There are a lot of benefits to cruising through life single, footloose and fancy free. However, one place it can have a downside is income. Existing in today’s economy on a single income is a struggle for many—including numerous hard workers who put in their full 40 (and more) per week. One thing that’s essential for employment, to do errands and to have a life is a car. But how do you get one when the cost of living is so out of control and you have only one earning source?
Follow Some Basic Income-Car Buying Rules and Guidelines
There are a couple methods for purchasing a car on a limited income. Although they may not get you into a Pagani Zonda, they can keep you from breaking the bank or going deep into debt.
- The 1/10th Rule from the Financial Samurai: The Financial Samurai is worthwhile reading. It’s a hilarious and honest look at making wise financial choices. Basically, The Financial Samurai’s rule states don’t ever spend more than 10% of your gross income on a car. So what does that look like for you? If you make $50,000 a year, your car shouldn’t be more than $5,000. Impossible you say? You may be correct, but the bottom line is don’t spend too much for a car. Find a vehicle that allows you to get around and will last awhile, but don’t be dumb about it. The Financial Samurai’s article also reminds you the other costs involved in owning a car—like maintenance, insurance, gas and licensing.
- The 20% Guideline: Another way to look at buying a car is to make sure the cost to own a car isn’t more than 20% of your monthly take home income. Say you take home $1500 a month. That means you only have $300 to work with—total. Your $300 should cover car payment, insurance, gas, maintenance and emergency funds and any annual fees.
For many on a limited income and who truly need a car to make ends meet, the 20% Guideline is most likely the better route. However, there is one other option for buying a car on a single income.
Pay Cash
Let’ say your credit is less than stellar, your job less than stable and no one wants to co-sign on a car with you. What do you do then? Although paying cash for a ride may seem completely out of reach, it’s doable. A car payment can put excess financial strain on your budget. When you pay for something outright, it’s done. You don’t have to factor in that particular monthly payment or figure out how to.
Once you get in the head space that you can do it, here are a few tips to get you going:
- Keep your old wheels or take the bus as you save money – Your car may have 280,000 miles and some serious cosmetic issues, but as long as it drives hang onto it until you can save some money.
- Save, save, save and save some more – People are more capable of saving money than they thing, even if the budget is stretched unimaginably thin. Find creative ways to store up some cash. Use apps to track your excess spending. Skip the $5 daily lattes and buy a used espresso maker off Craigslist. Sell your overpriced name brand apparel that you never wear. Host a yard sale. Find free events in Houston instead of paying to party. Every few dollars you gather put in your car fund. Before you know it, you’ll have enough saved up.
- Make extra money – There’s no rule saying you can’t get a second job for a limited amount of time. Think of it this way: If you have a major financial goal, you may want to work 70 hours a week for three months, or until you can buy a car outright. It’s amazing what you can accomplish when you know a situation won’t last forever. If you can’t secure a second job, do odds and ends. Mow lawns, weed gardens, babysit. There are lots of ways to create your own small entrepreneurial endeavor.
Be Patient
As you work toward the goal of a getting a car on a single income, be patient with yourself. There’s no need to keep up with the Joneses. Even millionaires realize that new cars are usually a rip-off. Start with a reliable used car you can afford, and enjoy the fact that by being wise with your money, you won’t go into major debt to get something you want—it’s a more stress free way to live on one income. You can even plan ahead by starting to save for your next ride once you’ve paid off the car you’re about to get.
