How to budget for a car? Especially buy first car in your life. This article shows you step by step buying car guide for those with limited savings or income.
Step 1: Start recording your daily expenses to find out your total monthly expenses.
Step 2: Analyze your monthly cash flow. Determine how much your monthly savings (extra money) is.
Step 3: Before considering buying a car, setup an emergency fund which is sufficient to support your living cost for 3 to 6 months just in case you are out of situation (jobless, retrenched, and etc).
Step 4a: If your monthly savings are below 30% of your income, it is not advisable to consider buying a car. Because the car loan installment will increase your burden. Therefore, move backward to Step 3 and restructuring your cash flow by increasing the sources of income or to cut down expenses (without affecting your basic living quality) if you insist to own a car.
Step 4b: If your monthly savings are 30% or above of your income, then you afford to spend 15% – 20% of your savings for the car loan installment. This approach will helps you to determine the maximum payment that you can afford for a car loan.
Example:
- Monthly Income: RM2500 (100%)
- Monthly Expenses: RM1750 (-70%)
- Monthly Savings: RM750 (30%)
- Budget for monthly car loan installment (maximum): RM500 (-20%)
Step 5: Determine which car to buy according to the budget at Step 4b.
Step 6: Determine the car values & down payment (10%) needed and start your savings plan to achieve the target.
{ 2 comments… read them below or add one }
a useful guide, thx man ~
(start doing budgeting after reading ur post, hahaha)
You are welcome!