Here we will be discussing the budget strategy that a person can employ to buy a mid range (Rupees 5-10lakhs) car in the coming 5 years with his savings. Dream about buying a car? Right of the bat there are two things to consider in the first place in order to buy your dream car, buying with a loan or all cash. Better to go for loan even if you can afford cash deal to save some tax issues. So, even with saving there is a need to use a Car loan to safeguard your interests. Plus having cash in hand is better than spending it in one go.
Clearly each month you will have to save something from the salary to be able to meet the future demand for down payment and repayment. Remember that no sum is too small and you better keep adding regularly. We have already suggested not to spend all saved up money this way on the car, it has other expenses too which can be met with the money in hand if you opt for loan.
Set up a different account
When you are saving for a specific purpose always create an individual account for the same. This way even in dire need you can refrain from using this fund. Then at later stage when there is a substantial sum, you may want to look into it for building investment portfolio only for the car. The maturity sum should be submitted back to this account only.
If you do not know what are Mutual funds you can read the article Mutual Funds for Beginners| How common Indians make Money?
Investing in Mutual Funds can be a great idea to realize your dream about buying a car. Since it is a short term goal, look for those mutual funds which will give high returns in 5 years. You can invest Rs. 5000 each month in SIP mode. Predicting 15% interest, you can get 4.5 Lakhs in 5 years. Wait for 3 more years and you will get twice your investment that is 9.3 Lakh Rupees and a better car. Of course the returns will depend on market situation but still you can predict better returns than fixed deposits. But do not stop investing.
Other means to help buy your dream car
We all tend to find ways to spend more, now on try finding ways to save more. There is no harm in cutting corners on needless expenses. Like, you can always make your own coffee or tea. Today an average tea would cost nothing less than Rs. 10 even on the least expensive shop. This will be a great way of making Rs. 30-40 per day which is roughly Rs. 1200 per month just from tea. Smoke much? Reduce one per day and voila! you would have saved around Rs. 500 that month. Similarly other things like your penchant for brands could be given a back seat too. Try getting discounts via coupons and all these savings can be dropped in that account. If you want to learn other saving methods we have discussed in various articles on this blog.
Less on entertainment more of necessities
We have becomes addicted to entertainments expenses. People own a TV, mobile, laptop, iPad and smartwatch too. To be fair you may need all of them but surely there is a way to save if you have it in you. Like don’t recharge the DTH for the month you are not home, saves at least 300-400 bucks, same for your WiFi router. When you are all the time online, do you need a token newspaper subscription? Better to save that money and deposit in your car fund. Planning to upgrade your phone, don’t do it if it can go another year or so. Got a landline phone at home? If not necessary get it disconnected as we all are now connected with cell phones more than landlines. Some of the more brilliants ideas at personal level may come to you when you sit with family and discuss what unwanted expense is done.
Buying a car is every Indian’s dream. To actually realize the dream about buying a car, one must follow some strategies. If you follow the tips given above, you will definitely buy your dream car and park it in front of your home.