Is your car a money sink? Are you spending 10 to 20 percent of your income making car payments, insurance payments and gas pump payments? Imagine what you could do if you stopped paying all that money on your car. What if you started using the cash to pay down debt or fill out your Roth IRA?
Sell your fancy car and buy an old reliable
Do you have a pretty car? Is it red? Are its curves oh-so-smooth and its seats oh-so-soft? Does it come with a monthly payment?
The only reason to keep a fancy-pants car is if you own it outright. If not, it’s time to sell. A monthly car payment is the dumbest financial move you can make. Seriously. I want you to put an appointment on your calendar right now to visit a used car lot and trade in your money pit of a car for a used car you can afford.
Don’t make the argument that your new hybrid car saves on gas. We’re going to address the gas issue later. I refuse to believe that you’re saving as much money on gas as you’re paying every month in car payments.
Sell your fancy car and get an old reliable. I’m partial to those old Volvos shaped like bricks.
Cut your insurance without involving small reptiles
How much car insurance are you paying right now? I guarantee that for most of you, the answer is “too much.” When’s the last time you contacted your insurance agent to ask about reducing your monthly payment? Spend some time looking at insurance packages online to get an idea of what you’re worth. If you’re a good driver, you are eligible for a lower monthly rate or for a package that exchanges a higher deductible for lower payments. Of course, you’ve already switched out your fancy-pants sportscar for a modest used model, which will bring your rates even lower.
So shop online, find a package you like and ask your insurance agent to match it. If your current company won’t do the match, you’ve already found a suitable alternative.
Save money on gas by not driving places
The way to save money on gas is to not drive places. If you can share your commute with one other driver, you can knock up to 50% off your gas bill and you get to drive in the cool carpool lane. Consider adopting an “evenings and weekends” rule: don’t drive the car on the evenings and weekends. If you can’t get there via public transportation, walking or biking, don’t go.
I know this is a hard rule for some people, and it also involves some advance planning; if the rule is that once your car touches the driveway, you can’t back it out until the next morning, you had better get serious about planning errands and making grocery lists. Of course, this isn’t the kind of rule that you’re expected to follow at all times. Think of it like exercising: you don’t do it every day, and you don’t do it the day you’ve got to drive three states over to your cousin’s wedding, but you exercise as often as you can or you lose the ability to fit into your clothes.
Also: if you spend every evening and weekend walking everywhere you need to go, you have a much better chance of being able to fit into your clothes.
Don’t be stupid
Don’t do stupid things that end up costing you large amounts of money. Don’t drink and drive. Don’t text and drive. Don’t put on your makeup while driving (yes, I’ve seen this happen). Be a smart, defensive driver and you end up saving both money and stress.
A note on speeding: yes, I know that the secret rule of driving is “go with the flow.” But I also know exactly how much speeding tickets cost. You decide when speeding is worth the risk.
If you trade in for an old reliable, cut your insurance plan, practice car-free weekends and remain a safe, defensive driver, you can cut your “car stuff” payments from 20% of your income to under 5%. What you do with those extra hundreds of dollars every month is up to you.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.