Hi Everyone! (Car/SL Question enclosed)

[LesTigres]

Hi Everyone,

This is my first post! I recently come across M³ and this excellent forum during the holidays. I'll give you a little background about myself and if you would, I'd like you guys opinion about my car & student loans.

Me:

Personal Stats:

-Single Male
-Age 26
-Two degrees in Engineering (Civil/Struct)
-Working at a small business providing mixed Architectural consulting/Industrial consulting in the SE US.

Financial Stats:

-Salary of $46,000/Yr
-No Employer 401(k) match (lost it earlier this year) but contributing ~$250/Mo to Roth IRA with Vanguard. (~$4K Bal. in existing 401(k))
-Employer provided Insurance plan would be considered "Cadillac" plan by federal government.
-~31K in existing student loans (down from 40K following graduation); loans are at a fixed, aggregate APR of ~6.6%.
-~14K in existing car loans on 2010 Ford Taurus (making ~370/Mo payments @ 4% interest)
-Currently ~2450/mo in cash outflow (expenses + loans + retirement) w/ ~2900 income (net savings of $450/mo currently being used to create $5k emergency fund, just completed as of this month).
-expecting to lose ~400/Mo soon after moving out of roommates place and renting my own single bedroom apartment (total expenses will be approx. equal to total income (No savings except  $250/Mo retirement contributions)


So that’s me, Nice to meet you! My question to you guys is this: Should I ignore the sunk costs into my 2010 Taurus, sell it and buy a used more Mustachian vehicle? I have approximately 17K miles on it (I put about 6K/Year on it) and could probably get about $3k out of it if I sold it today. Bear in mind if I don’t sell it I could probably keep it for 15+ years before any significant maintenance at this pace.

Question #2: Now that I’ll be living in my own place and I have an emergency fund ready to go, should I stop contributing to my Roth (which is currently doing double duty as my parking spot for my E-fund) and instead pay down my student loan debt?
My short term goals are to be debt free by the time I’m 30.

Thanks All!

[James]

Should I ignore the sunk costs into my 2010 Taurus, sell it and buy a used more Mustachian vehicle? I have approximately 17K miles on it (I put about 6K/Year on it) and could probably get about $3k out of it if I sold it today. Bear in mind if I don’t sell it I could probably keep it for 15+ years before any significant maintenance at this pace.

Question #2: Now that I’ll be living in my own place and I have an emergency fund ready to go, should I stop contributing to my Roth (which is currently doing double duty as my parking spot for my E-fund) and instead pay down my student loan debt?
My short term goals are to be debt free by the time I’m 30.

Absolutely sell the Taurus!!!  Think of all that money you can put into savings and loans rather than something you drive!  Buy some small commuter after reading MMM's car post, if you can't find it let us know and we can find it for you. 


Why do you need a separate emergency fund from your Roth?  In an emergency you can pull your money back out from your Roth without penalty, so I would continue to max out the Roth every year and only maintain a decent buffer in your bank account but no separate EF.  It's personal preference, but that is my suggestion.


Regarding Roth vs Student loans, I'd knock out those student loans asap.  It's very possible you could beat 6.6% over time in the market, but I think you would feel a lot better without the loans before focusing on aggressive savings.


The key though is getting expenses under control, I would guess you could cut back your expenses to some extent.  It matter less at this point what you put the extra money into, savings vs investments, either is much better than spending it.  30 year old you will be grateful!

[DocCyane]

Perhaps you should reconsider living alone. That is a pricey option, though I understand wanting your own space.

[MsSindy]

How motivated are you to be debt free?
 - are you willing to room with someone?
 - are you willing to drive an older car?
 - are you willing to negotiate a higher salary?  (I'm not too familiar with new civil/struc engineer positions, but seems kind of low compared to the other eng degrees I'm familiar with)
 - are you willing to work a side job for more $$ to pay your debt

Your motivation will determine your decisions.

I agree with James on the Emergency Fund.... what kind of emergency are you preparing for?  Since you're renting, you shouldn't have house emergencies.  If you get an older car, you should probably have a couple hundred set aside for unexpected repairs.  But other than that, I'd throw that money at the student loans. 

[fidgiegirl]

I thought engineers made a lot more money than this.  I make more as a teacher (though admittedly I have more years in the workforce than you).  Is this a common salary?  Could make a faster dent in the debt with a higher salary, theoretically, as long as your Real Hourly Wage goes up . . .

[Jack]

I thought engineers made a lot more money than this.

So did I, but apparently not. (I'm a civil [traffic] engineer with slightly less than 1 year experience, and make just over $40k.)

I'm particularly annoyed that I could probably make double as a computer programmer, but such a job wouldn't count towards my PE license.

Oh yeah, back on topic: ditch the Taurus; unless it's an SHO it's a boring car anyway!

[LesTigres]

Thanks for the replies everybody! I'm going to reply in two posts, the first will address the salary points mentioned above and the second will address the remainder.

Everything you ever wanted to know about engineers salaries: A significant component of engineering salaries depends on the individual engineers experience level, the markets that they serve, the size of the company they work for & the relative strength of the economy of that market. As an example, assuming equivalent experience levels,  a structural engineer in the oil and gas field would have a lower salary than say a petroleum engineer in the same field (because the petroleum engineer would be the project lead on any projects that both engineers would work on). Also in general, engineers in any field will have higher salaries when their field is growing rather than contracting or just keeping pace with the overall economy.

To further illustrate this point, Jack and I are both Civil Engineers and although we have different specialties, we are both considered unlicensed, intern engineers (only allowed to practice engineering under the supervision of a licensed professional engineer) at this point in our careers (Some engineers work in industries such as Aerospace or Manufacturing which have laws that allow them to practice engineering as unlicensed engineers as long as they only practice engineering within their specific company). Jack and I would generally expect to see a fairly significant increase to our overall salary as we become licensed professional engineers and began taking responsible charge of projects. Further, since we both serve the Construction industry which has been decimated by the recession of the past five years, we can probably expect better than average salary increases over the next five to ten years as the industry begins a meaningful recovery.

Also, generally, as the size of the company increases, so does the value of the salaries/benefits of the engineers that work for said company [although they will be more in tune to( & subject to the rules of supply/demand of) the market that their company serves]. Although I think this is a general rule of the overall economy and not only related to Engineering companies.

[LesTigres]

Whew that was a mouthful, So to get back on topic: The Taurus.

I think I am going to sell it. I've never sold a car myself before but I think it would be preferable to trading it in at a dealership? I've been playing around on KBB.com and it looks like I could get 2-3K more for it if I sell it myself. Does anyone know if any good guides or references to selling cars that are still financed? Would I take out a personal loan, pay the car loan and then sell it or is an escrow account involved??

In terms of the roommate situation; I think it's best If i have my own place. I've lived with my current roommate for several years and we get along very well but our bad habits are additive. I'm fairly overweight (~25% BF) and fairly impressionable and want to change my eating/drinking/exercising habits and my roommate is very into the drinking/partying/going out scene. Basically from my perspective, I'm trying to improve my personal life and financial life and this is something that I think will help me do that.

Regarding the emergency fund: The reason I've been carrying a larger emergency fund is because of my lack of trust of the current economy. I work for a small business and it scare the hell out of me that I'm maybe three bad months away from not having a job at all. Granted, I've been gainfully employed there for two years, but still, I don't have confidence in my employment for more than maybe three months of time in the future.

I will take you guys advice regarding the student loans and begin chipping away with anything that I have left over after expenses. And I probably will be able to significantly reduce expenses (except rent) after I move into my own apartment. The numbers I threw out were from last years spending via Mint.com.

Thanks again for the replies everybody! I'm very excited about what 2013 holds in store for me!