This question came from a viewer that sent me a DM on Instagram: he asked at what financial situation should he consider buying a supercar like the R8? This is a very good question and it's something that I wondered about early in my career.

For me personally, I always like to use net worth as a gauge for whether or not I can afford a car. A car is a depreciating asset, which means it loses its value of time. You don't want a depreciating asset to be a majority of your net worth. A new car on average loses 50% to depreciation over 3 years. Tack on taxes, insurance, maintenance, you're looking at about a 65% loss on the purchase price over 3 years of ownership.

There are 2 thresholds I suggest:

1. for real car enthusiasts (5% of people fall in this category), where their whole life centers around automobiles: if your net worth is at least 2x the purchase price of the vehicle, then you can afford it. This is a pretty aggressive number and means you'll have far less money to put towards investments, but the tradeoff is worth it if you LOVE cars.

2. for a general person, if your net worth is at least 4x the purchase price of the car, then you can afford it. This means after buying the car, you'll still have 75% of your net worth left to put towards investments. Sure, you could make more if you put the 25% towards investments instead, but you don't gain much more from investing an additional 25%.

Some people may say that you should have much more net worth before buying a supercar, but I disagree. Owning a supercar in your 20's or 30's is much different than owning one in your 50's or 60's. This net worth rule is a great balance between living your life to the fullest and saving towards the future. Let me know what you think!

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