The only debt I have is my car loan and one of my short-term financial goals this year is to get rid of this debt (I’m debt averse; D’s obsessively debt averse). That said, I do have a long-term financial goal where I want to fully pay for my next car in cash.
How do I even come close to doing that?
Here’s an effective strategy that I came across:
Once the loan on your present car ends, imagine that you’re still continuing to pay the EMIs (or a higher/lower amount based on your circumstances) albeit on a hypothetical loan whose tenure is equal to the expected life of your present car since purchase minus the tenure of the loan that you just cleared.
Depending on this tenure, you’ll need to save/invest the EMIs on the hypothetical loan in the appropriate financial instrument.
I went further and cooked up a “My Next Car Savings Calculator”. This calculator gives you a projected amount that you’d have at the end of the hypothetical loan.
What do you think?
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
Further reading:
- Tip Tuesdays: When’s a Good Time to Pre-close a Personal Loan?
- Tip Tuesdays: Savings Are for Short-Term Goals; Investments Are for Medium and Long-Term Goals
- Tip Tuesdays: How to Set a Financial Goal?
- Tip Tuesdays: Why You Shouldn’t Rely on the “Bonus” Component of Your Compensation
- Tip Tuesdays: Why You Shouldn’t Opt for a Decrease in Your Employee Provident Fund Contributions in Lieu of an Increase in Your Take Home Pay
