debt

Our Car Loan

Posted by Ginna on Nov 2, 2011 | 10 comments

I am sure all you long time readers of this blog are like, “Enough with the life posts — what is going on with your budget?!” (Although let’s be honest, any hard-core personal finance gurus have no doubt dropped off since the last financial post was… oh, forever ago. Seriously, I tried to search the last few posts and got tired of clicking “Older Entries” at the bottom of the page.)

I’ve loved sharing my weekends, trips, recipes, decorations, and random every day thoughts with you all! But it’s probably time I update where my wallet stands. Part of the reason I haven’t been talking about my money is because there isn’t much to talk about. Things have been wonderfully quiet and automatic.

So today I’m going to give a little background on the car loan we have. I got an email from a reader asking: why someone like me (who hates debt and worked so hard to pay off my student loans) would willingly go into another loan?

That’s a great question. The simple answer? Convenience.

My old Honda (may it rest in peace), was rapidly declining at the beginning of this year. It would take a good four minutes to start the engine (took longer in the cold), stall out if you break too fast on the road (resulting in near-accidents on multiple occasions), and would shake uncontrollably when it reached higher than 60 mph (which is just plain annoying). I had owned this car since college, but I think my bi-monthly trips to and from DC in 2009 put a great toll on my sweet car.

And J’s giant Buick wasn’t much better. Both of us owned cars approaching their 20th birthday and we felt that at the age of 25 and 26 it was about time we owned at least one reliable car made this millennium. Plus we had about eight out-of-town trips approaching, and neither of our cars would be up for that challenge.

After a lot of back and forth, we decided to buy a new car after we got married. We chose to finance a newer car as opposed to buying an older model with cash. It took a lot of convincing (on J’s part) since I could hear Dave Ramsey’s voice in my head screaming about that decision. But the truth is that financing a newer car was just easier. We could have spent $1,000 to fix my car, or $2,500 on an older car, but we felt like that would have been a waste when it could take us six months to save for a new car and then would have to go through the whole process of selling, buying and transferring all the title and insurance. We actually had enough savings to buy a reliable car, but didn’t want to blow all of our savings away (which ended up a wise decision when we had to replace J’s car in July) so financing was a safer option. I don’t think that car loans are for everyone, and in the future I will save and pay cash for any cars we get, but in this situation it was a good decision for us. Plus, so far we have only paid $78 in interest, and to me that is worth the security of having one reliable car in our family.

Once we agreed (and ignored Dave Ramsey’s nagging voice), we chose a reliable, modest car (read: no power locks or windows [I know, sad]) and put together a plan on how we could intensely pay it off as soon as possible. Every bonus or extra cash has been added to our loan.

Right now we are on schedule to pay it off at the end of this month (woohoo!). It makes me so excited to have a reliable car and enter 2012 with zero payments and an extra chunk of our budget to use on savings, giving or spending.

I’m curious: What is your view on car loans? Have you ever had a good justifiable reason to finance a car? Or do you side with Dave Ramsey and think all car loans are evil?

(photo credit)

Life is like a game of Chutes & Ladders

Posted by Ginna on Jun 29, 2011 | 10 comments

If there is one thing I have learned in the last few years about finance, it’s that gaining wealth and financial security is a long, arduous road. It’s like the childhood game I used to play, Chutes and Ladders. You take little steps forward, only to find yourself on the next turn sliding down, further from your goals. And isn’t it unfair that the ladders advance you instead of the chutes? It’s way easier to slide than it is to climb a ladder.

Unfortunately the real game of life is no different from my childhood game. For example, my life at the moment. After J and I got married, we received monetary gifts (ladder), saved money from our wedding budget (ladder), only to realize three weeks into our marriage that we needed to replace my car (chute).

Since both of us had old cars (1994 & 1996), we decided to buy a newer, more expensive car that should last for the next 15 years, and J would use his car only for work and back. We took out a small loan ($4,000) and paid the rest in cash on a 2009 Mazda3. I absolutely hate debt and it took a lot of calculating, but we figured that we could pay it off by January and keep our $5,000 emergency fund stable.

Fast forward to this week, a month after buying our Mazda. We had just put together our grand plan to pay off our loan and start saving more in our emergency fund, when J’s car broke down. And the real kicker: it will cost $1,600 to fix (chute). At this point, we would rather invest that money into a newer, more reliable car, but it’s still money that we don’t want to part with even if we fix it.

Life is just unfair sometimes, just like the game of Chutes and Ladders, where the steps are chosen by a dice. Cars break down when you need them. People who do less work seem to get the promotions. Emergencies happen. But the best thing to do in these situations is acknowledge that it sucks, see how far you’ve come since you started the game, and quickly move on. Because after you slide down a chute, there’s usually a ladder coming up. And the only way to win the game is to keep playing.

I’M DEBT FREEEEEEEEEEEEEEE!!!!

Posted by Ginna on Mar 4, 2010 | 49 comments

A person’s lifetime is filled with memorable dates: birthdays, first dates, anniversaries, etc. I am happy to announce that March 4, 2010 is added to my list of significant dates in my life. Today is the day I become Debt Free!

{via}

This post may be slightly dramatic recapping my quest towards debt-freedom… but some day I will grow accustomed to having a positive balance in my financial life and slowly I’ll forget the significance of today. So before moving on, I kind of want to be sentimental and inadequately describe the fantastic feeling of freedom I have at this moment. I owe nothing! Not even a tiny balance on a credit card! When I look at my money, it is all mine. Three years and $13,800 later, I am finally debt free! Here’s the final recap of my payments:

Thank you to anyone who has encouraged me during this last year! To anyone who is in debt… you CAN do it! It takes a lot of hard work and perseverance, but I promise the end result is worth it. I’m done! I’m done! I’m done!!!!

Answers about Banking & Debt vs. E-fund

Posted by Ginna on Mar 2, 2010 | 3 comments

I just got a comment from a reader and thought I would turn my answers into a post in case anyone else has the same questions. Thanks to all the readers out there! It still amazes me all who have joined me on this journey. Also, I started a formspring page if anyone else has any other questions for me.

Question #1:

Do you keep your funds in bank accounts, high-interest accounts, or just in envelopes at home?

I hardly ever use cash because I lose track of the receipts. Usually I just use my debit card. I will occasionally put large purchases on my credit card, but that is only to gain points and I always pay it off the next few days.

As for where I keep my funds, I’m a bit of a bank account slut and tend to have an account open for each of my savings goals. Dividing up my goals within accounts gets tricky for me. Here’s how they’re divided:

Bank #1: Bank of America
-Regular checking account
-Car Repair Fund savings account
-Credit Card

Bank #2: Credit Union (because it has great rates)
-Gift Fund – regular checking
-Emergency Fund – money market account
-Wedding/Future Fund – money market account

Other Institutions:
-401(k) – invested
-Roth IRA – invested

Question #2:

I am trying to get out of debt in this year, and I need to get some ideas. Do you think that is OK to build an emergency fund while paying debt or paying debt first and then build your emergency fund?

First off, it is definitely okay to build an emergency fund while paying debt. In fact, I recommend having a small E-Fund before you start paying debt so that if emergencies happen, you’ll have some money to cover it instead of credit cards (aka: instead of going further into debt).

After you gain a small savings (recommend at least $500-1,000), then I would decide which you are going to focus your efforts on: paying debt or building your savings. Ideally, you would be doing both at the same time with more aggression towards one… and that really depends on your situation. If you have a really high interest rate on your debt, I’d pay that first. However, if you have a mortgage and kids, then you may want to beef up your savings before tackling your debt.

I chose to focus my efforts on my debt, but that is because the majority of it is to my parents, so I wanted to get that paid off ASAP. However, that didn’t stop me from saving extra money during the process. I’m about to pay off my debt (!) and have about $4,500 in liquid assets. I wouldn’t recommend this to everyone, but since I am single, newly out of college, and have minimal living expenses, this plan worked best for me.

I also advise you to create a budget and spend the first three months tweaking it and trying different savings/debt goals and see what works best for you. Don’t be too aggressive or else you may give up altogether, but make sure that your goals are achievable and can be reached with a little bit of hard work and perseverance.

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If any other PF bloggers want to chime in or link back a similar post to share their experiences, please feel free to leave a comment! If you have any other questions (PF related or not) please ask below or on the formspring page.

Thanks again for reading! I can’t promise that I have the best advice or experience, but I’ll definitely share if anyone has questions! :)

Debt Update: I'm so close!

Posted by Ginna on Feb 4, 2010 | 15 comments

This month I’m paying $1,200 towards my debt—the most I’ve ever paid excluding my tax refund from last year. The money is a combination of $200 from babysitting and $1,000 out of my monthly budget. It’s a crazy plan to make February as frugal as possible. It may be a tight month, but it’s also the shortest and I’m just ready to get this over with!

ONE more payment until I am DEBT-FREEEEEEEEE!!!!!!

Debt Update: Another $800 bites the dust

Posted by Ginna on Jan 8, 2010 | 14 comments

Remember the days when I’d pay a measly $500 towards debt? Those days are no more. I didn’t update this towards the end of December, but I had an extra $300 through income and monetary gifts so I added a total of $1000 last month to finish the year strong. I cannot believe it! I don’t think I ever would have thought it possible this time last year to be this close!

This month I sent $800. I could maybe send more money that I earn, but right now I think I’ll need that for some living expenses this month. My hope is to get this paid off in March with tax refund money.

I cannot believe I’ve paid $12,100! That’s a freak-load of money and I’m so excited to soon add these dollars towards my savings.

Two more payments until I’m debt free!!!!