As for the ROI on your investments outpacing the interest on your student loans, having debt is a much bigger risk than missing out on a few percentage points in interest. The probability of something happening to you that reduces your income is high (a car accident, layoff, work injury, etc.), and weathering that storm is much easier when you don’t have a debt payment to worry about.

What if the ROI on your investments is greater than the interest rate on your student loans?

“Well, I’m just going to take the MCATs and see how I do. I’ll probably go to medical school. I mean, I don’t know what else I’d do and my parents want me to go….”

I’m tempted to yell “DON’T DO IT!!! Unless you’re really, really sure you want to be an doctor DO NOT DO IT. Go work for a while and figure out what you want to do first!”

Professional schools are an investment that only pay out if you’re sure you’re going to use your degree for a substantial number of years after graduation. This is not a decision you should commit to because you don’t have any better ideas.
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Most MBA schools require 60 months of work experience before you can even apply to their MBA program. There are a couple of reasons for this, 1. They want work experience so you can contribute real world experience to the classroom and 2. An MBA is to advanced degree, many graduates don’t even know where they post-grad job is going to be much less a career to advance. Lastly, I have also talked to many executives who have told me that if you don’t attend a tier one MBA program you’re wasting your time. Is this true? Knoweledge wise, probably not, but from a networking perspective it’s possible. My thoughts are, don’t spend $150k on a top MBA school if you aren’t absolutely sure it’ll help your career. If your company is telling you need it, it’s probably a good idea.

The reason I highlight the vehicle scenario (vs. other discretionary ‘want’ spending) is that vehicle expenses are often the second highest expense that most people have next to home expenses (which I also highlight in the post). I have seen a number of people get completely burned on excessive vehicle spending, so I had to bring it up. Since you have smartly paid off your vehicles without finance, perhaps your scenario wasn’t the best scenario to highlight – just the first that came to mind.

I’m certainly guilty of your #3 blunder, but I think you’re missing one very important element of buying a car that’s more than a 5k beater: pure enjoyment. If you look at owning a car as just another service or investment you make for transportation alone, then sure. Get the beater. On the other hand, if driving fun cars is a hobby and passion you have, then it makes sense to spend a little more on that expense of life, and cut a little more elsewhere.

I don’t see how this expensive is different than any other that one indulges in without a need. Does one need a huge flat screen tv? 200 cable television channels? High-speed internet? Tickets to Europe with x many nights in a swanky hotel? Unlimited talk & data phone plans? Fancy kitchen appliances? New and/or expensive clothes? 3-digit bar tabs every weekend? Boats? Jet-Skis? The list goes on obviously.

Everyone picks and chooses where to spend their “fun money”. Just because a large chunk may go to something like a fancy car doesn’t make it any more of a blunder than one who chooses to spend it elsewhere.

I want to make it clear that I am still discussing responsible spending. I’m not referring to taking many-year loans and throwing money away through interest just to get that out-of-reach purchase. As you know, I paid cash for the car, so I’m assuming it is not this irresponsible type of behavior you’re discussing when using my purchase as the example.

In regards to my amazement that you can max out your 401K, I think this post uses this example out of context. It’s painted in such a way that makes me look like I bought an expensive car, then can’t figure out why I can’t save as much for retirement as you. This is not the case.

The reason for my amazed feelings is because we have different saving methods. I think you’re stockpiling a lot of money in your retirement fund, while I’m putting less in, but putting more money away in a reachable savings account. When we bought our house, I put 20% down immediately. When my wife and I had new high-quality windows put in, we paid for it in full. If one of us were to lose our jobs, we have plenty of money to hold us over until we can both be employed again. I may not be getting the absolute maximum amount of matching money possible, but I am willing to forfeit that for the peace of mind of having plenty of money available to me at all times.

According to my financial planner/advisor, I am putting enough money towards retirement to have “a very comfortable retirement”, so I’m not worried about putting more. I think we have different saving methods with unique advantages and disadvantages. You thrive on knowing you will have a very comfortable retirement (and getting the most match money possible), and I thrive on knowing I have enough “right-now” money to tackle anything that comes my way.

Bottom line on this – my amazement at your 401k maxing has nothing to do with being able to afford a lifestyle or buy fancy cars. I was simply intrigued at the different approaches we use for long-term savings. I was amazed at your approach because I wouldn’t be comfortable doing it.

Lastly, I want to touch on one of your ending sentences: “get a serviceable used one that is at least 3-5 years old that you can pay for outright.” That may be what one should do if you see a car as simply transportation. However, in my case as a car enthusiast, buying a 7-year-old car for $20k that retails for over 50k new, and paying cash for it, doesn’t feel like a blunder to me.

Agree to disagree