Looking for criticism of my current plan for getting things on track.

Submitted by xReshi92 t3_zye277 in personalfinance

I need to get a car relatively soon, and I will start renting solo for the first time in July 2023, so I've been reviewing my finances and building a proper budget. Here are the high-level figures. My cost of living is very low right now due to my rent only being $540 since I'm still in a shared apartment. I have no vehicle, so no expenses there. I work from home. Groceries are about $100/week.

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Income (After Taxes/Health Insurance) $3,703.42
Bills & Utilities $1,090
Payment Plans $302.21/month (goes down to $180 after tomorrow and another $19.99 less after the 18th of January)
Subscriptions $48.66 (Monthly)
Savings $5,000
CC Debt $3,139.46

I expect to pay around $900 for rent when I move, and I'm looking at car financing for around $500/month (max). Right now, I'm just snowballing what little debt I have on CC's. Holidays caused my utilization to jump, which lowered my credit rating. I'll be paying off half of this next month right off the bat.

Savings are set aside for a car down payment, so rebuilding that will be key after getting the CC debt zeroed out. I do all my spending with my apple card, but until this month, I've always based it on my actual spending power. After the CC debt, I want to get my various installment plans paid off entirely. Is this smarter than leaving the (primarily low) monthly rates on? They don't accrue interest.

Having to pay $500 a month for a vehicle is depressing, but I'd rather get a new car if it's only going to be a little bit more expensive than a good used car. I'd love to buy a $3,000 used car, but that doesn't exist anymore.

Am I being reasonable in the figures I'm looking at for rent and a new car? Money will be tight, but it's doable. I'm curious if there's some obvious detail I'm ignoring.

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pancak3d t1_j25adpu wrote

For debt repayment, pay the highest interest accounts first. You should be dumping your savings into any high interest debt, your savings serves nearly no purpose if CC debt is eating you up. If it's low/zero interest then carry on.

For the vehicle, financing at 500/month on your salary is a mistake. What is the actual vehicle price? The two options you have are not "500/month new vehicle or $3000 beater" -- you are choosing not to see the options inbetween.

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xReshi92 OP t1_j25c0es wrote

I'm not facing any interest issues with my credit. Nothing significant. This is the highest my CC debt has ever been because I splurged a bit on Christmas gifts for family. I'm going to aggressively attack it in January. Putting $1500 on it tomorrow.

A part of me wanted to zero it all out with my savings, but that would delay the purchase of a car by a few months. I don't need a car asap, but I need one soon. I can see an argument for both options, but realistically, which is better?

>The two options you have are not "500/month new vehicle or $3000 beater" -- you are choosing not to see the options inbetween.

Honestly, after all I've seen of the used car market this past week, none of it feels worth it. I'd be paying minimum $350 a month for 6+ year old cars that have flaws. I recognize $500 is high, but everything is high for cars right now. 3 year old used cars are as or more expensive than brand new cars. Same exact make/model.

I don't want to finance a car that will require a lot of maintenance. I don't want to deal with for-cash craig's list vehicles (which would be the cheapest solution) given the sketchy nature.

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pancak3d t1_j25eas3 wrote

I just dont follow how you're landing on a $500/month vehicle. A 2022 Hyundai Ascent is <$17k and they offer financing deals but even if you got a 4 year loan, zero down, at 6% that's $400/month, worst case.

So saying you are planning to buy new, and put money down, and pay $500/month just tells me you want more car than you can afford.

In three years you'll have a 3 year old car, paying for maintenance, and kicking yourself for still paying 500/month that is interfering with your ability to fund other financial goals and leisure. This is a lesson a lot of people learn the hard way, I'm just trying to help you learn it now.

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xReshi92 OP t1_j25eutq wrote

This is fair and I need to hear it

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SpiritualQuokka t1_j25bjph wrote

You probably need to stay in your shared housing situation (or find another with similar costs) and purchase a cheaper vehicle. Various thoughts:

  • A $3k used car might not exist in your market, but there are certainly cars that will cost less than $500/month in finance charges with a $5k+ down payment. That's a huge range and for some reason, you've only considered only the extremes.
  • $5k in savings is enough for an emergency fund, a car down payment, or a moving fund, but not enough for all three. You don't have enough savings to do all of these things at once.
  • Using your credit limit to make spending decisions is insane. You need a complete budget, both to guide your spending and evaluate the decision to move. Right now, you've said nothing about costs other than groceries, rent & bills and debt. Most people also buy household goods, clothing, medical care, and they certainly have to maintain a vehicle if they have one. Those gaps make this decision impossible to evaluate.
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xReshi92 OP t1_j25cwwy wrote

Sorry if I misrepresented anything. My credit line does not affect my spending at all. I did a bit extra this month, but that was a unique case, which I am more than equipped to pay off quickly. I use a CC to spend based on my income, not my limit. Overall utilization is 44%.

>Right now, you've said nothing about costs other than groceries, rent & bills and debt. Most people also buy household goods, clothing, medical care, and they certainly have to maintain a vehicle if they have one. Those gaps make this decision impossible to evaluate.

This is a fair point. I budget $1,100 for general spending per month. This is an aspect I need to tighten up on more properly, as you're saying.

>That's a huge range and for some reason, you've only considered only the extremes.

As for the car, there aren't many great options between. I do see your point, but I want this car for 10 years. I want it to be worthwhile.

>You probably need to stay in your shared housing situation (or find another with similar costs)

Not an option. That said, I don't plan on moving until July. Which is why I'd rather get the car now and have some delay between.

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SpiritualQuokka t1_j25hgc9 wrote

Well, I guess since you're in the unique scenario where it will become impossible (must be illegal in your area now) to find shared housing in July, and there are only brand new cars available to purchase, I guess you have no choice here.

You're going to be in a bad financial situation, I'd start cutting other spending drastically immediately. You "one month unique" situation cost you an entire month of income in credit card debt and you have very low savings for all the things you need to accomplish. Hopefully you can cut most of that $1,100 in general spending, because you're choosing an expensive car, expensive housing and whatever you bought for the holidays over those items.

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theoriginalharbinger t1_j25fvo7 wrote

6k/year in car payment - probably closer to 9 or 10k once gas and insurance is factored in - is ludicrous on a 40k/year salary. You're going to be spending a week every month working to pay for the car you use to take to work.

Spend 10k on something used and decent.

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xReshi92 OP t1_j25hsok wrote

Not disagreeing at all. I’m glad I made this post, honestly. I’ve spent too much time arguing myself into accepting that cost.

> Spend 10k on something used and decent.

This just doesn’t exist anymore.

I definitely need to be more realistic about this, and I’m sure I can find something in the middle if I keep looking. Fortunately, I’m really not in a rush.

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