Step 1: Set a Budget
The first step is to figure out how much money you’ll need to save up for the car you want. A car is a big savings goal, and you can’t hit the target if you don’t know what you’re aiming for. Browsing through listings of several different makes and models of cars online will give you an idea of how much you’ll need.
For example, if you see the kind of truck you want costs somewhere between $9,000 and $11,000 after a certain number of years and miles, you might want to set a savings goal of around $10,000.
If you don’t have the money to pay for it in full, it means you can’t afford it. Don’t go into debt for things that go down in value!
Step 2: Set a Time Frame
You might not need to upgrade your car today or tomorrow. But you will need to do it eventually. The sooner you start thinking about your next car purchase, the better. If your car is starting to show signs of wear and tear and you might need to buy another one in the next year or two, the time to start piling up cash is now.
If your goal is to save $10,000 in the next two years for a car, you would need to save about $417 per month. That might sound like a lot. But think about it: That’s still $130 cheaper than the average monthly car payment! And if you give yourself three years to save up for a new car, you’d only need to save $278 each month.
The more time you give yourself to save up for your next car, the less panicked and pressured you’ll feel when you need to shop for one.
Step 3: Set Up a Savings Account
There’s no need to get fancy here. Opening up a separate high-yield savings account or a money market account to park your savings for a new-to-you car will get the job done. You can also set up automatic transfers from your checking account to your new savings account each month. That way you won’t forget or talk yourself out of saving!
And once you buy your car, you can just use that account as a sinking fund for car-related expenses like maintenance, repairs or even a future car purchase.
Step 4: Boost Your Income
Want to reach your car savings goal a little (or a lot) faster? Pick up a side hustle like delivering pizzas or starting your own photography business. There are plenty of ways to make an extra buck on the side, so get creative and start hustling!
Step 5: Cut Down Expenses
What if we told you that there could be some extra money to save for a car hiding right there in your budget? That gym membership you haven’t used in months. Those premium movie channels you never turn to. Eating out with your coworkers every single day. The list goes on and on!
If you need to set up a sinking fund for a car, check out EveryDollar. It’ll allow you to keep your car fund as a line item in your monthly budget and show you any expenses you can trim or go without—at least until you hit your savings goal.