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When we moved to Abu Dhabi, UAE, in 2018, we needed to buy a car. We considered different options.
We very nearly bought a Porsche. A few weeks later, we considered a Lexus.
After all, the UAE is full of luxury cars. Our friends had Maseratis, Jaguars, Land Rovers, and Porsches. In Canada, we each owned Audis, so we deserved to have a nice car. Right?
We had made it, right?
Yet, we knew better.
Steve booked us at the Ford dealer, and we decided on a 2016 Focus instead.
Recently I stumbled upon a blog post by one of my favorite finance writers, Andrew Hallam. He describes how Fords and Toyotas are actually the most popular car choices among wealthy people. This is because many millionaires got to where they are by living within their means and being mindful not to succumb to lifestyle inflation.
Lifestyle inflation happens when people increase their spending as they earn more. With an additional $10K in their annual budget, a couple might decide on a fancier trip or home renovation project.
Another choice is to keep your spending flat and to invest your bonuses or salary increases. Every dollar invested today has the potential to grow and ideally double within 7-10 years, so $10,000 dollars invested today will be worth $20,000 dollars in the future.
We recently sold our Ford for $6,000 less than what we originally paid for it 4.5 years ago. Fuel efficient and reliable, that car served us well.
Did I sometimes wish we had a nicer car? Yes, but all in all, there was less stress with the Ford, and we saved a lot of money.