It is challenging but possible to save up for a car if you have the correct strategy and mindset. At first, it seemed impossible for me to even consider buying a car. But I made it happen by setting realistic goals, making a budget, finding ways to save more, and looking for opportunities to increase my income.
Here is my real-life story on how I was able to save for a car on a low income. I had limited resources and income, so it took me three years to achieve my goal. But you could save quickly if you had better financials and a higher income.
My Childhood: Grew Up in Low Income
My name is Ryan. I grew up in a lower-middle-class family in a small town. My parents ran a small corner store in my town. We had a small piece of land near our house for farming. We grew vegetables and flowers in a farm plot, which we sold in our corner store. My parents worked hard at the store and on the farm to pay the bills and living expenses. We lived simply because we did not have any other choice. My childhood was full of sacrifices and struggles.
After graduating, I found a job in a nearby city, but the salary was low. I worked part-time and did freelancing to earn extra money on top of my salary. After working hard for the last six years, my life is now a bit more stable. I managed to save up and open a small grocery store near my workplace for my parents. Now, they’re earning enough to cover their expenses.
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I decided to Start Saving For a Car
Four years ago, I decided to start saving for a car, something that had always been a childhood dream of mine. Since my savings were limited, buying a new car was not the right choice for me. So, I decided to start saving for a reliable used car.
I Set Modest Goals Considering Low-Income Budget
Initially, I decided to purchase a car in two years. I asked about used cars at dealerships, checked online marketplaces, and reached out to private sellers to get an idea of realistic price ranges. After researching used car options, I found that I could buy a small, well-maintained, and fuel-efficient used car for around $6,000. I had planned for other costs as well to find the realistic price of my car.
- Car cost: $6,000
- Fees and taxes: $400
- Insurance: $100
- Maintenance & Repair: $400
Total Cost: $7,000.
$7,000 was a large amount for me on a low income, so I had to extend my plan from buying a car in two years to three years instead. I set a goal to save or earn an extra $195 each month, which would add up to $7,020 over 3 years ($195 x 36 = $7,020).
My Plan: Budgeting for a car
- Income: First of all, I had to identify my total net income after taxes and all other deductions.
- Living expenses: Calculating actual living expenses was an important part of budgeting, so I figured out how much I needed for my needs.
- Cut Discretionary Spending: It was essential to cut back on my wants to save from limited income, so I identified areas where I could reduce or cut nonessential expenses.
- Increase Income: After calculating my total income and expenses, I couldn’t save enough to buy a car in three years. So, I had to find other ways to earn extra money.
Had Opened a Dedicated Savings Account
I had opened a dedicated savings account with the name “car savings account” and avoided using that money for other expenses. I had never touched that fund for any other expenses. I had also decided to transfer any extra savings or earnings immediately into my car savings account.
I Saved Money by Living Thriftily on a Low Income
I had to reduce my expenses wherever I could. The struggles and sacrifices I faced in my childhood helped me a lot at that time. I used the below-given different saving strategies to save money for a car.
Saving Strategies I Used
I had reduced unnecessary expenses using the below-given strategies.
- Planned a meal and foodstuffs on a budget: Most of the time I cooked meals or lunches in bulk to reduce waste and used leftovers for the next meal whenever possible. I lived on affordable staples like pasta, rice, and beans, which helped me save around $20 each month compared to eating out.
- Used the cash envelope system: It helped me to spend only the budgeted amount on specific categories
- Enjoyed Free Fun: In my free time, I explored books and audiobooks in the library, strolled up in the garden, watched birds, and played music and songs. I used Facebook’s events tab to find free events in my area. It helped me save about $15 every month instead of spending it on concerts or movies.
- Lived within my means: I had always prioritized savings using the 15/65/20 rule, focused only on my needs, and avoided unnecessary expenses.
- Secondhand buying: I used to buy clothes, furniture, and electronics from thrift stores to save many dollars. I had saved around $250 in 3 years using secondhand buying.
- Used no-spend month challenge: I used the zero-spend month, also known as the no-spend month challenge, to cut my spending on want items.
- Used free tools, apps, and other resources: Free tools and apps have helped me a lot to save $1 or $2 on every online purchase and learn new skills.
- Automated bill payments: It will incur late payment fees if you miss the payment deadline. I had automated all my service bill payments to avoid late fees.
- Negotiated subscriptions: I negotiated my bills, like internet, cell phone, etc., with service providers to save $8 each month.
- I had always stayed away from unnecessary debt: Debt can eat out your savings, so I had kept my distance from debt.
- Reduced Commuting Costs: I used a low-income discounted bus pass to save on the public transit system. I had always walked or biked instead of taking the bus and used carpooling services for shared rides with coworkers for longer commutes. On average, I saved $9 each month by reducing the costs of transportation.
- Reduced utility bills: I started using energy-efficient lights, appliances, and natural ventilation to reduce electricity bills and saved around $15 every month.
All these tight budgeting strategies have helped me a lot to save for a car on a low income. I had managed to save around $960 after 1 year, $2,010 after 2 years, and $3,350 after 3 years in my car savings account.
You can read 8 Cool Stuff To Save Up For Money Goals
I Earned Extra Money
It was hard for me to save from my regular low job salary, So I decided to find creative ways to earn extra money.
What I Did:
- Freelancing: I worked as a freelance writer to write articles, blog posts, and resumes, earning about $40 every month.
- Side Hustle: I had also worked as a delivery driver in a local restaurant to add $25 each month to my savings.
- Selling unused items: I sold old books, unused electronics, unused gift cards, and tools on marketplaces. I had earned a total of $250 in 3 years.
I had earned around $2,650 after 3 years to buy a car.
I Automated Savings From Salary
I had opened a separate savings account to transfer my car savings into that account. I had automated the fund transfer process to send $30 every month on the 1st of the month from my salary account. It had helped me a lot to spend less and stick to my plan.
Whenever I earned or received any extra money, like gifts, bonuses, or tips from delivery gigs, I always deposited it into my car savings account. This was one of the best low-income money-saving hacks for me.
The automatic transfer process helped me to save around $1,080 from my regular income into my car savings account.
Achieved My Goal and Purchased My Car
After three years of continuous savings and extra earnings, finally I achieved my $7,000 car savings goal. I had saved around $7,080 in my car savings account. My parents were happy too when they knew I had achieved my milestone.
Researched, negotiated, and finalized the deal
I had decided to purchase a used car, a “2014 Toyota Corolla S Premium.”. However, it was important to know about the car’s valuation and maintenance cost before purchasing it.
Research
Before purchasing a car, it was important for me to research different models and valuations. I used Kelley Blue Book’s site to research.
Maintenance costs
One of my friends had advised me to get a mechanic’s inspection before purchasing the car, so I paid $150 to the mechanic for the car inspection.
Negotiated price and finalized car deal
I visited different used car dealerships to get an idea of the actual cost of the car I was targeting. The private seller was asking for $6,750 for a 2014 Toyota Corolla S Premium, but I negotiated the price and paid $450 less. I finalized the deal for $6,300.
Finally, I purchased a 2014 Toyota Corolla S Premium car with a focused budget, reduced expenses, and extra earnings.
Lessons I learned
Save small: You can achieve your short-, medium-, or long-term financial goals by saving small amounts like $4 to $5 daily.
Acknowledge sacrifice: Be ready to give up small things quickly to gain something big in the long term.
Make the most of what you have: You can create opportunities by using your skills and resources in the right direction.
You can achieve any goal if you have a solid plan and strategy. At first, I thought buying a car wasn’t possible for me with my low income, but I made it happen by setting a realistic goal and finding areas to save and improve my income.