Too big for my britches

**edg126** · 07-07-2014, 04:32 AM

Yikes. Our household take home is about 3.5x that with maxing out our 401K. I was sweating purchasing a 25K SUV back in 2010, pissing away the money on a car loan. My parents and everyone I knew at the time bought new, and it wasn't until after that I realized they were all stupid with their money. I paid the car loan off over 2 years just to not have to think about what a dumb decision it was.

I'm 32, and learned to quickly get over keeping up with the joneses and caring what others think. I'll be laughing at them at 45-50 when I can retire from leading a responsible lifestyle.

**bjl584** · 07-07-2014, 05:37 AM

Your mortgage is in line with your income. It's the car loans that are killing you.

Have you considered trying to sell or trade down to something cheaper? You have close to $50,000 in auto loans. That's crazy. I'd start seeing where the numbers would fall if you were to trade them on cheaper used cars. And start exploring the possibilities of selling them both.

**autoxer** · 07-07-2014, 08:07 AM

Originally posted by isaac View Post

We are looking for advice on budgeting/tracking what we have the best we can until we're both working and are much more secure. Thanks in Advance.

I just started using mint.com to track my spending, because it requires very little effort, just occastionally updating what category an expense might be. That will help you figure out how much you are spending on the variable expenses like gas, food, and utilities.

I know you didn't ask about the vehicles, but trading down will give you a lot of flexibility with your finances. I did the same thing when I was your age, ran out and bought a new car. After realizing how much it was limiting my ability to save for a house, I traded down to a 12 year old econobox, that was dirt cheap to own and operate. I drove that for a few years without any serious problems.

**Bob B.** · 07-07-2014, 12:30 PM

Originally posted by isaac View Post

I bring home about $3,200/Month.

My wife and I purchased a house in August of 2013
We financed $147,356 @ 4.125% APR for 30 years
We pay $839.34/Mo for mortgage, Tax&Insurance included

Then I decided she needed a NEW CAR in November 2013
We Financed $20,881 @ 2.39% APR for 74Months ($300/Mo)
We Currently Owe $19,085

Then I decided I needed a NEW TRUCK in February 2014
We Financed $27,627.66 @ 2.64 APR for 74Months ($400/Mo)
We Currently Owe $25,949

Plus Insurance (%160/Mo)

We have nearly $1700/Mo going out the door just from Home and CAR/TRUCK.

The suggestion is that no more than about 25-28% of your monthly income go toward housing. You are right on track with 26.2%.

Also, no more than 36% of your monthly income should go toward all debt/housing expenses. You are at 48%! Plus, vehicles should be financed for no more than 36 months.

As BJ said, your house payment is fine, but your car payments are killing you.

Do what you have to do to get out from under them. Than make sure that all debt/housing payments are no more than 36% of your income, and finance cars for no more than 36 months.

Good Luck!

**isaac** · 07-07-2014, 02:26 PM

A little more info about the vehicles.

I financed for 74mo instead of 36mo because I wanted lower payments until my wife became available to work next year, then we were going to put 100% of her income toward the loans.

Her Car -
2014 Toyota Camry Hybrid XLE w/ Leather
MSRP 33,050 (Got a Discount)
Traded In - $945
Down Payment - $9,419
Financed - $20,881.
I want to say it's trade in value is worth more than I owe, does anyone have any idea what it might be worth now?

My Truck -
2014 Toyota Tacoma Double Cab Short Bed Automatic V6 w/ Entune
MSRP 34,250 (Got a Discount)
Down Payment - $5,549
Financed - $27,627
I know Tacomas hardly lose any value at all, so I'd bet it's also worth more than we owe, do we have any car salesmen here that can tell me?

**Bob B.** · 07-07-2014, 02:46 PM

Check out car values at kbb.com

**cardtrick** · 07-07-2014, 04:24 PM

It depends on your goals in life. Just have enough for retirement? Early retirement? It makes you happy to have loads of cash in the bank?

I would say that lifestyle inflation is a bad habit. Keep your expenses where they are and as you get raises, bank them all. And, fund a Roth IRA if you can. It doubles as an emergency fund.

**isaac** · 07-08-2014, 02:23 AM

Originally posted by edg126 View Post

Yikes. Our household take home is about 3.5x that with maxing out our 401K. I was sweating purchasing a 25K SUV back in 2010

congratulations you're doing very well...

**isaac** · 07-08-2014, 02:23 AM

Originally posted by bjl584 View Post

Have you considered trying to sell or trade down to something cheaper? You have close to $50,000 in auto loans. That's crazy. I'd start seeing where the numbers would fall if you were to trade them on cheaper used cars. And start exploring the possibilities of selling them both.

Not really, I am thinking heavily about it now. I would have no problem trading my Tacoma for a cheapo 4wd Pickup of some sort. I work nights and my wife has class during the day, so we pretty much share her vehicle. The truck is just for hauling large items we may need being homeowners, and for occasions she might need the vehicle in the evening.

The problem would lie with talking my wife into trading down her beloved Camry. I know we won't trade down and get anywhere close to the same luxury that car offers. Not to mention I get about 48 MPG going to work and back, she gets about 42 going to school and back. We've put 15,000 miles on it since Thanksgiving 2013. That's a lot of fuel savings VS a car that got less MPG.

Originally posted by autoxer View Post

I know you didn't ask about the vehicles, but trading down will give you a lot of flexibility with your finances. I did the same thing when I was your age, ran out and bought a new car. After realizing how much it was limiting my ability to save for a house, I traded down to a 12 year old econobox, that was dirt cheap to own and operate. I drove that for a few years without any serious problems.

I agree, now. If I could chop that 700/Month just in half, an extra $350 a month in savings would be awesome. It's nice to hear I'm not the only dumb-dumb that ran out and bought a new car

Originally posted by Bob B. View Post

As BJ said, your house payment is fine, but your car payments are killing you.
Do what you have to do to get out from under them. Than make sure that all debt/housing payments are no more than 36% of your income, and finance cars for no more than 36 months.
Good Luck!

Like I said above, my thought process on the 74 Month loan was that my wife would be getting a job next year and we could aggressively pay it off very early.

Originally posted by Bob B. View Post

Check out car values at kbb.com

Thank you for the site. I looked up her 2014 Camry Hybrid and it's not listed, I guess it's too new. I looked up my Tacoma and it says the Trade-In Value is $32,000-$33,000. This seems odd because I think I paid $33,176 after Tax/Title/All that stuff. Would I really be able to trade it in with such a small hit in the value??

Originally posted by cardtrick View Post

It depends on your goals in life. Just have enough for retirement? Early retirement? It makes you happy to have loads of cash in the bank?

I would say that lifestyle inflation is a bad habit. Keep your expenses where they are and as you get raises, bank them all. And, fund a Roth IRA if you can. It doubles as an emergency fund.

I would very much like to start a ROTH IRA and start educating myself and getting involved in investing. My main focus right now is being debt-free (other than my house) as soon as possible.

First thing I need to figure out is if Trading my Truck for another much much cheaper truck at a dealership would be the best course of action?

Also how to talk my wife into letting go of her Camry???

**bjl584** · 07-08-2014, 03:25 AM

Originally posted by isaac View Post

I know we won't trade down and get anywhere close to the same luxury that car offers.

I don't think now is the best time to worry about luxury.

Keep the car if luxury really is a concern. Dump the truck. You said that you really don't need it. If you must have a truck, then pick up a used one for a few thousand dollars. Something half way decent that will get you to Home Depot and back is probably all that you really need.

**JulieAlbright** · 07-08-2014, 04:59 AM

It sounds to me like you might be able to get by with just one car now. Could your wife drive you and pick you up on those nights when she needs a car?

Look at it this way, you say that the purpose of your truck is to "haul large items?" How much could you save by renting a truck when you need to haul stuff and putting that $400 into your savings account to pay yourself?

That is the Roth IRA money you desire, sitting right there in a truck payment.

Think about it.

**autoxer** · 07-08-2014, 10:59 AM

Originally posted by isaac View Post

Not to mention I get about 48 MPG going to work and back, she gets about 42 going to school and back. We've put 15,000 miles on it since Thanksgiving 2013. That's a lot of fuel savings VS a car that got less MPG.

Running some rough numbers you probably saved ~$700 in fuel so far, but you spent considerably more than that to get the hybrid model. The break even point looks like it wouldn't be until year 4 or 5 at that rate. That's not a terrible return, but it shouldn't be used to justify a $30k purchase. You can find plenty of cheaper options that would get you from point A to point B just as effectively. The little luxuries don't offer you true happiness. As you slip into a new leather seat, you might experience a brief sensation of enjoyment, but that fades and just becomes the norm.

Originally posted by isaac View Post

Also how to talk my wife into letting go of her Camry???

First lead by example and sell the truck. Then sell her on the idea of striving for financial independence. The borrower is a slave to the lender. Wealthy people do not go into debt for luxuries. Only the people that are trying to look rich use debt that way. Read some books like, 'The Millionaire next door', 'The wealthy barber', and 'The Richest man in babylon.'

**ANewHorizon** · 07-18-2014, 10:58 AM

Easy solution to the wife's car. Sell it and buy a 2007 Camry XLE instead. This is the car we own and I love it. It has all the luxury she could ask for: heated seats, dual air control, leatherseats, sunroof, 6 cd player, Bluetooth, etc etc.

A good used 2007 is running anywhere from 10k to 15k and that is a good savings over the newest and best.

**dawnwes** · 07-19-2014, 03:31 PM

I think selling his car would be the better option. She has a hybrid and drives a lot. A used 2007 won't get near the gas mileage as the hybrid. My husband calculated that for US, we would break even in 2.3 years paying the extra for a hybrid.

I have the 2014.5 Camry Hybrid. We just got it in March. We paid more than $20,800 for it though.

Dawn

Originally posted by ANewHorizon View Post

Easy solution to the wife's car. Sell it and buy a 2007 Camry XLE instead. This is the car we own and I love it. It has all the luxury she could ask for: heated seats, dual air control, leatherseats, sunroof, 6 cd player, Bluetooth, etc etc.

A good used 2007 is running anywhere from 10k to 15k and that is a good savings over the newest and best.

Too big for my britches