Reader Mailbag: Debts and Exercise

Welcome to today’s reader mailbag!

My husband and I are currently a two-car family looking to make the transition to one car for awhile. My husband will be telecommuting for work at least through the end of the year (we are moving to a different state where he will continue to work for his current company). Our new city will also have significantly better public transportation options (the Twin Cities area). We own his car (2004 Chevy Malibu with about 75,000 miles on it) and have $7,000 left on the loan for my 2006 Chevy Malibu Maxx (45,000ish miles) with 6.8% interest. We will pay this off before the end of the year.

Our question is, does it make sense to sell his car? If he switches jobs around a year from now we might need to purchase another vehicle, depending on where it is located. If we don’t sell it, it will just sit in the garage.
– Ashley

Congratulations on moving to the Twin Cities? I live just a couple hours south of there and I really enjoy visiting there (my wife has family in the outer edges of the metro area).

When you say “switches jobs around a year from now,” I’m assuming you’re referring to the move to the Twin Cities and not leaving his current company. If that’s the case, I would sell the car. Then, when you move to the Twin Cities, I would give public transportation a genuine shot before jumping on board buying a replacement car.

Once you move, it may make sense also to carpool. I’m not sure what you’re doing in terms of work, but if you can both get into carpools at your work on different days, you may be able to both use the car for commuting. Of course, you might be staying at home, too – it’s unclear from the email.

Anyway, I don’t believe you’ll necessarily need the car when you move and if you don’t need it now, I would sell it. Even with leaving it in your garage, you may have to maintain a minimal insurance on it (depending on laws in your state), and if there’s a good likelihood you won’t need it again, I’d sell it.

Given all the uncertainty in today’s economy, what methods do you use to keep fear from creeping into your financial decision-making process? Is there any such thing as “healthy” fear?
– Jesse

I’ve always been a believer that the only thing we have to fear is fear itself. I don’t feel that there is anything to truly fear in this economy that doesn’t exist at other times in our national life.

The biggest thing that I do to keep fear from creeping up on me is I ignore fear peddlers. I don’t waste my time listening to or thinking about people who try to make me afraid of the future. For one, those people are usually salesman in some regard, trying to sell you books or magazines or gold investments or long-term food products, so they have a personal economic interest in making you afraid. For another, you can still get the facts you need without the fear by acquiring your information from a variety of sources. This eliminates the salesmanship and political angles (or at least neutralizes them).

There are some things people should always do to ensure a secure future. A healthy emergency fund – at least a few months’ worth of emergency expenses in cash – is one. A well-rounded set of transferable skills is another. Those things should be done in strong economic times or poor ones.

Just take a critical eye to the reasons you’re afraid. Who’s delivering those reasons to you? Is it a person or business that has financial incentive to make you afraid? Often, it is.

I am a 23 year old female college graduate. I graduated with a degree in mathematical science. When I first graduated last May, I had an extremely hard time landing myself a job because of the economy. Finally, I found a position doing A/P work (although I was over-qualified) in a corporate HVAC office. I do not like my pay and continued my side jobs with tutoring and waitressing to help cover my college credit card debt. An old boss offered me a position to replace his current office manager making $10G more a year of my current salary. His office is a private, family owned company. I accepted the offer. What an exciting challenge I thought to myself, to be 23 and offered such a high position! When I handed in my letter of resignation, my current job matched the offer. Both parties said they see a lot of potential in me. It was honestly, one of the nicest (yet hardest) compliments I have ever received.

Now, here is my big decision: do I go corporate? or private? The big advantage of the private position is that he is willing to match a 401K and the corporate position does not. Other than that, all offers on the table are the exact. Should I allow these two factors (an old boss, and a 401K) to sway my decision?
– Erin

I think the factors you should care about don’t have to do with compensation at all. I would go for the position that puts you in the best long-term situation for your career.

Since I don’t know about your career or the two positions in any detail, my suggestion would be to find someone in your field that you trust – maybe an old professor or something like that – and have a long conversation where you lay all of the details down. You want to choose the one that will give you the best platform for a great career for a long time.

My feeling would be that the office manager job would probably fill that requirement better. When you leave your current job, make that reasoning very clear. They may just suddenly promote you to something better to keep you – it sounds like you’re valued there. There is nothing wrong with both companies trying to get you / retain you and competing over you a bit.

Put yourself where you need to be for the long term.

I just read your archive post about making breakfast burritos in bulk. I love the idea and look forward to trying this.

I’m just wondering how long will the burritos “keep” in the freezer. One week? Two weeks?

I’d appreciate any advice you may have about this.
– Maya

I have made that burrito recipe (or variations on it) many times, along with other “convenience foods in the freezer.” Each time, I either wrap them individually in Saran Wrap or freezer bags.

In my experience, the items are usually good for a couple of months and edible after that if you haven’t finished them off.

There are two big keys, though. First, package them as well as you can. Make sure they’re minimally exposed to the conditions of your freezer. Second, when you cook them later, wrap them in a paper towel or a hand towel when cooking so that you don’t lose retained, frozen moisture to the microwave. These two things will make all the difference in the world.

You mentioned you’ve started using EA Active instead of Wii Fit for simple exercising on your Wii. How is it working for you?
– Billy

I use them both, actually.

I find Wii Fit to be more fun, but provides less actual exercise. The games in Wii Fit are more enjoyable than the other game and there’s much more of a sense of trying to beat your high score while also moving around quite a bit.

On the other hand, EA Active provides a much better workout, but doesn’t have as much of a “fun” factor. I can actually get sore with EA Active (provided one replaces the elastic band the game comes with with a band with much more resistance or with wrist weights) and the exercises are enjoyable and clear, even if they’re not as “fun” as Wii Fit. My one complaint is that the leg band with EA Active slips like crazy. I fixed this by wearing cargo shorts when I do it and just putting the nunchuk in a pocket.

I play them both a few times a week. I can actually get sore from EA Active but I usually have more fun trying to beat high scores on Wii Fit.

Long story short – my husband is on a 10-year payment schedule for about $130K in student loans from undergraduate and law school. The bulk of his income goes to those loan payments, leaving us enough to pay utilities bills, groceries and such. But we also have a combined credit card debt balance of close to $10K.

The issue is this: We’re obviously not leaving enough money at the end of each month to aggressively pay down our cards and start a real savings account. As of now, we usualy keep a few hundred dollars in our joint savings, but that’s it. I want us to readjust my husband’s student loan repayment schedule to 15 or 20 years so that we’ll have more money to pay off the cards and build a savings NOW (with the possiblity of putting more into his loans LATER). He argues that paying off the student loan debt sooner will be better in the long run beacuse we’d save tens of thousands of dollars on interest.

It’s a discussion that comes up every few months with no solution or agreement on how to handle this. Sure it’s great to pay down debt, but are we paying off the wrong kind of debt? Shouldn’t we extend the student loan payments in order to pay down the credit cards and start saving for unforseables and other investments (namely a home)???
– Lauren

The obvious answer here is to tell you to re-evaluate your spending and look for some ways to spend less, because that’s the best method you have for improving your situation.

Beyond that, though, I think it’s reasonable to take a look at extending his loans, depending on what the interest rates on the various loan options are. If the loan extension causes the interest rates on the loans to jump up, it’s not a good idea to extend them, even if it reduces your monthly payments by a little bit.

I’d probably say your best plan would be to throw your credit cards in a blender and live without them for a while. Use your debit card (as a credit card, of course) for purchases.

Is it better to pay one extra principal payment a year or pay half your mortgage twice a month? I paid our typical payment Feb 1st, but then paid half of our normal payment on Feb 15th and will continue paying half on the 1st and 15th…

I know I am ahead by approximately half of the principal now and will make up the rest on each payment a little at a time. I just thought it would be better because it drops down the principal every month which would mean less interest.
– Krissy

Many people argue that it’s better to pay half of the mortgage payment early in the month. On paper, that can make sense, but it only makes sense if your lender is compounding interest daily (rarely) or using a daily average to calculate the interest on a monthly basis (much more likely). If they are truly just compounding the interest monthly based on the balance at the end of that month, it won’t help a bit.

Thus, your first step is to either read through your mortgage or call your lender to find out how the monthly interest is calculated. Many lenders do a daily average with monthly compounding, which means they calculate the balance of your mortgage each day over the course of a month, add them all up, then divide by the number of days in the month. If you get a half-payment in early, you reduce the balance of your mortgage for half of those days, thus reducing the calculated interest at the end of the month.

You just need to know how your lender calculates these things. Once you find that out, you’ll quickly be able to figure out whether an early payment will help you out.

I am going to be voluntarily jobless for the next 3 months without much income (oddjobs and part time stuff here and there but nothing substantial). I have 2 credit cards with about $1000 on each and one with $2000, would it be better to pull out my money from my retirement (Im 25, its not much, but after taxes it would be right at 2k) and pay off the 2 cards, or leave the money in the bank and just make payments slightly above the minumum?
– Will

I would leave the money in the account and make minimum payments on the credit cards for these jobless months.

For one, you’re suggesting pulling money out of retirement to pay off debts. The only time you should take money out of retirement is when you’re legally allowed to pay it back or you’re absolutely forced to do it. Neither case is on the table here.

For another, if you use that money now for credit card debt, it will not be there when you’re actually in a situation where you genuinely need it, and it won’t be there for retirement, either. Since I’m not sure what “voluntarily jobless” means – do you actually have a job lined up in a few months? – I would be very hesitant to take out that money.

I’m a 26 year old reader, I’ve been reading since 2006. I saw this story on Huffington Post and it blew my mind. If she is the poster child for a “broken system that needs to be corrected” they need to pick their stories better. It kind of made me want to pull my hair out, and, for some reason, I’ve chosen to give you that same frustration by linking the story below, haha. Overview- she chose to go to Tulane instead of a local state school that would have “basically paid me to go there”, and now she’s complaining because she’s racked up 100,000 in debt on an English degree and traveling abroad. Le sigh…

http://www.huffingtonpost.com/sara-tobin/college-debt-100000-in-de_b_471034.html
– Cortney

Here’s the problem with confessions like this: hindsight is 20/20.

At her current stage in life, she’s very worried about money. Looking back, she can see a lot of situations where she made choices that were very poor in terms of the immediate financial consequence, such as going to Tulane and studying abroad. She regrets it, because her current concern (money) is now the focus.

At the earlier stage, her focus was not on money, but on receiving the best education she could get. She made choices solely with that in mind and it sounds like, even today, she recognizes that she receives value from it.

The problem is that today, with her new realization that money is a scarce resource, she’s faced with choices that she doesn’t like. It’s now time to pay for that education.

There is absolutely no point in looking back at the past and getting angry with yourself over the choices you made. It’s a waste of time. Instead, you need to look at where you are now and ask yourself what choices you can make today – and tomorrow – to put yourself in a better position in the future.

Today isn’t the day to sit back and whine. Today is the day to step up and take action.

My wife and I are 26 years old and we are getting about $3k in tax refunds and work bonuses this year. We’re trying to decide how best to use it.

We have no credit card debt just paid them off, over $7k [...]! We have about $17k in student loans at 3.5%. Mortgage of about $195k at 6.5%. Unfortunately not yet able to refinance as yes we were prior to the housing collapse in a 0% down 30 year mortgage (but can’t fix that now). We’d need to get to about $165k to avoid PMI and potentially refinance. Emergency fund currently at $2k. We spend about $4k a month in expenses so would love to get the emergency fund above $10k should one of us lose our jobs (very low chance but possible in this economy). I have a 401K with about $27k in it. My wife has no retirement savings.

The question is do we use the $3k to start a Vanguard Roth IRA, do we put it toward mortgage principal, or do we add it to our emergency savings? We have other online savings accounts setup to pull money towards our short-term goals of trip to Europe, building a fence, having kids, etc. Long-term goals (3+ years) would be new house to support a family (currently 2 bedroom house), one or both of us back to graduate school, new car for my wife, etc.

My thought is start a Roth IRA, I’ve been talking about it forever and this is a good opportunity to start with $3k to avoid fees with Vanguard and start a Target age fund. Then we scrape to reduce the mortgage as it has the highest interest rate and work to get rid of the PMI as soon as we can and build equity in the house we plan to sell in 5-7 years. We then can also funnel a higher percentage of pay to the emergency fund as there is some room with the credit cards now paid off to do that.
– Jay

I think there are valid arguments for a lot of different ways you could spend your money here. You make the case yourself for the Roth IRA. There’s also a good argument for putting the money towards your mortgage, since it’s your highest interest remaining debt and you’re thinking about upgrading in the future. There’s also a good argument for simply supplementing your emergency fund.

I would step back and look at your situation more deeply. What would you do if you lost your job? Do you have resources to help you manage that situation well? What if one of you got sick and had to go on an extended FMLA leave?

This pushes you either toward the emergency fund or the Roth, I know, which is where I would go.

Since Roth saving is for long-term saving, I think what I would do is take the $3,000, put it in my emergency fund for now, and then keep trying to fund it to build it even bigger. At the end of the year, I would look at my emergency fund and ask myself how much of it I could reasonably afford to put into a Roth IRA without putting myself at risk.

Good luck!

Got any questions? Ask them in the comments and I’ll try to include them in a future reader mailbag.

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  1. Colin says:

    Jay: I’d reduce my withholdings so I don’t get a refund (you didn’t say how much of the $3k is refund). I’d love it if anyone lent me money interest-free for a year so I could plop it in a CD for myself and make interest. Any takers?

  2. Rob says:

    In regards to mortgage payments, don’t miss the obvious and find out exactly what payment arrangements your company will allow you to make, and how they carry it out.
    Some mortgage companies do not accept half payments, and some only accept them under certain circumstances.
    I know of at least two, for example, that split your payment in half, but only apply the payment when the second half is made. So, basically, instead of paying down your interest early, as you might think you’re doing, you’re giving the mortgage company an interest-free loan for two weeks every month!

  3. Johanna says:

    I think the Tulane student’s story *is* evidence that the system is broken and needs to be fixed. Hasn’t the current mess with the housing market taught us that when lenders have no incentive not to lend money to people who can’t pay it back, bad things happen?

    As it is, student loans follow you around for the rest of your life. So lenders have no reason not to lend $100K to someone seeking an English degree, because they can be pretty sure that they’re going to get paid back eventually. And enough students are willing to borrow $100K for their English degrees that schools like Tulane have no reason not to keep raising their tuition to ever more astronomical levels.

    It seems to me that if private student loans could be discharged in bankruptcy, lenders would think twice about lending a student more money than her degree would allow her to reasonably pay back. And students like the one in the story would have no choice but to go to state schools – until the private schools, competing over a smaller pool of students, come to their senses and lower their tuitions to reasonable levels.

  4. Stacey says:

    Re: Rob…

    Our mortgage co. also doesn’t allow half-payments. We have a higher interest-bearing checking account, so we like to keep out money in the bank as long as possible.

    My solution: I pay our mortgage online through the bank’s website. It doesn’t cost anything, and we can make as many payments as we’d like. I schedule two payments each month: The first, our prepayment, gets sent a few days before the mortgage is due. The second, our actually monthly bill, gets sent the next day.

    We do this because our bank likes to apply overpayment AFTER our monthly bill is paid. By doing this, we’re saving a few dollars each month and hundreds of dollars over the length of the loan.

  5. J says:

    @Erin — never accept a counter-offer. You already made your decision to leave before they gave you the raise. Go on to the private company.

    @Lauren — Another tool you have at your disposal is to increase your household income. I do agree that you should look at your lifestyle and cut up those credit cards. With 130K in loans they are really a luxury you can’t afford.

    @Ashley — if you have a paid for car and are moving to an entirely new area, I’d really suggest keeping it a couple months and re-evaluating selling it then. When you move to a new area, you never know how the details are going to work out — and public transportation can be very location-dependent. I live in an area with extensive public transportation options, yet none of them are especially applicable to my work and life situation.

    If the car is in good condition and reliable, there’s very little downside keeping a couple of months after the move until you are sure you can do without it. If you were not moving and had worked out the details it would probably make sense to sell it now.

    @Cortney — A small detail in the story is that the parents divorced and the father no longer contributes to the girl’s education. That sucks for her, but isn’t a fault of “the system”. Overall, though, the story reads like she’s a victim and it’s everybody else’s fault when in reality she could have transferred out at any time. She’s a legal adult and signed those contracts for the loans all along the way. Welcome to the world of adult responsibility. It sucks sometimes.

    I’m not saying that higher-ed doesn’t have a litany of problems (especially tuition rates that defy all reason) — but in this case there are plenty of alternate ways to get an education that can be done far more cheaply.

  6. Carey says:

    Rob, you are correct – many mortgage companies will not accept partial payments, and if they do, they will apply them in the say you stated.

    Trent, you kind of dropped the ball here. The question was whether it was better to pay half twice a month (keeping yourself 15 days ahead as Krissy says), or to make a 13th payment per year, applying that to principal. Mathematically speaking, with any realistic values for term, interest rate, and balance, it is ALWAYS better to make the 13th payment. This is one of those things where opinions don’t really matter – just check the numbers and make a decision.

    I did a quick spreadsheet on it that I’d be glad to send you, comparing the two payment methods. I used a 200,000 balance on a 30 year loan at 6%, but of course, you can plug in whatever you want. At the end of one year, with just making 1 regular payment each month on time, the balance is 197,543.98. If you pay half your payment 15 days early, the balance is 197,540.82. So you’ve saved 3.16. If you add an additional 1/12 of your payment to principal each month (which makes a 13th payment after 12 months), your balance is 196,311.34. So your balance is down 1,232.64 after paying an additional 1,199.10 in principal, an interest savings of 33.54. I’d say that’s better than 3.16.

    And this is all assuming your lender calculates your interest daily, or using an average daily balance, as you mentioned. But 95% of mortgages are not calculated that way. It’s normally calculated monthly, assuming a 30 day month and a 360 day year (so you pay balance * 1/12 of your rate in interest each month). Occasionally, it’s calculated using the actual number of days in the month divided by 360 , but it’s still monthly.

  7. Colin says:

    Tulane is currently $52,240 for tuition + usual stuff. I really cannot name a single undergraduate degree that’s worth $200k. Her rationale for continued enrollment at Tulane is evidence enough of why Tulane can charge $200k for a bachelor’s degree.

    The bachelor’s degree is becoming the new high school diploma: name a high school that remotely costs $52k/year to attend.

  8. matt says:

    Reading these mailbags always reminds me of how lucky I and the S.O. are to have graduated without any debt. I cannot imagine what It must feel like to be saddled with so much additional debt when one is just starting life on their own.

  9. Kat says:

    Johanna, while there are average salaries for each degree, there is no saying whether the English major is premed or prelaw and going to be making six figures when they are done with school or they are going to network their butt off and get a great job right out of school, or if the finance major is going to decide they hate the stress of banking jobs and work at a nonprofit instead. Your degree does not determine your life. Also, when you apply for your student loans, you don’t necessarily know what your major is going to be. Lenders assume that going to college means that you will have a higher than average salary, which is pretty much true across the board. There is no physical property that student loan lenders can take back, like a house or car, and very little would prevent 21 year olds from declaring bankrupcy to get rid of $100k debt when they are not planning on getting a house for 10 years and their credit score wil be fine again by around age 30. I don’t see how you can screen 18 year olds without a credi history or make them promise to get high paying jobs. There is no way to figure out what a degree can “reasonably pay back,” as I have a sociology major friend who makes 6 figures, and a business major friend who works at a nonprofit.

  10. Lorrie says:

    Erin, in my experience in both corporate and private positions, the thing to keep in mind is the growth potential that the position will offer you. In the corporate world, there are many rungs on the ladder, and you have the opportunity to move up for many years. In a private company, its is entirely possible that “Office Manager” is as high as you can ever hope to go. I am currently the office manager in a small, private company. The only position above mine is the owner (there are others on the same plane as me, but no one else above me). At this point in my career (nearly ready to retire), that’s fine. But if I was 23, I’d want to go where there’s room to grow!

  11. guinness416 says:

    The sad thing to me about student loans like that is that it’s basically kids with no life experience making those multi-thousand dollar decisions. If your parents aren’t able to offer good advice you’re SOL.

    I consider myself extraordinarily lucky that I won the lottery of being Irish and having my education taxpayer-paid. Despite being a fairly savvy teen – had travelled widely, worked, even invested, experienced sex/drugs/rocknroll etc etc – I had no concept of how decisions made at 17 could impact me going forward. How could I?

  12. matt says:

    Guinness I have to agree with you, the S.O. got a degree in biochemistry, thinking that it was sound decision making getting a science degree, now 5 years or so after graduation she has realized the only jobs she can get are as a lab tech, which has a glass ceiling and doesn’t have as much earning potential as she would have hoped.

  13. Ward says:

    Erin,

    I learned a long time ago to never take the counter offer. First, if they valued that much they should have been paying you that in the first place. Second, if you take the counter offer, the trust between you and your employer has been broken and they will never see you as a loyal employee again, as you were willing to leave them. I took a counter offer once and would never do it again. Once you have made the decision to leave, it is final.

  14. DOTTIE says:

    #6 CAREY
    80% of your comment was based on 95% of what mortgages are not(daily calculated interest). That makes me 100% frustrated that I spent 5% of my lunch break reading a comment that provided less than 5% of useful information. Trent’s response made much more sense to me.

  15. Marle says:

    The woman on Huffington Post doesn’t make herself sound sympathetic, but the actual facts are a lot more sympathetic. She was able to afford the first year fine, with savings, a scholarship, and a Stafford loan that was probably reasonable. Then her school raised tuition and her mom had to take out a loan. Then she got the awesome opportunity to study abroad, which is great for anyone who can do it, but her greedy school made her pay them full tuition so that a school with lower tuition could teach her. That’s not fair. Then they raised tuition again, by *25%*! What else goes up 25% a year? She was fine the first year, but no one told her that the following years would *not* be the same.

    The article could have been written to show the problems with rampant inflation of college tuition, but instead she sounds really selfish and says stupid things like that she hopes her mom keeps working her second job to pay off the loans, or “People ask me why I didn’t just transfer to a cheaper school, why I studied abroad, and why I have taken on this massive debt to stay at a school that I have come to hate.” No one can help you with that last one.

  16. J says:

    @matt — your S.O. needs to open her eyes and realize the doors that can be opened with a biochemistry degree. First off, having a job — any job — in the current economic climate can likely be viewed as a good thing. The second thing to realize is that glass ceilings can be shattered. Sure, your S.O. is a lab tech now, but is tuition reimbursement an option at their employer? Somebody in that lab is likely doing interesting research, and they likely have a MS degree or PhD. If they don’t like the research/science part of the job, someone is managing those lab techs and someone else is likely working patent law issues — both of which are degrees for which your S.O. can study for, hopefully on the employer’s dime.

    Your career path needs only be as limited as you want to make it. But the path may be hard and difficult and it may require work and sacrifice to get somewhere.

  17. MattJ says:

    I can confirm that the breakfast burritos last for months. I’ve been eating one for breakfast almost every workday for over a year, and I always cook about 40. 40 burritos / 5 days a week = 8 weeks from fresh intil the last one’s gone. I also had a long trip last year, so I’ve eaten burritos that have been in the freezer for about 3 months. No degradation in quality.

  18. As painful as it it; most families needto have two cars on hand. Stuff always seems to come up and one is in the shop…

  19. matt says:

    @J Yes/No She is doubly limited by being a H1B, she cant just leave and go anywhere she has to be sponsored. And she would like to goto med school, problem is the clinical experience requirement, she is having a hard time coming up with that while working full time to be able to apply (also international students have a less than 10% acceptance rate). She is working on the masters, but its a small university she works for, and there isint anywhere to move up, and they dont have any money to give her a raise, she would just be a lab tech with a masters, the next move up the chain is her boss, the department head which is a MD/PhD, its more like a concrete ceiling. Its easy to say well look somewhere else, but the combination of staying in this town with me and my job, and H1B makes that pretty much impossible.

  20. J says:

    @matt – if you get married, the H1B problem goes away, right? :). The thing I was getting at was that it’s a better use of energy and time to try to better your situation somehow

  21. Mule Skinner says:

    @Cortney: Someone who is smart enough to earn a bachelor’s degree should also be smart enough to do the cost-benefit analysis on it. Perhaps that should be a criterion for admission.

    I have a tenth grade daughter who is already being recruited by colleges; and she is thinking emotionally about where she would like to go.

  22. Mule Skinner says:

    @Courtney — Generally, people who will have to earn a living should major in something that will allow them to do it. Those who won’t have to earn a living can major in something more genteel.

  23. Mule Skinner says:

    @Ashley — Keep both cars. The cheapest car is the one you already own. It does not cost much to keep a car that’s not being used. And when you do need it, you’ll appreciate having kept it.

  24. Brittany says:

    @Ashley

    Have you considered renting/loaning out the car to a family member or close friend while you don’t need it? This needs to examined carefully, because there are a lot of risks associated with it, but I did this with my car to a cousin while I was out of the country for an extended amount of time. Charged him a small amount of money (enough to cover wear/tear, etc., but significantly less than a car payment or lease) and he paid all expenses. Worked fine for me and kept it up and running while I was gone (it was an older car that liked to stop running if it wasn’t driven at least every couple of weeks).

  25. Colin says:

    @13, et al:

    If you’re quitting over money then ask for a raise first, and if they don’t (or it doesn’t meet your desires) then give notice immediately. If they offer the raise *after* you give notice then you know you called their bluff and you *should* leave because of that, not the money (i.e., they didn’t value you before you were leaving)

    If they give you a matching raise then great.

  26. jim says:

    Jay: I’d put it in the emergency fund.

    Lauren: Generally delaying payment of lower interest loans list student loans to pay off higher interest credit cards makes sense. But whether or not it will pay you to switch to a longer repayment period on the student loan would depend on if the interest rate for the student loans would go up. If refinancing to a 15 or 20 year period lowers the interest or keeps it the same then I think you’re better off doing so for sure. But if refinancing your student loans jacks up the interest on them then you may end up paying a lot more by doing that. Raising the interest on the student loans by 1% or more with the purpose of saving interest on the credit cards would probably not be worth it.

    On the other hand if you’re really struggling right now to make ends meet and pay bills and avoid using credit cards then extending the student loan payment period may give you enough breathing room.

  27. Amanda says:

    Jay- Fund the emergency fund, but then pay off the student loan debt. You can sell a house if you need to, but a student loan NEVER goes away until you pay it off! I would pay off that loan before I put another cent in retirement (unless you have employer matching). Wouldn’t it feel great to be debt free (except for the mortgage) before you had a child?! :)

  28. Jesse says:

    Thanks for taking my question, Trent – great advice, as always!

  29. elderly librarian says:

    Marie says “her greedy school made her pay them full tuition so that a school with lower tuition could teach her. That’s not fair.” I agree. My son attended a selective LAC and they had one of these scams going on too. To attend a European school for study abroad, you had to pay the American college’s tuition in order to get “credit”. If you study abroad on your own, the European tuition would be minimal compared to what is charged in the U.S. My son wouldn’t do it–he realized it was a ripoff.

  30. Steve says:

    Am I the only one that thinks Ashley and her husband should sell the second car? The cheapest car is the one you don’t own at all. There are real costs to keeping a car that you don’t actually use – both in expenses (registration, insurance, property taxes, and you still have to maintain it and drive it every few weeks to keep it running) and in deprecation. Also, there would be a cost to move it to the new city! I would say, get rid of it and if you have to buy another one in a year, so be it, you’ve still saved money.

  31. Steve says:

    I’m not even sure I quite understand the mortgage question. Paying a mortgage twice a month will save you practically nothing – on a $200,000 mortgage it’s just barely enough to cover the extra stamps. (about $6/year). Prepaying your mortgage is another thing but biweekly payment plans aren’t worth the typical extra fees. If I were prepaying a mortgage I would just set up my automated bill pay to send an extra 8.3% or what not with my regular payment each month. (Properly marked as “principal prepayment” or other appropriate verbiage.)

  32. J says:

    @Steve — I think they should sell the second car if they truly don’t need it — after they move. If they were not moving to an entirely new city they should sell it right now. But they aren’t. They are moving to a new place where public transportation is rumored to be better. Until they actually live in that place and find out if the public transportation actually works for them, keeping the car a little while (a couple of months) is a better option. For a couple of months you can sit on your hands on transferring the registration, insurance, and so on.

    This advice, of course, assumes that they haven’t already picked out home that has extensive public transport options, and also that there isn’t a significant cost (for example, renting a parking spot in a garage — not uncommon in dense urban areas) to keep the car around.

  33. Jessica says:

    @Ashley

    We are a one car couple living in the Twin Cities. I would say a lot of you answer will come in where you plan to live in the cities vs where you will need to get to work.

    If you are planning on living in an suburb and working in the city, one car will work. Also, living and working in the city.

    If you are going to live in one suburb and try to get to another suburb, it won’t really work. It can 2 plus hours to go from suburb to suburb just because all routes go throug MSP or SP.

    If you know for sure where at least one of you is going to be working, and you have choice, move close to your employment. That way one of you can alwasy get to work.

    We have alwasy made sure that one of us lives on the busline or within walking distance of our house. That is how the one car thing can work. We have been one car for 3 years now. And I dread the day we will have to purchase another car.

    Check out Metrotransit.org to review the bus lines. Because also, it can also be extrememly difficult to get from some neighborhoods between St. Paul & MSP as well.

  34. Sara says:

    I think Krissy might be confusing the idea of paying half a mortgage payment early with the biweekly mortgage payment plans offered by some banks. Paying half a payment twice per month will have little, if any, effect. The biweekly payment plans consist of paying half a mortgage payment every 2 weeks. Since there are 26 weeks in a year, this will result in paying an extra month’s payment each year, which can save a lot of money and knock several years off the mortgage.

    You can get the same benefits by paying extra on your principal each month (1/12 of your regular monthly payment will add up to an extra payment in a year) or just by making an extra payment once per year. Bankrate has a mortgage calculator that will show the effect of adding an extra amount to your monthly payment or adding an extra payment each year. If I put the URL, the comment won’t get posted, but if you google Bankrate mortgage calculator, you’ll find it (click “Show amortization table” after you enter the basic information to get the info on adding extra payments).

  35. J. says:

    My husband and I are a one-car family, as is another couple we know in another city. It can work for some situations; it works well for both us and them. A quick note: You have to consider not only public transportation and biking/walking options, but also how you will handle the times when one car isn’t enough. My husband and I both take public transportation to work, keep cab companies’ phone numbers in our cell phones and live within walking/biking/bus distance of repair shops and rental car agencies, so having only one car isn’t really an inconvenience for us. And the occasional cab ride (5 in 2 years; we haven’t had to rent a car yet) is a fraction of the cost of a second car.

  36. Sara says:

    Ok, I just re-read my comment above and realized I wrote that there are 26 weeks in a year. I meant that paying every 2 weeks would result in 26 payments per year because there are 52 weeks in a year (duh!).

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