Budgeting Essentials
Keep the Clunker and Paydown Debt
Keep the Clunker and Pay Down Debt
Here are just a few reasons why keeping your old clunker of a car makes good sense:
Hidden considerations
You may spend less money keeping your old vehicle in good operating condition than you would spend purchasing a new vehicle. Especially if you must finance that vehicle.
In addition to a new car sticker price, which has increased substantially, you also need to consider financing costs and insurance costs.
A trickier question might be, how much will this vehicle be worth on the used car market in a couple of years?
Will the auto workers strike be followed by vehicle price wars?
Financial condition
Do you have a budget? If not, let me convince you to start one. Why?
A budget is a clear-cut way for you to know exactly where you stand money wise. The more financially solid the ground beneath your feet, the less chance you have of falling into serious debt that can devastate you for decades to come.
A budget can easily confirm whether or not you have the financial ability to purchase a new (or used) vehicle. Knowing this can save you a lot of grief and anxiety.
Contingency Plan
What happens if you or your spouse loses a job? It can take a while to replace a good job. Especially one that you really enjoy.
A medical bill can come as quite a shock. Whether it’s an ER visit, a day surgery, or medical procedure, the costs associated with emergency situations can be debilitating.
Keeping your clunker and paying down debt is the wisest move you can make in this economy. Buying a new or new-to-you vehicle when you don’t have to - ties up your cash, your credit, and your freedom of choice.
Here are some steps you can take today:
- To optimize your time, it is wise to check or create your current budget. (I have a free budget workshop you can take.)
Take a good look at debt versus income. Include every scrap of debt you owe.
If you have to slither sideways to make ends meet, keep the clunker.
- Check or create your emergency fund. Have you saved enough money to pay for (not charge) the expense of an unexpected event? If so, great! If not, it’s time to get after it. Don’t wait until it’s too late. Keep your clunker.
Ideally, you should have six months worth of operating expenses saved up
to help keep you afloat in times of trouble.
This buys you time and peace of mind.
- Review or create your up-to-date contingency plan. You may even have a plan in place for multiple threats. One for job loss. One for unexpected bills. And one for severe storm damage.
You would be surprised how many people do not read and remember the details of their home/renters insurance policies, automobile insurance policies, and homeowners policies. Coverage tends to shrink over time as deductibles (the dollar amount you are responsible for) increases with time. Another good reason to keep the clunker!
Some Resources for you to check out.
(We receive no compensation for mentioning these articles.)
#1
You could easily end up owing more on your car loan than what the car is worth.
Here is an article by LendingTree that discusses how people who have bought a car in the past year have regrets. (click lending tree above).
They also offer suggestions on what to do when you regret your car purchase.
#2
Natasha Gabrielle has written an article dealing with the question of whether you should buy a car in 2023.
Under discussion topics include chip shortages, auto loan rates, and auto insurance rates.
(click on Natasha Gabrielle above)
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