The #1 Wealth Killer No One Talks About...

one of the largest expenses that most people have actually sits in plain sight and no it is not your coffee habit every single day this was supposed to be hot oh my God so in this video we're going to discuss exactly what that largest expense is as well as how you can save thousands of dollars per year by understanding the components of this cost and how you can actually make money with all of those savings that you have so first we got to understand that most households have the same major categories of expenses and that's going to be housing Transportation taxes utilities and household costs which I think I'm just going to lump that in with housing and then food Etc so if we can save big on these categories we're going to save a lot of money now can you guess here what the number one wealth killer is hint it's going to be the cost that actually varies the most from person to person here and that's why it sits in plain sight it's actually Transportation so cars are a huge wealth killer and the reason is is that a lot of our society attributes success to having a really nice car or a nice ride and I think a lot of people buy nicer of a car than they can actually afford because of status I was having a conversation with NATO Brian last week he's also a financial YouTuber and the inspiration for this video and one of the things that we both agreed on was that cars are taking away significantly from that people seem to give each other props whenever they get a new car hey excuse me man excuse me your car is awesome what do you do for a living my wife's rich and it's always so nice to see your friends you know driving around in a nice ride however we're not really too aware of the financial impacts that it actually brings about because it's sitting right under our noses and everyone does the same thing but in 2023 used car prices are up again so they're up 2.5 percent in January month over month and 15.7 percent of people who finance a new car in quarter four of 2022 committed to a monthly payment of more than a thousand dollars a month which is the highest it's ever been now crazily enough in addition to that we're still seeing crazy dealer markups on many cars that are in demand so look at this Porsche right here it has a 250 000 markup which is absolutely insane the markup is basically almost the price of the car itself lastly the average cost of ownership to operate and own a car according to AAA in 2022 is 10 and 728 dollars per year so let that sink in a little bit that's a lot of money so let's actually outline some of these expenses of owning a car and I'm going to tell you about how I would try to save money in every single one of these categories all right so I've pulled up this 2018 Honda Civic here and as you can see the true cost to own over five years is 43 993 dollars which is just shy of 8 800 a year now I purposely chose a Honda Civic it's a pretty economic car it's not crazy expensive it's also five years old it's not like it's some crazy flashy BMW that every person in their 20s really covets and really wants all right we can see that it's still quite pricey to even own this economical car I mean the average American salary is roughly 54k a year so imagine owning a used car and in that cost of ownership every single year is taking up 16 of your gross salary it's going to be really hard to build wealth and compound our savings if we're continually living outside of our means especially when it comes to car ownership now I'm not saying that having a Honda Civic should be considered as live outside of your means in fact I think a Honda Civic is a pretty reasonable car but I do want to draw attention to the fact that it could be costing you a lot more money than you might think all right so let's actually break down the costs here the biggest expense on this Honda Civic is depreciation so 99 of cars will depreciate or basically have a reduction in their asset value as wear and tear and time goes on so card appreciation is one of the biggest reasons why I think investing your money in a car is a really bad idea because as soon as you invest that money into a car the depreciating asset the value of that car goes down so essentially you are putting your money in something that is bound to go down if you want to save money on this category I would suggest not buying a new car so infamously if you've ever heard this whenever you buy a new car and you drive it off of the lot it then becomes a used car and immediately 10 to 15 percent of that car's value is taken off due to depreciation if you look at car depreciation curves I'll bring one up on the screen right now different cars are going to have different curves but the sweet spot to buy a car is somewhere in the three to five year used Range this is when most of the depreciation has been chipped off already but the car is still basically new enough so that it's not going to run into a lot of problems with maintenance and repairs so I think when it comes to cars if you want to save a lot of money on depreciation you want to buy a car that's used about three to four years old and maybe has between 30 and 40 000 miles I'm always looking at that for a sweet spot and basically if you can get one of those cars you're going to save a lot of money on depreciation all right real quick before we move into the next category I wanted to tell you about my free newsletter it's called hump days it'll be linked down below but it's a free publication that comes out twice a week covering business and the economy we put a lot of time and effort into it every single week so if you enjoy our content here on video you'll also probably enjoy that I will link it down below alright the next biggest category on this Honda Civic here is taxes and fees now you're really not going to get around this one generally every car that you get is going to have some sort of taxes and registration fees every single year if you're a family with multiple cars one way to reduce this cost is to just reduce the number of cars that you own that's a lot easier than done but I know some families that have three or four cars and there are only two or three people in that own household that could save you a bunch of money here because let's say you had one more extra car than you actually need that's costing you fees every single year in registration as well as in California where I'm from you have to pass a smog check pretty regularly which can also add up but in general you can't really avoid taxes and fees so it's pretty hard to save money here the next liver here is financing so when it comes to financing these are in reference to interest payments especially when you go and finance a car not many people will buy a car up front with all the cash that they have not many people have 30 40 or 50 000 to drop in a car so what actually ends up happening is someone will put up 5 000 or maybe seven thousand dollars down on a car and then Finance the rest with interest as well as the loan interest fees are going to be super high these days because the interest rates keep on climbing and climbing so right now I believe if you have good credit the interest rate on a car is between six and six point five percent now if you have bad credit that interest rate is going to be even higher and at that point I probably would suggest you not to even try to buy or finance a new car perhaps go for something a little bit used or a little bit older regardless if you finance lease or you own the car outright the next biggest category here is fuel now this is something that people always don't really factor in when it comes to their monthly payment they might say to themselves yeah my monthly payment is 500 or 600 a month but they're forgetting that gas costs them 200 a month every month so if we look at the cost of fuel just for the Honda Civic here it's 12 807 over five years that's an extra 25.61 per year or about 200 a month that's assuming you drive it 15 000 miles a year and that can really add up I mean there's not really that much you can do when it comes to saving money on gas you could get a Costco membership and always fill up at Costco it is a lot cheaper to fill up there so you could save between five and eight dollars every time you fill up and that could add up over time if every single time you fill up your car you go to Costco you could also buy an electric car but that's not always feasible and honestly electric cars are really expensive these days so I mean hopefully in 10 to 20 years everything is going to be moving towards electric and more fuel efficiency however right now I don't really see us like just stepping away from fossil fuels anytime in the next five years so assuming you have a car right now you are probably going to be spending money on fuel for at least the next five years and honestly I think gas prices are just going to continue to go up over time insurance for this Honda Civic is 6949 dollars for five years or about a hundred and fifteen dollars extra per month a good tip I got from NATO Brian when we were talking about cars was that every single year he marks down a certain date on the calendar and right on that date he calls his insurance company and sees if he can get a better rate on his insurance and if he can't do that then he's going to shop around for different rates at different insurance providers the thing with car insurance is that many places will offer you similar or even equal Insurance to your current provider and every insurance company knows that if they get you as a long-term customer that you're worth a lot to to them over time so what you can do once a year is let's say you have AAA Insurance you can use that Triple A insurance policy that you have call around to different places call State Farm call Progressive call Geico see if you can get a better rate for your exact same coverage oftentimes these companies are going to try to undercut each other and often you will get a better deal saving you a lot of money in the short and the long run now this is personally something I even do with utility bills like for example my cell phone plan or an internet bill so for example with Comcast I have it marked on my calendar every single year to call them and just get the introductory rate again so every single I mean I've done this for four straight years now but around you know Christmas time I usually call Comcast I'm like hey you know things are getting a little bit tight on the budget and I might consider switching to a different internet service provider if you're not able to honor the introductory offer you'll usually be connected to their retention department in which case they will usually extend the offer for you for another year or two and I've basically done this every single year so if you are watching and you're from Comcast I never did that however if you're if you're not from Comcast this is something you can do you can call utility bills like that and see if they'll offer you a promotional rate moving forward all right so repairs and maintenance are the final two parts of this sliver here and these are hard costs to really reduce unless you know what you're doing around a car with YouTube tutorials these days you can actually learn how to do basic maintenance on your car if you're willing to learn and put in the time and the effort for example changing your oil is not super difficult you could watch this 20 minute tutorial for example from Chris fix and you can learn how to change your oil and then every subsequent time you change your oil you're probably going to save between 100 125 and 150 on labor if you think about how many times you'll have to change your oil in your lifetime that means watching that 20 minute YouTube video on how to do it is going to save you a bunch of money in the long run cars are supposed to get their oil changed every what 3000 Miles so let's say you drive 15 000 miles a year that's five oil changes per year now imagine you're the age of 30 right now and you want to drive until you're the age of 75 less 10 75 that's the hard stop that's 45 years of oil changes or about 225 oil changes for simplicity's sake let's say you only do 200 oil changes over your lifetime not 225 because you know you miss things and you know maybe you want to go to Disneyland and just totally forget I don't know whatever you want to do anyway let's just call it 200 even 200 oil changes times 100 in savings every single time that's twenty thousand dollars over the course of your life that you could be saving if you just watched a 20 minute YouTube tutorial and then just change the oil yourself every single time I think that might be well worth it that's depends on you if you like to you know work on your car or not but that's pretty interesting another thing that you can do is that whenever your check engine light comes on you can go to a place like AutoZone and they have a free diagnostic tool and so you just go there they tell you what's wrong with your car and then you can decide what you want to do with it so what they're actually doing is running an OBD2 scanner into your car and then telling you what's wrong with the car so that you're not running to the dealership every single time that you know your check engine light comes on and you can actually buy one of these scanners yourself online once you figure out the problem you can then assess what you actually want to do so here's a little bit of a personal story my mom who's in her 70s bless her heart she had the check engine light on her cargo off she cannot figure out what it was and she was afraid to drive on it so she made an appointment to get it serviced in about a week and so what actually ended up happening was she barely drove on it for that week you know she just kind of stayed at home didn't wasn't very mobile and then when she got to the dealership she just found out that the check engine light was basically signaling that the gas cap was not screwed on very properly so she wasted her time in going to the dealership and you know had she had just known it was a gas cap I'm sure she would have just kind of finagled it around with it until the check engine light went off so sometimes the check engine light is a really benign problem and that's something that's good to know all right so my last tip here is that if you can go without a car that actually might be the best Ultimate solution that you can have so let's pretend you don't have a car and let's say you save 10 768 dollars or the average cost per year of ownership and instead you take that money and you go invest it in yourself or you invest it in the stock market so what if you took ten thousand dollars in 2018 and you put it let's say in Microsoft stock well Microsoft stock has done really well for the past five years and it's almost tripled in that time that means your ten thousand dollar investment would be worth closer to thirty thousand and who knows what it would be worth in another five or ten years now that's just one example here obviously and obviously I chose a really good example where your money triples you could also lose your money but the idea here is that the opportunity cost is so great because not only are you paying ten thousand dollars for the cost of ownership of the car that means you're not having that ten thousand dollars work for you elsewhere another thing that you can consider is just living closer to where you work so a lot of people they commute to work in their cars and that creates a lot of wear and tear depreciation fuel costs Etc now if you have the option to live closer to where you work but the rent was a little bit higher let's say it was 200 more per month you actually have to do the work and figure out is that worth it to you in dollars and your time definitely could be worth it you could be paying 200 more dollars per month for a place that's closer to your work but now you don't have to drive as much saving you fuel depreciation maintenance wear and tear all that good stuff it could actually amount to a lot more of savings I mean you probably know someone that has a crazy commute I remember I used to work in corporate culture and people would drive 45 minutes regularly or even an hour just to get to work these costs add up so really consider where you live and where your workplace is and you know when you are applying for a new job that's something you can consider as well so with car prices still going up and trying to keep up with the Joneses these days try not to succumb to owning a car that you can't really afford so to recap number one if you are trying to buy a car try to buy it in The Sweet Spot of the depreciation curve so usually three to five years used number two shop around for insurance every single year number three try reducing your Fleet if you have multiple cars for the same household and number four try consider living closer to work alright guys I hope that you enjoyed this video make sure to check out my free newsletter hump days that's where we have that free business user player twice a week that'll be linked down below I'll see you guys in the next video thank you for being here let me know what you guys think in the comments peace

Channel: Humphrey Yang

Views: 1,086,603

Keywords: humphreytalks, cars, wealth killer, transportation, housing, honda civic, depreciation, taxes and fees, fuel, gas prices 2023, this is keeping you poor, how to get rich, how to be wealthy, how to compound wealth, how to make 100k, making 100k per year, how to make more money, side hustles

Id: p8gT4N-UHtI

Length: 14min 18sec (858 seconds)

Published: Thu Feb 16 2023

Reddit Comments

[u/Hold_Effective]

Whenever the question of what advice I’d give my younger self comes up, my answer is always “don’t get a car”. Conservatively, I think I’d have ~$100k more currently saved/invested if I had skipped car ownership in college.

[u/Liichei]

"Buy the least expensive used car you can find" is a terrible piece of financial 'advice', because those things are financial black holes with bunch of things in it that are on their last legs, making them quite expensive in the long run.

[u/Boulder_Train1]

I live in a car dependent place. Plus I like to drive out to the national forest and hike/fish/hunt. That being said all my cars have been 20+ years old a used. I mean First car I had was for 8 years and was a 700 dollar jeep. Not having a car payment allowed me to pay off student loans and save a down payment on a house. Not living paycheck to paycheck is nice.

[u/crazycatlady331]

This is very location dependent, especially in the US.

I've had a car my entire adult life. THe last car payment I made was when the World Trade Center was still standing. But I also make savings a priority and get mileage reimbursement at work (at the IRS rate) that goes directly into a "replace my car' fund.

[u/mace4222]

This is late stage capitalism 😔