Future car fund: yay or nay?

[The Freethinker]

In 3 months, my car will be paid off. It's been a long nearly 4 years of financing.

I found this idea on another website: since I'm so used to budgeting and living within my means, instead of using the freed-up $300+ every month, why not deposit it into a savings account every month - that way I'd "force" myself to stay within my means as I have for years, and over time, I would accrue thousands of dollars. So, say, if my car payment is $350 a month, and I begin making these saving contributions in February 2012, I'd have $16,800 after 48 months. That'd be a new car right there, cash - and given my car will probably last me many more years, I wouldn't even need a new car then.

My only reservation about this idea is that with the ever-increasing inflation and the continuing debauchery of our currency by the Fed, it may not make sense to leave this kind of cash in a low-interest account over time, and rather, I should just take the $300+ each month and dollar-cost-average buy silver, or just throw it into my Roth IRA, or buy foreign currencies. I would hope that by early 2016, a car comparable to my current Japanese auto will cost roughly what it costs now - but what if the currency's been plundered to the point a car costing $20k now costs $45k then?

Your take?

[brandon]

If you have any high interest debt pay that down first. Next thing to get in line would be emergency savings. If you have enough cash to live and pay all bills for 3-6 months with no income, then you're good. After that my next priority would probably be saving up for a nice vacation. If you have the extra cash, why not have a little fun? If that's not your thing you could open a vanguard account and set up automatic monthly transfers of $350 into a mutual fund.

Lots of options. All depends what you want. If you have good credit I wouldn't worry about saving up for a car in 5 years. Interest rates on new cars are low enough that there isn't a big drawback to financing.

[Nate-ForLiberty]

Inflation is higher than savings rate. Saving dollars = throwing them away. Buy silver.

..after maxing out your ron paul donations of course!

[The Freethinker]

If you have any high interest debt pay that down first. Next thing to get in line would be emergency savings. If you have enough cash to live and pay all bills for 3-6 months with no income, then you're good. After that my next priority would probably be saving up for a nice vacation. If you have the extra cash, why not have a little fun? If that's not your thing you could open a vanguard account (not an IRA) and set up automatic monthly transfers of $350 into a mutual fund.

Lots of options. All depends what you want.

I have a mortgage which I always pay on time. Other than that the car loan, on which I have 3 payments left, is my only debt. I do have credit card debt, but I pay it off every month.

I will have an upcoming cash windfall early in 2012 - workplace bonus and federal tax refund. Combining these two sums with what I currently have will make 6 months of living w/o income an absolute certainty.

Thanks for the mutual fund idea.

[Zippyjuan]

I like the plan of putting the money away that you would have been spending on the car payment. Doing it regularly the same as you were making the car payments will make it easier. Otherwise you will have the temptation to start spending some of it.

[Icymudpuppy]

An excellent opportunity to invest. Put that money into a secure investment. Personally, I prefer Firearms, but that's just me.

[Athan]

Firearms are a good investment. However BEYOND that. Silver. Or small gold coin denominations if possible.

[The Freethinker]

I already have a handgun, and I'm about to take a hunter education course (as mandated by my state). From there, if I do decide to take up hunting, I'll be buying a shotgun for hunting... I am looking at models which are good for both whitetail deer hunting AND home/self-defense. The aforementioned cash windfall in early 2012 will enable me to make one-time investments in hunting gear, weaponry, and ammo.

I already invest in and own physical PMs and am always on the lookout for more. DCA FTW... and buy the dips.

[acptulsa]

Yea--but why not stocks?

[rp4prez]

There are so many things you can do. Here's what I am thinking about doing (would love some feedback).

Take half of my emergency fund and putting it into GoldMoney.com and just letting it stay there and putting enough in every month to pay for the storage fees, which is small. I take $250 a month and buy physical silver (junk silver and ASE) and fractional gold. Job bonuses and tax refunds are spent in one of several ways: vacation to Mexico (it's CHEAP and all inclusive), pay off student loans, put into GoldMoney.com, or buy big items like a safe, gun, ammo, etc to prepare.

[Krugerrand]

Take my advice for what it's worth ... I'm not expert or even a novice. I keep a monthly car fund going in a similar way. I also use that money for any significant car repairs as well - with the understanding that repairing my existing car saves me from buying a replacement.

If you like the idea of building up your PM levels .... consider putting that cash aside each month and then 4x a year buy PMs with some percentage of it. ... much like what financial planners do ... every year or so they will balance your investments. Setup your cash savings, but 'balance' them regularly how you see fit - (PMs, stocks, cash, mutual funds, etc)

If, when the time comes to buy another car, you find the interest rates make it worth not using your stash - GREAT. Jump on those low rates and keep building the stash even more.

[kah13176]

My take is that people shouldn't be taking loans out to pay for things that depreciate. You lose quite a bit of money. Pay cash up front for a modest car, and you save SO MUCH in the long run.

[John F Kennedy III]

Inflation is higher than savings rate. Saving dollars = throwing them away. Buy silver.

..after maxing out your ron paul donations of course!

This.

[angelatc]

My take is that people shouldn't be taking loans out to pay for things that depreciate. You lose quite a bit of money. Pay cash up front for a modest car, and you save SO MUCH in the long run. This. Yes, start saving for a new car by investing that $350 somewhere. Put it in a variety of places - stocks, pm's, a regular bank account...

When you buy that new car, make it a gently used car, and since you're not financing it, stop paying for full coverage insurance. You'll save enough in 5 years for another newish car on that alone.

[helmuth_hubener]

25% Cash
25% Gold
25% Stocks (broad mutual funds)
25% Bonds

And you don't touch it. You don't take it back out to buy a new car. You never take it out. You need a new car, you find some other way to fund the purchase. You never draw down the principal. You just let it grow, forever.

[Romulus]

assuming you have no other high interest debt:

20% silver
5% ammo
save the rest as liquid.

[cucucachu0000]

yea maybe put half into some metals get a little gold and silver.

[danda]

My take: Avoid the car payments in the first place. Debt = Slavery. or at least Voluntary Servitude. So avoid debt. period.

If you spent a little time on craigslist you can find decent reliable transportation for under $2000, maybe even $1000 most anywhere in the country. Yes, its a little older, but so what?

If you can't afford even that, then you have a goal to save up for.

If you keep this mindset, and always save and invest for a rainier day, you may find that eventually you reach a place where you can drop $30k for a new car without thinking about it and without entering into debt.... but until that day... you can't really afford it.

[Seraphim]

If you want to save for a car, but have one that should last a while and you will likely not need to spend that money anytime soon..I'd suggest investing in hard assets (commodities for example) and get a variety.

For example;

Some palladium, some copper, etc.

That way you are not exposed to the long term toxic nature of fiat cash and you have some growth opportunity in the raw crude assets used to build EXACTLY what you are saving for.

I don't recommend that if you think you will need to buy the car a year from now...but if your timeline is 2, 3+ years...much different.