downpayment or pay off car?

[Farrow1200]

Topic Title: Downpayment or pay off car

Life Situation: MFJ  I am 26, and my wife is 25 we have 2 children a almost 4 year old and a 5month old. Live in Southeast MO. Been reading a year or so but just now starting to implement some things not looking to go full out but would like to start doing a little better.

Gross Salary/Wages: Hard to determine it fluctuates depending on Bonuses received. My base hourly is 14.18$ we normally end up with between 150%to 200% more than that every week depending on how much we run. (i work in a steel mill) Nucor steel is the company i work for. my first full year there i made 80k and last year i made 102K. this year i am on track for between 90 and 100K. Every 4 weeks i get a 36 hour check then the next 4 i get 48 hr check, and i never have the same check twice its all dependent on our weekly bonus which is dependent on how much we run.

Individual amounts of each Pre-tax deductions: 96$ a week for health care, I currently max my 401k i just did that for the first time last year. No IRA or HSA, FSA or anything like that.


Rental Income, Actual Expenses, and Depreciation: I have a rent house from when i was stationed in NC. it generates 13,200$ income and actual expenses are around 15-18k. Have never had to pay taxes, no major repairs, and has never been vacant in 4 years with three different renters.

Adjusted Gross Income: Again hard to determine since my paycheck is different every week. every 4 weeks i go from getting a 36 hour check to a 48 hour check.

Current expenses:
Currently Rent:650 a month
Car payment 351 5.99% interest rate(i know)
groceries 300$
gas 180$
electric 150$ sometimes it not this much but never over this amount
water 70$
netflix, itunes 20$
cell phones 150$(i know working on this too)
gym memberships 80$
car and renters insurance 128$
internet 80$
so around 2200$ a month, usually save whats leftover( this is fairly new thing before we were just spending what was left as we saw fit). saving around 1000 to 2000$ every month depending on how the paychecks fall every week.



Expected ER expenses: havent quite figured this out would like to think i could keep current rate or lower.

Assets: Amount & description - old TSP from my time in the service 10k, have around 72K in current employer 401k. and 17K saved in cash. also have a savings account just for the rental house with 10k in it. My 401k and tsp our 90% stocks and 10% bonds.

Liabilities: Nissan Rouge currently owe 15, 586$. payment 351$. 5.99%

Specific Question(s): Currently me and my wife are really wanting a place of our own instead of renting which we have been doing for last 3.5 years or so. We originally had the intention of using the 17k for a down payment but have been toying the idea of getting rid of the Car payment this is my main point in posting this is to get some advice from everyone. I know i should be saving in a IRA for both me and my wife, i just haven't done it yet. Like i said i just now a few months ago started implementing some cost reduction and savings plan. please feel free to beat me up as much as you want looking forward to it. Thank you very much for any replies in advance.

[red_pill]

So you’re losing up to $5,000 per year from your rental property?  Did I read that correctly?

[Farrow1200]

Negative the 15 to 18k is all my depreciation insurance taxes property management and expenses so any thing over 13k comes off my w2 income as long as it does not go over 25k. Maybe I worded that weird. Thanks for the reply.

[nurseart]

I'm a bit unclear if you are losing money on the rental. If you are losing money, get rid of it.

I know it is tough when paychecks are different, especially when you are first starting to budget. It is really easy to splurge when you see a bigger check that week. But, just because your paycheck fluctuates doesn't mean you can't put a system in place to counteract that. What I do is I pay myself X amount each paycheck which is the money I need for expenses, in your case that might be ~600/week. Everything above that amount goes to whatever I am saving for at the moment. Take that money out and put it in its proper place when you get paid, otherwise, it will get spent!

Your rent is 650 a month. That is not bad! How much are houses you are looking at in your area? What will you need for a downpayment? Will your mortgage (+ insurance, prop tax etc) be more or less than your rent? You say you and your wife are "really wanting" your own place. Is that because where you are now is terrible and negatively impacting your life or because it is a dream you would like to achieve in a year or two? How is the market in your area?

If where you are now is OK I'd think about taking ~7k of your cash and putting it towards the car loan and then getting RID of that loan with the "anything over X on my paycheck goes towards this goal" method. You should be able to pay it off in 6-8 months and it would make a huge difference in your monthly budget.

[FrugalFisherman10]

I would read this post:
https://forum.mrmoneymustache.com/investor-alley/investment-order/


I agree with nurseart.

But  I really think you should get the IRA started.

When you say you "maxed" your 401k, was it the "max" to get the match from your employer?
Or was it the full $18,000?

[RWD]

Can you refinance the car to a lower rate?

[Farrow1200]

Thanks everyone for the replies, we went ahead and paid off our car loan it was the decison my wife was most comfortable with shes not 100% on board with it all so ill take what i can get. Next step is to fund an IRA. Any other advice yall have is greatly appreciated. We will not be selling the rental house im not sure if worded it wrong but the house is not losing money

[Farrow1200]

Also in regards to question about the 401k. I maxed it to 18k last year and will max to 18.5k this year. My company doensnt really match they give us profit sharing every march.

[Villanelle]

Thanks everyone for the replies, we went ahead and paid off our car loan it was the decison my wife was most comfortable with shes not 100% on board with it all so ill take what i can get. Next step is to fund an IRA. Any other advice yall have is greatly appreciated. We will not be selling the rental house im not sure if worded it wrong but the house is not losing money

How much do you bring in for rent?

What are *all* of the expenses (mortgage, property taxes, reasonable maintenance to include not only what you've actually spent but also projections for big expenses like new roof or replacing appliances, management fees, and anything else you spend)?  Often, people think their rental isn't losing money when it is.  Or, it is making money, but far less than could be reasonably expected in the stock market.  Maybe yours is fine on both counts, but unless you post specifics,  we can't tell.