I am in a position where I will not be paying for my lodging for the next month or two and I’m trying to decide where to spend the money I’ll be saving. My drive into work is further than it used to be, so some of those savings will get eaten up by extra gas, but I’ll still have more to work with than I’m used to.
There are several areas this cash could go: 1. Buying a new car/paying off my current one. The vehicle I drive is bigger than I really need, and not terrible on gas but not great, either. I’m financing, so I have to carry full coverage insurance. If I buy something outright I can eliminate my monthly car payment and lower my insurance rates, but I’m skeptical that I will be able to sell the current car for what I still owe on it. It also has about $500 worth of body damage that I think I should repair before trying to sell. I have always made my payments on time, so having this on my credit might actually be a good thing?
Paying back taxes. I have a payment plan going, but it would be nice to wipe this out completely. It’s not hurting my credit, but I won’t be paid off by NEXT tax time with the amount I’m paying.
Paying down the credit card that is in my name. My ex-husband is making payments, as the charges were his, but he’s made a few late ones and it’s messing up my credit. I don’t love this option because it makes me kinda pissy to think about paying off his debt but legally, it’s my debt.
Save every penny for a down payment. My income, plus the fact that I’m on the ex’s mortgage and the dings on my credit report make it impossible for me to get approved for a mortgage that would get me into anything livable, but if I had a good chunk of loot to put towards a place I think I could do it.
Move to Aruba. Obviously.
What do you guys think is the smartest place to put the money? It’s not a ton, but I’m being smart about where I’m spending these days and hanging onto every penny I can, living rent-free on top of that is a major boost.
Do you have an emergency fund? Hanging onto it might be your best best if you are currently a paycheck to paycheck person. Some people recommend $1000 in an emergency fund, I personally thing that’s a little light but I’m a little obsessive about financial security.
If your ex is a reasonable guy - would he pay you if you pay off the credit card? That way you’d have that bill gone, your credit would stop taking the ding, and you’d have some extra cash flow for a few months.
An emergency fund should be 6 months of living expenses. Whoever is telling you $1000 is enough I hope is making a bad joke, although I guess it is better than nothing.
You don’t need more debt right now, so scratch #4 off the list. It doesn’t get consideration until all other debts are paid off and you have a 6 month emergency fund. May sound harsh, but this nation could do with a bit more fiscal responsibility from everyone.
Normally the advice would be out of 1-3, choose whatever loan has the highest interest rate, and dump all the extra money you can into paying that off. My guess is it is probably the credit cards, but the fact the ex is paying them complicates it. If he already has been late a couple times your credit is trashed anyways so I would go with paying off the highest interest rate loan out of 1 or 2.
Selling your current car and buying a used car might be a decent option to help you out, but only if you are willing to buy super cheap, I am talking like something $3000 or less. It may not be an option with owing more than it is worth, depending how far upside-down you are. The credit that you have established paying off the car loan counts towards your report, even after you have fully paid off the car.
Its $1000, pay down high interest debt, get six months - that’s the general order that is recommended. Because six months living expenses saved when you have credit card debt (or pretty much anything other than a mortgage - maybe student loans) is the wrong priorities.
The idea is that if the brakes go out, you won’t need to add money to the credit card to cover it. I think $1000 is a little low - its not hard to get that in car repairs and vet bills. Not to be able to survive a period of unemployment or disability.
This sounds like the best advice so far. A cushion to cover minor emergencies, then tackle your debt starting with the highest interest rate first, then build up a real rainy day fund.
Nikki, forgive me, but I quite liberally snipped away at your OP in order to make it easier for me to see the things I wanted to address.
Don’t sell the car unless you can make what you owe on it. Or very, very close - if you can get to within a couple hundred, and can save gas money over a couple months to make up the difference, it’s worth a thought. Or if you can save gas money and buy another car for around the price you sold yours -that will be more reliable, and last you significantly longer, it’s worth a thought. (If you can’t afford to lose money, don’t lose money. )
I’m not familiar with back taxes… are you paying interest on that?
Would he pay you back if you pay off the credit card? I completely understand being pissy about paying off his debt. BUT, if it hurts you in the long run, you might want to. Can you call the credit card company to check the day before the payment is due, and then make the payment if he has not? As long as the payments are made, there will be no further dings on your credit, and showing you can make payments helps your credit. Until you want to use your credit, and find that you are over-extended.
Save every penny for whatever. Get an emergency fund going. ALWAYS a good idea. Car problems, medical problems, vet bills… save money, period. While you are living rent free is the best time to save up for things that might happen once you are not.
Have you gotten a recent credit report to find out how bad your credit has been dinged? Or if there are other things on it that you might not know about?
I do have an emergency fund that would cover me for close to 6 months if I was smart. If I’d had more time to move from my previous living situation it would have gone towards a deposit on a new place, but I’m glad I didn’t have to touch it.
The ex might pay me back if I paid off the credit card, but that amount that’s owed on it is more than I can pay off even if I drained the emergency fund, so I’d be making monthly payments.
Should I pay my car off entirely before saving for a house? The problem with that is that my rent-free situation is temporary. Renting is realllly hard because I have dogs, I can’t find anything in my area (meaning close enough to work to make sense), that’s why buying is appealing.
He’s been late but is now on a automatic payment plan, so unless his bank account is overdrawn or he cancels the plan, late payments shouldn’t be an issue any more. If I offer to take over payments and ask him to reimburse me, I’m afraid he’ll decide it’s not a priority and I’ll be chasing him forever for the money.
I owe a little over $8000 on my car, and with the wear and tear I’ve put on it Kelly Blue Book says it’s worth just over that. Factor in the body damage and I’m under water. If I spend the $500 to have the dents bumped out, I can hope to get what it’s worth and spend some $$ out of the emergency fund to buy a cheap used vehicle. That’s appealing because I would be saving the $200 monthly payment plus my insurance would go down at least $100. That $300 a month savings would make the cash I spent on a new car and whatever I lost on the current on wash out at some point. I think.
This is the ideal scenario but it might be unlikely… I may stick it up on Craigslist and just see.
There’s a fine associated with not being able to pay it all in one chunk, I need to take a closer look and see if there’s interest on top of it. At the time I had my taxes done, I simply didn’t have the money to pay what I owed, so I had to get on a payment plan. If I emptied my emergency fund I could pay most of them and the rest within a month or two of what I’m saving on rent.
I never use the credit card, it was meant for emergencies only and he charged it up with non-emergency stuff :mad: He’s on a payment plan now, and I’m sort of afraid to rock the boat. He’s trying to refinance his house and if I make the cc not his problem he very well may decide he’s off the hook entirely.
I do have an emergency fund, in a different bank from the credit union I have a checking account with so that it’s not easily accessible and therefore not tempting to dip into I also have a small savings account that I could drain if I have to, but it’s meant to go towards this year’s taxes so I don’t wind up owing again (I’m an independent contractor).
I have. My score is in the “good” range, but not excellent. Everything on it is accurate. The mortgage dude I talked to told me that based on the past two year’s tax filings I simply don’t show enough income to buy, which is why I want to have a big downpayment ready.
NONONONO - I don’t know the OP or the ex, but if he’s late with payments on the card when there’s a legal agreement in place, he’s going to be even LESS reliable about paying the OP.
So, unless the OP just wants those dings to quit happening, and is willing to write off the money entirely, don’t do it.
The OP is still on a mortgage with the ex, right? Unless you still have partial ownership of the house in question, you got really screwed in the divorce. The agreement should have forced the ex to refinance in his own name.
Vehicle: You mention that maybe you could get rid of the car (with no net profit) and use the savings from the next couple months to buy a different one outright. Unless your rent is exorbitant right now, the savings wouldn’t be enough to buy anything decent outright. Would the car you could afford be as good as the one you have right now?
Keep the money in checking/savings. A few months from now once you’re settled into a new living situation and monthly expenses are fixed/predictable, then think about using that money for some of those other options. I’d be thankful for acquiring some extra liquidity durning an unpredictable time.
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I also have a small savings account that I could drain if I have to, but it’s meant to go towards this year’s taxes so I don’t wind up owing again (I’m an independent contractor).