Author Topic: Punched self in face, now what?  (Read 15134 times)

Galvenoc

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Punched self in face, now what?
« on: May 07, 2012, 08:04:58 PM »
Hey Everyone,

So... an old college roommate of mine turned me onto the MMM ways maybe a month ago. I've been reading up on the topics covered by MMM since his first post, delving into some other people's posts on the following topics, and I am having a bit of a problem relating it to my situation.

I have seen my faults regarding previous spending habits, the habits taught to me regarding my family's financial tendencies (who would've thought following in the footsteps of parents in debt would make it hard to figure out money?.... *punch self in face*). So, after hours of icing a swollen face, i turn to the aid of those with fuzzier upper lips than myself.

Here is my situation...

I, being a young, virulent, clean shaven, 'recent' college graduate (ok, may 2011.. not recent but go with it) made a few poor choices financially upon graduation. I may or may not be one of the individuals listed in this article...

https://forum.mrmoneymustache.com/ask-a-mustachian/kill-off-remaining-student-loans-new(used)-car-maxing-401k/

regarding a car purchase....

I spent frivolously when i got my first official job paying, what i thought to be an unending amount of money, 55k/year. Made finance choices all before the big brother of student loans came due.

Now, i wasn't being completely oblivious to upcoming expenses, i had assumed student loans would come to roughly 3-400 a month, with rent coming at ~800-1000 a month and 100 for utilities. With those numbers, i assumed 460/month for a car, 548 after insurance, was not insane. little did I know, my student loans came back at $850 a month... anyways I digress, and to avoid a novel i'll spell it out in less of a mass of text.

I'm not sure where to go from here. Everything I read says pay off the high interest loans first after emergency fund. Ok, got that. My high interest loan is clear:

Loans:

Sallie Mae: ~450 / month
35568 @ 9.75%
6109 @ 4.75% 

Wells Fargo Private Loan
8739 @ 3.5% -- i pay 75 / month to slowly plink this away versus the 65.87

Gov't Loans: comes to ~230 / month
3831 @ 6.8%
19885 @ 4.5%

Campus Loan:
3582 @ 5.0% this comes to $40 a month, i'm paying $50.


Non Loan Payments
I have a car lease payment (as mentioned above) of 460/month
Insurance 88/month
Gym (only stress outlet these days) ~$53/month
cell phone $60/month
health ins /dental - ~45 or so out of paycheck before taxes 2x/month

Misc Stuff
Gas runs me around $250-300 / month, as i'm living at home and commuting 45 minutes to work one way, since i can't afford housing near work...
Ez-Pass typically runs me 40 / month for seeing my girlfriend, yes i have to pay tolls to see her... only for another 2 months, then she moves in-state for grad school... so this i expect to go away.
i spend ~$100 / month on restaurants, typically weekends with the girlfriend
another ~100 on 'entertainment' be it driving range balls, a movie, or whatever. I have knocked this down from 250 already, and am working on making it even less without driving my better half away...
I don't go to bars
I spend around $60 on food from the grocery store for work lunches

I'm 95% sure thats everything that is a typical expense for my month to month.

So this leaves me ROUGHLY with $1140 left over each month after the consistent expenses listed above.

I take home two paychecks of ~1600 a month after taxes, 5% roth IRA contribution, healthcare, and such already taken out. so 3200 a month.

I 'stache away (try to) $1000 a month for my rainy day funds/incaseshithappens fund. That is currently at ~7000. I only started doing this recently, say late January of 2011 (as per punching self in face after using mint.com 's interface realizing a net of about 200 since i started working each month). I assumed this would end up being rent money out of my paychecks.

SO there i go, thats the background. Now the rising action...

The sallie mae loan at 9.75%, it is VARIABLE which is joyous... I've had several attempts to consolidate the loan, and had some results come back in the 6.5% range, also variable, subject to change every month. Among the other questions that come up, the sallie mae loan (from my understanding) is at the max variable rate allowed by my initial agreement hence, it is semi fixed at that. To consolidate the ~30k in loans at 6.5% variable could potentially shave my stubbly 'stache off if, say next month wells fargo wants to make it 18%. In the short term, i would reduce monthly payments significantly, which I could then use to pay it off 'faster' than the allotted 15 year repayment time frame. Would this be advisable? I understand 9.75% is outrageous, however is chancing to a free floating, no cap, subject to change every month, variable rate consolidation financially sound?

I look forward to some feedback.

Oh, i forgot something... I currently live at home with no rent or utilities to be paid (only 'saving grace' right now).

Do i trim the savings to chunk the loans? or keep the savings to potentially move out with at some point in my "near" future. From what i've read, the general synopsis would be chunk savings down to less than 1k a month, blow that into unfriendly student loans. In theory, i could make a loan disappear every 3-4 months by taking it all into loans. gov't loan, campus loan, sallie may round 2, wells fargo loan... or do i use the extra $500 a month to chunk away principal amount of the salliemae 36g's

I apologize for the long winded description(s), and look forward to your feedback

James

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Re: Punched self in face, now what?
« Reply #1 on: May 07, 2012, 08:24:32 PM »
From what i've read, the general synopsis would be chunk savings down to less than 1k a month, blow that into unfriendly student loans. In theory, i could make a loan disappear every 3-4 months by taking it all into loans. gov't loan, campus loan, sallie may round 2, wells fargo loan... or do i use the extra $500 a month to chunk away principal amount of the salliemae 36g's


I know it seems daunting to focus on your largest loan first, it's totally against the whole snowball affect, etc.  But as long as that $36k is at 9.75%, I'd throw everything at it and pay minimum on everything else.  I would work hard on any means of locking that into something lower, that's a whole lot of interest every month. (if it was me I'd see if my folks could get a second mortgage or something like that, but I don't know your situation and that is a danger zone so tread lightly...)


What would it take to get out of the car lease?  I assume a lot, and it might not be worth it, but absolutely worth looking into.  That's a huge chunk of change every month.


Otherwise it looks like you are making the decisions you need to make.  No rent/utilities is huge, wise choice there and something that will get you ahead a lot faster in the long term.  Stick with it, keep paying attention to MMM, and let us know how it goes.  Good luck!

Galvenoc

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Re: Punched self in face, now what?
« Reply #2 on: May 08, 2012, 07:05:15 AM »
I appreciate the quick response James.

I looked into the mortgage situation, unfortunately neither of my parents (divorced) own property / have the credit to apply for a loan on the property they have. I checked with the grandparents even (desperate i know) however the bank gave them a run around because they don't expect them to last the 10 years of the loan period for a fixed rate, its unfortunate really.

I looked into getting out of the lease and, while it would save me money month to month, it would hurt my credit seeing as i've only had the car about a year of a 42 month lease. If it was closer to end term, i could trade in early for a 'discount' on another old used car which would be my next step a few years down the road if possible.

I'm just not sure if it is 'wise' to reduce savings amount at this point, to throw at the loans if I can't get a reduction of the rate.

trammatic

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Re: Punched self in face, now what?
« Reply #3 on: May 08, 2012, 08:10:43 AM »
I'm just not sure if it is 'wise' to reduce savings amount at this point, to throw at the loans if I can't get a reduction of the rate.

What are you saving for?  Realize that every extra dollar you push to Aunt Sallie is roughly equivelent to have it in a savings account with a 9.75% interest rate.  Especially if you can't get the rate reduced, pay that sucker off as quickly as possible!!!  Why do you need 7k in the bank?  If you were fired tomorrow, you'd still have a place to live, and cheap food to eat...you'd just need to pay for the car, and if push came to shove, let 'em repo it.  How likely is that to happen?  Keep maybe 1 or 2k in the bank for real emergencies, and throw every last dime you have into that Sallie Mae loan.  If it were me, I'd look to see if my bank or a credit union could hook a 2 or 3k overdraft LOC onto my checking account, and then drop that amount down so I'd only have a few hundered in the bank, pay minimums on everything else, and get Sallie paid off in a year or two.

I don't think you can afford to move out, so saving up for it is kind of pointless.  You only have 1k left over at the end of the month, and you expect to use that for the entire rent payment, AND you'd still have a commute since housing is too expensive near work?  You'd never pay these suckers off.

The lowest interest route is James' one.  If you're really itching to move out, start knocking out the smaller loans to free up cash flow.  You'll pay more for the luxury, but hey.

Also, since your girlfriend lives farther away, pick up an evening job during the week delivering pizzas or restocking walmart.  An extra 1k/month could be a real game changer...even for just the short term

Enphuego

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Re: Punched self in face, now what?
« Reply #4 on: May 08, 2012, 09:32:16 AM »
I'd crunch the numbers on renting vs commuting from your parents.  My gut feeling tells me that you aren't saving a dime by commuting, especially in a leased vehicle.  I'd imagine that you are going to end up over your mileage allotment.  You can use http://newsroom.aaa.com/wp-content/uploads/2012/04/YourDrivingCosts2012.pdf to figure out your actual driving cost per additional mile.  If you lived in a cheap roommate situation within biking distance to your work, you could probably break even on that drive.  You'd also have an extra 7.5 hours a week and could probably pick up a side job or cash producing hobby.  Do the actual math using your exact numbers and see where you land.  If you could ditch the car for a few years, you'd accelarate your debt paydown greatly.  If you factor in the excess mileage rate, I wouldn't be surprised to see that you are spending $1000 a month on your vehicle, which is $12,000 a year or a full quarter of your income.

James

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Re: Punched self in face, now what?
« Reply #5 on: May 08, 2012, 10:01:37 AM »
I looked into getting out of the lease and, while it would save me money month to month, it would hurt my credit seeing as i've only had the car about a year of a 42 month lease. If it was closer to end term, i could trade in early for a 'discount' on another old used car which would be my next step a few years down the road if possible.

I'm just not sure if it is 'wise' to reduce savings amount at this point, to throw at the loans if I can't get a reduction of the rate.

Trammatic really hits the main points, read his reply a couple times.

What do you need great credit for?  Once you have done your best to lock in your student loans and get a LOC on your checking account you should be able to take a credit hit without it affecting you much.  Paying back those loans will build back up your credit report just fine over the next year or two.  I'd still consider dropping the car lease and buying a beater and a small motorcycle or big scooter.  Obviously you don't have to, but you are asking about being badass mustachian right?  Driving a cheap car is also one way of reminding yourself daily of your priorities.

I agree that checking into renting a room close to work is a great idea.  I'm not sure that would save you money, but it can't hurt to run the numbers.  It's not just about the money, being able to bike/walk to work and living a cheap badass lifestyle on your own might better prepare you for the future.

The savings vs loan repayment is pretty clear cut financially, you are better of paying down that high interest loan than either investing money or having it in the bank.  I'd think $1000 in the bank is plenty if your income is fairly secure, and I would only invest if you are getting matching at work.  You simply can't beat 9.75% in the market, and I don't think stocks are cheap right now.  Best to just hammer on the debt.

Galvenoc

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Re: Punched self in face, now what?
« Reply #6 on: May 08, 2012, 10:07:08 AM »
To be honest, I don't know what I was saving for exactly. I've had a very skewed view of finances my entire life. For my first job (college internships), i was guided to lease a car, shell out almost everything I made (saved maybe 2g's after a semesters of work) to pay for the car the next semester and for 'living' money at school... so i always thought that the more i had in savings the better regardless.

This was, of course, the wrong thing to do, and i should've bought a used beater commuter car to get from A-B for no money out of pocket minus gas and insurance...

Anyways, I've been coping with the realization I cannot move out and will be 'stuck' at home for at least another year while i beef up my net worth.

I like what you're saying trammatic, and i think both you and James have good insight.

Here is what I'm thinking now, based on everything i've read, everything the two of you have said:

Dump ~ 5 grand from savings into sallie mae
I remembered now i have ~2k in a tax return sitting at home i haven't put into the bank, so that would be free to be thrown at a loan as well...
Change saving amount from 1k to ~250 / month, why? paranoia... so this puts an additional 750 / month into sallie mae to help chunk it down.
I'm going to look into the variable rate consolidation again, my concern is (let me know if this is without basis) that the loan interest may jump up to something even more outrageous than the current 9.75 which is max based on the original loan agreement.

This is starting, obviously i'm going to look into ways to cut expenses where applicible, and use that as extra pay-off money.

The other thing I had considered was increasing IRA contribution... however i feel like that would make me feel more strapped for cash month to month. long term, it would end up benefitting me but the money in hand would result in more payment per month, increasing net worth out of the red that much faster.

Thoughts?

Edit: In the process of typing this, Enphuego replied. In regard to that, the places near where I work are inexplicibly expensive. A 600 square foot studio is ~$850+ / month without any utilities included. Driving to and from work i get (average of course) 28+ mpg, drive home is 32, drive to work is about 26. i will undoubtedly be over mileage at the end of the lease if this trend continues, however doing a real calculation of the numbers is on my adgenda. I appreciate the link and will use that to help. The ten hours (hour each way 5 days a week) is definitely a drain that i could be doing something more productive during, but the places I've found with roommate situations will end up costing me more money out of pocket than I could hope to save on gas. Again it stems back to trying to get rid of the lease payment itself.
Auto payments: 460, ins ~90, gas ~250 that totals up to 700 / month, so before estimating wear, i would think the $1000/month estimate is about right.

trammatic

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Re: Punched self in face, now what?
« Reply #7 on: May 08, 2012, 10:42:20 AM »
As for the variable rate loan bit, they are typically tied to a benchmark.  If you find that benchmark, and google it to see its historical returns and variability.  I don't see rates going up significantly in the 1-2 year future, but don't take my word for it.

For example, variable rate mortgages are often tied to the 1-year LIBOR rate, and its history can be found here: http://www.moneycafe.com/library/libor.htm  I imagine your potential benchmark could be found online.

As for the return on your IRA, Warren Buffett roughly projects a 7% steady state in market returns...which means, investing in large index funds could return about that much annually on average.  (Obviously, nobody knows exactly what will happen...)  If you take his number, then it's a no-brainer to pay off anything over 7% before investing more (tax benefits excluded).  And you should also invest and not put extra into the loans with low rates...  Also, I think that James is right in that the stock market is not undervalued now, so you wouldn't likely get a bump in returns from that.

However, this ignores cash flow.  If you want to have more freedom with your money, it would be better to pay off even the low interest loans before ramping up the investment, or pick some medium number.

Get rid of all the loans over 5%, and then decide your goals...  Remember that any payments of principal to the loans is actually savings.

Bank

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Re: Punched self in face, now what?
« Reply #8 on: May 08, 2012, 11:49:59 AM »
As someone who works in finance, for what it's worth I also don't see benchmark rates going up in the next year or two.  If you play your cards right, that goddawful 9.75% loan (or what you roll it into) can be paid off by then.

The only thing I wanted to add apart from that is not advice at all --- I just wanted to say great job facing up to reality and trying to think logically about the best way to extract yourself from your current difficulties.  You're in the negative right now, but you'll find that if you stick with it, things will start to pick up speed.  You'll pay off a loan, and thus have all this extra money to devote to the remaining ones, which will in turn make them melt away even faster.  The tiny little snowball you're rolling right now will (there's no doubt about it) turn into an avalanche as long as you stick with it. 

Let us know how it goes, and good luck!

MacGyverIt

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Re: Punched self in face, now what?
« Reply #9 on: May 08, 2012, 12:20:56 PM »
Definitely get out from under that car lease as soon as humanly possible. I understand building credit -- but you can do that by paying off (in full, no balance to carry!) one credit card every month and not hemorrhage all that cash in a lease. If you can't use mass transit then get a reliable beater. Here's a good primer on lease take overs:

http://www.leaseguide.com/glossary/take-over-lease.htm

I Googled "car lease take over" and came up with a lot of sites, such as:

http://www.leasetrader.com/lease-out/
http://www.swapalease.com/
http://www.carleasedepot.com/index.php

Good luck!
« Last Edit: May 08, 2012, 12:22:42 PM by MacGyverIt »

James

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Re: Punched self in face, now what?
« Reply #10 on: May 08, 2012, 01:58:37 PM »
Definitely get out from under that car lease as soon as humanly possible. I understand building credit -- but you can do that by paying off (in full, no balance to carry!) one credit card every month and not hemorrhage all that cash in a lease. If you can't use mass transit then get a reliable beater. Here's a good primer on lease take overs:


Excellent point!  If you can get our of the lease without hurting your credit, even if it costs you hundreds of dollars up front, that will be huge in freeing up money for loans.

palvar

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Re: Punched self in face, now what?
« Reply #11 on: May 08, 2012, 02:34:48 PM »
As for the return on your IRA, Warren Buffett roughly projects a 7% steady state in market returns...which means, investing in large index funds could return about that much annually on average.  (Obviously, nobody knows exactly what will happen...)  If you take his number, then it's a no-brainer to pay off anything over 7% before investing more (tax benefits excluded).

I would definitely stop contributing to an IRA until your student debt is paid down.  A 401k with a match would be another discussion, but this is only your money.  No reason to borrow from Sallie Mae just to invest in the stock market.

bdub

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Re: Punched self in face, now what?
« Reply #12 on: May 08, 2012, 04:31:46 PM »

Galvenoc

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Re: Punched self in face, now what?
« Reply #13 on: May 08, 2012, 06:29:28 PM »
All,

Again, thank you for your input, it does not go unappreciated, nor un-absorbed.

I'm in the process now of looking into getting out of my lease. In discussion with some co-workers, an older diesel beater may be the right option, with double my current MPG, and ideally a car i would pay off in full / ~100 a month (if i can't buy it outright) would free up a lot of cash.

The current IRA contribution is the maximum i can contribute with corporate match at 50%. I drop 5%, they match 2.5, so i get 7.5% contribution... that's the only reason i have it set to that right now. Although, I believe that the extra cash-in-hand may help, even if it is a few hundred a year, to chunk sallie down a notch or two... i'm still torn on that subject itself.

Bdub -- thanks for the article link. I had not gotten up to this article yet in reading the backlog of MMM and will undoubtedly soak in every bit of what he has to say here.

As it is now, i have ONE creditcard through my bank, and i pay it off in full every month. I pay my car payments on the same day in full every month and did so on my previous lease as well. If for nothing else, i consider myself responsible in this aspect. If this would boost any credit hit i would take for 'losing' the lease, then that is all I can ask for. As I said briefly, i will be making some time for researching lease takeover.




James

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Re: Punched self in face, now what?
« Reply #14 on: May 08, 2012, 06:58:36 PM »
The current IRA contribution is the maximum i can contribute with corporate match at 50%. I drop 5%, they match 2.5, so i get 7.5% contribution... that's the only reason i have it set to that right now. Although, I believe that the extra cash-in-hand may help, even if it is a few hundred a year, to chunk sallie down a notch or two... i'm still torn on that subject itself.


Perfect, you are contributing enough to get the match, but not any extra.  Don't change that.


I think you are headed in the right direction.  Keep up the good fight and keep us updated as you go along.  I only wish I had your knowledge when I was at your stage, you will be very well set when you get to the point of making other things happen in your future!  Good luck!

jpo

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Re: Punched self in face, now what?
« Reply #15 on: May 09, 2012, 07:43:04 AM »
As it is now, i have ONE creditcard through my bank, and i pay it off in full every month.
Consider opening another one with a separate bank and charge something on it every year or so. If you rely on your credit card and it gets locked/frozen/whatever, it's nice to have a backup.

Nancy

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Re: Punched self in face, now what?
« Reply #16 on: May 09, 2012, 10:53:06 AM »
Hey, nice job taking hold of your situation, seeking feedback, and actually making changes. That's badass! Obviously, people are going to have various, conflicting ideas on what you should do, and I would suggest you seriously research all of your options before taking anyone's advice. Now, for my input:

1.) I agree with James that you should continue to contribute to your retirement accounts up to your employer's full match.

2.) I think you're right to send $5K from your savings and your $2K tax return to that 9.75% loan. Your current living situation is far more stable than what it will be when you eventually move out, so now is the time to reduce emergency savings and aggressively attack that 9.75% loan. Before you move out, you can ramp up your e-savings, but $2K seems like it will cover any true emergencies that you might have in your current situation.

3.) You should build your extra loan payments into your Mint.com budget and not view the payment as "I'll send whatever I have left over at the end of the month." If you think you'll pay extra at the end of the month, you will probably find that you ate out more than usual or played paintball an extra time. I think making a payment on your loan each pay period is a good way to keep yourself honest. If you feel like that would be too much of a pain, then you can automatically transfer the money from your checking account to an untouchable savings account each pay period until you are ready to make your extra monthly payment.

4.) If I were you, I would throw as much money at the 9.75% loan as possible (read the whole extra $1200/month) for as long as I lived with my parents. Also, whatever money you save if you switch your car situation should also be thrown at your debt. Make sure that any "savings" you make are reflected in your loan payment budget line. So, if you reduce eating out by $50/month, you increase your budgeted loan payment by that amount and actually make the increased payment.

5.) Check out No More Harvard Debt for inspiration. Good luck!

grantmeaname

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Re: Punched self in face, now what?
« Reply #17 on: May 09, 2012, 11:04:53 AM »
I'm with Bank(rupt$y)... I think that getting your debt refinanced at a lower rate could be very helpful as well. Even if it rises from that 6% range that you mentioned, it would have to rise pretty far and pretty fast for you not to benefit overall in the end.

Gerard

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Re: Punched self in face, now what?
« Reply #18 on: May 09, 2012, 04:08:52 PM »
Any chance there's somebody living near you who has to make that same godawful commute? Carpool possibilities?

Galvenoc

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Re: Punched self in face, now what?
« Reply #19 on: May 09, 2012, 07:04:16 PM »
At Gerard,

No, unfortunately i'm the only moron from my area that commutes to my terrible Job. The other option I might employ, is i could technically crash at my dad's house, who lives in the same town as my job (versus four towns away), maybe a few times a week and just pay for some food. The only down side to this is there is no 'room' for me to have, which is why i don't do it often as it is now. BUT, I believe i'm going to be doing it more to save frustration, if nothing else.

At GrantMeAName and Bankrupt$y,

I've looked into consolidating at a lower rate and ran into the following problems:

1) as mentioned before, my dad has bad credit from a scuffle ~12 years ago... divorce... long story. As such, he, being the only one of my two parents to own property, cannot cosign. My mom has no job, has good credit but no income to speak of.. i'm sure i make 2-3x what she does in a year on unemployment / disability. The banks don't like someone who makes nothing (comparatively) to cosign a loan.

2) my grandparents, years of great credit history, money, etc etc etc.... are old, and in mediocre health (and some days that's pushing it). The bankers don't see them as a 'safe' asset to pay off my loans over a '10 year' period (which would be about 2 MAX in my ideal situation). SO they don't grant them a positive cosign.

On that subject, i looked at a previous cosign attempt through wells fargo, and it was a 'example offer' not their 'hey sign this to get this!' document... I don't know how that works exactly...

In regard to Nancy,

I appreciate the vote of confidence! I will continue my current contribution as is. After reading what james said, it makes sense as is, and more would be pointless to invest on borrowed money from auntie mae (that last line is credit to palvar).
My mint account is like my personal saving grace. I literally check it 2-3 times a day some weeks just to get a better grip on every cent that leaves / enters my account(s). I actually have the mobile app too... maybe its borderline obsession... but i would think its a good obsession.

Again, everyone, i appreciate all of the input you have given me. It really helps to have someone reinforce what i was thinking, and back my elbow as i punch myself in the face for being stupid.

I will keep you up to date on what happens. As it is now, i believe i'm going to dump the 2k tax return directly into auntie mae's purse. Typically, my second paycheck a month was what i snagged savings out of, so that will be going into auntie mae's purse as well. I'm going to hang onto the 5k right now until i figure out the car situation. If for some reason I need some money to make up any fees or whatever, i want to have it available versus waiting another month or two.

Thanks again everyone.

James

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Re: Punched self in face, now what?
« Reply #20 on: May 09, 2012, 07:41:51 PM »

Crashing at your dad's place is a great way to save, is it close enough to bike from his place?  Just a thought for those days you are down there, it's a good habit to develop, even if it's only once or twice a week.


I checked Mint a ton like that when I first started making changes, once things settled down I dropped down to once a week or so.  I agree that the app makes it easy, just wish it let me categorize purchases.  We switched banks for our checking account in large part because the old one didn't connect to Mint.  Keeping track of every penny is perfect at this point, every little habit you develop right now will be huge over the rest of your life, both good and bad.  Just think, in couple years you will be able to look back over the net worth graph on Mint and see all that progress you made.  It will be worth it!


Hanging on to the 5k isn't a bad idea for short time, once you get out of the lease it would be great to be able to purchase a small cheap car with some of that cash.

Galvenoc

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Re: Punched self in face, now what?
« Reply #21 on: May 10, 2012, 07:03:58 AM »
unfortunately biking is not an option from my dad's... as the only way to get to work requires going on a major highway from his area, otherwise its ~8-10 miles of town driving where people don't pay attention. on the highway, its maybe 4 miles up the road. I thought about that, but it wouldn't be a safe decision.

the commute would cut my driving time in about 1/5th, and the distance down by another 1/5th (shocker how that works right?) so, i guess i could put up with a 4 year-old and an 8 year-old screaming and yelling a few nights a week to save myself money...

James

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Re: Punched self in face, now what?
« Reply #22 on: May 10, 2012, 03:11:31 PM »
unfortunately biking is not an option from my dad's... as the only way to get to work requires going on a major highway from his area, otherwise its ~8-10 miles of town driving where people don't pay attention. on the highway, its maybe 4 miles up the road. I thought about that, but it wouldn't be a safe decision.

the commute would cut my driving time in about 1/5th, and the distance down by another 1/5th (shocker how that works right?) so, i guess i could put up with a 4 year-old and an 8 year-old screaming and yelling a few nights a week to save myself money...


Those are the nitty gritty decisions, it's not something anyone else can judge, sometimes sanity comes at a price.  :)

Galvenoc

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Re: Punched self in face, now what?
« Reply #23 on: May 24, 2012, 10:00:21 AM »
So, its been a little while and I thought i'd share an update or two, as  well as pose a question... or two, again.

So i recently went to a few different dealers to get a 'buyout' estimate on my terribad lease mentioned way above in my OP. As expected, i'm (depending on which shark you asked...) 4-5k in the hole regarding the value of my car versus what its worth now, since it has 23k miles and is *cough* 1 year old... they don't like that for some reason regarding resale.

I'm still looking at trying to refinance my bad loans, still to no avail as of today...

I have also changed my mint finances to cut out as much fat as possible from my bad spending habbits to put more toward student loan debt. This past month i threw ~$800 more at those 9.75% interest loans to try and chunk them down and I plan on continuing that into the future months. I have an auto debit set up as well to take out their 'required minimum amount' next week, so thats ~1200 at them this month (woo me... or something).

I've grandpa'd my sports car to drive the best mileage i can, and in the past 3 weeks i have averaged 28 mpg on a car rated to 23 hwy, yea its not great but i consider that an accomplishment.

Ok so, update over, questions on.

Lease new gas sipper at reduced payment (~150-200 / month) with savings in gas (100+/month) netting me generously, 200-250 from what i'm currently paying? This is of course assuming the dealer wants to buy my car out from under my feet..

Or, go with what my gut is telling me is a better idea, and suck it up for a few more months, save some more green out of pocket and buy a tenderly loved used car off craigs list?

I know the latter is obviously the go-to that i'm going to get yelled at to do, but here is my dilemma.

A) ignorance. I've never bought a used car, my family doesn't believe in used cars, etc etc wah wah woe is me i'm spoiled.. got it, aknowledged. But in all seriousness, i don't know where to start that process. I scoured some of the other articles in this forum saying bring cash, get it inspected on a 'test drive' etc... but I don't know what to look for in a posting. I saw a few 'cheap' tenderly loved cars, that i would drive, ~5g which i could in theory buy out in cash, but I don't know what mileage range to be looking for, what is useful/safe for my 30 mi 1 way commute to work (which is part of the next question) etc... so there is that. I was thinking old VW TDI just for argument sake.

B) when i get rid of the current ride, do i use the money there to move closer to work? I may be able to find a roommate and deal with that situation just so i have a shorter commute, better peace of mind, and could (hopefully) be within a reasonable biking distance to work. Although, rent / etc is still ungodly expensive for no reason here, the apartments SUCK appearance wise.

C) Do i say *rude gesture* to the dealers and try to resell the car privately for what it's buyout is +maybe some more? buyout says the car is roughly 32k. now, i have no idea what that translates to as far as real world value, since the dealer i went to appraised my car at 27.5 (which is bull accroding to KBB). I know there is the takeovermylease website, which (if this dealer doesn't pan out again) i'm going to use as the next step.

Anyways, i guess my update runs me into the same internal conflict  I was having before where, once i get rid of the stress of paying too much, where do i go. I know taking another lease from a lease is stupid and defeats the point to drop my payment $100/month just for another contract. I understand this, but I'm still trying to determine if it's reasonable to do. I feel, and i am most likely wrong, i would have better peace of mind with a lease than outright buying an older used car. Is that worth it?

A car payment goes against slaying the monster of student loans, i know that. But, is it worth the risk of a car breakdown to do so? This is where i reach out to those of you who are more bushy-stached than I who have used cars, had them in the past, a close knit relationship with a car someone else dumped to stride toward continuing persistent debt. The notion of a *ahem* beater, to drive the roads i do back and forth to work.. is not promising.

erwannabe

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Re: Punched self in face, now what?
« Reply #24 on: May 24, 2012, 10:22:36 AM »
No advice as I will leave it to the experts, but just wanted to say loved your thread title :p

JR

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Re: Punched self in face, now what?
« Reply #25 on: May 24, 2012, 10:39:31 AM »
unfortunately biking is not an option from my dad's... as the only way to get to work requires going on a major highway from his area, otherwise its ~8-10 miles of town driving where people don't pay attention. on the highway, its maybe 4 miles up the road. I thought about that, but it wouldn't be a safe decision.

the commute would cut my driving time in about 1/5th, and the distance down by another 1/5th (shocker how that works right?) so, i guess i could put up with a 4 year-old and an 8 year-old screaming and yelling a few nights a week to save myself money...

I think you should give bicycle commuting a chance.  I ride 7 miles each way in a rural area with no shoulders where everyone drives a gigantic SUV or pickup because it snows 3 times a year and do just fine.  You may be nervous at first but you would get used to it.  And statistically speaking if you truly were worried about your safety you would not be using an automobile.

Zoot Allures

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Re: Punched self in face, now what?
« Reply #26 on: May 24, 2012, 10:46:12 AM »
The only thing I wanted to add apart from that is not advice at all --- I just wanted to say great job facing up to reality and trying to think logically about the best way to extract yourself from your current difficulties.

I second this. When I was 24, my financial missteps and years of complete denial were just beginning!

gooki

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Re: Punched self in face, now what?
« Reply #27 on: May 24, 2012, 04:03:49 PM »
Don't take another lease. Why pay $4,000 to $5,000 year after year after year. When a one off payment of $4,000 can net you a car that'll give you 7+ years of trouble free service. Even in a near worst case scenario you only get two years service out of it you're still up $4,000+

I'd be looking at something around the 60,000 to 80,000 miles. Small Japanese designed vehicle.

James

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Re: Punched self in face, now what?
« Reply #28 on: May 24, 2012, 06:05:30 PM »
Or, go with what my gut is telling me is a better idea, and suck it up for a few more months, save some more green out of pocket and buy a tenderly loved used car off craigs list?


I know taking another lease from a lease is stupid and defeats the point to drop my payment $100/month just for another contract.

A car payment goes against slaying the monster of student loans, i know that.


It appears to me you have things well in hand, you know what you SHOULD do, it's just very hard to step out of the mold and into a different and new way of doing things.


Sounds like you need to find out all your options and gather more info at this point.  Once you know all your options you can decide between having someone take over your lease, selling it outright, etc.
Based on what similar cars are going for on CL, Edmunds.com, KBB.com, etc, you can make a plan for how to make the transition.  But no matter how you go about it, it makes sense to me to purchase a cheap, high mpg car that will work well for the rest of your trip out of debt and do whatever it takes to get out from under a lease.  Buying and selling a car on CL seems like a big thing, and it is a bit of a big thing, but it's something you should know how to do.  Just going through the process, no matter how painful, will give you valuable experience you can't buy.  It's another step in getting released from the mold of all the consumerist drones out there.  And we are certainly willing to offer advice, help look through CL ads, etc, when you are ready.  Just post some links to cars you are thinking about and we can give our opinion.

SpendyMcSpend

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Re: Punched self in face, now what?
« Reply #29 on: May 25, 2012, 04:45:55 PM »
Triple A is like $30 a year.   Get a $1000 car and get triple A.

SpendyMcSpend

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Re: Punched self in face, now what?
« Reply #30 on: May 25, 2012, 04:48:17 PM »
Don't take another lease. Why pay $4,000 to $5,000 year after year after year. When a one off payment of $4,000 can net you a car that'll give you 7+ years of trouble free service. Even in a near worst case scenario you only get two years service out of it you're still up $4,000+

I'd be looking at something around the 60,000 to 80,000 miles. Small Japanese designed vehicle.

This is excellent advice.  You have to look at how much you'd lay out in the lease over the long-term, not just at what your payments are this month.  If you can spend $3-5k now and save tons in the next few years you are better off.

Galvenoc

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Re: Punched self in face, now what?
« Reply #31 on: June 06, 2012, 07:49:23 PM »
Ok so, fortunate turn of events, and now I need some input from other mustachians.

Fortunate turn of events first.
My mom's lease is coming due, and she offered to take over payments / ownership of my car (woo! so i can still drive it on weekends and not have to pay for it... win win!)

Now, seeing as i'm going to be out of an automobile in the very near future (maybe two months, max) I need to procure a mustachian automobile.

Buying and selling a car on CL seems like a big thing, and it is a bit of a big thing, but it's something you should know how to do.  Just going through the process, no matter how painful, will give you valuable experience you can't buy.  It's another step in getting released from the mold of all the consumerist drones out there.  And we are certainly willing to offer advice, help look through CL ads, etc, when you are ready.  Just post some links to cars you are thinking about and we can give our opinion.

Here is where I'm asking for help. I have found these cars in my area and would like some input on which ones to move forward with considering.
http://newhaven.craigslist.org/cto/3001601454.html jetta
http://newhaven.craigslist.org/cto/3030191801.html mitsubishi eclypse
http://newhaven.craigslist.org/cto/3030597355.html vw golf, looks good
http://newhaven.craigslist.org/cto/3031078822.html eclypse spyder convertible
http://nwct.craigslist.org/cto/3015157713.html TDI jetta
http://newlondon.craigslist.org/cto/3045399427.html eclipse spyder
http://newlondon.craigslist.org/cto/3044291771.html forrester
http://newhaven.craigslist.org/cto/3057621199.html 2000 gti
http://newhaven.craigslist.org/cto/3033280010.html mazda 6

There is also a very nice Mustachian fellow who has offered up a 2002 impreza wagon with 80k miles, approximately 4-5 g's. Pain peeling on hood and lots of city miles, ~30+ mpg (thanks for being honest btw)

I'd prefer a manual transmission as I find automatics boring (sorry if I offend). I like the 3rd one down (i think) the most, however it is one of the more costly ones.

I have about 6 in cash i can throw down. Puts me at close to 0 in savings, however i can then throw 1000 into savings after a month, from paychecks. I plan on taking my additional 1k shot from student loans and putting it into savings on the 17th so I will have ~ 7 to play with, so to speak anyways.

Anyways, I'm open to criticism and someone saying "ya dang foo!" etc...

AmbystomaOpacum

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Re: Punched self in face, now what?
« Reply #32 on: June 07, 2012, 07:49:41 AM »
For what it's worth, MMM has a list of good used car choices:

http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-smart-people/

trammatic

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Re: Punched self in face, now what?
« Reply #33 on: June 07, 2012, 10:13:47 AM »
Since you're looking at older cars, reliability comes into play.  First look on KBB and see if these cars are reasonably priced.  If they're too far under KBB, there's a reason, so make sure to find it out!!  (It could be that they need the money for something urgently or that the transmission is starting to slip.)  If they don't have a good reason, pass.

Then I'd look to the reliability of the vehicles in general.  VW is notorously bad...but check out the consumer reports on them.  Does CT have a safety inspection?  If not, I'd say to keep at lest $500-1k aside for repairs up front, in case the brakes need to be replaced, or something like that.

Good luck!

menorman

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Re: Punched self in face, now what?
« Reply #34 on: June 10, 2012, 05:35:15 PM »
Since you're looking at older cars, reliability comes into play.  First look on KBB and see if these cars are reasonably priced.  If they're too far under KBB, there's a reason, so make sure to find it out!!  (It could be that they need the money for something urgently or that the transmission is starting to slip.)  If they don't have a good reason, pass.

Then I'd look to the reliability of the vehicles in general.  VW is notorously bad...but check out the consumer reports on them.  Does CT have a safety inspection?  If not, I'd say to keep at lest $500-1k aside for repairs up front, in case the brakes need to be replaced, or something like that.

Good luck!
All of the above. Also, find a good mechanic in area/near your job to take your cars to instead of the dealer. With that being said, you don't want to spend upwards of $1k parading cars through the mechanic's shop for inspections, so find a friend who has some inclination of cars to go with you on the hunt, preferably someone who owns or is familiar with the car you're looking at. But even if you can't find someone, don't give up on yourself. Most cars (in the Mustachian price range) are relatively simple and just take you being willing to get a little dirty. Considering that most auto mechanics have a high school education, someone like yourself with a college degree shouldn't have a problem understanding basic systems of and on the car. If you don't, the internet now exists to answer you questions before you even finish asking them. However, basics to watch for in a car you're buying:
- Title: if salvage, why exactly and are any repairs documented?
- Engine: check for any fluid leaks, buildups around openings, missing covers/clips/bolts/etc., evidence of exhaust leaks, etc., does the engine run smoothly in all portions of rpm range, are there sounds that seem unnatural, etc. etc. etc. (ask if you want more clarification on what type of etc. to look for)
- Transmission: does it shift smoothly, does it slip, how many miles are on it, when was last clutch job, etc.
- Undercarriage: are there leaks, how dirty is it, are there grease buildups, is the weather sealant complete, etc.
- Suspension/wheels/tires: are the rims bent, do the tires show evidence of uneven wear, how's the camber/toe/alignment/etc., what is the condition of the shocks/struts/springs, does ABS work, is there brake chatter/are the rotors warped, etc.
- Interior: are there leaks from windows/sunroof, is the dash fully functional, are all amenities working, are any warning lights on, has the srs (airbag) system ever had trouble, how are the seatbelts, what condition are seating surfaces, etc.

Of course, it's possible to find specimens on all ends of the spectrum--otherwise immaculate vehicles with a blown headgasket to piles of rubbish with an engine that'll run another decade. You get to decide what trade-offs you want to make, although it is entirely possible to find great vehicles in great condition at great prices if you're willing to do a bit of research. Mileage isn't necessarily a great predictor of the car's condition due to the wide range of variation among owners. With that being said, a car with 100k will likely run with the same level of reliability as a brand new car, provided the maintenance items are taken care of. That's the big problem people usually have with used cars--they buy it and expect it to be maintenance-free just like a brand new one "should" be. Banish that notion, you should definitely expect to spend a couple dollars at the shop soon after initial buy to get fluids changed (trans, radiator, etc., not just oil), tune-up, etc. to make sure that it can continue to perform optimally for quite some time.

James

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Re: Punched self in face, now what?
« Reply #35 on: June 11, 2012, 08:12:37 AM »
I looked at the ones you listed, it's quite an eclectic group.  Yes, the third one down looks like a very fun car, and you have the cash to purchase it.  It becomes very much a decision of priorities.  Where do you want to be in the next 2-5 years?  That car says you want to enjoy driving.  I am sure there are plenty of cars out there with better mpg and lower price that will be more reliable over the long haul, so is your driving enjoyment worth the cost?  Would you borrow money at 9% to buy it?

First, determine your priority.  How much are you WANTING to spend based on your financial priorities.  You don't need to spend much, probably $2-4k would be the range I would be looking in.  Yes, often by stretching up you can get something much better, that's life.  Part of being mustachian is realizing there will always be that something more, and saying no to that is a virtue.  Doesn't mean you have to always say no, or even this time, just remind yourself where you are and what your priorities are first.

The impreza would interest me, first find out edmund and kbb value for the vehicle and then decide what it is worth TO YOU.  Since it has AWD you won't get as great mpg, so it might not be worth as much to you as something without AWD and with manual like you want.  So if the "value" by the book is $4,500, maybe it's only worth $3,500 to you.  Since it is from someone you know, there is also some value in knowing it probably isn't a lemon.  But compare it to what is available on CL in the same price range, and then decide.

Have you looked at MMM list of car ideas?  What are your thoughts about that sort of car?

freedomfightergal

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Re: Punched self in face, now what?
« Reply #36 on: December 10, 2018, 08:40:59 PM »
it's been a long time, how'd it all work out for you??