Is Your Retirement More Important than Any Car or Car Payment?

Is retirement investing on your radar? Or are you living in the moment with the thought that you’ll just work forever? But at least you’ll be driving a sweet car? Amirite? Before we get to how your car payment fits into this narrative, let’s discuss retirement in general.

If you’re not putting any money away regularly for retirement and your future, you’ll be in trouble when you can’t work anymore. And at some point, you won’t be able to work. While you might be healthy now, you can’t assume that you’ll be healthy enough to work into your 70s. And do you really want to work that long anyway?

And if social security is your retirement plan, you might want to to re-think that.

You need to put control of your future into your own hands. So how much will you need?

While that number will be different for everyone, let’s just do some simple calculations using some round numbers.

If you invested just $500 per month into simple index funds earning 10% on average per year before inflation, do you know how long you’ll need to invest to get to a million dollars? The answer is: 30 years. Which while it sounds like a long time, goes by fast I’m sure.

I think a million dollar nest egg would be a great retirement for pretty much everyone. You could debate the actual number you’ll need. But a million dollars is a nice round number for the purposes of this article. And if you add in any social security monies to that, I think you’d be fine.

The bigger question is: How do we carve out $500 per month so we can actually get there? Because it’s no good to say, “Just invest $500 per month.” when you don’t actually have that money to invest.

So let’s start with your budget . . .

Maybe there’s no room in your budget for retirement?

Your housing costs will likely be the largest item in your budget. But that’s a given. You have to live somewhere. You could rent, but most likely, you’ll end up buying a house. And once you own your house outright, you’re housing costs will plummet. But until then, your mortgage/rent should be the largest line item in your budget.

You also should be buying food. This is obviously an important line item as well. It goes without saying, but you need to eat.

And of course, you need to pay your utility bills. The lights and water need to stay on.

If you are like most Americans, another large item in their budget goes toward debt. Maybe even more than your housing costs. It could be student loans or credit cards or a car note.

We all know that credit card debt is bad. The interest rate is high. And credit card debt can snowball extremely fast on you if you don’t take care of it. But there’s no easy way to get rid of it other than to pay it off.

And if you have student loans, your budget can be spread thin too. But with student loans, hopefully you invested in a marketable degree that you’ve used to your advantage. And while student loans are still debt, you can parlay them into higher salaries throughout your career. That makes this debt not as bad as credit cards or car loans. However, those pesky student loans can take years to eliminate.

And then there’s the car payment. You need some way to get around, and everyone has a car payment . . . right? No, not everybody . . .

After all that, there’s no room left in most people’s budget for investing. A little less than half of all American adults have any money invested in the stock market. And with all these debt payments to cover there’s no wonder.

What can we cut to make room for investing?

The obvious thing to eliminate is the debt payments. But that takes time for student loans, credit cards, and mortgages. But there is at least one debt that you can eliminate almost instantly.

The budget item that is to me the most ridiculous, besides the other debt payments, is the car payment. And all you’d have to do to eliminate your car debt is to sell your car. And buy a car you can actually afford.

But back to your current car payment. Do you understand the damage you’re doing to your financial future by carrying a car payment? The average car payment is now $525 with a term of almost 6 years! There’s your $500 right there!!

So let’s think about this. Instead of investing $500 per month into something that gains 10% per year, you’re “investing” $500 into something that losing 10% or more per year on top of the interest you’re also paying!! And no matter how you look at it, the value of your car investment is losing money year over year. Do you really want to be dumping money month after month into an investment that is guaranteed to lose money. It’s not even a maybe or a risk. It will lose money.

Do you see how ridiculous a financing a car is yet?? Just don’t do it! And leasing a car is even worse!

A car payment will keep most people in debt for years.

This is one of the single biggest reasons that most Americans will never be financially free. They continue to finance car after car after car. It’s sad really. But it’s not hard to understand.

If you continually throw money at something that goes down in value, you’ll never be rich or even just okay. You’ll always be struggling. You’ve traded your future for a newer car every three years. Hopefully it’s a great car – a million dollar car. Because that’s what it’s costing you.

Instead, buy a cheaper car with cash, and start investing that car payment into something that goes up in value.

Turn around your financial future by eliminating your car payment. And never ever borrow money again to finance something going in down in value.

Do you have a car payment? Are you actively trying to get rid of it? What steps have you taken to provide for your future?

I appreciate you reading and sharing, and as always thanks for commenting. The Cash Dad wouldn’t be where it is without you, the reader. So thanks again.


Chris is the original Cash Dad. He's a father of 3 and a mechanical engineer by trade.


  1. For us, downsizing to a one care family was one of the best decisions we’ve made financially. Even those very few times when we schedule a conflict and we both need a car the small amount of money for a quick Lyft ride is much less costly than owning and operating a second vehicle.

    • Chris Reply

      That’s great. A car simply needs to get you from point a to b in my opinion. It’s when we start to view it as a status symbol that we get into trouble financially. ?

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