As I mentioned in last Friday’s post on automating your finances, we sent our last car payment in. It feels good to accomplish a goal and mark it off our to do list.
Our Financial Goals For 2009
- Debt: We would like to pay off my car loan by March 31, 2009.
- Spending: We’re going to limit eating out for dinner to twice a month.
- Frugal: My husband would like to bring his lunch to work at least three times a week.
- Savings: We want to have 6 months in the joint account in addition to building our house fund.
Next week when I’ll review February’s progress on our financial goals, we might have another goal in its place, most likely something long term.
Tips On How We Paid Off Our Car Loan
Paying off the car loan didn’t happen by accident, we came up with a plan and followed through.
Developed a realistic budget
Having a joint budget gave us a clear picture of where our money was coming and where went. I think the key for us with budgets is to make it easy to use and easy to change, so we use a Google Spreadsheet. We budgeted a car payment slightly higher than the required payment.
If you’re having some trouble with creating a realistic budget, here are some tips on getting started.
- Track what you spend in two weeks. It’s hard to cut back if you don’t what your weak points are. Having a little notepad or PDA with you and write everything you spend for 2 weeks.
- Withdraw from your bank’s ATM once a week. Take out money you need to eat out, tolls, parking fees, etc. If you run out of money, then make peanut butter and jelly sandwiches or bring leftovers for lunch. Do not go back until the next week!
- Use you cash, not credit cards. Don’t defeat the previous step by switching over to your credit card. This will help you to stop acquiring new debt, which in turn can drain your savings. National average for standard, variable cards is around 14%, so eliminating new debt will help you.
If you want to see how much a little extra can go when paying off your car loan, try using Money’s debt reduction calculator. Not only are you paying it off quicker, but you’re also reducing the interest paid on the car loan.
Snowflaked extra payments in the car payment schedule
We wanted to pay the car off faster, so we started making extra payments. It didn’t matter how small it was, we went ahead and used our bank’s Bill Pay feature to send in an extra $50 or $100 to the car loan in between payments.
Where can you find some money like an extra $50, $100 or more? Considering looking at some of your expenses to find a deal.
Get others’ opinions on how to tackle it
I’m grateful for this blog’s readers who have been kind enough to share their ideas. We used our economic stimulus check on paying down the car loan based on some feedback from Financial Highway readers. Thank you for your advice and support! We also followed personal finance tips from other bloggers.
If you want to read how others have reached their debt elimination goals and learned to pay cash for cars, here are some great posts:
- What to Do When You Pay Off the Car
- We Paid Off Our Automobile Loan
- How to Transition from Car Loans to Paying Cash for Cars
- Shaking the New Car Itch: A Tale of Priorities
What are we going to do with the car payment money now?
The money will be redirected to our emergency fund in a high-yield savings account. Our ‘car payments’ are going to help build up our cushion during these rough times.