Had a fascinating FIRE (Financial Independence, Retire Early) session with a mentee last week, delving into asset calculations. Amidst the figures, an interesting line item popped up – cars. Now, in the finance domain, cars are indeed considered fixed assets.

However, from the FIRE perspective, I had to steer my mentee’s viewpoint. When aiming for financial independence, the goal is to calculate a corpus that, if you choose to retire today, sustains your current lifestyle. The challenge lies in growing this corpus at a rate surpassing inflation (which historically hovers around 6.5%).

Here’s where the debate on cars being assets surfaces. Most cars are depreciating assets, losing value over time. Unless it’s a collector’s classic or a limited edition Bentley or Ferrari, the numbers aren’t in favor. Hence, my recommendation to mentees is to exclude car values from their FIRE calculations.

The typical follow-up question: “Does this mean you advise against buying cars and investing that amount?” 🤔 While I’m no expert, I believe some assets, like cars, carry immense emotional value. They serve needs and become essential, and decisions can’t always hinge on financial merit alone.

In our friend circle, my dad’s car, affectionately known as “1880” by its registration number, occupies a cherished spot in our hearts. 🚗💖. It was my first car, and even after two decades, memories of road trips and adventures linger. When my dad had to part with it, it was an emotional decision. So, my advice is simple – when investing in depreciating assets, do it based on need, not just for status or peer pressure.

Every decision in life isn’t purely financial. While upgrading to a luxury car for no reason might not align with FIRE principles, there’s room for investments with emotional value. The mentee got it, and we happily knocked off that line from his assets tab. 📉💼