How Much Money Would You Need?

Every once in a while, you see something that really makes  you think.  Hard.

Twice this week, I’ve seen a Bentley car that is obviously owned by someone who lives locally.  Now, Bentley makes a lovely car.  A lovely, expensive car.  According to Edmund’s, we’re looking at more than $200,000 for a basic Bentley.  That’s a lot of money.

I can be a little judgemental when it comes to spending money, but I was trying to think outside my usual small box.  I tried to imagine a world in which I had so much money that buying a $200,000 car fell into the realm of reasonable.  Obviously, there is some level of income or assets at which that type of spending makes sense, no matter how frugal you are.  But where does it lie?

I’m not going to pretend that I have the answer to this question, because I don’t.  I’m pretty sure that whatever amount of $$ we’re talking about is a level that my family is unlikely to reach.  But the question is more nuanced than that, because what’s reasonable for you might be completely unreasonable to me.

The question here is:  how do you decide what is reasonable to spend on any single budget item?  It’s challenging – on one hand, every person needs to make decisions for themselves.  On the other hand, there are some generally accepted guidelines for what might be a reasonable amount of spending on certain categories of spending.

Just today, I had the pleasure of participating in Experian’s weekly Credit Chat.  This week focused on issues that affect military families, and one of the other guests was J.J. Montanaro of USAA.  In our conversation, J.J. said that he uses 10% as a reasonable portion of income to be allocated towards transportation costs.  So, let’s take a $200,000 car: if you only owned ONE car, and  if you replaced your car every ten years, and never had any insurance or fuel or maintenance costs, you’d have to make $200,000 per year for that purchase to fall into a category of reasonable.  Except that, of course, very few families own one car, and we do all have insurance and fuel and maintenance.  So, let’s reckon that you have to be earning at least $400,000 per year before buying a Bentley seems even vaguely financially sensible.

Now, there are probably plenty of people who make that kind of money.  I just don’t happen to know any, and I have a hard time imagining how it might feel.  I’m guessing that your perspective on spending must be a little different at that level of income, especially if you have any confidence that the income is going to continue.

Have you ever made a purchase that might be considered extravagant?  Or do you have a regular monthly expense that might seem high to others?  Why does that make sense for your situation, or is it completely crazy but you do it anyway?  I am fascinated but this subject.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • 4M

    A Rolex.

    It’s irrational for so many reasons:

    1) it’s the most widely faked watch brand, people will just assume it’s fake
    2) it’s actually a lower rung watch when it comes to Swiss watches
    3) I’ll have to get an expensive rider for my insurance policy
    4) it’s not nearly as accurate as a $15 quartz Casio
    5) who even wears watches anymore
    6) Rolex mass produces these things, there not as rare or amazing as marketing would have one believe

    Yet I’ve been socking away 2/3’s of my “fun money/allowance” for five years towards getting this hunk of metal (of course this is also my presents for others fund, so the account hasn’t grown as much as I’d like, but it’s growing). It’s a lofty dream, but at least I’m not buying it on credit or hitting up the household savings account.

    That’s a huge upside of the fun money/allowance system, you can’t go into debt to get something, and you can’t just use the household funds to buy it either. Back in the day I would just buy what I wanted, but since putting myself on the fun money/allowance system back in the day, and carrying that into my marriage I’ve changed my behavior towards money and gained financial security in place of instant gratification in materials.

  • Anonymous

    Are you sure the Bentley’s were the real deal? There are after market modification kits that are making over Chrysler 300’s (I think-could be another sedan) with grilles, hood ornaments, logos, etc. I saw and had to inspect one in our local Denny’s parking lot. It had a cheetah print seat cover up front and the inside was just trashed. Upon closer look and with confirmation from my friend Google, it was clearly not a Bentley. Premise of the article about extravagant spending is still valid, just perhaps not this example.