Budgeting helps you save

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. That’s why it’s important to start budgeting for a down payment before your car stops running.

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

Save for a used car down payment

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 entire 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 monthly payments.

Save Money at Home

Your home may not feel like your castle, but it’s probably responsible for a huge chunk of your spending. Cut utility costs and bills by following these steps:

  • Change your showerheads and sinks. Low-flow versions can save up to 50% of your water consumption. 
  • 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 up 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 72 degrees while you’re gone, even if you have pets. You’ll save on both heating and cooling costs.
  • 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 laundry 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 location.
  • Stop speeding. Going from 70 MPH to 55 MPH could save you almost 20% fuel efficiency.
  • 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 makes 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 load.
  • 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 the short-term, they’ll keep your car on the road for much longer if you perform them at the manufacturer’s recommended miles.

Top Couponing Links

If you’re not already a couponer, we highly suggest you get to clipping. 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.

Apps can help you save big 

Top Budgeting Method: The Envelope Method

It goes like this: Let’s say you have budgeted $500 a month for groceries. 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 to pay 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 go to the store but don’t have enough money, raid the fridge for leftovers.

Use envelopes for easy budgeting 

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 new 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 your 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.

Take online surveys to make money 

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 payments on time mess up all the hard work you’ve done to improve your credit and your 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 payment history.

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.


Sources

Crashers, M. (2012, January 18). U.S. News. Retrieved from http://money.usnews.com/money/blogs/my-money/2012/01/18/5-reasons-you-need-a-budget

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

Washicko, C. (2013, July 9). U.S. News. Retrieved from http://money.usnews.com/money/personal-finance/articles/2013/07/09/the-new-and-improved-way-to-coupon






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