09/14/2021
It's time to begin budgeting for your car repairs... Remember: Repairing your car is just part of car ownership!
****How to Budget for Car Repair Costs****
Now it’s time to pop the hood and sort through the actual mechanics of budgeting for all these car-owning possible costs.
Save up an emergency fund.
Step one: You need an emergency fund. If you’ve got debt, start with $1,000. We call this Baby Step 1. Once you’re debt-free (and paying off all that debt is Baby Step 2), save up a fully funded emergency fund of three to six months of expenses (Baby Step 3).
When the unexpected happens—to your vehicle or anything else—an emergency fund acts like an airbag. Only instead of keeping your face from hitting the dashboard, it keeps your life from getting financially smashed in.
The way you build up an emergency fund, of any size, is by putting it in your budget. Be intentional by creating an emergency fund budget line.
Create a car repair sinking fund in your budget.
Simply put, a sinking fund is a special compartment in your budget that saves up money for big purchases. Create a line in your budget for car repairs and build up a sinking fund that’s ready for repairs or replacements.
Some of you may be thinking, Ugh. Stuffing money into a sinking fund each month for upcoming car repairs sounds about as enjoyable as waiting in line at the DMV. But look at it this way: If you had a car loan, you’d be putting $554 a month toward that debt.2 Instead, you’re the smart one who paid cash for your car and is now ahead of the game by consistently putting less than that giant car payment into a sinking fund for whatever comes your way. Hey, even “reliable” cars need repairs and maintenance. A sinking fund makes you budget-ready, no matter what you drive!
Should you use the emergency fund or sinking fund?
You know you’ll need to pay for repairs and maintenance. It’s a thing. And when you know something’s coming, that’s not an emergency fund situation. That’s a sinking fund situation.
Of course, sometimes there are real emergencies . . . When that happens, do a little tweaking to that month’s budget as your first line of defense. What budget lines can you trim to free up cash? What can you give up that month? If you still don’t have enough cash to cover the emergency after you trim up and cut back, then you take money out of your emergency fund.