The Right House-To-Car Ratio For Financial Freedom.

After delving into the exorbitant prices of new luxury cars, I’ve come to the realization that a larger segment of the population is purchasing such vehicles than I initially thought. This trend poses a significant problem for those striving for financial freedom, which is why I’ve come up with the House-To-Car Ratio guide.

I see people with expensive new cars parked outside modest homes everywhere. With hefty lease payments and revolving credit card debt, many Americans may find themselves trapped in the rat race indefinitely.

As someone who helped kickstart the modern-day FIRE movement in 2009, it hurts me to witness so much financial irresponsibility when the solution is so easy to fix. With my new House-To-Car Ratio guide, you can check whether you’re on track to financial independence or whether you need to make appropriate adjustments.

Given that everyone requires both shelter and transportation, this could be one of the most beneficial personal finance articles you’ll ever read. Let’s dig in!

We are all aware that a car is a liability, with a 99.9% probability of losing value over time. The only exception is collectible cars that appreciate over decades when left untouched.

Conversely, a house is an asset with a ~70% probability of increasing in value over a 12-month period. This probability rises the longer you hold the property.

Both car and homeownership are facets of the “American Dream.” However, the issue arises when individuals acquire too much car and/or too much house, particularly when financed with debt.

Given that homes tend to appreciate in value while cars depreciate, the logical conclusion is that individuals should prioritize investing more in a house, up to a certain responsible limit, and reducing expenditure on cars if they aim to accumulate significant wealth over time.

Coming Up With The Baseline House-To-Car Ratio

To build the baseline House-To-Car Ratio framework, we need to take the median price of a home in America divided by the average car price in America to get a score. For some reason, there is no reliable median car price in America, only average, but we can use the average used car price as well.