Tuesday, July 1, 2008

The Car Payments Breakdown

Well, my new paycheck is in my bank account and it's time for me to put my money where my mouth is and start paying up my pretend car payments. I sat down the other night with a pen and some paper and with the help of a calculator, I figured out how much money I would have to save each month to reach my savings goals in the next 2-3 years. I looked around online and found the calculations that you would have to do in order to figure out how much interest you would expect from $X in your account but I couldn't figure out how often my interest is compounded which is a problem. So, bearing in mind that all of my numbers completely ignore the interest I'll get, here's what I found.

  • To save up $10,000 in 2 years, I would have to put $350 into my bank account each month.
  • To save up $15,000 in 3 years, I would have to put $430 into my bank account each month.
I was told that you usually put about 15,000 miles on your car each year ... which means that I will hit my goal of 200,000 miles on my car within the next 2.5 years. My friend and I were talking about my pretend car payments, which she thinks is a very good idea, and wondered aloud to me about the affordability of these monthly amounts. She also pointed out to me that I wanted to move out of my parent's house in the near future and asked if I would be able to keep up with my new savings plan.

My response was that, as I have mentioned before, just about all of my big bills (rent, utilities, groceries and my basic dog care expenses like dog food) are going away at the end of this month. So I figure that I will take out the money that I need for gas and going out type stuff and I will save the rest.

So there you go. I will be putting $430 into my bank account monthly until I can't afford it anymore, and then I will drop it to $350 or $300 depending on what I can afford. I might even go so far as to put money from each paycheck of the month into my bank account. So if I live with Mom and Dad for only 3 months, I will have 6 months of savings in the bank. How about them apples?

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