Working Moms
welly01
member
What would you do with $10k?
welly01
member
in Working Moms
Save it for a new vehicle that you'll have to buy in the next year or pay it toward student loans of $60k?
BFP #1 3/2/12, T born 11/7/12
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Re: What would you do with $10k?
Do you qualify for student loan interest deduction?
I would save it for the car unless:
1) the student loan is actually multiple smaller loans and you can knock one of them off with $10k, or
2) you had a plan for how to save for the car anyway, this $10k is a windfall, and if it displaces the need to save for the car, you'll end up frittering away $10k worth of other money you had intended to save.
Also having a good reliable car is an investment in a way, b/c DH and I could not get to work without a reliable car. I commuted an hour each way for years. I couldn't have done that in some beater car that we paid cash for.
My guess on the Dave Ramsey stance on car loans is that people reading and/or needing his financial advice are trying to pay down debt and get on their feet financially. These may not be the folks who are qualifying for the0-2% car loans.
OP: I'd put it toward the car. But that is based on my financial situation which is that my student loads are low interest rates...even though we don't qualify for tax breaks on them. If your SL are high interest rate then I'd try to accelerate the payoff. We purchased both our cars used, each for about $20K and paid cash; one crossover and one SUV. It is really nice not to have that monthly payment.
Same question, then -- if you use the $10k for a bigger downpayment and thus have a smaller car payment, will you end up "wasting" the leftover money from the smaller car payment, or will it go to some specific goal?
It sounds like you guys are in a pretty secure place financially, in which case I think you should gift your future selves and throw the whole thing at the student loans.
What we do sometimes when we are using bonus money for something really boring is choose a small portion to spend on whatever we want. Like if we had $10k and knew we needed to put it in long term savings, we might take $500 and each pick one thing off the top of our wishlists, and that would scratch the spending itch so that we could feel good about sending the other $9500 off into intangible grown-up land. In some ways getting to choose how to spend $250 is more fun and feels more decadent than spending $10,000.
I look at taking out loans as adding cost to whatever you're buying. If you can pay upfront with cash for expendable things (cars, furniture, appliances, whatever...) you spend far less in the long run than if you have to take out a loan and pay someone interest. Have you ever looked at the final expense on a 30yr mortgage if you don't make any early payments? People easily ignore what the end cost is on the things they buy with borrowed money. Your $30K car will end up costing much more than that after you finish paying your 5 year loan off.
1/13 Decided to pursue DIA, 4/13 Home study Approved 9/13 Matched!
10/13 DS home with us! 2/14 TPR completed 5/14 ADOPTION IS FINAL!
3/14 Surprise BFP 11/14 DD is here!
We just bought a new to us minivan and paid cash for it. We looked at a 07 Honda Odyssey and a 06 Toyota Sienna Limited. Both had about 120,000 miles and in very good condition. They should both go another 100,000-150,000 miles before needing anything major. Both were around $12k and my wife chose the Toyota to replace her 03 Accord that had 290,000 on it. We sold the Accord for $4k the next day.
It's nice not having a car payment. The only payment that we have is a mortgage that can easily be paid by either of our salaries, so if one of us has to be out of work it will not create a strain on our finances or relationship. There is no logical reason to purchase a brand new car (or even one that is less than 5 years old) unless you just want to and can easily afford it. If you must finance it to drive it, then in my opinion you can not afford it.
Student loans are important to pay back, but if you don't make your car payment they will repo your car. If you miss a student loan payment, they are not going to come take back your intelligence.
FWIW, we did the DR plan and payed off all of our debt except our mortgage. I don't always agree with DR and we can't say that we will never be in debt again. What I will say, however, is that our stress level and quality of life have greatly improved since paying off the debt. It is so nice to know that we don't *have* to make payments on stuff anymore. Because of this we will try very hard to live (mostly) debt free because it is just nice.