No matter what age you buy a car as an adult, it can be a hit to your finances. When you’re in your golden years and perhaps on a fixed income, those hundreds of dollars a month can really add up.
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“Most people treat their car like a status symbol instead of a tool,” said Andrew Lokenauth, founder of Fluent in Finance. “That mindset is exactly what wrecks retirement budgets. My rule is simple: Your total transportation costs shouldn’t exceed 10% of your monthly income.”
Here’s the savings plan Lokenauth recommends that could save you more than $10,000.
Also see three reasons nearly new may be the best vehicle option for retirees.
A Simple Approach
Lokenauth said he uses a “drive-it-down” framework.
“Buy used — two to four years old, put at least 20% down if financing and never take a loan longer than four years,” he said. “Once it’s paid off, keep making that ‘payment’ to yourself into a dedicated car fund. By the time you need a replacement, you pay cash. No interest. No monthly drain on your fixed income. It’s not glamorous advice but it works.”
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Other Ways To Save
Per Brandon Gregg, CFP, advisor with BBK Wealth Management, a simple saving tip is to look for base models without all the bells and whistles. “It may not always be what you want, but it’ll save you money,” he said.
Another way to save money is to be proactive about regular maintenance.
“An ounce of prevention is worth a pound of cure,” said Marguerita Cheng, CFP, CEO of Blue Ocean Global Wealth. “Most definitely regular maintenance, such as oil changes, balancing and rotating tires, fluid check and brakes. By completing the scheduled maintenance, you can extend the life of your car.”
Speaking of car costs, Melanie Musson, a finance expert with Quote.com, said to remember that car insurance costs may not need to be as high as you’re paying now.
“If it’s been six months or longer since you last compared rates, do it today,” she said. “If you discover you’re overpaying, switch to a different provider.”
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This article originally appeared on GOBankingRates.com: Don’t Let Car Costs Ruin Your Golden Years — A Money Pro’s $10K Savings Plan
