Wednesday, November 6, 2013
How To Budget for Car Repairs While Erasing Debt
Whether new or old your car will need maintenance while you are trying to get out of debt. Ranging from routine oil changes to emergency transmission repairs, cars always require some sort of work to be performed on them. It is our unpreparedness to meet these maintenance needs that turns car ownership into a debt nightmare. Not being prepared for an auto repair leads to it being an emergency and how do most people pay for these emergencies? By putting them on a credit card of course. Which over time can add up. Here is How To Budget for Car Repairs While Erasing Debt.1. Cars Will Require Routine MaintenanceIf you drive a car then you must come to the understanding that cars will require routine maintenance over time. Even if you own a brand new car, there are routine maintenance requirements that will have to be performed at regular intervals. Check your owners manual for the schedule but usually it's something like at 1000 miles then 20,000 miles, 35,000 miles, 60,000 miles, 90,000 miles, and so on. On top of that cars will require having their old changed approximately every 3000 to 5000 miles.These routine maintenance intervals should not be emergencies. They are laid out very clearly for you by the auto manufacturer. So you should have plenty of time to budget and prepare for them.2. Cars Will Require Unexpected RepairsSecondly, you must come to the understanding that cars will require unexpected repairs over time. What we often call emergency repairs. Under the hood, cars are a symphony of lots of moving, mechanical parts. These parts wear out from use over time. Expect that over time you will have to repair the muffler, the transmission, the radiator, the fuel injectors, the engine. Tires will need replacing. Brake pads will have to be replaced. Therefore, they really should not be unexpected. The only unpredictable piece will probably be how much a particular repair may cost.3. Budget For ItSo how do you prepare for any auto repair? You budget of course. Each month or maybe each paycheck determine a fixed dollar amount that you want to place in your car repair fund. $100 per month is a good goal to shoot for. If you can't afford that much right away then make it any amount you can afford. $20 or $50 per month are good targets too. Any amount is better than nothing.4. Car FundWhatever amount of money you budget place that money into a "car fund." Nothing complicated. Set up a separate savings account at your bank that is dedicated to car repairs if you like. Then you can just transfer the money in there online yourself, or have your company direct deposit the money for you into that account if they offer that service. If you are good at tracking your money, you could even just keep it in a general savings account fund and then track how much of that money is set aside for car repairs in a spreadsheet. Pick a method that you like for where to keep the money.5. Budget a Little ExtraLook at your routine maintenance schedules at the beginning of the year to see what planned maintenance may be required. You should even be able to get a list of these from your dealership's service department or your mechanic with approximate pricing. Then budget a little extra each month so you can budget and meet those costs when the time comes.6. Emergency FundNotice that up to this point no mention has been made about dipping into your emergency funds. By now you should realize that your cars will need repairs. And if you budget all year long in anticipation of these, then most scenarios should not really be an emergency. But just a temporary inconvenience. However, there will come a time where a car repair will be so large that you might not quite have all the money in your car fund to pay for it. Then in that case pay what you can from your car fund. And then dip into your emergency fund to cover the rest.ConclusionBy now you should realize that car repairs, whether routine or unexpected, will have to be made every year. By creating a car fund and budgeting for these you can easily cover 95% of all car repairs without them becoming emergencies. And no need to pay for them with credit cards. For any amount that you cannot cover with the car fund then go to your emergency fund to cover the rest. So start budgeting for car repairs, continue to erase debt, and build wealth.