Saving for a car involves establishing buying criteria, setting financial goals and creating and sticking to a budget.
Decide What You Need
Set a goal for yourself based on how much money you need. For example, do you need $5,000 to buy a used car outright, or do you need to save up $2,500 as a down payment on a new $30,000 car? Also, consider how quickly you need to be able to buy the car. If it's something you plan to do over the next several years, you can create a savings plan that's long-term. If you need a car in a month because you're starting a new job, you'll need to be more diligent about cutting corners and saving larger quantities of money.
Don’t forget to factor in associated costs such as licensing, title fees, registration and car insurance.
Create a Budget
Create a household budget to help you allocate where your financial resources go. Start with your essential expenses such as housing, food, insurance and utilities, along with revolving debt payments. Next, add in nonessential expenditures such as entertainment, health club memberships, travel and other things you spend your money on that aren't absolutely necessary to everyday life. Based on your previously stated goals, determine where you can cut costs and set aside car money. For example, if your objective is to save $200 each month for a 12-month period, start trimming your budget to meet that objective. The easiest way to do this is to reduce the amount of money you spend on non-essential items, such as by going out one less night a week or dining in more often. However, you can also save money on essential items like groceries by clipping coupons or buying store-brand rather than name-brand items.
If you’ve never budgeted or are unsure of your monthly expenses, start keeping a journal to record all of your daily transactions.
Take on Temp Work
When you're saving for a goal like a car, consider putting in extra work to increase your earnings, if only for a temporary period. For example, you might work retail on nights or weekends during the holidays, or hold yard sales in the summer. If you have a specialized in-demand skill, such as computer know-how, make yourself available as a consultant, tutor or freelancer. Put the extra money aside exclusively for your car fund.
Give Up Luxuries
Give up luxuries for a short period of time to help you stash away car cash. For example, forego vacations and reduce or eliminate perks like cell phone extras, premium cable channels and pricey haircuts. Remind yourself that the modification is only temporary and is intended to help you reach a worthy goal.
Little things count! Even giving up a $5 coffee each day can net you an extra $150 or so a month in car savings.