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Old 05-01-2006, 11:15 PM   #19 (permalink)
iccky
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Location: Princeton, NJ
As has been said before, you're missing one crucial categories that I have in my budget: Entertainment! You're going to be a really bored guy with a nice car if you never plan on watching a movie, going out for a drink, going on a date, or whatever. I've got entertainment budgeted for 200 a month (a substantial portion of my poor grad student spending) and it's a struggle to keep it to that. Clothing too, which is 40 a month for me.

Something that hasn't been mentioned is a miscellaneous category. Little shit that doesn't fit in anywhere else always pops up. In mine right now I have shampoo, allergy medicine, envelopes, a credit monitoring service I forgot to cancel after the free trial period, and countless other things that were unplanned for, but cost money. 100 a month for me.

I also include a category for discretionary spending, which is basically any long lasting item that I don't have to buy, but I want to. My new bike, for instance, or a new stereo or computer game. You are going to want to buy stuff in the period between now and when you pay off the car loan.

An emergency fund is also essential. I think 6 months is a bit excessive, but at minimum you should have 2 months living expenses in a savings account. This isn't just for if you lose your job: I had some legal trouble that would have been a lot more expensive if I'd had to pay my lawyer with a credit card. Your signing bonus is a great way to start this, but try to get up to two month's expenses fairly quickly.

Beyond that, you probably can still afford the car. The key though is to think: is this what I want all of my disposable income to go to for the next four years? Also, think of all the other things you could do with the money. Travel. Down payment on a house. Getting married.

Since a car is a depreciating asset, once you sign the document you're signing away your financial freedom for four years. As long as you've considered it, go for it. But really think about it.
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