Buying car and budget advice...

[para38s]

I need some advice, that is why I am here. My wife drives a sedan with 240k, so we are trying to buy an SUV for the family(I have three kids). The SUV's I am looking at are too old or have to many miles to be finance(2002-2004, 120k-150k miles), the problem is I don't have the money to buy the truck cash either. I am looking at spending anywhere from $6500-$8500, and I only have $2000 in my savings account. The current car is not going to be sold either because I am going to drive it. I currently carpool with my dad, so I have a car to get to work, but when my wife goes to work, I am car less. So the goal is to have two vehicles at hand. I was thinking of buying the SUV with a credit card, my credit card has cash advance at no cost. So I can pull the money and go buy the truck with cash money. My credit card has a 8.25% interest, but I can also transfer the balance (once the balance is there) to 0% credit card if choose to. I have good credit(750) so I get a lot of 0% credit card offers. I can spare $200 momthly towards the car, and add my year end bonus ($2500) at the of the year. So I can pay the car in about 24 months.


Budget sits like this.

Income $3500/month after 401k, medical and taxes. My wife and I 6% to my 401k( It also has an employer match).

Mortgage $1150
School Loans $525
Utility bills $450
Food and house expenses $550
Gas $300


Total $2975

So it leaves me $525 for unexpected expenses. I can spare $200 out of this money for the car.

[J.Apple902]

My initial thought is that $2k in savings is not enough, even if you were going to let that sit and not consider using it for a vehicle purchase. Many people will tell you to have at least 2-3months worth of expenses saved up for an emergency fund - $5k would be a good target for you. Most people like to have 6 months of expenses sitting in a savings account.

Aside from that, can you afford another $200 of expenses? Maybe. Only 6% towards retirement? That is low but I understand you are on a somewhat tight budget. I would like to examine a more explicit summary of your budget. What does the $550 monthly food/house actually break down to? $300 a month on gas with one car is a lot. Have you refinanced your mortgage? Out of curiosity how old are you? This will determine my attitude towards your retirement contributions.

If you are wanting to shave down things on your budget it's probably food. How often do you guys eat out? The budget you have shown includes nothing by way of:

luxuries
eating out
clothing
discretionary spending (maybe the $525 remainder - do you guys just blow that each month? With only $2k put away I am thinking this is a yes)

[bjl584]

I need some advice, that is why I am here. My wife drives a sedan with 240k, so we are trying to buy an SUV for the family(I have three kids). The SUV's I am looking at are too old or have to many miles to be finance(2002-2004, 120k-150k miles), the problem is I don't have the money to buy the truck cash either. I am looking at spending anywhere from $6500-$8500, and I only have $2000 in my savings account. The current car is not going to be sold either because I am going to drive it. I currently carpool with my dad, so I have a car to get to work, but when my wife goes to work, I am car less. So the goal is to have two vehicles at hand. I was thinking of buying the SUV with a credit card, my credit card has cash advance at no cost. So I can pull the money and go buy the truck with cash money. My credit card has a 8.25% interest, but I can also transfer the balance (once the balance is there) to 0% credit card if choose to. I have good credit(750) so I get a lot of 0% credit card offers. I can spare $200 momthly towards the car, and add my year end bonus ($2500) at the of the year. So I can pay the car in about 24 months.


Budget sits like this.

Income $3500/month after 401k, medical and taxes. My wife and I 6% to my 401k( It also has an employer match).

Mortgage $1150
School Loans $525
Utility bills $450
Food and house expenses $550
Gas $300


Total $2975

So it leaves me $525 for unexpected expenses. I can spare $200 out of this money for the car.

The $525 left over, where does it go?

You need more in savings. Ideally 3 to 6 months worth of expenses. So, somewhere between $9 and $18K.

Rule of thumb for a car is to finance for no more than 36 months and have the payment represent no more than 10% of your monthly takehome. And, that is the topend.

I don't think that you can afford a car right now other than a beater that you can pick up for cash.

I'd make due with your current situation as long as you can and save up more money over the next several months before buying anything.

[disneysteve]

Budget sits like this.

Income $3500/month after 401k, medical and taxes.

Total $2975

So it leaves me $525 for unexpected expenses.

I'm concerned that you are overlooking expenses so that you don't really have $525/month surplus though I'm not sure what you are including in Household Expenses. I don't see insurance (auto or life) on your list. Auto and home maintenance, out of pocket medical costs, clothing, school activities, etc.

How much is left on the student loans?

Is your wife's current vehicle operational? If so, I'd put off replacing it as long as possible and use that $500 surplus (assuming it exists) to boost the savings and be able to put down more on the car (or even buy it outright). Also, don't totally deplete your savings to buy the car. You need to maintain an emergency fund of at least a thousand dollars or so.

[para38s]

I am 24 years old, the $550 for food/house expenses are used for just that food. We only eat out once a week, the rest is used for food, diapers, toilet paper and etc ( family of 5). I have not refinanced my mortgage, I owe 145k with a 5.5% interest rate, $1150 includes taxes and insurance. The $300 for gas(CA Gas prices $4.49/gal), is what it is, I carpool with my dad and pay for half of the gas( we commute 120 miles a day). The wifes car is used to take kids to school and for my wife to go to work. The $525 remainder is used for unexpected expenses, luxuries, clothes and savings. I just recently had a $2500 unexpected expense. From the remaining $525 is where I can spare some money for the car. Also we just recently paid of a student loan (two months ago) that gave us another $100 a month. So that is new to us.
I just contribute 6% to make the company match, I have only been contributing to this for the past 3 years. Student loans will paid of in a little less than 4 years, if no extra is paid.

The problem of buying a beater is that I already have a beater, and I really wanted to buy a good reliable SUV for long trips.

Thanks for the help guys, I hope I answered every body questions.

[para38s]

I'm concerned that you are overlooking expenses so that you don't really have $525/month surplus though I'm not sure what you are including in Household Expenses. I don't see insurance (auto or life) on your list. Auto and home maintenance, out of pocket medical costs, clothing, school activities, etc.

How much is left on the student loans?

Is your wife's current vehicle operational? If so, I'd put off replacing it as long as possible and use that $500 surplus (assuming it exists) to boost the savings and be able to put down more on the car (or even buy it outright). Also, don't totally deplete your savings to buy the car. You need to maintain an emergency fund of at least a thousand dollars or so.

There is 24k left on student loans. Auto insurance is included in utility bills, life insurance is paid by employer. Here is the kicker, the $525 left over is used for medical cost, clothing and unexpected expenses. Which are not there every month, at least I hope there not. My wife's car is operational, but we don't really trust it for long trips, even though it has never left us stranded.

[disneysteve]

There is 24k left on student loans. Auto insurance is included in utility bills, life insurance is paid by employer. Here is the kicker, the $525 left over is used for medical cost, clothing and unexpected expenses.

I'd suggest making a more detailed budget. You don't really have $525 extra each month because with 5 people, I'm sure you are routinely spending money on out of pocket medical costs, clothing and other things not listed.

What was the nature of the recent $2,500 expense. Was it truly unexpected or just unplanned for?

Have you looked into refinancing? You can definitely do better than 5.5% today. We refinanced at 3.99% and rates went even lower after we did that. That would help out too.

[para38s]

I'd suggest making a more detailed budget. You don't really have $525 extra each month because with 5 people, I'm sure you are routinely spending money on out of pocket medical costs, clothing and other things not listed.

What was the nature of the recent $2,500 expense. Was it truly unexpected or just unplanned for?

Have you looked into refinancing? You can definitely do better than 5.5% today. We refinanced at 3.99% and rates went even lower after we did that. That would help out too.

True, just for example this month I had to spend an extra $250 because of mothers day ($200) and one of my kids had to go to the dentist($50). No clothes this month, but last month we spend around $100 on clothes.


Bills
Cable/internet/phone $90
Water $55
Electricity $65
Gas $40
Cell phones $100
Auto insurance $100

Total $450



Food and house expenses.
Food $400
Diapers, soap, toilet paper and etc. $150

Extra $525 Maybe not extra!
Medical/Dentist avg $50
Clothes avg $60
Car maintanance avg $55
Birthdays/holidays $60

Total $225~

That's all I can think of. So in reality there's only $300 left, that's is if nothing unexpected happends.

$2500 went to an unexpected one time medical bill.

I looked into refinancing my house but with PMI rates being so high, it did not make sense. I was not looking at a significant discount($60 savings). I bought my house with 5% down, not the common 20% down, so I have to pay PMI. In my area it cost more to rent than to buy, so we decided to buy, instead of renting.

[bjl584]

I bought my house with 5% down, not the common 20% down, so I have to pay PMI. In my area it cost more to rent than to buy, so we decided to buy, instead of renting.

I will have to disagree. It depends how you buy more than where you buy. With 5% down and having to pay PMI plus insurance, taxes, and maintainence and upkeep, then renting probably would be cheaper.

But, I will have to say that you shoul dsave up more money and keep driving your current vehicle for the time being. I don't think that you can afford to take on more debt right now.

[disneysteve]

So in reality there's only $300 left, that's is if nothing unexpected happends.

As I suspected. So you have $300/month "extra" at best and you want to tie up $200/month on a car payment. That leaves you just $100/month for the "unexpected." One medical bill or car repair and you're screwed.

Keep the car for a while. Save up more until you can pay cash and still leave yourself at least a small emergency fund. Look for ways to trim spending every place you can.

[para38s]

Here is another question, if I can work some extra or maybe even get a raise to come up with the extra $200, would it makes sense to buy the SUV then. Considering I can buy the vehicle with a 0% credit card, or at worst case scenario put it on my 8.25% interest credit card. And still add the $2500 year end bonus. So it can be paid in less than 24 months.

[bjl584]

Here is another question, if I can work some extra or maybe even get a raise to come up with the extra $200, would it makes sense to buy the SUV then. Considering I can buy the vehicle with a 0% credit card, or at worst case scenario put it on my 8.25% interest credit card. And still add the $2500 year end bonus. So it can be paid in less than 24 months.

Raising income to raise lifestyle isn't necessarily a bad idea, but in your situation I would rather see you do the following:

Pick up some overtime and/or a part time job. Pay down your debts and save up some cash while continuing to driver your current car. Find a replacement car that you can pay cash for 6 months to a year down the road.