CAN YOU AFFORD A CAR?

This is the question you should always ask yourself when you are faced with the need for a car.

THREE SIMPLE WAYS TO FIGURE IT OUT

The thought of getting a car for a young adult that is just starting and settling into a career path is usually top of mind. In a place like Lagos Nigeria, the cost of commuting to work daily is quite high and next to feeding right after housing, especially for those that stay far away from work. Apart from the cost, the stress of using public transportation to commute to work can be very frustrating.
But before you decide to get a car, are you sure you are ready for it?
For such a big purchase, there are three rules you should consider before going for a car shopping.

Rule #1: The 20% Rule
The affordability of getting a car is dependent on the cash you have at hand. If you have read the spending rules posted earlier, you would understand that the 20% savings plan is a sacred and that would come in handy at a moment like this when you really need to get a big purchase like a car.
If you do not have some money saved up before but you have enough money to afford a car, then you should go for it, but now is the time to take the 20% rule serious because it could serve as a bonus insurance now that you would be getting a car.
The most important thing is that, the moment you make payment for a car, you must start a fresh 20% savings plan or adhere strictly to an existing savings plan.

Rule #2: The Financing Rule
Not everyone would have some cash sitting somewhere waiting to be used for the purchase of a car. So, you have to think about how you intend to pay for your car if you are in dire need of one. Presently, there are loan institutions that can offer loans of up to N5million in Nigeria. But before you take a loan to get a car, ensure you do a proper analysis of your repayment plans. Ensure your repayment plan is convenient enough and you have enough left for your other basic needs, like feeding and accommodation. If the cost of the car you intend to get is too high and would affect your basic needs in the long run, you should consider buying a car with lesser price and similar specifications that fits into a reasonable repayment budget.
Remember you must have enough to also fuel the car once you purchase it.

Rule #3: The Retirement Rule
Next to the 20% savings rule is the retirement savings plan. This is the most important savings plan if your organization does not make provision for a retirement fund. You don’t want to ride all the cars you want as a young adult and wait on your kids to send some extra cash before you can live your retirement days in comfort. (Not like this is an entirely bad thing) Ensure you getting a car would not tamper with your retirement plan if your financial situation allows it, you can totally ignore the other guidelines and dedicate more of your monthly budget to buying a car, as long as you’re not paying so much for a loan repayment that you cannot afford to have a retirement savings.
That’s the whole rule. Ensure you have a 20% savings account for emergency, get a loan with a convenient repayment plan if need be, and ensure you have a retirement savings account.

Meh.

- Set a budget.
- Save up enough for the budget + 30-50% more. If car budget is 2m, ideally, you should have at least 2.7-3m in the account. Forget the whole "if you cannot buy two of it, you shouldn't buy it at all" nonsense. You'll be fine as long as you have a firm grip on your finances.
- Buy your car.
- Make whatever expenses that the purchase will bring out. There are always unforseen expenses after. Always.
- Enjoy your car.


Your budget is your budget, don't go above it. Don't!