First Person: How We're Budgeting for a New Car

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My 20-year-old junker car has been making some odd noises lately, which means that I'll be losing the transmission any day now. When that happens, I'll be looking for another car, preferable one that costs less than $5,000.

One of the challenges in buying an older vehicle is the lack of financing options available, especially if buying a car from a private party. Very few banks will lend money for a used car, and the ones that do tend to charge high interest rates. From our own experience, we discovered that the best option is to save aggressively and pay for a new car with cash.

Here's five creative ways we're finding money to divert into our car savings fund.

Bank the tax refund

Thanks to the "Making Work Pay Tax Credit," we ended up with a tax rebate we weren't expecting. This rebate and our state tax refund jump started our savings fund and brought us 25% closer to reaching this goal.

Missingmoney,com

Missingmoney.com is a free database of governmental unclaimed property records including uncashed insurance refunds and utility refunds, missing stock dividends, rent deposits, rebates and more. Since discovering this web site three years ago, our family has claimed over $1000 in missing money we didn't know we had. Just in the last month alone, we found $150 in unclaimed funds which we added to our car savings fund.

Yard sale or eBay what you don't need

Yard sales are a super easy way to raise cash which can also be added to a car savings fund. If yard sales don't sound appealing, trying selling your unwanted treasures on eBay or Craigslist instead. Last month, I sold an unused lamp and several boxes of tiles on Craigslist which brought me $280 closer to my new car.

Hit the recycling centers

Offbeat sure, but recycling centers are another resource worth considering when it comes to raising money. Our local recycling center is currently paying $500 for junk cars to sell as scrap, which is where my car will be headed next week. They'll also take things like composition carpet pads, aluminum siding, and all type of metals.

Start a money jar

When my neighbor bought some eggs, rhubarb, and fresh baked bread from me last week, I dropped her twenty dollar bill into the money jar with all the other bits of money hubby and I are always receiving. A money jar is a great place to stash refunds and rebates, money earned by doing odd jobs, or coins we've found in the parking lot. Tossing those extra bits of cash into a money jar can add up quickly and bring you even closer to your financial goal.

When it comes to saving money for a car, we've discovered that tax refunds, missing money and yard sales profits are a great way to start a savings plan. Combining creative savings with regular contributions from our paychecks will help us reach our goal in no time at all.

More by this contributor:
How to use found money to start a savings account
Does the Federal Government owe me money?
How "making do" can lower household expenses.