Why We Don't Own A Car (Yet) 👀🚗

Happy August! It’s the 1st of the month, which means that it’s time for a new issue of Money Convos. 

Summer is flying by, and we’ve already had a few fun experiences we want to share with you, along with some money tips you can use - so, let’s get started! 

Here’s what’s up in this copy 🤑🗞 

• How much car can you actually afford? 🚗

• We flew ‘for free’... kind of 👀

• 1 year review of our go-to credit card 💳

• We spoke on a panel! 🎙️

Money Convo Of The Month

How Much Car Can You Actually Afford?

Steph and I were talking recently about how crazy it is to think that, at age 29 (and I’ll be 30 next month btw!), we’ve actually never personally owned a car. 

And the reason I say that’s ‘crazy’ is because when we look at our family and friends, most of them own a car, and some of them have even gone into debt in order to finance their cars. This is also reflected in our broader society - a lot of people own cars, and will often choose to (or have to) go into debt in order to make it happen. 

Here’s the thing - there’s absolutely nothing wrong with buying a car. For some people, they’re a need, but the problem emerges when it comes to choosing what car to buy.

Our general perception on what ‘makes sense’ for us to buy has been heavily skewed by an industry that spends millions of dollars marketing new cars, and as consumers, it impacts our conscious (and subconscious) thoughts on what a particular car model says about us. Our personal identities can often be tied to the vehicle we choose to buy, and we feel like a ‘nicer’ or ‘newer’ car, regardless of the brand, will somehow change our lives…

…and it will change our lives, in a bad way, if we buy a car that we can’t actually afford! 

From a financial standpoint, cars are said to be one of the worst ‘assets’ that you can buy, mostly because cars (especially new cars) have a very high rate of depreciation. 

Depreciation = how much an assets’ value goes down over time. 

If we look at the numbers, new cars lose ~20-30% of their value within the first year of ownership, and by their fifth year, they can lose up to 60% of their value. Tell me that’s not crazy! 

How can you avoid this massive loss in value? By buying a used car instead. 

From our research, a used car within the 3-5 year age range is a great option for avoiding the most depreciation, but still ensuring the car has fairly recent technology, and maybe even some of its initial warranties. Personally, we believe that buying a used car and paying in cash is the best decision that you can make, financially, when it comes to a car purchase if you’re able to do so. 

Now, let’s get to the main question - how do you know how much car you can actually afford to buy? 

There’s two different guidelines that you can use to help you figure this out - the Percentage Of Income Approach and The 20/3/8 Rule. 

With the Percentage Of Income Approach, you would purchase a vehicle that accounts for no more than 10-15% of your annual gross income. So, if you make $50,000/year, you’d aim to spend no more than $5,000-7,500 on a car. *Note: you’ll have to adjust the amount based on what the market is telling you, and what’s available right now. 

With The 20/3/8 Rule, you would follow three ‘rules’ that help you prioritize a shorter loan term and less interest paid over time if you do choose to finance a car - 

1. 20/3/8 - Put down 20% of the vehicle cost

2. 20/3/8 - Have a loan term of no more than 3 years 

3. 20/3/8 - Your monthly car expenses (car payment, insurance, gas, maintenance) should cost you no more than 8% of your gross monthly income 

Again, both of these guidelines are just that - guidelines - that you can use as a starting point to help you when purchasing a car. But no matter what, be intentional, and try not to spend more than you can afford!

You can learn more about this topic, and how these guidelines work, by watching this YouTube video.

How Much We Spent On A 10 Day Trip ✈️

We just got back from a 10 day trip to London & Paris, and it was so much fun. 

Of course we want to share our expense breakdown with you, so here’s exactly how much we spent on a 10 day trip for x2 people.

If you want to see more behind the scenes of our trip, keep an eye out on our Instagram page - we’ll be sharing more photos and videos throughout the next few weeks!

AMEX Cobalt: 1 Year Review 💳

We’ve been using the American Express Cobalt credit card for just over one year now, so we thought that it would be the perfect time to share our review! 

Let’s start with a quick overview of the AMEX Cobalt.

We specifically chose this card because of the categories that this credit card rewards you for. The majority of our monthly spending - in an average month - goes towards food. So, we knew that our grocery spending alone would almost cover the entire $750/month minimum in order to receive our bonus points.

After that, every other expense we had (and put on this card specifically) would turn into points for us to benefit from. So, every time we ate out at a restaurant we earned 5x points, every time we were charged for our monthly subscriptions we got 3x points, and we earned at least 1x points on anything else that we bought.

So far, we love how we’ve been rewarded for our everyday spending. In general, we personally believe that you should only use a credit card with an annual fee if you’ll be rewarded for your current everyday spending habits. If you have to spend more money, or spend money in different categories, in order to get points, then that’s a red flag! You’ll likely end up spending more than you’ll be rewarded for anyways.

Now, one change that was made to the AMEX Cobalt over the past year that we didn’t love was the fact that they reduced the amount of points you earn for travel related purchases. You used to earn 2x points on travel purchases, but now it’s 1x points on travel purchases and an additional point if you book directly through the AMEX travel website.

But, the good news is that we can book travel related purchases using our other credit card, and then the points that we do earn from our AMEX Cobalt can be transferred over at a one-for-one match to our airline of choice. So, it works for us!

With all of that being said, here’s how many points we’ve earned with our AMEX Cobalt over the past year, and where they came from:

Overall, we’re really happy with the card so far (and as you saw, we were even able to use the points we’ve earned towards our flights to and from London!). 

If you want to hear more about our experience, then you can watch this YouTube video, and if you want to get the AMEX Cobalt for yourself, then you can use this referral link to get a 22,000 point welcome bonus (instead of the standard 15,000).

Highlight Of The Month: Our First Live Panel 👀

Last month we were invited to be panelists at an event called Don’t Go Broke Trying Toronto! 

We spoke about how we handle money as a couple, including our different backgrounds with money and what financial compatibility means to us, how to create joint goals, and what we do to ‘make money work’ in our relationship. 

We love speaking IRL, and we love talking about money for couples, so this event was the perfect opportunity to do both! 

We’ll be sharing more content about money for couples on our social platforms soon, so keep an eye out on our YouTube channel and Instagram account for more...

…and if you want to see some behind the scenes clips from the Don’t Go Broke Trying Toronto event, check out this video here.