Car Debt? @$#%&*!

You don't have to have a new car/truck. What's new to you is good enough. We often forget that on top of your car payment there are many other extra expenses. Including insurance, gas, repairs and maintenance, parking and even tolls, it adds up quickly!

Many financial experts recommend keeping total car costs below 15% to 20% of your take-home pay. So while your car payment may be only 10% of your take-home pay, you should plan on spending another 5% on additional car expenses.

For example, if your monthly take-home paycheck is $3,000, your car payment would be about $300 and you’d plan on spending another $150 on automotive expenses. This includes all cars, one check one car. If you have two expensive cars on one check, it's a budget killer.

However, there is some flexibility in this crazy car budgeting approach. If you absolutely got to have and want a more expensive car, you could consider part of your monthly payment as spending in the “your wants” category, as opposed to your "needs" category. You need shelter, food, clothing and transportation. Everyone wants a "sweet ride", not everyone can afford or needs a sweet ride though. But with all that being said, as long as you keep your personal budget balanced overall, you may end up with what you want. Also sometimes, you get what you want and later find out that it's not really what you need. You'll figure that out, eventually, just saying.

So, while 10% of your take-home pay for your car payment may sound really restrictive, if you economize in other budget areas, then you could choose to spend more on your car.

Also keep in mind that your interest rate on your auto loan will directly depend on your credit score and other factors. The lower your credit score is, this generally results in higher interest rates. It’s smart to compare offers to find the most competitive rate on your auto loan. I would highly recommend that when you are looking and saving for a new car to you, notice I said "new to you", not new car, that you constantly find ways to improve your credit score while saving and searching.

You can easily pay way to much for your car, a car that your budget can't handle. If your payments are too high to knock out a loan in 42 months (3.5 years), you're buying more car than you can afford, it's that simple. forget about those 60 or 72 month long loans that people get talked into all the time. Stretching a payment that long means your 'upside down' - owing more than the car is worth. This becomes a vicious cycle where you are always living in a crazy car payment. NOT GOOD!

Car debt crushes many people that want more than they need. Don't do that to yourself or your family. Invest in a family experience instead of making another car payment. All this being said, cash is still king, save and pay cash.

Always Reppin"

Never Flinch!

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Contact Coach Steve Hagen

Tel: 440 724 1841

Nashville, TN