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  #1  
Old 04-06-2011, 02:26 PM
Eireann Eireann is offline
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Default Should we pay off the car?

My husband and I are self-employed, so we never know when and how much money will come in. We just got a payment of $25k, and our monthly bills with debt, are around $5,300.

We have 4 main debts.
Car at 0% $6,800
Credit card at 14.5% $15,000
Business credit card (protected by LLC) at 0% $16,700
Credit card (for a friend's lawyer, hope church will help out) at 14.2% $11,500

My thinking, along with the Dave Ramsey approach of paying the smallest debt first, is to pay off the car which is currently worth $11k. That way we free up a $400 a month pymt and have an asset. We can also put that $400 towards the next debt unless we are in a lean month.

My husband fears a month without money, so he wants to keep all of it and pay off nothing, but he is willing to go with whatever advice you guys can agree on.
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  #2  
Old 04-06-2011, 04:55 PM
Reliable2all Reliable2all is offline
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Default Re: Should we pay off the car?

Yes, go ahead and pay off the car. Your thinking on the lines of Dave Ramsey is right. But then, cut down on the use of credit cards, it is an unsecured loan which can be controlled by you. Logically think of a way to improve your business/income so that you don't have to go over a lean period.
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Old 04-07-2011, 08:24 AM
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DavidBibby DavidBibby is offline
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Default Re: Should we pay off the car?

Like Reliable2ALL said,

You must stop using the credit cards.... both of them.

If you're going to follow Dave Ramsey's plan then do so from the absolute beginning. If you haven't done Baby Step 1 and have a $1000 starter emergency fund, then that should be your first priority.

WHY do you need this?
1) To prevent you from using a credit card in an emergency situation. Must emergencies are LESS than $500. Yes it's true that some can be much more so that's why Dave suggests $1000.

2) For security. You're husband doesn't like the feeling of having no money left... would he feel better if he knew there was $1000 stashed away somewhere? Would he be more willing to start paying off debt aggressively having this in place?

3) It's the first step on a good path. When you open an emergency account and you start to fund it.. it changes your mindset and your overall "paradigm" about money. Think of your emergency fund as an "Attractor" to good things. Once you have it...more will come to you.


AFTER you have your emergency fund in place... THEN pay off the CAR, then your credit cards by smallest balance first.

Take your windfalls and plug them into your plan.

Cut up your cards now.. you cannot go into more debt if you do not have the means to generate new debt...

You can do this... if you work really hard at it... I'd say 18-24 months.. you'll be consumer debt free.
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Old 04-08-2011, 08:56 PM
Eireann Eireann is offline
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Default Re: Should we pay off the car?

Thanks guys. Just paid it off. Feels AMAZING!!
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Old 04-09-2011, 06:00 AM
Reliable2all Reliable2all is offline
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Thumbs up Re: Should we pay off the car?

Quote:
Originally Posted by Eireann View Post
Thanks guys. Just paid it off. Feels AMAZING!!
Thank you Eireann; I just feel proud that i could help one family. Please keep in touch with the forum.

Last edited by DavidBibby; 04-09-2011 at 09:26 AM.
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Old 04-12-2011, 11:19 AM
littleroc littleroc is offline
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Default Re: Should we pay off the car?

Keep a couple thousand around for any sudden emergencies and use the rest to pay off a huge chunk of debt. You will need to put every cent that comes in to retire the debt, but hopefully with decent income coming in you should be done in a year or two. Then since you have everchanging income I would put a years worth of EF fund away for expenses. Also, you need to do a flexible budget based on previous years to help manage your money.
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Old 05-10-2011, 07:27 PM
FinancialGuy FinancialGuy is offline
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Default Re: Should we pay off the car?

That's awesome! Must be nice to get a $25k payment! Are you guys attorneys or something?
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Old 05-17-2011, 07:32 PM
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moneyclass moneyclass is offline
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Default Re: Should we pay off the car?

well paying off the smallest debt first and then the next is called the snowball method which is good and means your stress level goes down because your eliminating debt.

the way to save more money is to pay the ones off with the highest interest first.

if you do pay off the car i would say to change your car insurance to liability with a higher deductible so your payments are smaller.
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Old 05-28-2011, 07:39 PM
jmckinstry jmckinstry is offline
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Default Re: Should we pay off the car?

Congratulations! As Dave Ramsey says (paraphrasing here) "driving a car feels better when it is not dragging a payment book behind it". If you have not gotten the title yet, that is also an awesome feeling.

Good luck with your other debts!
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Old 06-06-2011, 01:26 PM
ctcushing ctcushing is offline
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Default Re: Should we pay off the car?

Great that you paid off the car! Congratulations, as I know it's a relief.

One caveat that caught my eye is that both you are self-employed. In those cases Dave Ramsey generally offers slightly different advice. Because without a steady income stream and given your monthly expenses, $1,000 is nowhere near enough. In that regard I think your husband is right.

Because 100% your income is variable and subject to fluctuations, you need to have more in emergency reserve which will keep you from getting into trouble down the line and going back into more debt. I would think your step 1 emergency fund needs to be at least $10,000 (instead of $1,000) and should be gradually built to at least 6 months living expenses.

That in conjunction with slashing expenses (the beans and rice diet) and going with the ever prudent debt snowball approach.

Good luck!
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Old 06-14-2011, 06:11 AM
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pink_briefcase pink_briefcase is offline
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Default Re: Should we pay off the car?

Pay off the car. This way you won't have anything to worry about. We are living in world where the only thing that's constant is time so if you have the money to pay off the car do it..Don't wait any longer...6_^


Keep on keeping on...
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Old 06-15-2011, 12:58 AM
chris_m_uk09 chris_m_uk09 is offline
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Default Re: Should we pay off the car?

Good to know you paid it off
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Old 06-23-2011, 07:08 PM
socialpark socialpark is offline
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Default Re: Should we pay off the car?

nice, what car is it?
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Old 08-03-2011, 02:07 AM
Fredy Atwater Fredy Atwater is offline
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Default Re: Should we pay off the car?

If you just got a payment of 25k.

I would use this concept taken from Harv T Ecker book Secrets of the Millionare Mind. I would go for the whole piece of the pie instead of one particular alternative. I would just have to decide how much money i am going to use for each priority.

First

Leave 5k aside for emergency expenses.
That leaves you with 20 K balance.

Second

Pay in full
Credit card (for a friend's lawyer, hope church will help out) at 14.2% $11,500
and get rid of this card immediately .

Balance left 8,500.


Third

Pay off the $6,800.00 in car debt

Balance 1,700.00

Fourth

Send the remaining 1,700.00 towards
Credit card at 14.5% $15,000
To lower your balance to 13,300.00

Now you will have more money available from the car loan and credit card with a former 11,500 balance.

Make it a priority to send all your extra cash toward the 13,300.00 debt . Increase the payment of the 16,700.00 debt by at least 100 dollars monthly.

Buy the Transforming Debt into Wealth System by John Commuta.

The debt finalization of two of your accounts will lift up your spirits and confidence that you can pay your debt quickly.

You must have a cash emergency fund in a security box. I am not worried about investing that money. In fact I would suggest you forget about that money so you don't have to spend a penny. However, if you get a chance to gather enough money so if you add your Emergency Fund to it would mean getting rid of the 16,000.00 debt go ahead and do it.

I have eliminated more than 60k in a period of 4 years. I have one credit card I only use to avoid carrying too much money to close a pre planned investment because we are renovating an old house we bought. We had the cash so we paid off immediately.

You want to accumulate wealth not debt. I remind myself that. But impulse buying is a temptation i always try to avoid.

Please folks do be so good to strangers. I wouldn't be surprised if the people you lent all that money to are irresponsible and will not repay you.

Best Wishes. I worked hard to help you.

Keep those 5K secret.
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  #15  
Old 08-03-2011, 05:51 AM
JazMajor JazMajor is offline
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Default Re: Should we pay off the car?

I like reading threads like this... I am learning a lot!
Congratulations Eireann for paying off your car loan ... it really feels amazing
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