Financial Decisions

This thread is going to be similar to one called Financial responsibilities on the main page of Off topic right now. I'd rather make a new thread so I can get more opinions/ideas than I would otherwise. I'm about to close on a piece of land, and hopefully have a house built on it within the next year. I'm building small to keep my mortgage payment down since I don't make a ton of money, and I'd rather not throw my money away renting. My dad is in the construction business so I'll be saving some money.

A year and a half ago, I made the mistake of trading in a car that would be paid off by now, to buy the Tacoma I currently have. Problem is, I still owe around 23-24k. I work as a flat rate tech at a dealership, so my income is never the same. I'll make enough when we're busy to be able to pay everything, including mortgage and save roughly 25% monthly. Without the truck payment, I could easily afford a mortgage by myself and save roughly 50% of my income once I pay off my CC by the end of next year. But, I want to have my finances sorted so I can still afford a house and put money away when we're slow.

I really like my truck, and would like to be able to keep it, but it's the one big expense I can actually eliminate to make life easier. I've considered refinancing it in a year once it's paid down a bit more, but still probably looking at 250 a month stretched over a 7 year period. I've also considered doing something on the side, like woodworking, even though I have no experience. Something I can make like 500 extra bucks a month.

I'd love to hear some ideas/opinions to see what I should do with the truck.

 

Pay off cc first. Probably has the highest interest rate.

 

Financial problems couldn't be that bad if your looking at building a house. The truck will last you a long time. Maybe get a part time job to pay it off faster.

 

Get a sidejob business

 

It’s actually still 0% interest right now, but I want the payment gone.

I just think that money will be tight, and I likely won’t be able to save money, or as much when we’re slow, mainly in the winter.

 

Do you got at least 2-3 months of bills including mortgage saved up?

 

get a different job

 

If the credit card has an interest rate of 0% than I would make the monthly min payment and use whatever disposable income you have after that to save or pay towards the truck.

 

If you're that underwater on the loan, you don't really have more than a couple options. You can save money each month which is good, so if you can't afford the payment or don't want to afford the payment, make your minimums and throw everything extra aside. Sell the truck, pay off the remaining loan balance so the loan is closed out and then buy something more affordable, ideally with cash if you're able to put 50% of your income into savings.

Other option is to scrape through it for a year and refinance, but if you have to refinance all the way to a new 7 year term, then you're way over your head and I'd sell the truck and get out from that loan. I refinanced my Tacoma and it saved me $70/month and only added 2 months of payments to the existing loan. That was an easy choice to make.

Also, if you're considering buying a house but can't genuinely afford a truck payment, then for your own sake now and in the future - if you keep making bad financial decisions you're going to be screwed one day, and you'll be screwed every day leading up to it.

If it were me, I'd find out what I owe on the loan and find out what the truck is worth, start saving that difference up in cash each month (work more if you have to), and get rid of it. Might cost you a few grand to end up without a car, but it's a hell of a lot less than what you're going to spend to keep it. Debt has to either go down, or income has to go up. Truck loan sounds like the biggest hindrance, though I might be worried that when that 0% interest goes away you'll be SOL trying to juggle a truck payment and the average interest percentage on a consumer card.

You don't mention how much you owe on the credit card debt, but 0% doesn't last forever, and you don't want to refinance the truck only to be in the same situation later on again and then owe even more money on the loan.

 

I agree with the part time job. The thing is, if you get laid off in any capacity it sounds like you wont have much room to work with considering the investments you will be responsible for. I know I tend to play it safer compared to others, but I also rent as Im not really ready to take on buying a house at the moment as I want to have a little more cash flow before going into that risky avenue. I know with renting that your money isn't getting invested, but its also a consistent and predictable beast. Is it that you don't want to waste a dollar on rent compared to owning, or is it that you just cant wait any longer?

 

i'd take a look at your bills and focus on one or two manageable goals. i'd set a goal to get one of you debts paid off, and then tackle the next one.

my income is also variable. i keep a spreadsheet of all of my expenses, and anticipate expenses, and go off of a minimum of what i know i'll make each month. if i make more, then that's a bonus. i also send money from each pay check to a different bank and have gotten used to living without those funds. you could do that and use it towards one of your payments

 

Lucky for you you have a Tacoma. I say get the f rid of it (you’ll get another one later). Good luck, Man!

 

Great tips. If I may add, we spend a great deal of time (at least personally) budgeting and thinking how to pay our debts on a month to month basis. However not too many people really sit down and evaluate the pros/cons of each purchase (I’ve been guilty of this). I’ve recently started looking at purchases from the standpoint of what is this going to prevent me from doing in the future. Not a diss on budgeting at all by the way. Setting financial goals and sticking to them has become increasingly difficult with the advent of 2-day prime one-click shopping. Just like that I can get those new rims or that fancy GoPro I’ve always wanted. OP, this is not meant to tell you if you’ve made poor choices btw. I hope you find some time in a quiet place and evaluate your options, pros/cons, and think about what each purchase will mean to your next 5/10/30 yrs. I’ve found this very helpful in my own experience. Good luck.

 

I had 5-6, but I'm paying cash for the land. Probably not the smartest thing, but I plan to have it saved back up by the time I get the house built.

Actually, I'm not underwater on the loan at all. If I were to sell it right now, I could pay off the loan and have probably a couple grand left over. Honestly, I don't want to refinance it for another 7 years. It just sounds like a bad idea. Vehicles are really the only thing I waste money on. I started taking my lunch to work, and I rarely buy stuff anymore unless I need it. I just feel it'll be kinda tight each month, mainly because I'm treating the 25% I'm saving as a bill I have to pay and I can't touch that money unless truly necessary. I refuse to live paycheck to paycheck.

I owe 3k on my credit card, and figured out the number I need to pay each month to have it gone by this time next year.

Well, I still live at home and I want to get out asap and start my own life. I was planing to rent 3-4 years ago, but my friend backed out. And, since my dad is a contractor, I can save money building a house. It just doesn't make sense to rent instead of owning considering rent costs just as much as a mortgage payment for a decent apartment around here. If I didn't have my truck payment, I'd only have around $1200 that I'm obligated to pay each month, mortgage included.

 

Money is saved and spent $10 at a time. Everyone looks at the biggest payments and thinks this will fix everything. Look for money elsewhere. Phone, food, fun, everything. Get and keep every receipt for a month... account for every penny. Then see where it really goes. Pay off the card asap. Use what is called snowballing to kill debt. Take the money you would pay on the charge card once paid off and put it against the truck. If you want the house then make the monthly payment to yourself. If it goes smoothly for 6 months then build. If you own the land then you have locked it in. Building ALWAYS goes over budget. That is the business. Even if you diy. Get the amortization table for the loan on your truck. Find out how much interest vs principle you pay each month. If you double the principle, probably $100/ month then it is like a double payment. Finally take your time. Doing it right the first time on stable terms will set you up for success. Trying to start out on a shoestring with no reserves will cost you everything. Do it wrong and you'll end up back at your parents house with bad credit. I own five houses and carry very little debt. At age 39 I have watched two of my buddies over extend and lose everything. They now rent from me and still don't get it.

 

One thing to also consider is maintenance costs. Things do and will go wrong early.

 

Get a jump start on getting rid of this debt by getting a holiday season temporary job right now. It's pretty much perfect timing for you, and it'll suck for the next 6 weeks or so until x-mas, but clicking off one thing on the to-do list earlier than anticipated will feel good and be motivating.

I have recommended to all my friends to get financial tracking software (I love and have been a long time user of Quicken) and start tracking every dollar you spent. be meticulous about categorizing and figuring out exactly where you're spending your money. You really can't talk about budgeting and figuring out what you can afford and save without getting a handle on exactly where you're spending your money. Enter in your truck loan... and you can play the what if game to figure out how sooner you can pay off the loan with an extra payment or extra money in each payment. It's incredibly useful.

 

Rob a bank

 

I appreciate all the advice. I'll definitely have to keep track of where money is spent. Now that I'm taking my lunch, and just paid off my tool bill for work, that's another $400 bucks roughly that is being saved monthly now. I have a friend that makes less than I do a month on average, with a similar total in monthly bills, but still manages to save around $1000 a month, and has around 30k saved right now so I need to really get serious with saving.

 

Take a Dave Ramsey class in your area, or do online work. Don't like Dave?

Read up on Suze Orman online, TV, whatever.

The interesting thing is that while they are polar opposites in many ways, their common sense financial guidance is very, very similar.

Many things I could add. The most important is that you know you have not done well.

Make a written budget. If you don't know the ins and outs of your money, your money will manage you.

Get another job. Work for your Dad on weekends/holidays. Even as a laborer you'll produce extra cash.

Once you dig in a bit more, with a written plan, you'll start to realize exactly what you need to do. And my guess is having a new vehicle financed won't be part of the equation. But you have to work that out for yourself.