car


I haven’t exactly been good about my spending, but I still reached an important financial milestone this month….

I paid off my car!

As you all may remember, I’d been considering paying off my car loan ever since I landed my current job back in April.  I went back and forth on it (since either way my savings would take the hit), but when I moved into a lower-rent apartment I decided it was time. (You know how much I love starting things with a clean slate…)

The payoff was about $6,600 and now I have $229.50 less leaving my checking account every month. The best part is I paid my car off in two years instead of the scheduled 5! Hooray!

(And for the record, that leaves me with only one loan: a $27k Student Loan.)

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I’m 3 paychecks into the new job, and I’m starting to realize exactly how this lower pay is going to affect me. So, let’s talk numbers, shall we?

I knew before I accepted this job that if I was going to survive on $12/ hour I’d need to shift to a bare-bones budget. And really, I mean bare. No more dance classes in the budget, no more eating out (unless I include it in my groceries budget), no more miscellany. Even after cutting all that out I’d still be short. So I made the decision to take out my “irregular” line items from my budget….like license plates, car insurance, renters insurance. I’m obviously still going to have to pay them, but when I do they’ll have to come from my savings. [sigh]

And guess what? I was still short.

So I started thinking…maybe I should pay off my car?

Now, paying off my car would free up $229.50 each month. However I would still be about $180 beyond my means (meaning 4 paychecks wouldn’t cover my remaining expenses and I would still have to take money out of my savings to make it each month). On top of that it would also drain my savings by about $7,800.  The only thing that has me leaning towards paying it off is the psychological benefits…..1) it would feel better only taking $180 or so from my savings each month as opposed to $400+, and 2) it would feel GREAT knowing that I was finally rid of my car loan!

(Side bar: I was looking at my car payoff information and I noticed that they have my last payment date as 5/30/14. Which is 5 years after my first payment. That would all be fine and good except for the fact that I’d made a $500 payment last year….what happened to those two months it should’ve knocked off my loan?!!! Definitely looking into that…I don’t want to be robbed of my $500!)

For those wondering about the state of my savings, I currently have about $31k left, so taking out $8k would still leave me with about $23k. Which should be fine….

So, before I leave you all, here’s my “final” budget (with my car loan still in there):

Rent  $1,150.00  $13,800.00
Utilities  $   100.00  $  1,200.00
Groceries  $   150.00  $  1,800.00
Internet  $     45.00  $     540.00
Cellphone  $     40.00  $     480.00
Gas  $   150.00  $  1,800.00
Car Loan  $   229.50  $  2,754.00
Student Loans  $   167.25  $  2,007.00
Totals  $2,031.75  $24,381.00
Income  $1,623.52
Deficit  $   408.23

Oh, and a few footnotes….

  • The above assumes a 4-paycheck month.  5-week months will be a nice little bonus.
  • Yes, my rent is high. And I’m planning on moving to a smaller, cheaper place as soon as my lease runs out….which is in August.
  • There’s the occasional chance that I could get paid for overtime. However they only pay it on a per-project basis, so I’m not going to count on any of that. Bottom line is I need to budget for the worst case scenario, and this is it. (I hope.)
  • I need to negotiate my internet bill….

So, what do you think…..should I pay off my car loan?

I was at my parents house earlier this week, catching up with them as we hung out in the kitchen. My dad was standing by the window when he noticed a neighbor trying to park his car out front. Suddenly my dad is freaking out, yells out “your car!!”, and runs outside….

Turns out one of the neighbor’s friends was trying to parallel park his car between the neighbor’s car (in front of him) and my car (which was behind him). In the process he was backing up into my car. By the time my dad ran out he had already bumped into the neighbor’s car at least once, he had taken a chip of paint off my front bumper and was in the process of scraping it a second time.

Well, my dad was flipping out….mostly because the guy had already bumped into my car twice and was still not quite convinced that his car didn’t fit in that small space. (How many bumps does it really take to figure that out?!) Meanwhile I was already wondering if it was really worth all the hassle to make a big deal out of this….I mean, two scrapes aren’t going to affect the functionality of my car, and there weren’t any dents….did I really want to create a big stink about this? On the other hand, the dumbass should’ve been more careful and if he’d have stopped after the first contact with my car I would’ve had just a tiny chip and not a bigger scrape. I should be entitled to a fix, right?

Eventually the neighbor came out of his house and the guy came out of his car. He must’ve been cranky, because when my dad suggested that he pay for retouching the damage he jumped to conclusions and said “what, you’re going to sue me now?” eventually followed by “if you want to call the cops, call them!” (Which, for the record, while I wasn’t too keen on involving cops before, that just pissed me off…)

The end of the story is very anti-climactic. After the drama and attitude from the neighbor’s friend the report was never filed. Then, after letting my dad “do the talking” to come to an agreement about the repairs he ended up not agreeing to anything (what? after my dad was the one to make a big deal out of it all?!)

With such an anti-climactic end, I’m sure you’re wondering why I brought up this story at all. I only wanted to set the scene in order to ask you guys

What would you do? Would you insist the guy fix the damage one way or another, or would you brush it off and let it go? If you’d let this one go, how much “damage” would there have to be to make it worth the trouble?

I recently made my first big payment towards my car loan. $500 in addition to my monthly payment. At first I was very happy with myself. However, a few nights ago as I was re-examining my spreadsheet (re-building, actually) I started to feel a twinge of remorse. $500? That’s a lot of money…

Particularly when I look at my emergency fund. I managed to get it back to $9k, and I thought I was happy that. But the more I think about the car fund vs. the efund….the more I wonder if I’m doing the right thing. Am I?

I’ve been going back and forth since then: am I better beefing up the E-fund some more? Or do I make a dent in my car loan while I have the income to do it?

In favor of the car loan:
-Right now I’m scheduled to pay $1,500 in interest over the life of my car loan. The more extra payments I make, and the earlier I make them, the more interest I will be chipping off that total. (The $500 payment will save me $100 in interest over the life of the loan.)
-By making extra payments I’ll be done paying my loan faster. Right now if all goes as scheduled I have 2 payments less to make!

In favor of the E-fund:
 -Stuff at work is getting worse. It wouldn’t be all that surprising if  I find myself out of work sometime in the near future. I’m going to need to use the Efund at that point.
-So let’s say I’m out of work….the fact that I only have 53 payments remaining versus 55 makes no difference to me at that point, right? I’m still on the hook for the next X number of payments that are due while I’d be looking for a new job.

A few additional points to consider:
– $9,000 is just under 4 months of my expenses (no retirement savings, but comfortable living). While under normal circumstances I think that 4 months would be fine, in my case the industry is practically at a standstill. Until the economy is back in full swing, it’d be really hard for me to find a job in this industry. I have no clue how long it would be before finding the next job, and I have no clue if I’m ready to change industries…
– I also have my down payment fund to “save” me. While I would hate to have to draw from it, I have to recognize it is there should I need it. If I use the DP fund as an emergency fund, I have enough to live comfortably for a year at the least. However if I use up that money I’d be starting over when I finally feel ready to buy property. A bit of a tradeoff.

What would you do if you were in my position?

I’ve now had a Car Loan for two months, and I’m having conflicting feelings about it.

First is the resentment I have towards it, considering that it lowered my credit score by 22 points! No biggie, since I’m no longer looking at buying a house, but still….I was so close to 800 before! (Or at least I thought so.)

Secondly, I thought it would be easy making my extra payments. I enrolled for the automatic pay and when I called they said I’d have no problem paying extra online, and it wouldn’t affect my monthly payment. So first month I paid $260, or $29.50 over my bill. On the day the first automatic payment was supposed to go through I saw that they’d withdrawn only $199 from my account, and proceeded to freak out. “Why only $199?!! If they charge me a fee for late/insufficient payment I’m going to be really mad.” But they sent me a notice saying they received my payment as scheduled and everything was fine. So it looks like they credited that extra $30.50 towards the following month. NOT what I wanted. Now I’m going to have to call, ask how I can pay without affecting the next month’s due amount, and in all likelyhood will have to send a check with a note or something like that. Ugh. What a hassle. (Totally spoiled by online conveniences, as you can see.)

Lastly, something strange has been happening to me lately. I usually feel fine at the thought of having loans. My student loans are at 2.37% and totally worth the money. My car loan is $12,000 at 4.8%. I got the car at a good price, and I like that I have a low interest enabling me to feel ok about taking my time to pay it back. I know that’s not the best attitude towards debt (its quite a slippery slope), but I’ve been at peace with it.

Lately I’ve started to get impatient. I want to get this sucker paid down. I want no car payments. But….I just can’t seem to muster up the discipline and say that “all” of my extra money will go to this loan. I just enjoy my dance classes to much, am looking forward to a little bit of travel, and I can always find worthwhile places for my money to go. I even thought about cleaning out my former ‘downpayment” fund to do so, but I really like knowing I have that money waiting for me in case anything happens.

I’m just a little conflicted.

We’ll see how this first month of apartment living goes, and see if I can find any places where I’ve overbudgeted, or could stand to slim down a bit. Once I’m settled I can also start re-evaluating the possibilities of earning more money….either through taking more mystery shopping opportunities, or starting up that business that’s been in the back of my mind.

Either way, the bug has hit me: I want to get rid of that car loan.

Excellent news….my student loan payments DID go down! Starting in July they’ll be $167.25, that means I have an extra $13.74 each month.

I was this closeto making the decision to spend it on dance related stuff, but my boyfriend has convinced me to use it towards paying my car loan early. Yeah, not a life-changing amount, but every bit counts, right?! Now I’ll be paying an extra $43.74 to the car each month.

Am I the only one that gets super excited about having a new car loan, so that I can have the pleasure of scheming how I’m going to pay it off ahead of schedule? I’m sure there are others out there that feel the same way!

Um, no? Oh….right…

Yes, I’m excited about having a real loan. Sure, it means I’m in debt, but its a different feeling from having a lease, and knowing that even after you pay all that off you’ll still have to give back the car in the end. This time I get to keep my car. I haven’t quite made my first payment on the car yet, but I’ve already been thinking about how I’m going to approach paying it off early.

When I opened up the savings and checking account at the credit union, I figured it would be the home of all my car expenses (minus gas, I like using my Amex rewards card for that). So right now I have a direct deposit set up for the amount of my old car payment and I’ve already added some money to the savings account. My new payment will actually be $30.50 lower than what I was paying before, so while its not much I actually have options for what I chose to do with that money. I mainly had two choices:

1) Gas Fund- Some months I underspend on gas (like the last two months!), but sometimes I overspend. I want to keep a buffer for those months I go over my gas budget. The budget is $200, so I’m thinking $100 would be a nice buffer? I could make this a separate “account” from my car fund (it would only be a line item on my spreadsheet, but it’d just accumulate in my regular checking)  or I could group this with my car fund. It would also grow during the months I come in under my budget. I think right now its at $70-something.

2) Extra Car Payments – Should I go ahead and just pay an even $260 (my old payment) as soon as the new bill arrives? I figured this is what I’d do, but if anyone can offer some compelling advise to do otherwise I’ll take that into consideration. (I’m mostly excited about doing that so that I can use my Vertex42.com spreadsheet and watch the balance go down!)

Other than that I’d also like to have a general car “emergency/maintenance” fund. My car is brand new, so hopefully it won’t need any serious maintenance any time soon (knock on wood), however the time will come eventually and I’d rather save up slowly. So what is a good amount to have in a car emergency fund?

Here is my potential breakdown for the funds:

Checking: Keep the equivalent of one monthly payment in there, just in case. Otherwise the money will trickle in each week, and when payments become due it will go out automatically (or manually, depending on if I can get an automatic payment set up that is more than what is due. Not sure how that works.) Every few months the sitting balance will go over that “one-month equivalent”, I’ll transfer the difference to the savings account.

Savings: This money will come from extra gas payments when I go under budget, or “oversavings” for insurance. For example, even though the last insurance payment went down $100 I’m keeping that just in case it goes back up next time around. I still have yet to figure out how they determine our rates. (Its gone up and down a bit the last few years.)  It’ll serve as my emergency and maintenance fund….now I just have to figure out how much I need in there.

That’s where you and your ideas come in….do you have a car emergency fund? How much is a good amount to have on hand, even if my car is new? Should I even have one?

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