Bigger Car, Better Home, Boogie Nights: Which Huge Spend Hurts Budgets Most?
A larger apartment, a newer car or frequent nights out can all improve your quality of life, but at what cost? Some create a much bigger strain on your finances than others, especially when they add recurring costs to an already tight budget.
Here’s how each upgrade can affect your finances over the long term.
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A Better Apartment
Housing is oftentimes the highest fixed cost in most budgets.
“It affects cash flow every single month and it often comes with related costs too, like higher utilities, deposits, furnishing costs, renters’ insurance and sometimes a more expensive area or lifestyle around it,” explained Scott Oosterhouse, founder at Every Dollar Grows.
It’s also a commitment you can’t easily take back. You can end it early, but you may have to pay a fee or face a potential lawsuit.
Citing data from 2024, Cody Schuiteboer, president and CEO of Best Interest Financial, said that the number of cost-burdened renter households reached its highest level since records began, at 22.7 million households or 48.9% of all renters. Also, 12.1 million renter households pay more than 50% of their incomes on rent.
“It's worth noticing that after upgrading, people start to purchase 'one-time' things more frequently, which they usually repeat again and again, resulting in a series of additional expenditures,” Schuiteboer said. “This is an endless loop of expenses that begins with a lease signed on higher rent.”
A Bigger Car
Upgrading to a bigger car can also put pressure on your budget over time.
“There are so many different calculations, but one of the most drastic would be if you have a paid-off car that’s seven years old with 100,000 miles,” said Melanie Musson, finance expert withAutoInsurance.org.
According to Musson, you’ll need to pay for regular maintenance, but there are no car payments and auto insurance is generally cheaper for older vehicles.
“Then you upgrade to a $60,000 brand-new SUV. You will only have regular maintenance to worry about, but you’ll also have a car payment and higher insurance rates,” she said.
Even if you trade in the previous car, Musson pointed out that you could still have a car payment of around $1,000 per month.
“Over those five years of making payments, you will have spent around $60,000 plus the value of the car you traded in. And you will be driving a vehicle that’s worth about $30,000 because of depreciation,” she said.
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Musson calculated that over five years, you’ll have lost $30,000 at a minimum, whereas if you had just kept the original car, you might have lost only $5,000 to $10,0000.
There’s also auto insurance to consider.
“Insurance premiums for a $20,000 car will be about half of those for a $60,000 car for full coverage,” she said. “So, instead of paying $150 a month for insurance, you might pay $300 a month. Of course, your individual rates could vary significantly from these numbers.”
More Nights Out
One of the trickiest budget-related decisions has to do with frequent dining, traveling and entertainment, according to Schuiteboer.
“People do not sign contracts and do not take loans when they start traveling or dining out more often. All their decisions look trivial. Yet this is why these decisions are extremely harmful for those personality types and budget frameworks that tend to struggle with financial matters,” he said.
In other words, frequent nights often feel harmless because each individual purchase is relatively small. But those purchases add up.
“Every $300 spent monthly means $3,600 annually, which will never come back into the household's hands and won't bring any assets whatsoever,” Schuiteboer said.
Which Upgrade Hurts a Tight Budget Most?
“What all three categories have in common is that people usually underestimate the long-term effect,” Oosterhouse said. But one stands out in the short term, another in the long run.
Schuiteboer and Musson both agreed that the bigger car has the most immediate impact.
“The combination of higher payment, depreciation, insurance and gas prices will raise your monthly spending by at least $400-$600, which will mostly constitute wealth destruction, not growth,” Schuiteboer said.
But the better apartment can hurt the most over time.
“The more expensive apartment usually hurts a tight budget most because it locks in a bigger monthly burden that is hard to undo quickly,” Oosterhouse said.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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