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How to budget for a used car

Tracking your income, outgoings, and budgeting accordingly used to be a tireless and time consuming exercise that would leave your head spinning. But in recent times budgeting in everyday life has become something of a badge of pride. 

With automatic saving apps such as Money Box and Plum allowing you to do everything from saving and investing your spare change to opening an ISA it has never been easier to sort out your finances.

So when it comes to budgeting for a used car, what hints and tips can we offer to get you on the road a little quicker? Here’s how to budget for a used car.

Calculate your incomings and outgoings

Whether it’s via your bank app or a paper statement, make a list of your monthly net pay and any other income or tax credits you receive. Then a list of direct debits, standing orders, regular bills and other foreseeable outgoings.

This sort of forensic approach to your monetary health can raise some big alarms: are you still paying for a gym membership you no longer need or use? Are you being charged for a mobile phone you thought you’d long since paid off? With everything written down it allows you to deal with these types of issues that may have flown under the radar. It also allows you to get to grips with how much you have to work with to create a realistic budget.

Divide outgoings into fixed and variable costs

Hopefully after you’ve gone through the above you’ll be in a position where your income is greater than your outgoings. Looking at your outgoings with this in mind, divide them into fixed costs – rent or mortgage, car insurance, gas and electric bills – and variable costs such as how much you spend on takeaways, morning coffee or other ad-hoc comforts.

Once you’ve got a clearer picture of your variable costs, you might be able to identify where you can make savings: do you need to eat out every day? Could it just be a Friday treat? While we don’t advocate cutting out every perk and living miserably, being smart about your outgoings can pay off big time. 

Start a savings account

Having worked out what you don’t need, use these variable costs as the start of your savings contribution. If you’ve been getting a £3 Tesco meal deal everyday, by knocking it down to just a Friday that’s £12 a week you’ve saved without even really trying.

By utilising an app like Money Box, it can also round up your everyday purchases to the nearest pound: so if you spent £3.20 on a coffee, it will automatically put 80p into your savings. You’ll be amazed at how quickly that begins to add up.

If you don’t have the ability to budget toward big savings, budgeting in this way can show you that sooner or later every little helps.

If after you’ve assessed your incomings and outgoings you have some money to play with, common consensus states that dividing your income by 50% on needs, 30% on wants, and 20% on savings, is a healthy way to use your money effectively without impacting your way of life.

If you can, leave your savings account alone and avoid using it to cover anything other than an emergency expense.

Use technology to help you save money

Outside of the automatic saving apps we have mentioned, others savings apps are available that connect to your bank account and do the hard work for you.

If you want to do it yourself, there are a selection of free budget calculators online which can be invaluable assistance. PocketGuard categorises and organises your expenses, monthly bills and subscriptions into clear tabs and graphs so you will always be on top of your finances for example.

Keep it realistic

While you might set out with the best of intentions to save a fixed amount of £100 a month towards a used car, there are likely to be months where you need some extra capital: maybe for a weekend away or a family meal.

The only rule of this article is to save what you can: make your budget work for you and don’t get disheartened if you can’t save as quickly as you want. 

Following these simple budgeting tips can help you save money both in the short term and long term, whether it’s saving for a used car or a house or anything else. And that’s how to budget for a used car.

READ: How to get a cheap, reliable car on a budget

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