4-Wheeled Money Pits Always Need a Sinking Fund

I don’t know if you’ve taken a look at the price of vehicles these days, but they’re not inexpensive. I’m showing my age with the next statement, but I want it to make an impression. Today, there are pick-up trucks that cost more that my first condo, which was $83,000! Unlike today’s trucks, my condo came with a bedroom, a fridge, and a nice view.

My question to you is – have you started planning for how to pay for your next 4-wheeled money pit?

Myself, I hate car payments. The idea of someone reaching into my bank account every month and taking out my money… it makes my blood boil! Nope – not happening. As far as I know, there’s still one sure-fire way to keep the finance companies’ fingers out of my pocket. It’s called paying with cash.

When I bought my last vehicle, I employed what is quickly becoming a quaint, old-fashioned idea. That idea is called paying cash. And even though it was a 5-figure amount, I don’t regret doing so. Paying cash eliminated the need for me to pay interest to a creditor. I hate debt. And I really hate paying debt on a depreciating item. It’s not like my vehicle is going to be worth more in 10 years. Not a chance! Every fifth car on the road is the same as mine, so there’s no possibility that mine will ever be coveted as a collector’s item.

My vehicle is a transportation device, pure and simple. It takes me where I want to go. That’s all it is; that’s all I need it to do. No sense paying interest for the privilege of owning it. I paid cash to acquire it. And now…

Now, I can start saving up for my next vehicle. Ideally, I won’t have to buy another one for several years. That said, the days are long but the years are short. I’m quite confident that, in the blink of an eye, it will be time to buy my next 4-wheeled money pit . When that time comes, I want to have the money set aside to pay cash again.

Today, I encourage you to put yourself in a similar situation. Figure out what it will take to pay cash for your next vehicle.

Whatever you’re driving now, I can promise that it won’t last forever. At some point, it will need to be replaced. Start a sinking fund today. Believe me when I say that shopping for the next vehicle is tad bit easier when you’re not also worried about how to pay for it. And, once you’ve bought next vehicle, you’ll probably love the fact that it didn’t put you into debt. I drove my last vehicle for 13.5 years without a car payment. Trust me – that was one of the things that I loved best about it!

If you don’t already have a sinking fund, go and open a high interest savings account right now. Pick one that doesn’t charge you any fees. You can find one at EQ Bank, if you don’t know where to look. ***

Every time you’re paid, throw a few hundred bucks into this account. Better yet, set up an automatic transfer from the account where your paycheque is deposited to your HISA. When the process is automated, you won’t be tempted to spend the money elsewhere. Technology does the transfer for you. It’s a simple way to ensure that the sinking fund actually gets funded.

If all goes well, you’ll eventually have enough to buy your next vehicle in cash. This is ideal. Think about it for a second. When you have to take on a car payment, that means added stress on your budget. You have to find several hundred dollars every month to pay your creditor or else they will take the vehicle away from you. Where do you cut? Food? Entertainment? Travel? Sports? Gym membership? Self-care? Other fun-stuff? When you pay cash, your budget doesn’t have to suffer. The money is gone – you’ve got your vehicle – debt payments aren’t stressing your budget.

Should you have to buy a vehicle before you have enough to fully pay for it in cash, then the funds that you’ve set aside will become your down payment. The larger your down payment, the smaller your monthly car payment and the less interest you’ll pay over the life of the loan. This is smaller win for your budget, but still a big one. Instead of a $850 monthly car payment, maybe you can get it down to a $300 one. Not ideal, but also not more than $10/day.

If you currently have a car payment, try to pay it off early. The sooner it’s gone, the sooner that money is yours again. Re-direct that former car payment to your sinking fund. Within a few years, you’ll have a nice chunk of change in place for when your current 4-wheeled money pit needs to be replaced.

I’ll say it again, and louder for those at the back. Pay cash for your next vehicle. Start saving for it today so that the money’s sitting there waiting for you when you need it.

*** For the record, I have an account at EQ Bank. I’m not getting compensated for recommending them in this post.