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[MonaroGM]

Hello everyone this is my first post on this forum. Im currently 23 year old with a car payment. I owe $20,000 on my 2005 Pontiac GTO with 47,000 miles.. I owe about $5,000 more than its worth but everyone who sells these cars will not sell it for KBB value.. Dealers included.. i looked for this car for a very long time.

I currently have $5,500 saved. I try to save about 800 a month and have been doing so relatively successfully. I also want to buy a house. I have about 5 1/2 years on the car loan left.. what should i do?? When i save enough for the payoff amount should i just pay off the car off and then start saving for a house?? Or should i just keep stacking money in the bank since i have a fairly decent job and am still living at home?? Interest rates are 8% for me on this car i bought it on my own with low credit?? Any suggestions would be helpful..

Currently my plan is to just keep making the car payments and at the same time just save as much as i can even though im paying a lot of interest?? WWYD??? Id really hate to pay the care off then have no money for a home of my own and have to start form scratch again.

[Petunia 100]

Hello everyone this is my first post on this forum. Im currently 23 year old with a car payment. I owe $20,000 on my 2005 Pontiac GTO with 47,000 miles.. I owe about $5,000 more than its worth but everyone who sells these cars will not sell it for KBB value.. Dealers included.. i looked for this car for a very long time.

I currently have $5,500 saved. I try to save about 800 a month and have been doing so relatively successfully. I also want to buy a house. I have about 5 1/2 years on the car loan left.. what should i do?? When i save enough for the payoff amount should i just pay off the car off and then start saving for a house?? Or should i just keep stacking money in the bank since i have a fairly decent job and am still living at home?? Interest rates are 8% for me on this car i bought it on my own with low credit?? Any suggestions would be helpful..

Currently my plan is to just keep making the car payments and at the same time just save as much as i can even though im paying a lot of interest?? WWYD??? Id really hate to pay the care off then have no money for a home of my own and have to start form scratch again.

Do you have a workplace retirement plan? If so, are you contributing?

Have you started a Roth IRA?

How much do you earn, how much are you paying your parents towards living costs?

Do you have a written budget?

What are your life goals? Is there more education in your future?

Do you have other debt besides this car loan?

I think 20k for a 9 year old car is way, way too much. You could have bought a new car for that, or a similar car for less than half.

I think 5.5k in cash is sufficient for someone who lives with parents and has a large car loan. Start or continue retirement savings, leave your 5.5k as is, and focus on reducing that car debt.

[MonaroGM]

Do you have a workplace retirement plan? If so, are you contributing?

Have you started a Roth IRA?

How much do you earn, how much are you paying your parents towards living costs?

Do you have a written budget?

What are your life goals? Is there more education in your future?

Do you have other debt besides this car loan?

I think 20k for a 9 year old car is way, way too much. You could have bought a new car for that, or a similar car for less than half.

I think 5.5k in cash is sufficient for someone who lives with parents and has a large car loan. Start or continue retirement savings, leave your 5.5k as is, and focus on reducing that car debt.

I pay no living costs. I earn about 1,300 every other week. I bought the car i wanted.. i know it would be hard for me to pay for a prius... NO other debt besides the loan... 6% of my checks are paid into my 401K and my pension.. As of now i just took my PSEG test.. if i dont get into that company i will be going back to school. IDK what a roth IRA is..

[cardtrick]

Many ways to go about this. Here's what I would do:

1. I have no living expenses, so I don't need an emergency fund. I will keep $1000 in my savings account just in case.

2. Start paying off the car loan. No, don't wait till you have the pay off amount because the loan is accumulating interest at 8% a year, which is outrageous. If I can refi the loan to under 4% a year, then I would not pay it off early. That's because I'm confident that I can make 4%+ a year on my investments.

[bjl584]

It sounds like you bought too much car. But it sounds like you don't want to sell it.

Fine. But, you will want 20% down for a house plus a 6 month emergency fund in place before buying.

What are your prospects for a higher income? Promotion, raise, part time job?

[MonaroGM]

It sounds like you bought too much car. But it sounds like you don't want to sell it.

Fine. But, you will want 20% down for a house plus a 6 month emergency fund in place before buying.

What are your prospects for a higher income? Promotion, raise, part time job?

yup well at this point im trying to get this job at PSEG.. if i dont i will be going back to school to eventually get a better job and i guess ill be biting the bullet for my own young decision making on these interest rates for the time being...or maybe pay the 5,000 when i have more in the bank to refinance it.. Im fortunate to be making the money i am now with no degree. As to the other post i cannot find a similar car for half the price.. you show me a reliable 400 HP 2 door coupe that isnt a vette or a masarati for 10 grand lol thats an 05 or newer.. I know i owe 5,000 more than its worth.. sorry for the grammar im on my phone its easier this way.

[Petunia 100]

I pay no living costs. I earn about 1,300 every other week. I bought the car i wanted.. i know it would be hard for me to pay for a prius... NO other debt besides the loan... 6% of my checks are paid into my 401K and my pension.. As of now i just took my PSEG test.. if i dont get into that company i will be going back to school. IDK what a roth IRA is..

A Roth IRA is a tax-advantaged account. You receive no up-front tax deduction, but the money grows tax-free and eventually you will be able to withdraw it all tax-free. At your age, a Roth IRA can be a tremendous tool for building wealth.

How is your 401k invested?

IDK what a PSEG test is.

[MonaroGM]

My 401k is through vanguard

[Petunia 100]

yup well at this point im trying to get this job at PSEG.. if i dont i will be going back to school to eventually get a better job and i guess ill be biting the bullet for my own young decision making on these interest rates for the time being...or maybe pay the 5,000 when i have more in the bank to refinance it.. Im fortunate to be making the money i am now with no degree. As to the other post i cannot find a similar car for half the price.. you show me a reliable 400 HP 2 door coupe that isnt a vette or a masarati for 10 grand lol thats an 05 or newer.. I know i owe 5,000 more than its worth.. sorry for the grammar im on my phone its easier this way.

I'm not "into" cars, so I'm afraid I have no idea which cars have 400 HP and which cars don't.

I meant no offense. I get that you wanted a particular car and so you got it. IMO, putting a high priority on cars is an expensive mistake most people cannot afford to make.

Since you wish to keep the car, I suggest taking excellent care of it and driving it for many years. Doing so will bring the average annual cost down. If you pay down the loan aggressively and then are able to refi to a better rate, that will help too.

Is your situation at home stable? If there is a chance that you may suddenly find yourself needing to move out and rent your own place, you will need to have some cash available. For this reason, I would think long and hard before I drained my 5.5k savings account.

If you can throw an extra $800 per month on your car note, in addition to the regularly scheduled payment, your balance will drop quickly.

Best of luck.

[Petunia 100]

My 401k is through vanguard

That's awesome, Vanguard has rock bottom expenses. How is your money invested? Are you using a Target Retirement fund? Vanguard's TR funds are excellent.

[MonaroGM]

Im not sure but thank you for you for your responses.. im going be looking into these things idk as much as i should about my retirement plans.. how much of my paycheck would u reccomend i put in?? i do 6% now

[btctony]

Im not sure but thank you for you for your responses.. im going be looking into these things idk as much as i should about my retirement plans.. how much of my paycheck would u reccomend i put in?? i do 6% now

I wouldn't put more than 6% in your 401K until that car is paid for. I would get that car paid for ASAP and drive it for a very long time. From what I've read, a GTO will last 200K miles or more. I think I would go ahead and throw all but 500-1000 of your savings on the car. Cut your expenses down even more, if you can, and start attacking that car loan until it's paid for. Start budgeting and track every dollar that you spend.

Your take home pay is about 2600/mo, correct? And you save $800 of that? And you have no rent/mortgage, utilities, ect. to pay? I'm not sure what your car payment is a month, but lets say it's $400. You owe 20K. Put 5K of your savings on it. That will drop it down to 15K. Put the extra $800/mo you save on the car for a total of $1200/mo going towards the car. It would be paid for in a little over a year. If you go that route, don't even worry about a refi.

Then start saving for a house. If you can save that $1200/mo or more than you were putting towards the car for a year. You'll have 15K.

This is all assuming that you have no other debt.

[btctony]

Oh yeah ... And never ever ever ever finance a car again. I made the same mistake in my early 20's making the same kind of money as you. Thinking only about the ability to make a monthly payment rather than delaying gratification and saving. Twice actually. When I look back, I wish I would have saved more.

You're in a very good position right now, not having a rent/mortgage payment. I'm sure you want to get out of that situation and be on your own, but I would probably stay where you are until the car is paid off. After the car is taken care of, if you want to get out of your parents house, go with a shared situation with a friend that isn't going to cost you a lot of money and continue to live a modest life style. Most people spend way too much money on specific things. For some it's going out to eat, going out to drink ... Others spend it on collecting comic books or going out of town for a weekend every month ... Whatever it is. Stop it for now.

I'll admit, I'm on board with the intensity of the Dave Ramsey plan. For some, that is too hardcore and isn't realistic. For me, I love being hardcore about saving. Tracking every dollar and looking at the metrics on a daily basis helps me stay on board.

[MonaroGM]

I wont ever finance a car again new age GTO's are a very limited production car im hoping it will go up in value over time but for now im just going to enjoy it... things are home for me are not too stable... and im skeptical about draining all of my savings... what should i do?? Save 10 grand then start making double payments??

[TBH]

If you want to be in a position to move out soon, I'd leave your current savings alone but stop contributing to it for now while you throw all available money at the car loan. When you get it below the blue book value of the car, see if you can refinance it. By then you should also have a better credit rating because you will have made on-time payments for a while.

Your current savings is a decent emergency fund for someone in your position. It will also give you first and last month's rent if you need to move out.

Living at home is an opportunity to reduce your debt. Take the opportunity! I would also see if you can find any more excess in your monthly budget so you can pay the car down a little faster.

You sound like you're doing well. I would not personally buy a $20K car, but I'm sure I do some things with my money that you would never do either. If you must own a car like that, though, make sure that's your ONLY splurge. Be frugal in other areas (going out to eat, buying beers, clothes, etc) to balance out the expense of having that car.

Here's what I'd do if I were you, in order:
* leave $5500 savings alone and keep contributing 6% to your 401K for now
* put the $800 you've been saving toward your car loan each month
* refi the car when you get the loan below blue book value
* after that maybe split the $800--put $400 toward your car loan's principal each month and save $400

It sounds like you may not be able to keep living at home until you're ready to buy a house, and once you're paying rent it will be harder to save and pay down debt. So for now just try to reduce your debt so when you do have to move out you're in a better position.