#DebtManagement #CarLoans #PersonalFinance #SavingsTips
Hey there! I see you’re in a bit of a financial pickle with the debts you’ve got racking up. Let’s break it down and explore some options for you!
So, you’ve got a total debt of a little over $6,000 across your credit cards, which are all sitting at 0% interest for now—great news. Here’s a quick look at what you’ve got:
- American Express: $4,900 (with 9 months left at 0%)
- Lowe’s Card: $1,100
- Capital One: $280
On top of this, there’s the car loan situation—your car is valued at $18,000, but you owe $22,000 at a 12.91% interest rate. Ouch! That’s got to be stressful, especially coming from an interest rate that high.
Here are some pain points that could arise from this situation:
- High Interest Costs: That car loan has a significant interest rate, meaning you’re likely paying a lot more than you need to.
- Credit Card Interest: Once that 0% period ends, interest will kick in, which you definitely want to avoid!
- Car Depreciation: The longer you hold onto a car worth less than what you owe, the more money you’re potentially losing.
Given your solid income of $118k and monthly bills around $3,000, and a little $2,500 in savings, you’ve got options!
Possible Solutions:
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Focus on Credit Cards First:
- Since they have a ticking clock with that 0% interest, it might make sense to tackle those first before they start accruing interest.
- You can allocate some of your savings and perhaps make a payment plan over the next few months.
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Consider Selling the Car:
- If you downgrade to a $4,000-$6,000 cash car, you could free up a bit of cash in the long run.
- Pay off your loan to “equal” your car’s value. While it might feel like losing an asset, you’ll be eliminating a big chunk of high-interest debt!
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Build an Emergency Fund:
- Keep some savings as a buffer—having at least $1,500 as a safety net is great while you work on debts.
- Budget Wisely:
- Continue to squeeze out excess spending where you can to accelerate debt repayment.
I’d love to hear your thoughts on these options! What have your experiences been with managing debt like this? Have any tips or tricks worked for you in similar situations? Let’s discuss! 💡😊
You have $10k a month in income and only $3k in expenses.
Where is all your money going?
As long as you’re certain that you’ll be able to have the cards paid off by the time the promotional period ends, then yes, pay extra towards principal on the car; 12.91% is no good. And I hope that you currently have Gap insurance on that car.
> Currently on 60hrs grossing 118k with about 3k in monthly bills between my rent and everything
> Have 2500$ in saving currently and 500 in checking.
Unless this is a new salary that you starting making very recently, this is troubling. You need to sit down and track your expenses, to find out where all of the rest of the money is going.
With 7200 coming in and only 3000 in expenses, the good news is, you can be out of this bind very quickly. And with 2500 in savings in top of that?
If you can stick to a tight budget for just 3 months, the cards can be paid off and you can be right-side up on the car loan again. It’s really that simple. Depending on your credit score, at that point you might be able to re-fi into a better loan, but honestly, with that much of a monthly surplus, I would probably just stick to that tight budget a few more months, and pay the car off completely. You could be 22 years old with a great income, no debt, and a fully paid off car. You’ve made some errors, but could come out of them in great shape if you can maintain strict discipline with your finances for awhile. Hiw much would your monthly surus be at that point, with no monthly car payment?
Imagine being able to put away 15% of your income for retirement, plus save for things like the down payment on a house, having some discretionary spending money, being able to take vacations, etc. Honestly, its not far out if reach, just based in what you’ve said here.
Now is the perfect time to learn about budgeting. You have a good salary, and low bills. Do some thinking about your priorities. Do you want to retire before noon on the day of your funeral? OK, then you should build in retirement contributions of 15% of your salary. Do you want to be financially secure, and in a place to help your family when they need it? OK, then you need to build in repayment. Divide each credit card by the length you have at zero percent to repay. For example Amex, $4900/9 months = $550/month. Put that in your budget. Same for all the other cards. You can just go ahead and pay them off each month, or you can get fancy and pay the minimum and put the rest of the payment in a high yield savings account until the bill is about to start up on interest. Do you want to lower your car payment? Then you need $4,000 to pay down the loan to the value of the car, and however much you want to use to pay for a new car. How much can you put towards that a month? Whats more important, going out to dinner or getting out from under your car loan?
There is no value judgement on what goals you choose. Everyone has different priorities for how they want to spend their money. But be intentional. Choose what you want your money to do for you.
Sell both cars and get a 3-year old lease return that comes with a warranty. Why would you support, operate and insure 2 vehicles?