The price of the average American’s first car was found to be $5600, according to a survey by Goldeagle.
While it may seem like it will take a lottery win for you to be able to afford your dream car, the reality isn’t so bleak if you know how to budget.
With a bit of financial savvy and discipline, you can definitely buy the car of your dreams within a reasonable timeframe. Here are 5 money-savvy budgeting tips to help you save up for your dream car.
1. Optimize Your Budget
Cars are expensive, and so you will have to spend as little as possible to free up money to fund your dream car purchase. The best way to do this is by optimizing your budget. If you have not created a budget already, start by adding up all your expenses. You can do this by collecting all of your receipts. Then, categorize them and rank them in terms of priority.
It helps if you use a spreadsheet for this purpose. This way, you can find out what expenses can be trimmed or can have cheaper alternatives. When creating a budget, you must also determine whether or not you can realistically afford your dream car with your current income. Once you get your car, you will also be paying for gas, maintenance, and insurance. Add these on top of your current budget to find out if your finances can support that car in the future.
2. Maximize Your Income
The amount of cash coming into your budget directly affects how much you can put towards funding your dream car. Hence, it is wise to increase this income as much as possible. A second income stream is usually what comes to mind. But this isn’t limited to just taking another job. You can also check online for side ventures that fit your skillset and locale.
For example, if you have a knack for writing about a certain niche or interest, you can start a blog. If you do want to take on a second job, you can always go about it smartly. If your city is particularly lacking in good transportation options, you can apply to become an Uber driver.
Aside from this, you can also choose to invest your extra cash. This way you can profit without having to divert precious time to another job or venture. You just have to have a basic level of financial literacy. Low-risk investments are a great way to nearly guarantee some profit. Even if you only invest 10 percent of your savings, the return you can get would still be a tidy sum to add to your dream car fund.
3. Do Your Research
Another essential part of budgeting your car is to research it. This is to be informed of any downsides and caveats about your dream car. This will help you verify whether or not it really is worth budgeting for. You can also find out if comparable features can be found in a cheaper model or brand, as well as if you can be satisfied with a lower trim model.
A reliable car review site would be your best tool in this regard. Such a site can provide opinions from both professionals and consumers on whether your dream car is fit for the purpose you envision for it. You should also look into insurance and registration costs, as these vary between states and different models.
4. Consider Alternate Financing Options
It may happen that your current cash flow won’t let you get your dream car within a reasonable length of time. In this case, you should start looking into different ways to finance your vehicle purchase. That usually entails a loan of some form, and for that, you need to have a good credit score.
If your credit score isn’t that good already, it would be prudent to research ways to improve it. This will open up more options for loans, making it easier to find a deal that works for you. If you have bad credit, you can apply for a bad credit loan, but keep in mind that repayments for such loans can be more expensive than usual. If this is the case, make sure to look for a no-obligation loan quote. These quotes give you a selection of bad credit loans so you can more easily find the best deal for you at your current credit score.
5. Double Down On Your Savings
Whether you’ll be financing your car or paying in cash, the best practice is to simply save as much as you can. Look for new ways to redirect cash into your car fund. This includes things such as opening a separate savings account to keep money that will pay for your car. A passbook savings account would make it more difficult to withdraw and discourage you from spending that money.
You should also look into ways to maximize the interest you earn on that account. One way to do so is to open an account with trustworthy online banks that have competitive interest rates. Rewards and bank bonuses are also things to keep an eye out for. Even small bonuses, when put together, can be a big help towards reaching your goal.
It shouldn’t take a miracle for you to be able to buy your dream car within your lifetime. All it takes is earnest management of one’s finances and some clever investments and optimizations.