How to Budget for a Down Payment
Posted 10 March 2016 12:00 AM by J.D. Byrider
When you need a car, chances are good you need a car now. Without a reliable
vehicle, your life stops because you can’t get to work or run errands.
why it’s important to start budgeting for a down payment before your car
We all know how important budgeting is, even if we don’t do it. Budgeting
allows you to create a spending plan for your money and it helps you save money
for the things that are important to you. Following a budget will also help you
spend only what you earn and avoid putting too much on high-interest credit
cards or loans.
Getting Started: Budgeting Basics
Saving money begins with budgeting where you spend your money. You need to
make a plan and stick to it, especially when you are on a tight income. To
start, sort what you spend your money on into two categories: what you need and
what you only want.
Focus on the future and the long term instead of instant gratification. Your
needs are things you need for survival, like shelter, basic clothing and food.
Your wants are everything else.
Here is a simple budgeting worksheet to get you started:
Download the PDF
Cut Costs without Major Lifestyle Changes
You’re probably identifying a lot of things as “wants”
that you would have
considered to be absolute needs. But, you don’t have to overhaul your
life to save money. Consider making some of these small changes:
- Stop paying for cable. Instead, use a streaming
service like Netflix, Hulu
and Amazon Prime.
- Pack your lunch. Not only can you save an estimated $2,000 per year if you
don’t eat out, you can also make healthier choices.
- Cancel email deals and alerts. These are just tempting
you to spend money on
things you don’t need or want.
- Buy used. You can often find great, gently used home
décor, clothing and even
electronics for a fraction of their retail prices at thrift stores.
- Cancel memberships. Get rid of the gym membership you
don’t use, and consider
cancelling the membership to the discount store if you rarely go.
- Reduce your phone bill. There are many ways to do this, but most boil down to
mply comparison shopping or asking for a better rate.
- Visit your local library. Not only do they have books,
they also have music and
movies that you can check out for free.
- Save on your insurance. If you’re not sick
often, consider calling your
insurance company and requesting a higher deductible, which will lower your
Save Money at Home
Your home may not feel like your castle, but it’s probably responsible
huge chunk of your spending. Cut utility costs and bills by following these
Change your showerheads and sinks. Low-flow versions can
save up to 50% of your
- Add insulation. Reduce as much as 20% of your heating
and cooling costs with
new/more insulation, according to Green Energy Solutions, Inc. You can pick
a roll of insulation for about $15 at most home improvement stores.
- Change your bulbs. LED bulbs are more expensive
upfront, but operate for just
pennies. Fluorescent bulbs also last about 4-10 times longer than regular
incandescent light bulbs.
- Fight drafts. Weather stripping your home prevents
drafts, which could keep
your heating and cooling costs from skyrocketing during summer and winter.
Use a programmable thermostat. Your home doesn’t need to be exactly
while you’re gone, even if you have pets. You’ll save on both
- Lower your water heater’s temperature. Keep your
heater’s temperature at 130
degrees, which is hot enough to kill germs and safely wash dishes. Do
in cold water.
Save Money on the Go
Be a better driver. Read this short guide for great tips on eco-friendly driving.
Use apps. The GasBuddy app helps you find the cheapest gas based on your
Stop speeding. Going from 70 MPH to 55 MPH could save you
almost 20% fuel
Pump up your tires. Tires lose about a pound of pressure
each month, which is
bad news, since driving with tires that are just 3 pounds underinflated
your vehicle's fuel economy drop by 1%.
Clean your car. If you're hauling around an extra 100
pounds, for example,
you're lowering fuel efficiency by up to 2%. Time to get rid of that extra
Consider a warranty. Especially if you’re buying
used, a warranty could help
you save on repair costs.
Keep up with maintenance. Though oil changes cost money in
they’ll keep your car on the road for much longer if you perform them
manufacturer’s recommended miles.
Top Couponing Links
If you’re not already a couponer, we highly suggest you get to
Coupons are basically free money. The best part is you no longer have to cut
paper coupons since there are endless digital coupon websites and apps. Some of
the best resources for coupons are below.
Top Budgeting Method: The Envelope Method
It goes like this: Let’s say you have budgeted $500 a month for
When you receive your first paycheck of the month, withdrawal $250 and put the
cash in an envelope. On that envelope, write "Groceries” and only use it
for food at the store. If you go food shopping and leave the envelope at home
by mistake, turn the car around and go back to get it.
Make sure to take enough money to cover your groceries for that trip. If you
take $150 and you tally up a bill for $160, take some things out of the cart.
Put any change back in the envelope. When you get paid again, put another $250
in the envelope. That’s your $500 for the month for food. If you want to
the store but don’t have enough money, raid the fridge for leftovers.
Use the envelope system for items that tend to bust your budget. Common
examples include groceries, restaurants, entertainment, gasoline and clothing.
When the money runs out of each envelope, don’t spend any more until the
month starts and new money goes in your envelope.
Tips for using the envelope method
Direct deposit into a separate savings account for bills, and have the
payments automatically withdrawn from the same account.
Most employers offer the option to have a certain percentage or dollar
amount put into a separate account, straight from your paycheck, which can help
you start saving. You can automate a portion of your check to the account and
build your nest egg without thinking about it.
How to Make Extra Money on the Side
Sometimes, you just can’t budget the extra money you may need into
savings account. Below are some of our favorite ways to make a little extra
money on the side. To see an entire list of “44 Ways to Make More
Money,” visit Forbes.com.
Make Payments on Time to Improve Your Credit
While you are putting a lot of time and effort into getting your financial
health back on track, don’t let something silly like not making your
on time mess up all the hard work you’ve done to improve your credit and
overall financial life. Try to work with companies that report your on-time
payments, like J.D. Byrider. That could help put you in a better position to
improve your credit score because you’re hopefully building a positive
Wondering what good credit can do for you? Read What Can I Do with Good Credit.
Ready to take the next step? Start budgeting now with this simple worksheet.
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Geary, L. (n.d.). Bankrate. Retrieved from http://www.bankrate.com/finance/personal-finance/5-big-bills-you-can-cut-fast-1.aspx
Hamm, T. (2014, January 22). The Simple Dollar. Retrieved from http://www.thesimpledollar.com/5-tactics-for-getting-a-better-cell-phone-deal/
Holbrook, S. (2013, May 31). U.S. News. Retrieved from http://money.usnews.com/money/personal-finance/slideshows/8-thrifty-home-improvements/3
Ramsey, D. (n.d.). Dave Ramsey. Retrieved from http://www.daveramsey.com/blog/envelope-system-explained
Shin, L. (2015, February 26). Forbes. Retrieved from http://www.forbes.com/sites/laurashin/2015/02/26/44-ways-to-make-more-money/#6580c34466e1
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