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Another area of significant financial expenditure is car payments. On average, new cars lose about 70% of their value in the first four years. Individuals often spend a considerable portion of their income—up to 70% or more—for a vehicle that depreciates rapidly.
Many car owners find that their total vehicle expenses can far exceed their potential investment savings. The recommendation for optimal financial health is simple: avoid spending more than half of one’s annual income on vehicles. This means that a family earning $80,000 should not be driving $70,000 worth of cars.