How to Save Up for a Car Without Breaking the Bank

The post How to Save Up for a Car Without Breaking the Bank appeared first on Penny Pinchin' Mom.

Learning how to save up for a car is like learning how to save up for anything; it calls for discipline and a few financial tricks. Learning how to save up for a car without breaking the bank can now be somewhat difficult. But it can be done, and as usual, I’m here to help you out.

Tips on How to Save for the Car You Want

According to market research, about 5.3% of the cars owned by Americans qualify as luxury vehicles. These are cars that cost upwards of $70,000 just to buy. The maintenance cost will bring tears to your eyes.

Needless to say, a vast majority of Americans don’t own luxury vehicles, but that’s not to say that these people own broken-down used cars. There are still some wonderful options that fall within a reasonable price range.

What is your dream car? How much will it cost you? How much of that do you have saved up as we speak?

The simple truth is that not many people have enough money saved up to buy a car. That’s why a vast majority of us go the financing route.

While it’s a viable option, there are some additional costs to consider, such as the possibly high interest rate that comes along with those car payments.

Since you are here, I assume you are looking to sidestep all that and go straight to outright buying your car. Here’s how you can do that without breaking the bank or losing your sanity:

Do Your Research

“When buying a used car, punch the buttons on the radio. If all the stations are rock and roll, there’s a good chance the transmission is shot.” − Larry Lujack, renowned DJ

There’s just no way around it; you simply have to do your research. This research has to be extensive because there are quite a number of things to consider:

The make of the car The size Fuel consumption Maintenance Comfort Off-road capabilities

A lot of this will depend on what you are looking for when buying the car. Do you want something spacious enough for the whole family, or are you going through a bit of a mid-life crisis and, therefore, want a two-door sports car?

There’s no shame in that! Once you’ve decided what you want, log into a few forums and see what people are saying about that kind of car.

You will find first-hand experience on how expensive or easy it is to maintain, the best auto shops for that model, and a lot on the car’s reliability or best practices to enhance that reliability.

Pro Tip: If you aren’t too set on buying a new car, you can also find people selling their pre-owned cars in these forums. And since most forums are a close-knit community, your chances of getting scammed are minimized. Never zero, but minimized.

If you do choose to go for the pre-owned option, you will be saving yourself a bit of money! Just make sure you have a trusted mechanic look over the car before you hand over your hard-earned money.

Narrow Down a Price Range

If you are going to save money, you need to have a target savings goal in mind that you can work toward. Not only will that give you something to break down (how much you need to save every day, every week, and every month), but it will also help you visualize the end game; it will help you strategize better. It may even motivate you!

For example, if you want to buy a car worth $20,000, you could decide to save $1,000 a month for 20 months or $5,000 a month for four months. I know this is sometimes easier said than done, but I don’t want you to be disappointed when your expectations are set too high.

Use Cash

Every time you use your credit card, you are paying interest on that purchase. Cumulatively, especially over a long period of time, this interest can be a significant amount of money. Ultimately, it is the money you could have saved to buy your dream car.

Try using cash as much as possible for your purchases and work on that savings goal. It may be an inconvenience at first, but it will pay off in the long run. This is what I would do:

Calculate how much you pay in terms of interest per year when you use your credit cards Take that money and put it aside as part of the car fund Put the credit card back in your wallet and use cash or debit instead

Using cash also has an underlying advantage; it can help you improve your spending habits. Spending hard cash is much harder than swiping your credit card. Soon enough, you will find that you choose not to buy lots of frivolous things you spend money on daily. This ends up saving you more money.

Use the “100 Envelopes Saving Challenge”

Have you heard of the “100 envelopes saving challenge?” It’s quite simple. Get 100 envelopes and label them accordingly from envelope #1 all the way to envelope #100.

The challenge is all about saving the corresponding amount on the envelope of the day. If it’s envelope #1, you put $1 in it. Next day, you go to envelope #2 and put $2 in it, and so on, until you are done with envelope #100 on the 100th day.

Increase Your Income

If you are going to learn how to save extra money for a car, you might as well teach yourself how to earn more money for the expense. Buying a new car is only the beginning. You are going to need gas, car insurance, and money for car maintenance and repair costs.

Increasing your income is a wonderful way to increase how much you can save quickly before that trip to the car dealership, as well as how much you can continuously put aside to pay for your monthly payment and other car expenses once you get it.

Automate Your Savings

I’m an avid saver, and one thing I have learned is that there’s always going to be something else you could use the money on. Always.

Even if you have a strict budget and savings goal for your car fund, if you have $100 today, I guarantee you that you’ll find something to use it on unless you are determined to save it and add it to your savings account.

Setting up an automatic savings account system works wonders for me. What I do is come up with a specific budget, one that covers all our basic needs. Once I have that figure in mind, I come up with another number—an amount that can be taken out of the family paychecks without leaving my kids destitute.

Let’s say, for example, $500 a month. Once I have that number, I set up an automatic deduction from my checking to my savings account every month.

What this does is take most of the thinking out of my hands. The money is automatically deducted, so I don’t feel like I have it and, therefore, can’t find something to spend it on.

Of course, there are many other ways to save money, but I have found that when you are learning how to save up for a car or anything else related to personal finance, really, the trick is to make the process as painless as possible.

Otherwise, you just end up despising whatever it is you are saving up for; you’ll look at it as the bane of your financial existence.

The post How to Save Up for a Car Without Breaking the Bank appeared first on Penny Pinchin' Mom.