Author Topic: Car savings once and DONE  (Read 990 times)

TwoPupsOnACouch

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Car savings once and DONE
« on: September 03, 2017, 08:32:34 PM »
   I'm trying to apply the retirement savings philosophy of saving a large chunk of money, then living off the interest while never touching the principal- to car purchases. 

This would be in leu of the traditional method of saving money for car- buying the car- then beginning the car savings process all over.

I want to save once and have that savings principle last forever and only use the interest for car purchases.   

 The last three TwoPupsOnACouch  car purchases have been $14K, +/- $100,  and happen every 4 to 5 years for the household.   So to be conservative, I would want the interest from principal to equal $14-$16K  every 4.5 years.   

  Any pointers on how I can achieve this goal?  I have never invested outside of my 401K.    I'm assuming to reach these goals, I would have to invest in index funds. Probably through Vanguard?   Does it make sense to use the S&P 500 ETF?



maizeman

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Re: Car savings once and DONE
« Reply #1 on: September 03, 2017, 09:39:44 PM »
So call it $4k a year of car spending, which means you'd want ~$100k ($4k*25) in savings to support your car spending for the rest of your life.

frugaliknowit

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Re: Car savings once and DONE
« Reply #2 on: September 04, 2017, 09:49:03 AM »
So call it $4k a year of car spending, which means you'd want ~$100k ($4k*25) in savings to support your car spending for the rest of your life.

If ~ 100K is "too chunky", another alternative:

Open a moderate to lower risk balanced fund (since you will tend to tap it every 4 or 5 years) to the tune of $14K (depending on how soon you think you will need another car..), then "layer" about $333 per month on it
(pay yourself car payment).

For example, if you think you need a car in 2 years, you might put in ~$7K, then add $333 per month to it.

Over the long run, the balanced fund should keep up with inflation (no home runs, just "steady Freddy").