Use the Savings to Speed Past Other Debts
I was taught to set goals that are challenging but achievable. Accordingly, I set a goal to keep a car for 12 years before burying it. A few decades ago that would have been unrealistic but thankfully todays vehicles, if properly maintained, can run for 200,000 miles or even more.
This is good news for the frugal. It enables us to lower our car costs and free up cash flow by spreading out and staggering vehicle purchases. For example, if you live in a 2-car household, heres a schedule to consider following (its the one my wife and I follow):
Now through year 6: Household member 1 buys a car, takes out a loan and pays it off in 3 years.
Year 6: Household member 2 buys a car, takes out a loan and pays it off in 3 years.
Year 12: Household member 1 replaces 12-year-old car with a new one; takes out a loan and pays it off in 3 years.
Year 18: Household member 2 replaces 12-year-old care with a new one: takes out a loan and pays it off in 3 years.
And so on
This allows you to spread out new car purchases every 6 years. And because each car is paid off in 3 years, you never have more than one car payment to make, and 50% of the time you dont have any. If we assume an average loan or lease payment of $400/month, every 3 years when you have no payments you can save $12,000, or $24,000 in a single 12-year cycle.
Of course if youre a 1-vehicle household this approach wouldnt apply, but the principle remains the same. Buy a vehicle and pay it off quickly, then start saving.
So take financial advantage of advances in automobile technology. Change the oil regularly, free up Cash Flow, and use it to get further ahead on other debts.
While were on the subject of potential pitfalls, its important to also point out that rental properties are NOT for everyone. If you dont think you could effectively choose and deal with tenants, then becoming a landlord might not work for you. Being handy with repairs isnt a requirement but making sure they are done in a timely manner is important, and if you pay someone else to do them it cuts into your bottom line. There are a host of other considerations, and many other sources of information on this topic that can give you more detailed guidance.
P.S. Remember: Dont buy an unnecessarily expensive car. Worst asset types should be functional, not lavish!
I was taught to set goals that are challenging but achievable. Accordingly, I set a goal to keep a car for 12 years before burying it. A few decades ago that would have been unrealistic but thankfully todays vehicles, if properly maintained, can run for 200,000 miles or even more.
This is good news for the frugal. It enables us to lower our car costs and free up cash flow by spreading out and staggering vehicle purchases. For example, if you live in a 2-car household, heres a schedule to consider following (its the one my wife and I follow):
Now through year 6: Household member 1 buys a car, takes out a loan and pays it off in 3 years.
Year 6: Household member 2 buys a car, takes out a loan and pays it off in 3 years.
Year 12: Household member 1 replaces 12-year-old car with a new one; takes out a loan and pays it off in 3 years.
Year 18: Household member 2 replaces 12-year-old care with a new one: takes out a loan and pays it off in 3 years.
And so on
This allows you to spread out new car purchases every 6 years. And because each car is paid off in 3 years, you never have more than one car payment to make, and 50% of the time you dont have any. If we assume an average loan or lease payment of $400/month, every 3 years when you have no payments you can save $12,000, or $24,000 in a single 12-year cycle.
Of course if youre a 1-vehicle household this approach wouldnt apply, but the principle remains the same. Buy a vehicle and pay it off quickly, then start saving.
So take financial advantage of advances in automobile technology. Change the oil regularly, free up Cash Flow, and use it to get further ahead on other debts.
While were on the subject of potential pitfalls, its important to also point out that rental properties are NOT for everyone. If you dont think you could effectively choose and deal with tenants, then becoming a landlord might not work for you. Being handy with repairs isnt a requirement but making sure they are done in a timely manner is important, and if you pay someone else to do them it cuts into your bottom line. There are a host of other considerations, and many other sources of information on this topic that can give you more detailed guidance.
P.S. Remember: Dont buy an unnecessarily expensive car. Worst asset types should be functional, not lavish!
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