Celebrating! Less than 10k in total debt

[Radiance]

Steve, what percentage of your net is the recommended amount for car payment? Assuming it is the first car you buy and it is bought in credit.

Or maybe my question really is, how much car can I afford?
Thank you

Hey, i am highjacking my own post!!!

[BlackDiamond]

I'd rather have my car payment and be able to keep my job than not have my car payment and be unemployed. My alternative would be quadrupling my housing expense to rent in the city. Not gonna happen.

I make decidedly less than the average person in Boston but right now, it's all I have. I have no doubt that this car will last about the legnth of time of the loan.

It must be nice to have the money to do a 3 year loan, but not everyone is that fortunate.

I have a small savings but basically live paycheck to paycheck, just like everyone else I know.

[disneysteve]

The general rule I've read is that your total car payments should not exceed 20% of your monthly take-home income. That's 20% total for however many cars you have, so if you and your spouse each have a car loan, the total payments shouldn't exceed 20% of income (not 20% to each car). Of course, you need to modify that number based on your own circumstances. If you have a big mortgage or lots of other debt like CCs and student loans, 20% may be too high for you.

You also need to factor in other costs of ownership. Some cars cost more to insure. Some cars have higher maintenance costs. So you need to make sure you can afford the overall costs, not just the monthly payment. If you are buying a car with higher than usual insurance or maintenance costs, you probably want to keep the payment well below the 20% figure.

I also think it depends how much you earn. Someone bringing home 10K/month certainly doesn't need to be spending 2K/month on a car payment.

[disneysteve]

It must be nice to have the money to do a 3 year loan, but not everyone is that fortunate.

The point is to buy the car that you CAN afford with a 3-year loan. That might be a few years old and have some miles on it, but so what? You should be able to find a good, dependable car that you can afford with a 3 or 4 year loan. My car has 125,000 miles on it. It works fine. It is worth about $3,000 right now. I see no reason why it shouldn't last at least 200,000 miles before it starts giving me any major problems. Someone buying it today would have a perfectly good car that they could drive for at least a few more years. Of course, I'm not selling it since I plan to be the one to hit that 200K mark myself.

[nanamom]

I realize this wasn't started a a car thread but....
My husband and I drive a 2005 van because while we only have 2 children we do like to "borrow" our grandkids from time to time and need the space. In all honesty if it weren't so expensive to drive (gas and all) I'd have a 15 passenger van! But I digress. My van won't be paid off for about 5 years more. I am praying it lasts that long. By then it will have mega miles on it. At that point while we hope to keep driving it it doesn't look good. We won't have money saved to buy a "new" (we always buy used) on with cash and so I think I am on the car payment merry go round for ever.

[Radiance]

20% is too high, I can buy a luxury car with that
I right now spend $300 which is 5% and I think it is too much for a car.

I think I'll keep my car as long as I can, and continue setting aside the $300 so I can buy my next car in cash, that will be super cool! imagine my negotiation power...When I am there I'll comeback to see if you cna convince me to buy used. Righ now I am cool.

I think Honda Civics are a tiny little higher insurance because of the risk of theft, but balanced out because I live in gated community. Maintenance is average I guess, less than VW, for sure!
My car is not red nor yellow which sometimes insures for more than other colors, mine is blue.

I think I will be fine, BTW I need to take my little blue civic for oil change and the thing they do so wheels align correctly. I set aside $100 per month for car maintenance so I am cool.

[BlackDiamond]

The point is to buy the car that you CAN afford with a 3-year loan. That might be a few years old and have some miles on it, but so what? You should be able to find a good, dependable car that you can afford with a 3 or 4 year loan. My car has 125,000 miles on it. It works fine. It is worth about $3,000 right now. I see no reason why it shouldn't last at least 200,000 miles before it starts giving me any major problems. Someone buying it today would have a perfectly good car that they could drive for at least a few more years. Of course, I'm not selling it since I plan to be the one to hit that 200K mark myself.

Well, the last 3 cars I bought cheap all died before the loans were done, so sorry. Not a gamble I'm willing to take again. I will finance new ones and expect to always have a car payment. My father once told me having a car payment is a part of life where we live and I believe him. With a 5 year loan, my payment is less than 10% of my net monthly pay, has 3 years to go and I feel confident that this thing won't die for at least another couple of years. It has 57K miles on it.

It needs about 1500 worth of work right now. Everytime I get my savings up to anything at all, an emergency comes up and I'm back to nothing.

[Radiance]

I have a small savings but basically live paycheck to paycheck, just
like everyone else I know.

BlackDiamond, that is truth, but that doen't make it right
Almost everybody I know eats poorly and hate veggies, that doesn't mean it is right, they put themselves and they children at risk of many deseases.
If i lived live the majority I know I would have a very miserable existence!

But I digreess, You don't have to live paycheck to paycheck, you have the power to change that. I lived paycheck to paycheck all my life until Sep 2009, now i only use 65% of my paycheck and that includes sending money to savings.

Just Give it a try, you can do it! It feels awesome!
Set a goal, right now you use 100% of your salary, what can you do so you only use 90%? or 95%?

I don't know if you already did, but if you post your current budget here you will receive a lot of ideas to cut back. sometimes people here are very passionate so they forget to be patience, gentle...ok, I'll say it, they can be mean. but they do it out of love...
Take what you need and leave the rest. If you take it personally, the only one who loose is you

Maybe you can need a loan for your next car, but if you create the goal, two cars from now could be in ca$h.

[Radiance]

Look at your self talk:

I will finance new ones and expect to always have a car payment. My father once told me having a car payment is a part of life where we live and I believe him.

I am on your side regarding new cars vs used, but with all respect to your father, a finance car payment does not HAVE to be a part of life a car payment might but as a savings fund done in advance... think about it, you can save and do it cash... really!

[disneysteve]

With a 5 year loan, my payment is less than 10% of my net monthly pay

Clearly, you have convinced yourself that a car payment is a necessity. If that is your mindset, then you are right and you will always have a car payment. I'm just trying to tell you that there are other ways to do it regardless of your income or where you live or how many miles you drive.

[disneysteve]

20% is too high, I can buy a luxury car with that

I'm not sure how they came up with that number. I found it at Edmunds.com which is generally a good source of info. I also think it is too high but it depends on your income. If you take home 40K, that gives you a payment of $667 which would be 24K over 3 years. That really isn't that extravagant of a car. I'd still recommend spending less and getting a good quality used car.

[BlackDiamond]

You asked for my budget, here it is.

Single, mid 30's. I got my tubes tied because I can't afford kids so expenses related to saving for kids will never be a concern. Was getting married this year but FI has worse finances than I do so I decided not to.

Net income (gross don't count because I lose $1000/ mo to taxes and health insurance and my pre-tax subway pass and parking reimbursement etc.) is $1221 (approx, give or take $1) every 2 weeks.

We'll call it $2442 for a month. I almost always make another $400 selling my belongings on Ebay. But to be conservative, I'll say my NET income is $2650, assuming a low Ebay month,

Rent -- $400
I rent an apartment with a roommate. I pay $400.
This makes me feel like a worthless loser because apparently, everyone and their grandma owns homes except me. I hate living with another person but I am autistic and NEED (not want, but NEED) a quiet place where I won't have people stomping around above or beneath me or other people's screaming kids running around. I have quiet where I live. My roommate owns the house and refuses to rent to families (rules are lighter on that since he lives there). My best friend lives beneath me and is respectful not to be noisy. My bedroom is under the upstairs neighbors bathroom so noise isn't an issue.
(The average 1 BR apartment in MA away from the city costs $850+ util. I am fortunate. Houses are completely out of reach for me, even far from the city.)


Utility -- $139
I pay the gas bill. It's a budget plan for $139/mo.
We hardly ever turn the gas on. It was $123/mo but it just went up as did everyone's in the state. It's an old crappy house with forced hot air. My roommate pays the tv and electric. My parents pay for my phone as part of my xmas present every year. I think they do it because they know otherwise I wouldn't have one.


Car/Insurance/Commute -- $523
My car payment is $227/mo. 2007 Ford Focus w/ approx 56K miles. I pay the $227 for now because it is more important to me to build up savings and pay off unsecured debt. Insurance is $91/mo (I work for the insurance co…this is the best rate I can get. I am the "best" level of driver you can be in MA. Includes full coverage which I am required to have and renters insurance) I spend about $100/mo on gas, almost never use my car for things aside from my work commute. I walk everywhere. I spend $105/mo on parking (cheapest subway garage around)


Medical Needs -- $35
I have one medication I have to take every month that costs $15 . I have to wear heavy duty ear plugs almost 24 hours a day because of my autism. I am hypersensitive to noise. The cost for this can vary but generally $20/mo.

Debt -- $500 (is what I actually pay)
Personal Loan - 10.99% interest. Balance $12500 / monthly payment is $287, BUT I pay at least $500. This debt came from repairs to my last "older" car that I tried to save and very expensive surgery for a dog that happened w/in 1 week of each other. I will never waste that kind of money on an animal again. I learned my lesson the hard way. The dog died after 2 very complicated surgeries. He was 2 years old. Those two things ate up my then EF as well. I had some cc debt but I've paid that all off. My credit score is 770.


Entertainment -- $5 (approx)
I plan on $50 or so a year for music on iTunes and aside from that, none. I do not go out, shop or get take out or movies.. I have a tv from 1998 and a dvd player from 2001. I have a 7 year old computer. FWIW, I do not like going out. I do not drink or smoke.


Food -- $100
I'd say $100 for food /max per month. I live off ramen, mac & cheese and hamburgers. I sometimes buy chicken and make pasta type dishes. Rarely, I will buy steak or turkey. I take leftovers for lunch. I buy store brands only. My guilty pleasure is salsa. I might splurge on a $3.50 jar of name brand salsa once a paycheck. I drink water.

Clothing/ Personal care -- $5-10
$5-10 or so for toothpaste, mouthwash, floss and 99 cent shampoo and soap. I have not bought new clothes in over 2 years. I buy only as needed. I do not buy cosmetics. I cut my own hair. I don't dye it or style it. ***i put this wrong when I added it at first, so I guess I have an extra $30-40 / month left over due to wrong calculations****

Travel $0 -- I have stopped traveling but in the past, I paid with cash. I did travel a lot in the past when I should have been using the cash to save.

Total expenses : $1712 which leaves $938 for savings and/unexpected expenses. If I wanted to live by myself, I could not afford to. I consider this pathetic. I actually cancelled my wedding and ruining my relationship over this. I really don't even know why I wake up in the mornings.

Savings :
$3030 in cash. I try to add at least $100/mo to it PLUS whatever I make off Ebay. I started this in December of 2009. Prior to that, I had nothing. Prior to that, I'd had about $3K before but every time I manage to save up any amount, an emergency comes up and depletes it. Last time I saved this much, I fell and needed to go to the hospital and that cost me $1500. Within 2 weeks, my tire blew and I needed to get tires and alignment. And then I was back to nothing. I am just an unlucky person. Crap like this happens at least once every other month. I have saved up about this much several times in the past and no lie, as soon as I do, something happens. Just today the car started shaking and I noticed a toothache. It's like a curse. No investments but I just started a 401K thru work. Nothing in it yet.

Job :
Lots of security and I've gotten 2 small raises the past 12 months.

[Radiance]

Good job, but please copy and paste on new thread, this post has too many topics already... I know you will get a plan that works!

Try to see your situation solved already so it is possible in your mind, that is key!

[disneysteve]

I agree that this ought to be it's own thread but since we have it here, let's talk.

Net income is $1221 every 2 weeks.
We'll call it $2442 for a month.

That's not correct. There are more than 4 weeks in a month (except Feb.). $1,221 every 2 weeks is $610.50/wk. That is actually $2,645.50/month not counting ebay.

Rent -- $400
I rent an apartment with a roommate.
This makes me feel like a worthless loser because apparently, everyone and their grandma owns homes except me.

That certainly isn't true and there is absolutely no reason for you to feel bad about renting or about having a roommate. I think both are very responsible things to be doing.

Car/Insurance/Commute -- $523

I don't think these numbers are bad at all.

Debt -- $500 (is what I actually pay)
monthly payment is $287, BUT I pay at least $500.
My credit score is 770.

Also not bad. Actually, quite good that you are able to make substantial extra payments.

Total expenses : $1712 which leaves $938 for savings and/unexpected expenses.

In reality, your monthly savings is $1,151 because the extra loan payments count as savings.

You said earlier that you live paycheck to paycheck. That isn't anywhere close to true. You take home $2,650 (plus ebay) and you are saving $1,150 which is 43% of your take home pay. That's phenomenal. I fail to see any financial problem here at all. You are living very frugally and responsibly and saving a huge percentage of your income.

[LivingAlmostLarge]

Congrats!