Pay off car or save money?

[HardWorker]

I have no savings and really never have, but keep trying to learn to save. Live paycheck to paycheck. I have bad credit, as in real bad from a bankruptcy a couple of years ago. No credit debt, only house and a car.

I have $1300 in tax money coming up (I also have some extra money from stuff I sold on Craigslist.)

I owe $1800 on my car, which may or may not have a problem, like a transmission problem. It's a long story, but it runs great at the moment, and maybe I'm just paranoid. Engine light came on, now off.

I pay $238 a month for the car, 6.25% or close to that. It will be paid off in November.

Even if the car blew up and I had the $1300, it wouldn't be enough money, and I wouldn't have the car money each month to save up for fixing it. I'd have to pay off the car *in November* then save to fix it!

Should I save the $1300 and pay off the car in November and start saving the $238 a month, having about $2000 by the end of the year?

Should I just keep paying on the car? I am not worried about other emergencies at the moment, just the car. I can handle the rest.

Thanks for any help.

[disneysteve]

I have no savings and really never have

I have $1300 in tax money coming up

Should I save the $1300 and pay off the car in November and start saving the $238 a month, having about $2000 by the end of the year?

Should I just keep paying on the car? I am not worried about other emergencies at the moment, just the car. I can handle the rest.

Keep making the car payment and use the $1,300 as your emergency fund. If you send all of that money to the car loan today and something happens tomorrow, you're screwed.

[Petunia 100]

Do you have a written budget, Hardworker? If not, I suggest you start working on one.

Don't let the word "budget" scare you. A budget is simply a spending plan. It can be as broad or as minute as suits you.

Having a budget is really key to being able to save regularly, IMO.

[MardenI]

Maybe doing fifty-fifty?

Half to pay off the car loan, so you save on loan interest and keep the other half in a savings account.

[FrugalDad123]

Hi Hardworker,

If you want to create a budget I can help you with it. Feel free to type anything that you feel your money goes to, and any spending you feel looming on the horizon. Just type away and we will form and shape it into a budget at a leisurely pace together.

Best Regards,
FrugalDad123

[lindsay06]

Always pay off your debt first, but make sure you have at least 6 months worth of income for an emergency fund.

[woodie96]

Hardworker,
I can understand the reasoning behind your thoughts, but you stated in your original post that "I am not worried about other emergencies at the moment, just the car.", but earlier in the post you state that you have no savings.

As DisneySteve said, if you do pay off the car and something happens with the car, which in my case usually does, then you will have to borrow money to fix it. Then you are back at square one.

Although 6% interest on a car isn't the best, we have seen much worse here. To pay it off month by month, assuming you pay April - November, you will only pay a little over 1900 for the car.

Come November you will have a car, AND 1300 bucks ini the bank for future use.