Want to have an extra $147 in your pocket? Just do this one thing. Image source: Getty Images.
Living paycheck to paycheck is a way of life for many Americans, and finding extra money to save can sometimes seem impossible.
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The good news is, for most people, there are lifestyle changes you can make to leave more cash in your pocket. You could do a lot of little things to save money, like giving up eating out, cutting cable, and shopping with coupons. Making all of these changes can free up quite a bit of cash if you're willing and able to sustain them.
But, if you want to make a big impact on your financial life -- without constantly feeling like you need to scrimp and save -- sometimes it pays to focus on the big stuff. Cutting some of your largest monthly payments can have a far more profound impact on your financial life than trimming the fat at the margins -- and one big payment that it's easy to cut is your car payment.
In fact, making this one simple change to how you buy cars could give you $147 more per month in your pocket -- which is a pretty substantial chunk of change.
Make this one change to save $147 more per month
So, how can you end up with an extra $147 freed up in your monthly budget? It's simple -- just buy a used vehicle instead of a new one.
According to Experian, the average monthly payment on a new auto loan is $525. The average monthly payment on a used car is just $378. While that new car smell may be nice, buying a brand new vehicle is one of the worst investments you can make. In fact, Carfax research found a brand new car will lose more than 10% of its value in the first month you drive the vehicle off the lot.
That means if you buy a $40,000 brand new car, you've just lost $4,000 in less than a month. Of course, your actual losses are likely even bigger if you've borrowed because you'll be paying interest on that $4,000 -- often for years as car loans grow longer.
Most people can't afford to just throw away $4,000 every few years when they buy a new car -- and there's no reason to do so when you can get a late model used car for a far more affordable price and can borrow far less.
Changing the way you buy cars could make all the difference
Borrowing for a cheaper used car, rather than for a brand new one, is always going to be a better financial bet to avoid deprecation. But, if you really want to be smarter about how you buy cars, you'll opt to stop taking out car loans altogether.
How can you do that? It's simple. Buy a cheap used car, but keeping making the full “car payments” to yourself that you were making with the costlier new car. Drive the used vehicle for as long as you can, then use those “car payments” you saved to pay for your next used car. Rinse and repeat this process and you should be able to pay for your cars in full and have additional money to set aside in savings.
Once you have no car loan at all, your savings will exceed $147 per month and could turn into a small fortune over time.
Are you ready to save $147 per month?
Saving $147 per month doesn't have to be hard if you just follow this one simple tip and opt for a used car instead of a new one. You can change your whole financial future and all you have to do is give up that new car smell. It's worth the trade-off!