Whenever we see a luxury car that goes vroom right next to you on a signal, our heart is filled with a child like joy. Unless you’re a monk, one is likely to behave like a kid that wants a toy that his/her friends have. Soon enough, brain takes the charge of the situation and the reality hits us hard. If you can relate to going through multiple cycles like these every week, you are suffering from something called ‘Adulthood‘. But what if you are a rebel? You disagree? You want your heart to win over and actually end up buying a classy vehicle some day. Welcome aboard. This article, motivates you to aspire, to manifest your dreams in to a reality. But, aspiration alone isn’t likely to get you there. We may need a lot of planning on the way too! Here’s how to plan for a dream car 101.
So do you plan to own a shining Beamer or are you more of a Mercedes person? Does that dream look pretty far fetched to you? If not, why are you even reading this? What if I tell you that if you break down your dream into S.M.A.R.T. goals and steps, it is totally feasible. Even if you don’t have enough money to save right now, you are doing just fine. Let us understand how to approach this conundrum. Start with the step by step guide below:
1. Which Car?
Duh! Indians would always be found saying that they want to own a chauffeur driven, luxury car. Which car you ask? They’ll probably won’t know. What’s the learning here? Don’t get the first step wrong. At least know what are you planning to buy. Even if you are confused at the moment, at least have a couple of options in the mind. It is advised to detail out the granularity in this step. It’s better if you narrow it down to the variant, model of your dream car. This is going to form the basis of your next step on how to plan for a dream car.
2. Value of the Car?
What does your dream car cost? For the course of this article, let’s assume that I plan to buy a car worth Rs. 30,00,000. That won’t just be it. Do you have 30L in hand right now? Probably not! So when are you planning to buy it? Let’s say in next 10 years.
I am really sorry to break it out to you but that car isn’t going to stay at 30L forever. Inflation is real. So assuming the inflation to grow at a 6% per annum level, your pretty car is going to cost you about 53L when you are ready to buy it. Don’t lose hope yet. This is just getting you prepared for the reality.
Thus began the journey of financial discipline.
Of course you’ll have to save for your car. What were you thinking? Now I would use something called Dream Car Calculator to dig into numbers. Dream car calculator would tell me the time frame in which I would be able to afford the dream car I have planned.
On the left, I would simply put in the future price of my dream car, maximum savings I can do at the moment, current savings (if any) and expected returns from my investment.
On the right, this would simply show that I would be able to buy my dream car in about 15 years time.
As a thumb rule, here is a simple flow chart that will help you decide if you should generally develop a habit of saving or not!
4. Step Up!
Remember we accounted this value for 10 years. But now you don’t have enough savings or enough to save to drive your dream car until 15 years. Before you give up yet again, let compounding show it’s magic yet again. If it feels any better, let me tell you, most of the investment journeys begin this way.
We discussed about step up SIP a few posts ago. You may not be able to save enough right now, but as you grow professionally, let your portfolio grow at a same pace too!
Simply calculating using step up calculator, I realize that if I step up my SIPs each year by 20%, I will be able to achieve my goal, just in time. If that’s not magic, I don’t know what is. Whenever we get bonuses or increments, our primary instinct is to enhance our lifestyle. However, even if you avoid doing just that for just next 5 years, I believe you can set yourself up on the path of financial freedom.
So this time when you buy a car, you need not write “Dad’s Gift” on the windshield any more because its you who has nurtured this dream for so long and finally brought it to fruition. Please note, even if you don’t plan to buy a lavish expensive car, this article serves as a guide on how to go about a goal planning. For me it is a car, for you it may be a house, for others, it may be something entirely different. But come what may, savings is the only route. The key is to maintain a disciplined financial lifestyle and let compounding do its wonders. Also, stay on the top of your numbers. Keep on aligning your goals and savings at regular intervals if need be.
I hope to see you soon rolling in that German beast you have always dreamt of. Have anything else in mind? Comment below and I will try to address it to the best of my knowledge.
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Until next time..