In today’s economy, with so many uncertainties, it’s more important than ever to set a realistic budget allowing you to cover all your monthly expenses. Once you know your expenses you can start cutting back on unnecessary things and putting money away for a car.
Stick with your budget, and never lose focus on your quest to buy a car. If you plan and save, your next car is closer than you think. These simple ways will help you budget and save for your next car purchase.
Calculate Current Monthly Expenses
Image Via Flickr by Dave DugDale
Look over your monthly expenses. Start by downloading a bank statement for the most recent month and add up all your expenses on a spreadsheet. Place each charge into a category like monthly credit card bills, car payments, utilities, insurance, and food. Add a miscellaneous category for all other items.
Tally up the total for each using the spreadsheet’s formula function. Then tally up the total for the month. Once you have a monthly total, compare it to your net pay (after tax pay on your pay check) for the month. To get a monthly net pay total, multiply your weekly check amount by 4.333, the average number of weeks in a month. Or, use your bank’s total net deposits for the month excluding any one-time, non-recurring deposits.
Start Cutting Expenses
Next, take a look at the items you can live without. Eating out often costs hundreds or each month depending on how many times you go. Consider eating out less and packing a lunch several times a week. That saves up to $50 a week, or over $210 a month.
Other excessive expenses include trips to the convenience store, entertainment like movies out, extra beauty or spa visits, and clothing purchases. Trim back any superficial purchases. Put all of your savings into a special, interest-bearing account for your car down payment.
Make automatic deposits into a savings account from your bank each month and watch the savings grow before your eyes.
Refinance Your Credit Card Debt
Analyze your monthly expenditures for credit card bills. Consider consolidating your credit card bills under one account, or through a debt consolidation company in order the amount you spend each month.
If you have bills in collections, pay them to increase your credit score. A better credit score lowers your financing cost.
See What You Can Afford
Experts recommend spending up to 20 percent of your monthly income on car payments. But before you finalize your car budget, factor in unexpected circumstances like a lay-off in a two-income family, a rise in your rental rates, or an increase in mortgage payments due to tax increases or interest rate changes on ARM loans.
Start shopping at dealers. Always remember you will save by buying used cars, and not buying a newer, more expensive vehicles. Make sure you are properly insured when you test drive the car, companies such as Weekly Cover offer short term insurance while you test your car.
Budget wisely and you’ll get the car you want and have money left over for everything else.
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