We were fortunate enough to connect with six financial experts who are big on helping people with their money. While they range in their professions â including certified financial planners,â¦
“I was wondering how a mom of three little ones (mine are ages 5, 3, and 1) can find the time to grow a blog without killing myself? – Sarah on Twitter I often get questions from many of you who are wanting to build a business but feel frustrated by the lack of time… Read More
According to the U.S. Department of Agriculture (USDA), raising a child to the age of 18 sets families back an average of $233,610, and thatâs for each child. This figure doesnât even include the cost of college, which is growing faster than inflation. CollegeBoard data found that for the 2019-2020 school year, the average in-state, […]
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Side hustles have always been a good way to earn more money and better your finances. With so many people in debt while wages have fallen flat, theyâve become especially popular over the past decade. Now, with the coronavirus pandemic, weâve seen them shoot ahead in popularity even further. According to a recent survey by […]
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Are you in the market for a new or new-to-you car? If so, you’ve probably wondered “How much car can I afford?”
While your local car dealership might be happy to tell you the sky’s the limit regarding your car purchase, your personal budget might be telling you a different story. Spending more than you can afford on a car turns that car from a blessing into a burden.
How much should I spend on a car?
Deciding how much to spend on a car starts with knowing your current financial numbers. You'll need to know your current income, expenses, and savings amounts.
Know your numbers
There are several financial factors that can influence how much you should spend on a car. The amount of money you earn, of course, needs to be taken into account.
When determining how much you earn, always use your net take-home pay to start with. From there, factor in the other financial obligations you have.
In other words, look at your budget. If you don’t normally use one, now is a good time to start. Having a clear view of all other monthly financial obligations will help you better determine how much you can afford.
The 50-30-20 budget plan can be helpful. In short, the 50-30-20 budget plan works like this:
- 50 percent of your budget goes toward must-have and must-do obligations, such as housing expenses and child care
- 30 percent of your budget goes toward savings and debt obligations
- 20 percent of your budget covers unnecessary expenses and “fun” money
There are many ways to design a budget, but the 50-30-20 budget gives you a good place to start. It will certainly point out of there are any areas that are totally out of whack.
What do you have in savings?
Having a healthy savings account balance is important when making a car purchase as well. If you don’t have an emergency fund with a balance equal to three to six months’ worth of expenses, building that emergency fund up should be a priority.
If you don’t have an emergency fund with a balance equal to three to six months’ worth of expenses, building that emergency fund up should be a priority.
With an added car payment, having a plush savings balance will help you ensure you can cover the new payment even if you hit a financial bump. Or, for instance, if the car needs repairs.
Determine the total cost of the car
Once you have looked at your budget and determined the amount of money per month you are comfortable spending on a car you'll want to be clear on the total car costs before you make your purchase. Affording a new car isn’t simply about the payment.
There are several other costs associated with car ownership, such as:
- Insurance policy costs
- Fuel and parking costs
- Maintenance and repair costs
You can call your insurance company ahead of time and get a quote for the new vehicle you're considering. If you are still trying to narrow down what type of car you want, check out this list of the most and the least expensive cars to insure.
Call your insurance company ahead of time and get a quote for the new vehicle you're considering.
Fuel costs are fairly easy to determine. A Google search will give you the MPGs of any car you could think of. Compare that to your current car to see if your costs will change.
Maintenance and repair costs can be harder to determine but you can get an idea by using averages across a brand. Here's an article from Autowise that displays the cheapest and most expensive cars to maintain.
Be sure to factor in an accurate estimate of these additional car ownership costs as you determine a purchase price and payment amount you’re comfortable with.
Get the right kind of car loan
Doing your due diligence as you shop for a car loan is important as well. You do not have to get financing through the dealership. You will likely do better getting a loan yourself through your bank. At the very least, have an understanding of what rate you would qualify for before heading into the dealership so you know if they are offering you a fair rate.
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Your guide to understanding how a Fed rate cut could impact your mortgage as a homeowner or prospective buyer.*
The post What Happens to Mortgage Rates When the Fed Cuts Rates? appeared first on Discover Bank – Banking Topics Blog.
Using Wade Pfau’s data and “predictions” of the future, we’re creating an updated Trinity Study to use for our retirement planning.
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Every time thereâs a large credit card breach, youâll hear some expert say risks for consumers are low, because itâs easy to cancel a credit or debit card and get a new one. Not so fast. If fraud appears on your bill, but you donât notice it, youâll pay for it. More important, changing account… Read More
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