Quote:
Originally Posted by creditcardfree
I do think it is great that you want to pay for a car with cash. Nothing wrong with that. In your case, it seems that this will be a need in the future because of the lease.
Did you know that if you keep paying the minimum on your student loan, it will take you 34 years to pay it off? You will have almost paid $10K in interest. Yuck!
It is important to minimize debt of any kind in order to have cash available to invest and create wealth.
If I were in your situation, I decide now to buy a less expensive car. Maybe $5K. Once I had the car money saved I would start attacking some debt. I would pick the student because it is the smallest debt.
Right now you have $650 to save each month.
Once you pay off the 401K loan you add another $163.
With these two amounts you have $813...save for 6 months and you have your $5K car funded.
Until the car lease is up: Pay $813 plus your regular payment for 6 months to bring your student loan to about $4660. Now you are at this time next year.
Once the car lease is up you have $398 to put towards debt. Now you have $1259 to put to your student loan. Guess what? With that payment it will be paid off in 4 more months. That is approx Sept 2010!
Then, if it were me, I'd put all that money towards your car loan. At this point your car balance is about $13K. You could pay it off in about 8.5 months!!
So, two years from now you could have paid a car with cash, and paid off 3 loans. Wow! How would that feel? Maybe then you could save another $5K and help your wife move up to a nicer vehicle. She will have only driven the "new" one for 1 year, so it's value would not be significantly different.
Just some food for thought! Best wishes.
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This is exactly what I am looking for.. a nice easy break down of what steps to take next. If my wife wants more expensive vehicle maybe we can sell something else we own to make up the difference.
I am starting this month with my mortgage on bi-weekly auto pay, then I will up the student loan payment. I will also discuss with my wife about paying the 401k loan in full with cash we have.