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Wednesday, July 26, 2006
Saving For My Next Car
Over paying over the life of the loan can shave several years off the life of the loan, it is a very good idea. I intend to do the same with my car loan, at least as long as I have the car. If I decide to sell it to get rid of the loan and be debt free faster then that will be much better, as long as I am not upside down in the loan at the time I sell and I can afford to get another car (that I can actually afford) to replace it. Either way, I have a mutual fund thAt I will put most of thse monthly payments in, for a future car down the line (10-15 years) that I will pay cash for with that saved money. Eventually I will be able stop putting money in that fund because I will have enough cash saved to buy 2 or 3 cars, keeping them each at least 10 years. Anotherwards, lets say I only fund this fund for 10 years. Considering my payments alone, after 10 years of saving those payments I would have enough to buy 2.5 cars or put another way I would have enough to buy a good used car once every 10 years for 25 years. By which time I will be in my 60's with not much need to buy another car after that. Add in the rate of return, that fund would last many more years then the principle alone.
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You have proposed a good strategy for saving for your next car purchase. I think there is great wisdom in converting car payments into savings deposits, in order to buy a car in the future debt free. The transition, I suppose is the hardest to overcome. That is, the trick I suppose is to get out of debt quickly through the debt-snowball strategy and then begin that car savings fund with the money that one ritually paid the loan co. I really like your thinking on this! Sean
ReplyDeleteHey Your Highness,
ReplyDeleteStumbled on your blog a couple days ago and read your comments about FPU. Tonight is our graduation luau from FPU and that was an incredible experience. I am a changed woman. There was a fella there who was in his 80's. His wife had died years ago and had always done the bills. Well he got debt free and kept telling us younger folk- 30's,40's 50's to do this NOW. About 2 others became debt free. I've been married for 20 years and we were going along our merry debting way when WHAM my 46 year old husband had 2 strokes and open heart surgery and is completly disabled. The bad news was all the debt i just pretended didnt exist. We are down to 12k in cc, 61k mortgage, 7 K hell loan. I just had to empty out the er fund for a traffic accident but like Scarlett Ohara- "I'll never be hungry again." I cant say enough about Ramsey and I enjoy your royal website too! Final Ramsey thought,
"Take the cheese, I want out of the trap!" Dazlette
I still don't understand your thinking with your current car. Sure you got tricked with the model name, but that's water under the bridge. Bottom line is that you're paying interest for a shiney, newish car. Do you want to be debt-free? Save up to pay out of the loan, and sell that car. You can get a much cheaper one, perhaps with no loan at all. You said you're paying it down in two years, and maybe you just like a shiney car. My car has so many things wrong with it, but payments aren't one of them!
ReplyDeleteI believe I have said repeatedly that is what I want to do. The problem is saving any money.
ReplyDeleteIf I decide to sell it to get rid of the loan and be debt free faster then that will be much better, as long as I am not upside down in the loan at the time I sell and I can afford to get another car (that I can actually afford) to replace it.