Finances

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3GiftsFromGod
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Finances

Postby 3GiftsFromGod » Thu Jan 24, 2008 2:39 pm

Hello! I would like to ask for advice on something our family is facing. My DH and I have been working on straightening out our finances, God has blessed our efforts and truly helped us along the way. We are don to a very small amount of debt and almost a full emergency fund! Our issue is what to do now!
We are expecting baby #3 in May and we have a compact car, so we need a larger vehicle. Well, I think we could squeeze but DH doesn't think it will work :)
Our tax return is the issue.
Should we:
1.) Pay off all remaining debt, and put the left overs in our emergency fund. Then, start to save for a vehicle, possibly need one before we have all the money and go into yet more debt...
or
2.) Buy a larger vehicle for exact or less than we have (no debt), and just keep at our old plan to pay off remaining debts.

Both options seem to be a good choice but we are torn on what to do. We are prayig, but I wanted to see what people thought and not ask family or friends who will try to help us out:) Which is nice but we do not need help!
Thanks!

momo3boys
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Postby momo3boys » Thu Jan 24, 2008 3:41 pm

I vote for staying on track and buying a larger vehicle. I did and I am so glad I did. It makes ife so much easier, grocery shopping, field trips....What ever you decide, or your husband decides I'm sure you will be fine.
Phi 4:13 I can do all things through Christ which strengtheneth me.

4given
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Postby 4given » Thu Jan 24, 2008 3:57 pm

I can see why you'd be torn. I like option #2 as long as....

...absolutely, positively no more debt would be accrued,

...the added cost of fuel, insurance, etc. would not effect your current get-out-of debt plan

...your tax return would be enough to purchase a reliable vehicle.

That's just me, though. A real financial guru may suggest squeezing into the compact car until you've obliterated your debt completely and saved enough cash to purchase a vehicle out-right.

Let us know what you decide!

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Theodore
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Postby Theodore » Thu Jan 24, 2008 11:39 pm

Good time to get a loan, the interest rates are pretty low. First, do some online car searches to find used cars near you that look the sort of thing you want. Look up each one on a car valuation site (such as Kelly Blue Book) to make sure you aren't getting ripped off on price, then find a good mechanic and bribe him to come check out the prospects with you. You can probably find a decent car this way relatively affordably. If you want trade-in, of course, you may have to buy at a dealership, but you'll be a lot better able to identify how much the dealer is trying to pad his prices if you look up the car you want and have a mechanic check it for defects. I've done some work for a guy who does marketing for car dealerships, so I know a bit about the sorts of things they try to do to you.

Decrease
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Postby Decrease » Fri Jan 25, 2008 9:36 am

I am for option #1. Pay off your debt and then save for a car. A couple of reasons. First, a car is one of the fastest depreciating cars out there. If you were to look at this in terms of investing from a logical standpoint, you will see that you would be better off paying the debt (which saves you interest that you pay every month). If you buy a car, you will be investing in something that depreciates quickly and you are still paying interest on your debt. Thus, if you are paying 6% interest and your car depreciation of a car is 14% a year, you can see that you are actually losing more money on your investment (not really 20% but I think you can see it is a large amount).

If, though, you pay off the debt that is 6% and save to buy a car in cash, you still will lose the 14%, but you will not lose both the 6% and the 14% at the same time. So instead of losing close to 20%, you will only lost 14% and you have the 6% you can reinvest or use to save.

I hope I make sense. Economically, you are better off if you pay off the debt first and then buy a car. There can be overwhelming circumstances that will make the economics useless but logically, a few months of "getting out of debt" and saving could save you a pretty penny.

I hope that helps.

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Theodore
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Postby Theodore » Fri Jan 25, 2008 3:36 pm

Car depreciation is beside the point. The car will depreciate at the same rate whenever you buy it, that's just the cost of getting to use it. Same for car insurance and so on. Of more import is interest, but if you get a good car loan on a relatively cheap car, you won't be paying more than maybe $30-$50 per month in interest. That's basically the extra cost of buying now vs later.

3GiftsFromGod
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Postby 3GiftsFromGod » Fri Jan 25, 2008 7:36 pm

Thank you to everyone!
We are still deciding....I know boring update :)
I will let you know what we decide. Luckily my dad is a very good mechanic so I may be able to rope him into car shopping with us. Honestly I am leaning to #1 and DH is all for #2, he will have the say in the end but for now we are debating in a friendly manner on what to do :wink:
I truly am comfortable with either option, but I hate the idea of accruing more debt, (we may have to though).
We shall see!

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Update (kind of)

Postby 3GiftsFromGod » Thu Jan 31, 2008 11:35 am

Well we decided on option 3 :)
I was doing some research on the net about car seats and cars and all that fun stuff and I came across the Sunshine Kids Radian, this is the skinniest I could find and it has a steel frame. SO I will be putting 3 of these in our little car! (2 forward facing and one for the new baby rear facing)
This choice allows us more time to decide and save. Sooner or later we will be needing a new vehicle but until then this choice is cheaper and allows us to pay off all debts we currently owe! So thank you for your advice, I am glad that option 3 popped up because we were getting a little frustrated!


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