Do you think people are impressed by what you drive? To be honest, some might be, but I most certainly am not. In fact, if you work in a low-level job and are driving around in a brand new Lexus, I would lose all respect for you. When I see someone that is earning more that $100,000 a year driving a used Toyota or Honda, these are the people I respect. ‘What does it really matter?’ some of you might ask. I definitely have my reasons.
The Poor Impressing the Poor
Imagine three friends of yours that have varying social class. For instance, let’s say your friends names are Sam, Jamie, and Alex. Sam earns approximately $25,000 a year, Jamie has a salary of $60,000, and Alex earns a very respectable $150,000 per year. If you wanted to prove that you were a success, it would give you the best feeling to impress Alex, the friend that is already a success, right? You really want to buy a new luxury vehicle, but you yourself only earn $35,000 a year.
There is absolutely no way that you can save up the cash to buy this $40,000 vehicle, but you find one that is your dream come true, and you believe that it would really impress your friend Alex, who has a slightly older model of the same car. After the salesman checks your credit, you discover that you just barely have enough money to lease this luxury car for a year. You sign the papers and can’t wait to show off your new ride to Alex. When you roll into Alex’s driveway, do you know what he’s thinking? “Wow, what an idiot. There’s no way he can afford that car. He’s going to be poor for the rest of his life.” To your dismay, Jamie will most likely think the same thing; but when you drive past Sam, the $25,000 a year man, his jaw drops and starts drooling over your car. He can’t believe how nice it is and is totally envious of you!
This scenario happens all the time. It’s a case of the poor impressing the poor and no wealth ever comes from it.
What Do the Wealthy Drive?
Sure, some wealthy people have luxury cars, but they never buy a vehicle that has a value equivalent to a full year’s pay! In fact, many of them wouldn’t spend more than 20% of their yearly pay on a new car.
[Related Article: What the Rich People Really Drive]
Nearly half of the wealthy (those earning $500k or more) still like to drive Hondas, Toyotas, and Volkswagons) and are never impressed by those that spend all of their money on expensive luxury cars. Do you know how many people can really afford to buy a brand new BMW? Not very many. In fact, over 85% of BMWs on the road right now are leased. They aren’t actually owned at all!
Why the Poor Stay Poor
These luxury vehicles are one of the major reasons why the poor stay poor today. They lease them in order to feel important and wealthy, but what it actually does is drive them deeper into poverty! I mean, think about it. If you have an extra $400 per month and sign up for a vehicle lease that’s $380 a month, you only have $20 a month to work with. It’s pretty difficult to get yourself into a financially successful position with only $20 a month. In order to get truly wealthy, you need to delay your gratification, increase your cash flow, and invest your extra dollars to propel yourself into a better future.
Do you know anyone that drives a car that is keeping them poor?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.