For many people it is an exciting day. Perhaps not as exciting as paying off one’s mortgage, but an exciting day nonetheless. It is the day that one has made the final payment on one’s car. Yes, the day that a depreciating asset is finally paid off is an exciting day that translates to usually hundreds of dollars saved each month or thousands of dollars each year.
As it relates to budgeting and thinking about your budget, I would suggest that you continue to make that car payment. Except this time I would like to encourage you to pay it to yourself. If possible, resist the temptation to buy another car as long as it is feasible. And by that, I mean to say if your car is running relatively decently and does not require several thousand dollars of repair on an annual basis, I would keep it. Maintain it as your owner’s manual recommends. A new car, or a new to you car can be very tempting, but is it helping you achieve your life’s goals? Even if one of your goals is to have a particular type of car, would it not make more sense to delay your gratification and save up some money so that hopefully you will be able to pay for your car in cash rather than paying interest on it?
Some people may have high interest debts to the side once your car payment is paid off. I would advise considering using that money that you were paying for your car payment to accelerate debt repayment. Once the high interest debt is paid off, it would then be time to set aside money for your future car. Even if you were only able to save for two or three years before you needed to trade in or purchase another car, if you follow this method on a consistent basis, you should find that you will be in a better position in your following car purchase.
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