Money Matters
ambrvan
member
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
to save or to pay... that is the question
In October we bought a new car. The very first vehicle from a lot either one of us have ever bought. I love it, although I never would have made the purchase myself. DH bought it for me. I am a "money hoarder" to be totally honest, and H is a spender by nature. I handle all of our finances per mutual decision.
Since October we have gone from no car notes, to two car notes (unexpectedly had to buy H a new [used] truck this month). The second note is not that big of a deal. Luckily I had enough money in an emergency fund that can cover the first 12 payments, so that note does not come out of our monthly income and is not a burden. I will "refill" our emergency fund when we get our income tax refund. We were planning on putting all of our tax refund money into a savings account towards purchasing a home in the next year. I am beginning to rethink this. I don't think I want to jump into a mortgage with both of these car notes hanging over our heads (the payment on my car is too large for my comfort).
Anyway, here is my dilemma. I think I have already answered it in my head, but I just need some outside thoughts.
So what should I do with whatever tax refund money we have left after replenishing our emergency fund? Should I throw it all at the smaller truck loan (think $) so that it will be paid off completely within the year? Should I throw it all at the much, much larger new car loan (think $$$) because I will pay much more interest over the life of that loan than I will the other loan or than I will gain by putting leftover money into savings? I have pretty much ruled out saving it for a home. I do not feel comfortable getting under a mortgage with so much new auto debt hanging over us.
But I still have to tell DH I don't think we will be buying a home this year. He really doesn't want to sign another lease here, but I am not moving again until we buy a home (this rental house fits us perfectly and is actually very nice). The good Lord knows I want the buy a home so badly, but I don't want to put us in a bind to do it.
Since October we have gone from no car notes, to two car notes (unexpectedly had to buy H a new [used] truck this month). The second note is not that big of a deal. Luckily I had enough money in an emergency fund that can cover the first 12 payments, so that note does not come out of our monthly income and is not a burden. I will "refill" our emergency fund when we get our income tax refund. We were planning on putting all of our tax refund money into a savings account towards purchasing a home in the next year. I am beginning to rethink this. I don't think I want to jump into a mortgage with both of these car notes hanging over our heads (the payment on my car is too large for my comfort).
Anyway, here is my dilemma. I think I have already answered it in my head, but I just need some outside thoughts.
So what should I do with whatever tax refund money we have left after replenishing our emergency fund? Should I throw it all at the smaller truck loan (think $) so that it will be paid off completely within the year? Should I throw it all at the much, much larger new car loan (think $$$) because I will pay much more interest over the life of that loan than I will the other loan or than I will gain by putting leftover money into savings? I have pretty much ruled out saving it for a home. I do not feel comfortable getting under a mortgage with so much new auto debt hanging over us.
But I still have to tell DH I don't think we will be buying a home this year. He really doesn't want to sign another lease here, but I am not moving again until we buy a home (this rental house fits us perfectly and is actually very nice). The good Lord knows I want the buy a home so badly, but I don't want to put us in a bind to do it.
Re: to save or to pay... that is the question
Are you under water on the car? If not - sell it - NOW! and buy something used that works into your budget now and for your long term goals. Any vehicle should be paid OFF IN FULL within 3 years.
As far as DH's truck, it was unexpected, but we had enough in our emergency fund to be able to fund payments for 12 months, plus insurance increase. We could pay the payments out of our monthly income if we needed to, but I did not want to have to short change other parts of the budget to do so. We will replenish the emergency fund with our tax refund, so no real losses there.
Over all, there really has been little change to our budget. Funds are allocated differently, but the overall amount used is fairly the same. But it still makes me uncomfortable thinking of taking on a home loan while we have two car notes. We have had lots of ups and downs through our relationships, H and I have both been laid off before. I know how quickly things can change and put you in a bind if you aren't prepared for it.
I thought about it yesterday in a different light. Instead of thinking that if we hadn't bought the vehicles, we might be moving into a new house right now... I started thinking, if we hadn't bought new vehicles, we might be under a mortgage commitment and suddenly in need of a vehicle (or two) and unable to meet that need.
I talked to DH about our options, and he said whatever I decided was best. I think I am going to replenish emergency fund, pay up a year's worth of car insurance, put the rest toward the biggest car loan (greatest interest, longest term), and use the money saved from not paying monthly on car insurance to pay extra principles on DH's truck. That would get his paid off in about a year, and significantly reduce the balance on mine and allow us to pay extra on it next year once his truck is paid off early.
Bankers DO indeed have an interest in you borrowing money - the longer the loan the better (for THEM - not you!)
I would throw as much as possible on this new purchase and get it paid off ASAP - and NO longer than 3 years. Better yet, consider selling it and buy something slightly used (1-2 years old with low mileage)
WHY does the car loan have a high iterest rate - do you have alot of other debt or poor FICO scores?
1. Refill e-fund.
2. Pay up two terms of car insurance(12 months) (or at least put back enough to pay the next term if they won't let me pay the future one now).
3. Put the rest down on the new vehicle.
4. Put the money we would be spending monthly on car insurance toward the smaller vehicle loan every month, which would have it paid off before the end of the year.
5. Then we can put the money from all of these resources after that is paid toward the new car every month.
Our budget is not stretched thin. We can still cover emergencies. And we never feel stressed or pressed to make any payments or necessary purchases. We just have to put off a house a little bit longer. So the car is staying. I'm not going back down the road of getting a used vehicle that is going to have something major go wrong and not be able to fix it or just be throwing money into it the moment we get it. The warranty is the best part of the new vehicle. My payments aren't too high for comfort, just too high for me to feel comfortable taking on a mortgage, as well (although, we can qualify for a mortgage right now).
And honestly, we were putting 10qts of oil in the old vehicle every week, carrying water jugs in the trunk for when it over heated, replaced the radiator, replaced the alternator, replaced the transmission, replaced the fuel pump, and then something about the undercarriage went wrong and they said that last part alone was going to be about $3-5 to fix. All that happened in less than 6mo. I would say the new car has actually been an investment, despite future depreciation.