Dear Dave,

My wife and I are following your plan, and we’re in the middle of the Baby Steps. Do we have to wait until Baby Step 7 to buy a new car?

Alan

Dear Alan,

No, you don’t have to drive a beater until you pay off your house. My advice is to drive the minimum car you can until you get past the first three steps. Remember, Baby Step 1 is a beginner emergency fund of $1,000. Baby Step 2 is paying off all debt except for your house, then Baby Step 3 is fully funding your emergency fund with three to six months of expenses.

Once you’ve done all that, then you can move up to a nice car. I didn’t say move up to a new car. I want you to save up cash and get a really nice, barely used car. I never advise buying a brand new car unless you have a net worth of at least $1 million. At that point, you’ve got enough assets in place to where you won’t even feel the massive hit in depreciation that comes with buying a new vehicle.

But until then, drive good used cars. That’s what the typical millionaire did, and I want you to model your financial behavior after people who are in the position you want to be in some day!

—Dave