First and foremost, treat yourself and your finances like a business. Think of yourself as the CFO (chief financial officer) of your household – you manage the budget/finances, goal planning (e.g. new car purchase), retirement savings (e.g. 401k), etc.
So what would you do as the CFO of your household? Well, activities would include:
Overseeing the financial activities and operations of your household
Review your net worth such as your assets (e.g. paychecks, checking accounts) and liabilities (e.g. mortgage)
Analyze your income (revenue) and expenses (discretionary/variable and recurring/fixed)
Review your net savings (net profits for corporations) and compare against your budget
Finally, based on your findings (monthly/bi-monthly/quarterly), highlight performance areas that missed your budget targets and begin optimizing spend by putting together action plans
By developing a simple spreadsheet with all the key information laid out neatly, you’ll quickly spot out the troubled areas that’s forcing you to live paycheck to paycheck. (Food was always my killer!). I also suggest utilizing tools such as Mint and Personal Capital, very easy to use and set up.
Here’s a chart from a budget model I created many years ago that I still leverage today and has helped me continue to find savings and strive for financial freedom (figures are for illustrative purposes only).
Question: With what salary can I comfortably afford a $60,000 car?
Okay, so given the limited information we have, I’ll have to make some assumptions here to help whether or not you can comfortably afford a $60,000 car. Here we go.
First, let’s make some assumptions for the car in terms of what you will pay for monthly payments:
Okay great! Now that we have that cleared away, let’s now assume a frugal budget given each credit scenario as well as salary potential. Moreover, let’s assume your single, living alone with no tenants and have no student debt. I removed 401k/IRA contributions from this analysis for simplicity sake (would add another potential 10–15% from net savings).
So as you can, can it be affordable? Sure, depending on what level you are at in your career and what your salary is. However, this is all heavily dependent on whether you stick to your budget and are able to live within your means. Otherwise, you’ll quickly be living paycheck to paycheck, which you’ll want to avoid at all costs.
Hope this provides some visual context to your question. Enjoy!
If you found this engaging and helpful, feel free to visit my website www.yartykim.com!