Alexander from Idaho known as into The Ramsey Present with a cash query surrounding a $200,000 inheritance, in addition to a motorbike he’s been eyeing to buy. The bike in query is the Harley-Davidson Low Rider S, which might value round $30,000 with all of the bells and whistles (1).
Dave Ramsey agrees the bike could be enjoyable. However he doesn’t assume Alexander ought to leap into this buy, particularly when he learns extra particulars in regards to the family funds.
“Proper now, we’re spending greater than we make,” mentioned Alexander to The Ramsey Present hosts (2).
The couple brings dwelling round $85,000 per yr to help their household of 4. However they at present spend round $1,000 greater than they make every month. With a latest inheritance of round $200,000 cut up between a financial savings account and a mutual fund, Alexander plans to pay for the bike in money.
To high issues off, the couple hasn’t paid off their mortgage, regardless that the funds from their inheritance may probably wipe out their remaining steadiness.
After listening to the story and realizing that Alexander gave the impression to be explaining away all the explanations they don’t must repay the home, Dave Ramsey mentioned, “I don’t assume we’re going to have the ability to make it easier to, honey.”
Ramsey left the caller with no uncertainty on his opinion: It’s not a good suggestion to purchase a motorbike proper now.
Like most automobiles, bikes are depreciating property, that means they lose worth over time. Some specialists, together with Premier Motorsports, estimate that bikes lose 15% to 25% of their worth within the first yr alone, earlier than happening to lose an estimated 7% to 10% in worth for a number of extra years (3). With that, Alexander’s $30,000 bike buy could also be value round $22,500 after only one yr of having fun with it.
Past the acquisition value of $30,000, different hidden prices go into sustaining this bike buy. For starters, Alexander might want to pay for insurance coverage, which usually prices round $164.23 for a 12-month coverage in Idaho, based on Progressive (4). Plus, gasoline and upkeep prices can add up rapidly.
Along with the precise prices of proudly owning the bike, there’s additionally the chance value of utilizing this cash for a motorcycle buy as a substitute of different monetary targets. For instance, let’s say they selected to speculate the $30,000, it may very well be value $59,000 in 10 years, assuming a 7% price of return.
