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There are two areas we consistently see service-members put their finances into unmanageable debt; a home purchase and a vehicle
purchase. The guaranteed paycheck gives people a sense of financial stability, and for many this is there first steady paycheck. Lenders
are more than willing to give credit to service-members, as they know the military is not going out of business and the service-member
will have a steady paycheck. Peer pressure also plays a part of the purchase for many service-members. Before making any major
purchase we recommend you see a good financial consultant.
The total cost of your transportation should not exceed 15% of your monthly gross income (before taxes and allotments are taken) which includes vehicle payment,insurance, fuel, maintenance and repairs. Again, we use simple easy to understand numbers; no complex formulas.
We recommend you establish and maintain your household finances based only on the income of the service-member. This will greatly improve your financial success and goal achievement.
Example: An E-4 and spouse have a combined total household monthly gross income of $4,300 but only use the gross income of the military service-member which is $3,300 X .15 = $495 their goal is not to exceed $500 for the total monthly transportation costs. We use simple formulas for financial success.
To do list, before you buy:
Know your Values, Goals and Sacrifices that are in our books
Establish a weekly/monthly spending plan in writing, also known as a budget Have a Revolving savings account fully funded and allotments started to your Emergency account, see our books for details
If you can’t pay cash for a vehicle and must use credit, make sure you use our simple formula to calculate what you can afford based on your monthly budget. Then pull your credit report and score to see how your credit rating is, see our book (Your Credit Score) for details. This will determine your interest rate and if you can qualify for a loan. We recommend not to finance a vehicle if you can’t find interest rates (APR) 7% or below. This would mean paying cash (not using credit) for a lesser vehicle until you a build better credit history, or clean your past credit history.
If you must use credit then use your own financial institution for financing first before you go to the dealership. We recommend not financing a used vehicle for more than 48 months, the shorter the better. Putting a 50% down payment or more is always a good idea. If you qualify for a 0% interest loan this works well as long as you stay within our payment percentage guidelines, which may require a large down payment.
Never fall in-love with a car model then start shopping for that model before you do your financial homework. Do the process in reverse, the financial part first then start looking at vehicles.
Once you have used our above formula knowing how much car payment you can afford. Go to a website like www.bankrate.com and use their auto payment calculator to figure the total cost of a vehicle you can buy. This is a simple process. First put in an approximate vehicle cost, then interest rate and length of loan and hit calculate payment. You work with this simple calculator until your pre-determined ($285) payment appears showing you what the approximately total vehicle cost will be.
Once you know the total vehicle cost based on your payment you can start to shop. Start on the internet at www.autotrader.com, www.cars.com these are user friendly
Patience is key, use www.edmonds.com to review used car reviews, cost of ownership and what you can expect to pay in your region. A good book to read about the auto sales industry is “Don’t Get Taken Every Time” Remar Sutton. Vehicles are a depreciating asset, not to mention a money pit, remember your Values, Goals and Sacrifices.
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