Should I buy a $75,000 Tundra with my $100,000 salary and $60,000 in savings?

Just because you make a six-figure annual income doesn’t mean you should blow it. Indeed, we’ve heard countless stories about high-earning folks who still manage to live paycheck to paycheck. Lifestyle creep, big splurges (perhaps to deal with being burnt out at the office), and a lack of budgeting are all factors to blame for high-earning individuals who can’t quite seem to get ahead financially.

Indeed, on the social-media community (think Reddit), the group refers to themselves as HENRYs, which is a clever acronym for “high earner, not rich yet.” Undoubtedly, the group isn’t exclusive to six-figure earners who spend as much, if not more, money than what’s coming in. However, it’s not too uncommon to hear stories of big spenders who don’t feel rich despite making far more than the average American. Indeed, if you earn more, only to spend more, you’re not going to save enough to invest and build real wealth.

This individual makes a good income. But does that justify splurging on a new truck?

In this piece, we’ll look at an all-too-common case involving an individual who’s making good money ($100,000 per year income), but is looking to blow their $60,000 savings (and a bit more) on a Toyota Tundra truck. Indeed, such new trucks do not come cheap. And while the individual’s vehicle recently died, I wouldn’t treat such a nasty occurrence as an opportunity to splurge.

While the Toyota Tundra is a reliable performer that’s probably well worth the price of admission, depending on who you ask, I’d argue that it makes little financial sense to go further into debt (they’ve got around $3,000 in outstanding debt, which isn’t anything to be too concerned about, given their income).

Indeed, there are better ways to go about replacing one’s old car. And buying a new truck, especially a fancy one, I think, is not the way to go. In this piece, we’ll look at options that could allow this individual to replace their vehicle without having to blow a huge hole where their savings would have been.

At the end of the day, a $75,000 expense may not seem all too bad, given their high salary. However, given the tough labor market (layoffs have been happening left and right), I’d argue that it’s not a good idea to make a move that’d wipe out one’s emergency fund (that amounts to at least six months’ worth of living expenses). Sure, it’ll feel good to drive that new truck off the lot. But then, the bills will start mounting. It’s not just the sticker price of the vehicle, but insurance costs, fuel, parking and all the sort. These are phantom costs that can really sink an otherwise sound budget.

In the case of this individual, though, the budget is anything but sound.

Forget the new truck. Buy a used car

Trucks are handy to have around, but they tend to be a heck of a lot pricier and harder on gas. If one is keen on a truck, a used truck could be a way to spend less than the $60,000 in savings. I think the sweet spot would be to spend less than $50,000. That’d leave over $10,000 in savings. Indeed, that’s still not enough of an emergency fund, but it’s better than going deeper into debt.

If one is fine with a compact car, which tend to be worlds cheaper than a truck, I’d go down that route. Indeed, for around $25,000 in the used car market, one would have enough savings left over such that things wouldn’t get too horrid if a layoff were to strike unexpectedly. Given the pace of AI automation, I’d argue that having a fatter emergency fund (think a year) would be even more prudent.

Is vehicle ownership even necessary?

If possible, perhaps foregoing vehicle ownership altogether could help individual get back on track with their retirement savings. Indeed, ride-hailing may not be for everyone, but it’s a cheap way to go, especially for those who can’t afford a five-figure expense right off the bat.

With the advent of self-driving vehicles, I’d argue the price of ride-hailing is bound to move lower over the next five to eight years. Indeed, perhaps a nice middle ground would be to postpone one’s used vehicle purchase until the savings are lofty enough such that a purchase wouldn’t leave one without an emergency fund. I’d say wait until the savings are at least $100,000 before getting back on the market. Sure, the car may have just died, but given where the financial situation is, I’d still argue it’s not a good time.

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