Whether you’re in the market for a new car or trying to manage your existing vehicle’s expenses, a household budget helps you to pinpoint where your money is going.
1. Budgeting helps you to be prepared for both expected and unexpected costs
Budgeting allows you to set aside money for routine expenses, such as servicing, as well as for emergencies. For example, if you find yourself in a situation where you need urgent car repairs, you’ll have money available.
2. Budgeting helps you to stay focused on your financial goals
Having a household budget will help you to become more disciplined with money. You’ll be able to avoid spending unnecessarily on things that don’t help you reach your goals.
3. Budgeting shows how much more credit you can afford
If you are looking to finance a new car, budgeting can help you to see whether you’d be able to cope with the loan repayments. If there isn’t space in your budget for another large expense each month, then you either need to wait for your new car or find places in your budget where you can save. This helps you to avoid the debt trap of biting off more credit than you can chew. Remember that a healthy credit score is vital when you want to apply for any type of finance.
If your budget shows you can afford a car loan, it will also reveal how much you can manage for your instalments – but don’t forget to calculate operating costs as well.