You can fulfill your long cherish dream to have a car by saving money with low income. To save money for a car is somehow difficult task specially for those, who have low income. At present time, having a car is not luxury rather an essential element to save time and feel comfort.
In this article, you are going to learn essential tips and tricks on how to save money for a car with low income. So, cheer up! Before starting saving for car, you should get out of debt fast.
Simple statistical information
An American minimum annual salary for a full-time job is $15080, according to federal wage scale. On the contrary, average car price in America is $42258. Per month average down payment is $563. But in India, average annual salary is Rs. 204200 (2715 dollars) and a medium label car price is Rs 6-7 Lac ($7977-$9306). But an American living cost is higher than an Indian living cost.
Why should you save money?
For saving, you should learn how to save money fast with a low income. You may save money for several purposes in mind. Someone wants to save money to invest in land. Moreover, if you save money, you can buy a house fast or can start investing in share market.
How to buy a car with low income
For your easy realization, I suppose your annual income is $15000. You may have student loan, credit card borrowing or mortgage. Nevertheless, you can materialize your dream by having a car by leading a discipline life.
Whether you have a car or first time you want to buy a car, you can reduce stress by saving money. Moreover, saving money can open the door to invest in the stock market. Therefore, saving money is undoubtedly a good habit.
How much should you spend for a car?
As a low earner, you should not exceed the range from 15000 dollars to 20000 dollars for a car. Moreover, you should spend maximum 10% of your salary for loan payment in case you want to buy a car by minimum down payment. However, if you can save a mentionable money for down payment, you can reduce your installment amount.
How to save 15000 dollars for a car?
As I guess your annual salary is 15000 dollars and you have some other loan installments, you have to face difficulty to save 15000 dollars. In this situation, you should try to buy a car with 100% down payment so that you can escape from extra burden of paying one more installment.
Top 3 ways you can save money with low income
Prepare a monthly budget
A monthly family budget helps to identify the source of expenses. Family expenses consist of monthly grocery to utility bill. Try to cut expenses a small percentage. If your current family expense is 60% of income, you can lessen this percentage to 50%. Thus, you can save 1500 dollars (15000*10%) annually.
Lead a discipline life
By controlling others expenses such as dating, hang out, tour etc, you can save another 500 dollars annually. So far, you can manage 2000 dollars by following a family monthly budget and leading a discipline life. So, you have remained 13000 dollars for spending. Yet, the question remains unanswered- how to manage rest of the money.
Second source of income
A car has on going fuel and maintenance expenses. So, part time income can smooth your life. To earn some extra money, you can start physical or online business. Otherwise, you can work extra more hours in case your job supports to boost up saving. At least you should earn 3000 dollars annually by doing part time job. By this way, your annual saving will touch at 5000 dollars. That’s excellent!
Deadline to have car
By 5000 dollars annual saving, you can have a car within 3 years (15000/5000) without paying any installment. Do you want to wait for 3 years? Your answer should be big “YES”. Hence, you should wait 3 years from now to buy a car. For living a stress-free life, we should avoid debt. Debt turns to insolvency. 3-year waiting is better than buying a car with 5% to 10% down payment.
Disadvantage of small down payment for a car
Imagine, Jone have recently bought a car by 750 dollars (15000*5%) at 5% down payment. In America, automobile loan interest rate may vary from 3% to 14% based on credit rating. Just think 5% interest on 15000 dollars. Interest amount is 750 dollars.
If interest rate is 10%, gross amount payable will16500 dollars. You will pay extra 15000 dollars for interest. That sound good now. But you will lose eager, when you have to pay one more installment in each month. So, choice up to you.
In Conclusion
In order to have a car with low income, you should lead a discipline life for 3 years. After 3 years saving, you can buy a car with full payment. Try to avoid loan for a relax life. If you have read the whole post, you have got the answer- how to save money for a car with low income.
Founder of The Financial Ask
