01-24-2017 06:09:33
Insurance, registration, maintenance, parking, fuel, parking tickets, car washes. Oh, and for all you gear heads, the "mod budget" on top of all that.
Yeah, cars are expensive.
If you’re planning on buying a car in the near future, saving up enough money to make the down payment is likely a major concern. Thanks to a wide variety of financing and leasing options available today, car ownership is possible for almost anyone, but you’ll need to practice a little discipline to get there. Here are some great ways you can start saving for a car.
The first step towards saving up enough money to buy a car is to stop stuffing all your spare cash under your mattress. If you want to get to your goal quickly and efficiently, you need to build a smart system for pooling your money.
Unless you’re actually hiding your money in a hole in the back yard, you should already have a checking account. If you don’t also have a separate savings account, get one as soon as possible. Start by checking out these recommended banks for savings accounts from NerdWallet.
Once you set up your savings account, set up automatic deposits from your checking account so a portion of your paycheck goes straight to your savings account right when it comes in. Creating an automated system removes the temptation to blow all your money on payday and also removes much of the stress of saving. So you can set it and forget it. No more worrying!
Once you’ve set up your saving account, the next step is trimming the fat from your monthly spending. Start by making a budget. How you plug up the holes in your leaking bucket of cash if you don’t know where they are? Use these great apps and tools to help you find out where your money is going and organize your finances.
LevelMoney watches your spending and highlights categories (like coffee or clothes) that you’re spending the most on.
Mint is the ultimate mobile budgeting tool. Use it to store information on your spending, bills and savings accounts all in one place.
Wally is a specially designed daily spending tracker that has the useful ability to scan, and categorize, all your receipts.
Once you know what you’re really spending your money on, you’ll be able to spot the fluff. Forgotten subscriptions for gyms and magazines that you don’t use are notorious examples of hidden spending. If you don’t need it or love it, cut it.
That doesn’t mean you should live like a hermit. As financial planning guru Ramit Sethi likes to say, “spend extravagantly on the things you love and cut costs mercilessly on the things you don’t.” Your goal should be to find the places where you’re spending money on things out of habit or laziness and cut those. Once you do that, increase the size of your monthly automated savings withdrawals.
In addition to cutting spending, making more money is another way to accelerate your savings. Obviously you know that and you’re a busy person with a full time job. But you may not know there are plenty of ways for a tech-savvy person to make a little money on the side with little effort.
Craigslist is so last decade. If you have some spare stuff that you wouldn’t mind parting with, apps like Gone! and Move Loot can help you sell it quickly in minutes.
A recent surge of apps that all want to be the “Uber for X” are making it easy to translate spare time into cash. Watch other people’s pets for pay with DogVacay, loan out a bike through SpinLister or build some shelves through TaskRabbit.
Money may not buy happiness, but it will buy a BMW, so more of it probably isn’t a bad thing.
If you’re planning on financing your car purchase, you should pay very close attention to your credit score, also known as your FICO score. If your credit is bad, use the time during which you’re saving money for a down payment to try to improve it. Otherwise you’ll face higher interest rates which can cost you dearly.
To understand why, let’s run the numbers. If you end up with a 1.5% interest rate (very good) for a 5 year loan of $10,000, you’ll spend a total of $10,385 by the end of the loan. If your rate is 7%, you’ll spend $11,880 by the end of the loan.
If you don’t have a credit history, which is common for young adults who don’t have credit cards or loans yet, you should follow these tips for building up credit before getting your auto loan.
Work on your credit score now so it doesn’t stop you from buying your dream sports car later.
Carefully consider where you’d like to finance your vehicle. Even though a lot of people do it, it’s not smart to walk into a dealership and set up financing through them. Instead, set up your financing ahead of time. Consult with your bank or credit union to set up your loan with them. That way, you’ll know exactly what type of loan you’re approved for ahead of time, and you’ll be able to work with a bank that already sees you as a loyal customer.
At Car Saints, we often meet people who’ve faced harsh financial consequences for rushing into an ill-advised financing plan with a seedy dealership. Avoid the headache and heartache by planning your car purchase ahead of time and setting yourself up for good financing.
By saving diligently and thinking ahead, you’ll make sure your car shopping experience is a good one that won’t ravage your bank account.