You may remember that paying off my car loan was one of my goals for 2012. Well four years and a few thousand dollars later. Mission accomplished! The part that may shock some people is that I’m still going to be making the same monthly payment even though my loan is paid off. The only difference is that instead of sending that money to the loan company, I pay myself with it.
In my opinion this is one of the most effective ways to save more money. From the first payment I made on the loan, I had the payments set up to be automatically paid from my account. Obviously over four years of paying the same amount each month I became pretty accustomed to seeing that amount leave my checking account every month. I’ve been essentially living without that money for so long that now that I’ve paid my loan off I’m not going to miss a beat and have already for that same amount to be automatically transferred to my savings account. I set up a sub account in my savings account for car expenses which is where this money will be going each month.
So now if I run in to some unexpected repairs or maintenance, I have a dedicated fund set aside to deal with it. The best case scenario, if I don’t have to pay for too many repairs going forward (knock on wood) would be that when I decided to buy a new car down the road I’ll have enough money in this fund to put down a large down payment, or even pay cash for my next car. I don’t want to get too far ahead of myself though. We’ll see how that all works out over the next couple years.
Paying off a big debt is one of the best feelings. Even though I wasn’t struggling with debt in the least. It’s still such a giant weight lifted off my shoulders knowing there’s one less payment I’ll have to make every month.
If you’ve budgeted a set amount each month for anything (car, mortgage, cable tv, cell phone) and then for whatever reason don’t have to pay that bill anymore. Don’t give in to the temptation of thinking that you now have an extra couple hundred dollars to spend every month. Take that payment and save it. Either by setting up a fund for repairing or replacing the item like I have, or by using it to fund your retirement account. The point is, you weren’t missing the money when you owed it to someone else, so you won’t miss it when you take it and use it to build up your safety net. It’s never a bad thing when you’re the one earning the interest each month instead of paying it to someone else!