DAVE RAMSEY: Budgeting Auto Repair Costs | Business

Dear Dave: I’m following your plan and recently out of debt, but I have a question. When I do a monthly budget, should I be in a specific category for car repairs and maintenance, or just use my emergency fund?

Dear Ashleigh: Congratulations, you have become debt free! You know, new cars, old cars, and intermediate cars all have one thing in common: they will need repairs at some point. Fixing your car is just one fundamental part of car ownership, and every car owner should be prepared for this.

When life happens, to your vehicle or anything else, an emergency fund acts like an airbag. Only, instead of preventing your face from touching the dashboard, it prevents your finances from being destroyed. As for car repair costs, I advise you to create a sinking fund in your budget. A sinking fund is a special place in your budget where you save money for specific, expensive items, like car repairs.

I know, putting money into a sinking fund each month sounds as nice as standing in line at the DMV. But look at it this way, if you had a car loan like most people, you would be investing hundreds of them every month. Instead, you’re one of the smartest people who has zero debt and can easily create a repair fund for your car by setting aside less than the average car payment each month. Even “reliable” cars need repairs and maintenance, and a sinking fund in your budget for that sort of thing means you’re prepared to handle virtually any automotive problem that arises.

You know you will have to pay for repairs and maintenance. It’s a thing with all cars. And when you know something is coming, it’s not an emergency fund situation. Excellent question, Ashleigh!

Dave Ramsey is a personal finance expert and host of The Ramsey Show.

Comments are closed.