Help with advice for 23 yo.

Submitted by bilferjoij t3_11dq91l in personalfinance

Hi there. Looking for assistance on finance. Currently have around 5k in savings. Monthly income is around 1500 give or take a few. I have a car loan that is 17,210 and the pay off amount is 12,752.03. Current balance is 12,717.71. Interest rate is 4.690%. Should I pay more monthly than I already am? I currently pay 300 a month. 300 on credit card monthly but no over draft fees as I pay it off monthly. Only other bills I have are insurance and gas. Still live at home with my parents. Bad habit of spending money on my project car that I have since parked (not that it matters, but LS swapped iroc-z camaro). Have it in a car capsule so now it can sit for years and I can continue to save money and pay things off.

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landmanpgh t1_jaa8axv wrote

Yeah there's only upside to paying off your car faster. If you're making $1500/month and basically paying around $900/month between your car payment, CC, and insurance/gas, there's no real downside to paying it off faster. Even a couple hundred a month extra will make a huge difference. Presumably, you have a safety net with your parents and don't need to worry about rent/food/etc., at least right now.

The other thing you can do, of course, is try to find something that gives you more hours or pays a little better.

Cool car.

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bilferjoij OP t1_jaaa4xe wrote

Thanks, and should I just pay the extra payment that would be my credit card usage towards it then?

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landmanpgh t1_jaac4jr wrote

Sure, anything you can do to pay it down faster.

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PurpPanther t1_jaa9ag8 wrote

4.7% interest right is right on the edge of a recommendation either way. Right now, high yield savings accounts can get you 4%+ which would come close to cancelling out any interest charged.

If you value having money saved and available more, then I would contribute to a high yield savings account.

There’s also an argument to be made that a car is a depreciating asset and should be paid off as soon as possible.

It’s really your choice as long as you’re saving the same amount of money you’d be paying extra.

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greyAbbot t1_jaadhzr wrote

If you borrowed $17k for a car while making $18k/year, you have paid way too much for your car. The absolute maximum vehicle value you can afford is half your annual income, and in general way less than that would be better. It's just too hard to save money while paying for that vehicle. Even if it were already paid off, the depreciation is costing you too much money.

So if it's a struggle to find a car that fits that limit (or if the only cars available are so damaged that they're costing you tons in repairs), then the real financial advice is to figure out a plan to be making a lot more money in a few years.

Yeah, I'd be paying extra to get rid of this debt; 5% interest isn't terrible but the less interest you pay, the better. And take really good care of that car so you minimize repairs and maximize lifespan, while in the meantime figuring out how to move into a career that will boost your salary. Maybe that requires some education or training, so the smartest financial thing you can do is figure out how to pay for that while keeping other expenses low. The reality is that there aren't a lot of good financial answers while making $1500/month, because no matter how good your financial choices and budgeting are, everything is always going to be tight and unexpected emergencies are going to put you in a big hole.

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bilferjoij OP t1_jaaf5wj wrote

I did make a little bit more at a job that I did work at before my current one, but I quit there because they were giving me broken promises of moving me positions for over a year. (At a car dealership, now I work with girlfriend’s family ar their business). I did get a loan out on a prius so very low maintenance cost (in theory). I take care of my vehicles especially after driving crap ones for years. I had a hard time with education but I do see how it proves well to further it. Not sure what to do career wise, though. In a stuck spot, not making any excuses as I could be doing a lot better.

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