Credit and Automobiles

Several of my friends have made automobile purchases over the past two years. The names have changed to protect their identities.

Take Jordan. Jordan is in his late 20s, lives with his boyfriend. Has a Nissan vehicle that he bought used and is making payments. His payments are around 375/mo and his interest rate is about 15%. Some elements of Jordan’s life have changed and now he has a need to move out of this sedan and into an SUV. Jordan has poor credit due to mistakes made several years ago. Things have improved, but they are still far from ideal. If he buys another used vehicle he will get screwed over again with the financing because of a low FICO and high associated risk. The dealership he approached to buy another used model gave him horrible advice. The suggestion was he get out of his current car through a repo and just buy the one he wants beforehand.That way he doesn’t have to worry about making payments on two vehicles since no one wants to really buy a 5 year old car with 90k miles for what he owes.

My advice? See if a local credit union will allow him to refinance at a lower interest rate once his credit has improved. Or sell the car even though he is upside down, take a loan off to pay the difference and save enough cash to buy the SUV he really wants. In his situation, having another car loan and worrying about student loans and renting a house later this year is spreading him to soon. He will have to either get something really old like a ’99 Pathfinder or just make do with his sedan. I cannot in good faith encourage him to buy another car, the math just doesn’t work.

The next friend, we will call Adam. Adam’s situation is a little different. As a teenager his mother took out credit cards in his name, maxed them out and didn’t pay the bill. He also had one of his cars repoed several years ago when tough financial times hit. Adam is in his late 20s and recently bought a car just hours before we discussed his financial situation. Adam’s payments are ~$480/mo for 72 months on a used Kia that has a purchase price of $18k. The real kicker -his interest rate is 18%. Not 1.8%, not 6%, not 10%… 18%!!! I did some quick calculation. Over the course of his loan assuming he doesn’t refinance. His total payments will be over $34k. He said some people suggested he file for bankruptcy but that would be like a time bomb going off in his personal finances. I also believe Adam is making student loan payments, but not 100% sure.

I care about my friends, but don’t repeat their mistakes.

  1. Cars should be something you get to enjoy, not a financial noose that makes it impossible to do anything else fun in life.
  2. Anything over 6% interest rate on a car is insane.
  3. Car loans over 60 months are also insane. If it takes you that long to pay it off you really can’t afford it.
  4. Pay attention to your credit. It’s like an STD, bad past decisions can and *will* haunt you in the future.
  5. Nothing with a motor should be more than half your gross income. I got that one from Dave Ramsey and pretty much agree. Cars will depreciate and going much above that will leave you car poor. Expenses such as maintenance / repairs, fuel costs, and insurance will eat up more cash than people who just focus on the payment will realize.
  6. If you buy a new car and are younger, you may need to cut lifestyle elsewhere. In the case of both friends and myself, we eat out infrequently. Many millenials though are totally rejecting the idea of purchasing a car and getting into auto debt.
  7. Credit. Protect it at all costs, ignoring it makes you much more of a slave to money due to all the interest.
  8. Opportunity costs. Retirement planning, other activities to boost net worth. Jordan is going to college now and has a FT job. I doubt he has enough extra money to contribute into a retirement account. I have doubts about Adam contributing to his 401k because of his gripes about not having enough money to do certain things.

I’m lucky that my credit never got screwed up over the years, through my various trials and tribulations. My student loan is 4.25% and car is 1.9%. No credit card debt that carries from one month to the next. Not everyone is as fortunate. I hate paying more than I need to on anything. I used a 25% off first order coupon for Taco Cabana online. I buy items on Amazon if they’re cheaper than my local store.

It’s hard to watch people deal with financial pain, but at the end of the each day…we all make our own decisions.

Death of a Friend

No I’m not talking about Prince. Though his death was definitely a shock to me. I have listened to his music since the 1980s. Took me about a week to deal with it. Nor am I talking about my father who passed away at almost 11 years ago after 19 years of health problems related to kidney failure.

I’m talking about the death of someone else I knew. Someone I was really interested in dating. His name was Chris. He was only 29 years old. His birthday is two days before mine. Chris had his fair of struggles in life. He confided in me with a few of them. I really wished I was able to do more. We unfortunately lost touch with each other last June.

Yesterday I went to look him up on Facebook and found that he passed away just over a month ago. **One Month**  I don’t know from what. I feel a sense of loss. I never met any of his family members. He wouldn’t let me get close enough to be a regular figure in his life. I tried a few different occasions. Work or other things going on his life got in the way. Wish I could hold him again and tell him to stay strong and that everything would be alright. He was a beautiful person inside and out, just wanted to see him at his true potential. Not working crazy hours at a hotel just to make ends meet. His family setup a gofundme page to help with burial expenses.

I’m just speechless. RIP Chris. You will be missed. Not just by me but by all the people you’ve touched.❤

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Month 49 – Navient $7,922.89, NMAC – $31,188.19, Retirement – $19,045

Month 49 Update

As I mentioned the last month… I did purchase a new car, am not relying on credit cards each month and putting aside more money toward emergency funds. As a result, I decreased student loan principal balance only by $592.32.

month49update

Navient:     $7,922.89 @ 4.25%
NMAC:        $31,188.19 @ 1.9%
Credit Cards – To be completely paid off by end of month
$69.08 (Costco Amex – groceries + gas)
$502.73 @ 12.24% (Chase card used for food / Amazon / utility items mostly)
$41.21 – Department Store card for mother’s day gift.
Total Credit Cards: $613.02
Total Debt: $39,724.10
Savings:      $2800.02
This figure includes money earmarked for emergency fund, rent, car payments, etc.

Retirement:
401k – $15,166.29 – Up $1,691 since two months ago. Only $10,108 is vested.
Roth IRA – $3,315.10 with Betterment. My earnings are still -2.5%
Brokerage House – $564.07 – Down 10% due to AAPL. Might be a buying opportunity for more shares if it dips lower. Only own 6 shares which is about $3 a quarter in dividends.
Total Retirement – $19,045.46

As expected, my car insurance went up since buying the new car. $703.88 it was $592.95 before. For 65% more horsepower a 19% increase in premiums isn’t bad. I also switched everything over to e-policy to maximize my savings.  Still have uninsured motorist coverage even though I have never been involved in an accident in my 15 years of driving. No tickets on my record for Texas and the ones I got in NY are no longer a factor.

Do I have any regrets about buying the car? Nope, it feels like a car that is truly made for me. Cockpit-like feel to the cabin, the effortless acceleration of the VQ engine, the exterior ground lighting, the LED daytime running lamps, no body roll in corners. Those shiny aluminum alloy rims on 245/45R18 Continental Procontact tires too. So much grip in the corners and 0-60 in 5.9 seconds. Put it in sport mode, the steering tightens up and the throttle is super responsive. The $30k 4DSC. Guy I work with with a Mercedes Benz CLA complimented me on the car, said he thought about getting one but it was 6 months too early.

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2016 Nissan Maxima SV – Added $31k of debt but excites me every drive

I may be obsessed, I try not to park close to other cars and only wash it by hand with Optimum’s No Rinse car wash product. Was paying  $40/week at the gas station wash with my black Altima and the results were mediocre. $15 at the regular car wash only to see a ton of swirl marks from their highly abrasive “soft touch” brushes. Now I do it all myself and can have the car completely done in 30 minutes. My absolute fastest washing the car by hand was 15 minutes. Yes I use a grit guard, microfiber towels and do a pre-spray to loosen up any dirt first, but…can’t recommend the product highly enough.

Last but not least… I decided to get serious about losing weight again. That was one the span of about a week. I threw my 6 individual packs of Famous Amos cookies in the trash. For breakfast I switched to eggs and protein (bacon, sausage or their veggie equivalents). For lunch I eat a salad and a protein source. I try not to go overboard with anything that has sugar. The protein fills me up and I crave the junk food less less. In  2015 I was 215 just to put things into perspective. The last time I did the ketogenic diet was 2012 and I got as low as 207. I was too extreme though with it and feeling dizzy all the time. Now I’m just being less hardcore while still enjoying carbs.

What good is money and fancy things if you aren’t in decent enough shape to enjoy it? This is after about a week.
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Hoping to continue the trend and be in the 220s next week. Being fat and tired is not the way to live a rich, fulfilling life. Stay tuned. Thanks all for sticking around and reading all my posts.

Last but not least… Joe made a new post about 4 years later on No More Harvard Debt. Check it out. His book is pretty good too. My approach / situation / income varies but at my core I still enjoy not wasting money on things I don’t enjoy and cut back on things like food, entertainment and clothing to help reach my long term goals. Live With Passion!:)

Real Estate in Dallas

People say real estate is a goof investment over the long haul. I’m not so convinced as a millennial who could  possibly move in a few years. The Dallas housing market is also on fire. Some homes are selling within 48 hours. This wasn’t the case when my ex-partner and I bought our first home in 2012. Everyone’s gone mad since.

Some of the fees I don’t have to worry about as a non-home owner:

  • Maintenance – Roof, hot water heater, foundation, hail damage, floods, plumbing, HVAC
  • Housing Association / Transfer Fees
  • Property Taxes
  • Mortgage Interest
  • Alarm / Security
  • High utility bills – more square footage means higher bills to heat / cool
  • Closing Fees
  • Appraisal

It just seems to me that in many instances, the overhead doesn’t guarantee you will end up ahead. I also have friends who were caught in the housing bubble and had to do short sales.

The main appeal to me with home ownership is saying I own a piece of land / property, having my own garage and know that over the long term my money is building equity and not making someone else wealthy.

On the other hand… The homes I would consider are close to 200k. With a 20% down payment that would be $40k of up front costs. I can see the value if you have a family. For a single guy with my income it doesn’t make sense. So I’ll keep renting unless all of a sudden it becomes a buyer’s market again. The main appeal to me is a garage but that’s just because I’m a geek and like to fiddle with things in a garage lol.

Maybe I will buy someday. Just after 3-4 years after I’ve put enough aside. My rent is $800/mo now. If I save that for 4 years that’s enough for a down payment on a home. Even on a home that needs work I still think the overhead would be more than rent.

Rhetorically, there is a certain level of pride that comes along with saying “I am a home owner”, but also a high amount of stress. Everyone in my family who has bought one complains about the high taxes in New York, difficulty in finding tenants should you choose to rent and even then the troubles with evictions. Then the county comes up with more and more fees / surcharges that just makes you feel like a slave instead of a financially prosperous individual.

Here’s an interesting article from 2014 :

10 Things Millennials Won’t Spend Money On

Thoughts?

Props to Chasing Simple Dreams / A Rant About People and Being Enough

I don’t usually do this, but….I’d like to send a shout out to Terri at Chasing Simple Dreams. Of all the people who have commented on my blog, she’s been one of my biggest supporters at 29 comments! The first one was back in December of 2013! Terri if you’re reading this, thank you so much!!!! It means a lot to me that a stranger would continue to leave words of support for all this time.


The second part of this post is about friendships. I’m 32 now and have gone through a couple phases of my life where I felt alone. Why? Here’s a list:

  • Religion – See that mostly here in Texas, a lot of people network through church. Mention that I used to be a Jehovah’s Witness and the conversation and don’t go to church at all usually ends pretty quickly.
  • Sexual Orientation – Called the f word by some jerk in high school close to 5 years before I came out to anyone. Even then there are straight couples who probably see me as a sinner. Or family members that would stop talking to me if they knew I was gay.
  • Ethnicity – Not black or white enough, the two main groups of people in the school I went to. This extends to society in general.
  • Socioeconomic class – Disabled father and mother who worked a difficult job without a fancy title or pay
  • Car I drive – You drive a slow FWD car? What the heck man?? Sidenote – I bought the new car for me, not to impress others.
  • Conversationally – Being shy or not feeling like I have anything to discuss
  • College – Dude, what college did you go to? One you’ve never heard of. Did you play sports? Nope. What fraternity were you in? None, I went to a commuter school.
  • Drinking – As I get older I realize my tolerance for alcohol is on the low-ish side. I get a buzz after 1 drink and drunk on the 2nd one. Frozen margaritas are a bit offender..
  • Sports – See the college / professional league game last night? Nope I don’t follow sports. Ohh well that sucks.
  • Hobbies – What do you like to do for fun man? Listen to Personal Finance podcasts, read car forums and workout. Ohhh that’s lame.
  • Family – Seeing guys profiles on dating apps where they mention their friends and family are their life. Also a shit ton of instagram pictures with them looking super photogenic and on fancy trips every week practically. My family is 1500 miles away and I can go 5 days without socializing with a single human being.

Some slight exaggeration here, but you get the idea. At the root I never felt good enough for people to like me. My self-esteem was low, my POV was always me vs them.

How do I deal with it?

  • I’ve accepted the past is the past. My efforts are best spent on things I do have control over.
  • Having good people around. This has made my life more rich and fulfilling. I want to experience that more and grow in the process.
  • Bouncing back – Sometimes I have bad days, but I still put myself out there. If people don’t want to talk to me because of the color of my skin, where I’m from or any of the other ridiculous reasons they can come up with that’s on them, not on me.
  • Being assertive – Focusing on what I want in life and using my time and energy toward that.
  • Seeing my progress – Some people stay in the same town and never leave. Great if that’s how you roll but if you’re miserable like I was, that doesn’t really fly.
  • Modeling – YouTube videos on people who dealt with this are priceless. Helps to break the pattern pretty darn easily.
Last but not least….Get the *fuck* off social media unless you’re marketing something or that’s your career. Don’t let it run or ruin your life.  A good portion of the people on there are pretentious, narcissistic or funding their lifestyles on debt. The others work their asses off (a few of my friends work 60-80 hrs a week), sacrifice in other areas (say 6 roommates in a NYC apartment, or no car), or have help either from their spouse or parents. Focus on deep, meaningful relationships with a small number of people. I’m working on that number, but a total of 10 feels about right.

Great minds discuss ideas; average minds discuss events; small minds discuss people.

This is a famous quote by Eleanor Roosevelt I often thing about. In a few years many events that pop up in the current day won’t matter. I’m talking about things a celebrity said or did to drum up publicity. Aside from the mindless entertainment component, who really cares what happened on <insert reality show here>. I have a habit of writing these late at night so I apologize for any typos or ramblings. I like living the good life and aside from money and health, quality connections are critical. :)

April 2016 – My New Zero Based Budget

This is the budget I’ve put together. Not disclosing my income here, but I do have monthly HSA contributions, 6% of my gross going to my Roth 401k, plus a 3% match and a 2% employer retirement contribution. I like Zero based budgets because every dollar gets a name. At the same time they can be scary because there is no money left over.

A couple points:

  • Student loan is still being chipped away at. In January it was $12,845, now it’s $8,515. Tax return, half my bonus and extra money each month went toward it.
  • I don’t spend $300 a month on entertainment. When I go out with friends I can often get by spending $20. At most $40 in one sitting. There is a line between groceries and entertainment. $300 seemed like a number that would cover a more outgoing month.
  • This is a budget based on cashflow, not leveraging the usage of any high interest credit cards. Also avoiding the high interest rate minimum payment game.
  • Raises – Possibly getting one in the coming months.
  • Bonuses – This doesn’t factor them into account. The last one however was pretty substantial. I’m not banking on getting another one
  • I don’t own a home, I rent. My lease rate is effective until April 2017. I’m fine with not owning, though I may upgrade to a slightly fancier place next year.
  • Car Fuel – Variable – My car gets 22mpg city / 30hwy. So let’s assume an average of 24mpg. Premium fuel at Costco today was $2.09/gallon. At the normal gas stations it’s close to $2.40. I drive roughly 12000 mi per yr. 12000/24 = 500 gallons a year. 500*2.09=$1,045 1045/12 = $87. I fully expect fuel costs to rise so the $150 number sounds more like the old “normal”.
  • Car maintenance = not on here. I have oil changes and tire rotations for the next 3 years / 39k miles.
  • Clothing – not on here. I do buy new (inexpensive) clothes from time to time but that can also be part of the entertainment / grocery budget.
  • I’m still looking at ways to make an extra $100+ a week without going nuts. I e-mailed someone about helping to post Real Estate listings on Craigslist but didn’t get a reply. There are lots of other options, the more I think about it CL is probably one of the worst places to do this.
  • I have cut back buying lunch at work considerably. I estimate a $200/mo savings.
  • Not actually paying car payment yet. 2nd week of May, so banking the money in the meantime.
Monthly Budget

3400

Percentage to Total Portion of Budget Remaining
Rent

800

23.5%

$2600.00

Car Payment

544

16.00%

$2056.00

Student Loan

453

13.32%

$1603.00

Groceries

392.92

11.56%

$1210.08

Entertainment

300

8.82%

$910.08

Emergency Fund Add

200

5.88%

$710.08

Car Fuel (estimate)

150

4.41%

$560.08

Car Insurance (estimate)

106

3.12%

$454.08

Roth IRA Contribution

100

2.94%

$354.08

Cell Phone

92.16

2.71%

$261.92

TV + Internet

90.32

2.66%

$171.60

Apt Electricity

80

2.35%

$91.60

Dog Grooming

35

1.03%

$56.60

Gym Membership

21.6

0.64%

$35.00

Renters Insurance

20

0.59%

$15.00

Haircut

15

0.44%

-$0.00

Month 48 – 4 Years Talking About Money

Holy mother trucker!!! It’s been 4 years. My original name for the blog : “ONE MAN’S MISSION TO GET RID OF 45159.35 OF DEBT“. Kind of tacky perhaps, but it gets the message across.

So the purpose of this blog was to focus on the original debt I had on April 2012, none of the subsequent debt. So I write this post with that focus.

So with that said, as was said on the Suze Orman Show. So Suzy how am I doing?!?!!

Credit Cards: ~$241 balance. I’m moving away from credit card usage for many of my day to day expenses. The interest rates are high and I usually spend more than I want to. My debit card is more convenient, keeps me more accountable and helps to ensure my monthly spending stays more in check.

Navient:
On 4/8/2012:
snapshot

Today 4/4/2016:
navientmonth48

So since I started $33,459.67 has gone toward principal. Or from the total balance to begin with…$38,254.66. That was more than my entire take-home pay up until I was 29. It’s been a rough journey. As I get closer to the finish line I have decided that debt freedom isn’t the goal. The goal is to live a rich life that I enjoy. Pinching pennies isn’t the only way to make financial progress. Earning more, learning new skills, making small tweaks over time. Those things add up.

Someone commented last month that most people don’t pay attention to what they spend money on. I agree with this statement wholeheartedly, because when you pay attention you decide what to prioritize in your life. Not your bills. You spend where you want and cut back on the rest.

$8,500. Not counting interest, paying my currently monthly minimum of $453 leaves about is about 19 months away. The reality though…. Even with my $544 car note I will still have some extra to set aside on my loan. If I get a raise in a few months that money will go toward the loan.

Every night I watch videos on Udemy on web development. This year I am learning how to perform in a series of areas. I’m looking to develop my side hustle game. $100/week would cover most of my car payments. $250/wk covers that and the student loan payment. A little extra money can go a long way.

Lastly but not least, my car payment isn’t due for another month. I’m building a buffer in the meantime. By the time it’s due I will have an extra month’s payment set aside. I like this trend and maybe I’ll increase it. The APR is 1.9% or ~$600/yr in interest so not too extreme. My student loan at the current balance is $362/yr using 4.25% interest.

Some people have big debts at 10-18% interest and payments out of whack proportional to their income. I am blessed to be where I am now, but say I did have an 18% interest rate. On the SL it’d be $1532 and $5,760 on the car loan. That would be a whopping $7292  a year vs my $962 or 758% more. I know some don’t believe in credit but if you’re gonna play the game with the bank make sure your number is high enough so you don’t get ripped off. And minimize credit card debt because it will take forever to get out from up under it.

And the other bits…
401k: $14,921
Roth IRA: $3,843
Total Retirement: $18,764