Dave Ramsey tells cardiologist earning $650K he doesn’t ‘deserve’ a $250K Porsche. What he says he needs to do first
The Ramsey Show Highlights/YouTube
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Recently, a caller to The Dave Ramsey Show asked whether he should buy a $250,000 Porsche, seemingly expecting the famously frugal finance guru to quash the idea, but his answer was surprising.
Ramsey was actually not opposed to the luxury car purchase in theory, given the caller’s high income.
With that said, he did discourage the caller from heading to the dealership and signing up for a loan immediately (1). Here’s what happened.
The caller explained he’s a newly qualified doctor who just signed a big contract and will be making $650,000 per year as a cardiologist. His wife also works, earning $100,000. He wants to reward himself with a major splurge.
“Training has been very arduous,” the caller said. “I feel like I want a Porsche, and my wife is in agreement too that I deserve a nice car. The thing is, I’m not sure if I can afford it.”
Ramsey, of course, questioned the caller and discovered he owns two homes, one of which has a $150,000 mortgage, but is generating $1,000 per month in profit as a rental. The other is his primary family home, with $300,000 still owing on the mortgage. The caller also said he’s getting a signing bonus of between $75,000 and $100,000, and has $60,000 in an emergency fund.
While those numbers all sound good, Ramsey noticed right away that the man didn’t seem to have the cash on hand to buy the Porsche outright. For that reason, he advised the caller against it.
“Have you ever heard me tell anyone, in any situation, to get a car payment?” Ramsey asked, before answering his own question with a clear “No.” Ramsey also cut to the heart of how he sees the situation: “You’ve been a grown-up for so long. For just a minute here, you want to be a four-year-old.”
Ramsey made two suggestions for how to indulge this immaturity without breaking the bank or taking on debt in the form of a car payment.
For one, the caller could get a cheaper, pre-owned Porsche and pay for it entirely in cash out of his sign-on bonus.
Alternatively, Ramsey suggested selling the rental property, arguing $1,000 per month is not worth the hassle, given the couple’s high income.
If the caller isn’t willing to do either of those things, Ramsey advised him to wait and buy a luxury car in a few years, when he’s in a better position.
“If you want to buy a $250,000 Porsche, I’m fine with that, with your income,” Ramsey said. “As long as you’re debt-free, and you have your emergency fund in place, and you pay cash.”
“You deserve it when you can pay for it. Until then, you don’t deserve it,” he said.
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While the caller was obviously excited about his big new job and equally big paycheck, both Ramsey and his co-host believed buying the Porsche would be impulsive and amount to giving in to the desire for immediate gratification.
Instead of jumping into buying the shiny new car, the better option is to become debt-free and save up to buy the car over three to five years. Doing that would allow the new doctor to use his wealth to build true financial security for his whole family, eventually reaching the point where he would be able to afford the car without compromising his long-term goals.
The advice to delay the purchase doesn’t just apply in this situation. Anyone eyeing a luxury item should wait until they are truly able to buy it without borrowing.
Delaying also gives you time to think about whether the expensive purchase is really going to add enough value to your life to justify the cost. If you decide the item isn’t really something you need once the initial excitement has worn off, that’s all the better (2).
Ramsey acknowledged that the caller had worked hard to get where he was, and said there was ultimately nothing wrong with indulging his desire to buy the car. While it may be surprising that Ramsey would sign off on such an expensive purchase, his point was that it’s fine to splash out sometimes if you do so responsibly.
The key, as Ramsey explained, is that you need to put the important things at the top of your to-do list and knock those off first. This includes things like building emergency savings, paying down debt, saving for retirement and saving for kids’ education.
Once you are doing all those things, if you make a budget and have funds left over for a luxury car or other splurge item, then you can put that splurge right into your financial plan and enjoy it guilt-free, especially if you don’t borrow and avoid interest.
If you’re not a high earner yet, but still want to get ahead on planning for the future, you could also try looking for a financial expert through Advisor.com.
How it works is simple: Just enter a little bit of information about yourself and what you’re looking for, along with your area code, and Advisor.com will match you with financial professionals near you.
Either way, if the caller listens to Ramsey, he can use his high income to set himself up financially for life — and then save up for the car of his dreams when the time is right.
