Author Topic: Pay down the debt, or flip my way out of it?  (Read 967 times)

LumberJesse

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Pay down the debt, or flip my way out of it?
« on: April 07, 2020, 02:41:14 PM »
Hey all.

Quick and dirty:

I make $20/hour at a job I love and get to live in the mountains outside of a national park. My housing is fixed at $480/mo and includes all utilities and an onsite meal plan, so I seldom spend money on food. Health insurance is covered, I own my car, car insurance is $60/month, and because I live onsite I do not commute. I am 25yo.

I'm laid off right now (COVID19), but should return to work full time in June. I was gifted a reasonable amount of money (for me) by a family member recently, and had the opportunities to pay some stuff down.

So, I paid off my credit card (and will from now on use it only as a "gas card"). I also paid down my outstanding medical debts (about $2000).

I now only have one debt remaining- $8500 of a gov subsidized school loan at 2.5%.

I have enough to pay that debt and have some left over but..........

I have been buying and selling cars for a long time, on my own and with my dad. I've had quite a few and can usually make some money on them. Obviously we're in a buyers market, so to have any money at all puts me in a good spot. My dad got out of $75K credit card debt working hard and largely by flipping cars. His opinion was always to sell for a profit and use the difference towards the debt, and keep cash on hand.

He thinks I ought to hang onto the cash and flip some cars as opposed to paying off the very low interest loan right now. Currently I agree with him.

Thoughts?

J

v8rx7guy

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Re: Pay down the debt, or flip my way out of it?
« Reply #1 on: April 07, 2020, 03:21:28 PM »
Hey all.

Quick and dirty:

I make $20/hour at a job I love and get to live in the mountains outside of a national park. My housing is fixed at $480/mo and includes all utilities and an onsite meal plan, so I seldom spend money on food. Health insurance is covered, I own my car, car insurance is $60/month, and because I live onsite I do not commute. I am 25yo.

I'm laid off right now (COVID19), but should return to work full time in June. I was gifted a reasonable amount of money (for me) by a family member recently, and had the opportunities to pay some stuff down.

So, I paid off my credit card (and will from now on use it only as a "gas card"). I also paid down my outstanding medical debts (about $2000).

I now only have one debt remaining- $8500 of a gov subsidized school loan at 2.5%.

I have enough to pay that debt and have some left over but..........

I have been buying and selling cars for a long time, on my own and with my dad. I've had quite a few and can usually make some money on them. Obviously we're in a buyers market, so to have any money at all puts me in a good spot. My dad got out of $75K credit card debt working hard and largely by flipping cars. His opinion was always to sell for a profit and use the difference towards the debt, and keep cash on hand.

He thinks I ought to hang onto the cash and flip some cars as opposed to paying off the very low interest loan right now. Currently I agree with him.

Thoughts?

J

I've flipped quite a few cars in my time, but I'm not sure that's the best option right now.  People are not exactly looking for cars at this point in time... I am basing this off the fact that I normally watch Craigslist and FB Market but since the lock down I haven't even been looking since I don't really feel comfortable meeting people who might be sick, riding in close quarters with them, shaking hands, exchanging pens & paperwork etc.  I think there will be a ton of opportunities in a few months as people default on loans and look for cheap commuters, but I wouldn't do it now.  Since you have no work and you don't know how long you'll be out of work, I would save any cash you have until things become more certain than investing in cars or paying down debt.  Not sure I'd be taking advice from someone who rang up $75K in CC debt...

Alternatepriorities

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Re: Pay down the debt, or flip my way out of it?
« Reply #2 on: April 07, 2020, 03:31:15 PM »
If it were me, I'd probably set aside enough cash to cover expenses for at least three months past June and then look at where to invest the rest. I can't speak to car flipping, but there has to be something you are comfortable investing in that will return better than 2.5%. Paying off a gov subsidized loan would be my lowest priority right now. Is it one the ones the government is deferring payments and interest on for six months? I'd also look into filing for UI. If you can get into the habit of investing during the rough times it should be easy in the good times.

LumberJesse

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Re: Pay down the debt, or flip my way out of it?
« Reply #3 on: April 07, 2020, 03:46:47 PM »
@v8rx7guy

For what it's worth, a lot of that debt was out of my dad's control- he just ended up paying it off.

Speaking to car flipping: other than the risks with spreading, wouldn't that make now a great time to buy? Cheap commuters are my bread and butter, and I'm noticing a lot of folks dumping their spare car/cheap commuters right now for extra cash. Seeing many "toys" as well, i.e. older off road rigs that typically sell for twice what most are asking.

@Alternatepriorities

It's worth mentioning that my employer (who owns my housing) has decided not to charge housing/food for the duration of the closing. I am also currently on UI, and have deferred payments on my student loans indefinitely. Right now all I'm paying for is car insurance, some repairs, and cheap bourbon.

Alternatepriorities

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Re: Pay down the debt, or flip my way out of it?
« Reply #4 on: April 07, 2020, 03:54:34 PM »
So, you're getting $600 a week plus whatever your state is chipping in and have basically no expenses until June? Sounds to me like a great time to max out your Roth IRA if that wasn't part of your original plan for the year. It sounds like you have pretty good confidence in your ability to pick a good car to flip and assuming this doesn't turn into another recession you'll likely come out ahead. I assume you do some work on the cars during the flip? Seems like a productive and relatively low risk way to spend the lock down if you can do it.

v8rx7guy

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Re: Pay down the debt, or flip my way out of it?
« Reply #5 on: April 07, 2020, 04:02:50 PM »
@v8rx7guy

For what it's worth, a lot of that debt was out of my dad's control- he just ended up paying it off.

Speaking to car flipping: other than the risks with spreading, wouldn't that make now a great time to buy? Cheap commuters are my bread and butter, and I'm noticing a lot of folks dumping their spare car/cheap commuters right now for extra cash. Seeing many "toys" as well, i.e. older off road rigs that typically sell for twice what most are asking.

@Alternatepriorities

It's worth mentioning that my employer (who owns my housing) has decided not to charge housing/food for the duration of the closing. I am also currently on UI, and have deferred payments on my student loans indefinitely. Right now all I'm paying for is car insurance, some repairs, and cheap bourbon.

If you think you want to do it, and as mentioned above you do have the time for it and seem confident about it, I would say go for it.  I'm personally conservative when it comes to things like this and I think that cash is going to be king for a while, not used cars.  The other question I have is, do you have room for this?  Are you performing work on these cars, and is your housing situation going to be good with all flipping cars entails on the premise?  I think the deals will be plentiful soon, but the buyer could be a ways out.  Cars will not be repo'd for a while yet and I really do get the feel that people aren't shopping for used cars on craigslist and FB market due to the virus.  These are my concerns, but it's your money & life!

slappy

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Re: Pay down the debt, or flip my way out of it?
« Reply #6 on: April 08, 2020, 08:30:52 AM »
How long have you been at this job? How did you get into debt with a $20 hour job and such low expenses? I can see his point about the low interest debt and it certainly seems like you have the knowledge and experience to flip cars. Can you ease into the car thing? Like just do one at time, rather than working on 2 or 3 at a time? I wouldn't want you to get all caught up in the "buyer's market" aspect of things and then get in over your head.

SuperSecretName

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Re: Pay down the debt, or flip my way out of it?
« Reply #7 on: April 08, 2020, 08:35:52 AM »
don't pay off the 2.5% debt.

now is probably a good time to pick up some good deals, even if you need to sit on it a few months.

wellactually

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Re: Pay down the debt, or flip my way out of it?
« Reply #8 on: April 08, 2020, 08:57:59 AM »
@slappy - OP's debt is a student loan, I expect it's from before the job.

BikeFanatic

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Re: Pay down the debt, or flip my way out of it?
« Reply #9 on: April 08, 2020, 09:07:28 AM »
I feel you and everyone needs 3 to six month cushion of cash. Do you have that? Also keep the student loans you need the cash more than peace of mind.

slappy

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Re: Pay down the debt, or flip my way out of it?
« Reply #10 on: April 08, 2020, 09:12:51 AM »
@slappy - OP's debt is a student loan, I expect it's from before the job.

That's why I was curious about how long OP has been at the job. I get not wanting to pay off debt at 2.5%, but I'm wondering about the other. It seems like with the income and expenses listed, there shouldn't be a reason to have debt. Of course, if this is a new job, then maybe OP is still digging out of past debt. I was just thinking about the overall situation vs the specific question that was posted.

lhamo

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Re: Pay down the debt, or flip my way out of it?
« Reply #11 on: April 08, 2020, 10:05:12 AM »
If your loans are federal student loans, payments are going to go to $0 until and the interest rate is being dropped to $0 until September 30:

https://studentaid.gov/announcements-events/coronavirus

So no, DO  NOT PAY THEM OFF RIGHT NOW!

I personally would be sitting tight on most cash until you are certain your job is coming back.  Parks have been closed in many parts of the US as part of the shutdown so I would not count on your job/housing still existing in June.

Personally I would not be putting money into cars until we see where the economy is going.  But if you see a good deal that you wouldn't mind driving yourself, maybe buy that one with an eye to flipping it later.  Then you have wheels so you can do delivery driving etc if your job disappears.

LumberJesse

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Re: Pay down the debt, or flip my way out of it?
« Reply #12 on: April 08, 2020, 08:02:44 PM »
@slappy

I think you're quick to assume, and you know what they say about that. I still have debt because before now my expenses haven't been so fixed, my job didn't pay as well, and I had other more pressing debts to focus on (medical and CC).

Speaking to flipping cars, I've had 40+. I'm not new to it, just trying to decide if this is the time to get back into it.

@ihamo

You're right- my park has been shut down but I work for a lodge outside of the park. They've guaranteed us housing through June 1, and because I'm in management my job is not in danger unless we stay shutdown indefinitely. I doubt considering our owner's investment in the company that they'll stay closed any longer than they need to.


slappy

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Re: Pay down the debt, or flip my way out of it?
« Reply #13 on: April 09, 2020, 06:33:57 AM »
@slappy

I think you're quick to assume, and you know what they say about that. I still have debt because before now my expenses haven't been so fixed, my job didn't pay as well, and I had other more pressing debts to focus on (medical and CC).

Speaking to flipping cars, I've had 40+. I'm not new to it, just trying to decide if this is the time to get back into it.

@ihamo

You're right- my park has been shut down but I work for a lodge outside of the park. They've guaranteed us housing through June 1, and because I'm in management my job is not in danger unless we stay shutdown indefinitely. I doubt considering our owner's investment in the company that they'll stay closed any longer than they need to.

I wasn't assuming, I was simply asking. I believe I even stated that if the job was newer, it would make sense that you were still covering debts from the past. I said that you obviously have the experience and knowledge to flip cars. Not sure what part of that was offensive.

GoCubsGo

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Re: Pay down the debt, or flip my way out of it?
« Reply #14 on: April 09, 2020, 09:41:53 AM »
Now's the perfect time to use spare cash to start investing in equities.  You seem to be ok with risk and instead of buying cheap commuter cars, I'd be buying high quality company stocks at 20%+ discounts.