Honda but we realized our spending was not in line with our values. So we made a move to get back in line; despite a loss.
When we started in real estate, we decided to put all of our eggs in one basket for a while. “Isn’t that what they say not to do?”, you may be asking. It is what traditional wisdom says not to do. But we decided a long time ago that we didn’t want to be traditional. So we chose to use the power of focus. This meant, for us, that we were frugal and budgeted but it also meant that we quit investing in my supplemental retirement account. I had been religious about this contribution from the start of my career so this was a kinda big deal for me. We instead, moved that contribution to a savings account called “Real Estate”. We didn’t know exactly what we were doing but we knew that having access to money would be needed and would give us some cushion. It felt good because we were getting all of our priorities lined up and pointing us in the direction we wanted to go. We made ten year goals and exceeded them in two years. This is not at all to brag but to emphasize the power of focus in our lives. When we got everything in alignment, good things started to happen. We didn’t start driving new cars (for long) but we did get more freedom. Veronica was able to quit a great job, that kept her away from her family too many hours, and run our business. And we were able to travel. Along the way we built a little portfolio of rental homes. And this will replace, down the road, what we missed putting into that retirement account. Our great tenants will pay down the mortgages and build our equity. We will take great care of them and their home in the mean time. They will likely keep driving newer cars than us. But one day you may see me driving my Mercedes Sprinter Van and wearing some terrible clothes and you’ll know that I have “arrived”. For now I’ll keep trying to make daily tweaks to my budget to keep us pointed where we want to go. I’ll try to find a moderate place between frugality and enjoying the fruits of our labors. And I’ll certainly continue to try daily to “keep the main thing the main thing”!