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It’s 10 p.m. and I’m out the door with a large, hot pouch with fresh-out-of-the-oven pizza inside. I smoothly unlock the doors before I reach my car, swing the door open, set the bag in my passenger seat, and run around to the driver side. Simultaneously, I stick the keys into the ignition and reach for my seat belt. I press the clutch and then turn the keys…nothing.
My heart plummets! Not again. Yes, again. You see, I am no stranger to car troubles. In fact, my entire family is notorious for crazy, off the wall, car problem scenarios. Like a 15-passenger van with 11 people in it quitting in the middle of Interstate 45 in Houston, Texas, in rush hour traffic. And all 11 of those people climbing out and stuffing into a double cab Dodge Ram tow truck hooked up to said van and making an up close and personal trip home.
A station wagon catching fire…twice. The second time toasting it for good. 5 cars and a house to one’s name and the only thing mobile is your home? Yep, we’ve been there. My Jeep Liberty was bought at an auction “as is” with no knowledge of the mechanical history of it. The day after we paid for it, the auction shop advised there was a bad oil leak. Therefore it wound up going straight from the shop to my driveway for a number of months before I had the money to put a new engine in it. I also had to replace the rack and pinion a few months after that. Between the cost of the vehicle, tires, engine, rack and pinion, catalytic converter, and various other issues, I spent over $10,000 in 2-3 years.
Fast forward back to “today.”
Back to the moment of crisis, I’m a delivery driver for Domino’s while I’m going through school at Sam Houston State University. My job demands a working vehicle. And I’m done throwing money away repairing this 2.4L 4 cylinder engine Jeep Liberty. Yes, I had it’s specs memorized. Thankfully I had a whole week off of work for Spring Break. Only I wouldn’t be able to spend it car shopping. I was going to Moore, Oklahoma, with the Student Initiatives department on what is called an Alternative Spring Break. (It was a volunteer program where we worked to help clean out homes for people who were unable to do the work or pay for it after a recent batch of tornadoes devastated the area.)
While I had down time in the evenings, I perused the internet for used vehicles. But not just any used vehicle. I wanted one from a quality brand and I needed an SUV. You see, Huntsville is full of hills. It is also notorious for these RIDICULOUS dips into and out of parking lots. The streets quickly flooded in any sort of precipitation and my job did not let up when the weather turned sour. In fact, it was quite the opposite. When it rained, the delivery business went up!
Torrential downpours, tornado warnings, hurricanes, we were out there delivering pizzas (can’t tell you how amazing it was that the store was shut down for remodeling when Harvey came through!) So I really wanted something with a little height. I also wanted something with less than 100,000 miles on it, preferably within the last 5 years, and 4-wheel drive was a plus. I didn’t get within 5 years, but it was pretty close when I found a 2009 Toyota RAV4 in South Houston. It was just a little over the top of my pre-approved loan amount at $12,500. I had $600 in cash, a $500 vehicle trade in, and they came down to meet me (after I spent $250 on a pre-purchase assessment from Christian Brothers Automotive to insure I was getting a good vehicle that wouldn’t need any immediate repairs.)
So I bought some “insurance” product through USAA who was financing my car so I wound up with $12,344.15 on the loan with a 4.35% interest rate. The date was March 15, 2016. If I ever did it again, I probably wouldn’t bother with the extra insurance. It was a 5 year loan with payments of $229.61 each month. I bought my car the second to last Spring semester in college (one and a half years before I graduated).
While in school, I was also paying $275.28 a month on my RV loan, $325 a month on the pad rental for my RV, plus all of my living expenses. It did get a little rough in school resulting in some pretty serious credit card debt besides my student loans due to various “promotions” affecting my time delivering pizzas and making tips. But I paid my loans and living arrangements in cash every month.
I made an extra $500 payment on the principal of the loan in June of 2016. Take note I applied all of the extra to the PRINCIPAL. Never pay on interest with your extra payments. The first extra payment was made 3 months after I took out the loan. This was most likely during a really good month of delivering pizzas at work.
In January of 2017, I made an extra $200 on the principal. Incidentally foiled the automatic payment for February and paid $229.61 twice on the principal. That meant in March the normal payment paid twice as much interest and less against the principal. I made no extra payments after this until January this year when I cashed out a secondary IRA I couldn’t keep funding on top of my 2 retirement funds I have through work. I put $2,500 towards the principal, and then finished it off when my tax refund came through with $1,935.02 on top of February’s regular payment.
Just after the first of 2018, I paid for Dave Ramsey’s Financial Peace University course online. I wholeheartedly recommend you take this course (and I am not an affiliate of Dave Ramsey, though don’t think I didn’t look to see if it was possible!) I funded my emergency fund with $1000 and then worked really hard to get my budget just right. It took a little extra work to iron it out. But I finally fine tuned it to work for me.
I would like to take this time to say that I made no extra payments on my car loan for a year due to the fact that I had a baby to prepare for, prenatal care, delivery fee (since I wanted a midwife and birthing center delivery, my work’s insurance wouldn’t pay for that), post-natal care, and save up enough money to cover the first loan payments that would come due while I was on maternity leave (some of which would be unpaid due to the fact that I would only be employed for 5.5 months before I gave birth and the requirement is 1 year of employment for paid FMLA leave). So by the time I wasn’t making payments on the midwife or spending my money on the bed, breast pump, and other various items I would need for the baby ahead of time, I was due to make payments on my student loans.
I also started focusing on Dave Ramsey’s debt snowball technique by paying down my smaller debts first. In fact, I paid off the smallest student loan I had which was $1000 before the end of 2018 and rolled those payments into the next smallest student loan. So even though I didn’t make any extra payments in there on my car, I still made headway on my goals to becoming debt free.
I ended up having to blow my emergency fund on new tires and sick visits to the pediatrician. And until my tax return came in this year, I never recovered it. But I still managed to pay off my $12,344 car loan a week shy of 3 years after I got it. And for an idea of what I had to work with last year, my take home pay was just over $32,000.
Now that my loan is paid off…
…it frees up those payments to go towards paying down my student loans. While the next couple of months it will be going towards court filing fees and the cost of DNA testing, I’m still set to make an extra payment this month on my student loans and commencing full extra payments in June.
Part of my nerdy planner habit is to find ways to envision what my plans are going to turn out under different scenarios. Not a lot can be planned so well, but there is this amazing little thing called Excel which has a free spreadsheet for loan amortization. Working my plan means that I will be free of student loans in 4 years, and that isn’t including the use of my tax returns over the next three years. I’m about to go fix that…
Make the investment into your financial security and take Dave Ramsey’s course. It will revolutionize your life. To top it off, it is super interesting and fun to watch. Dave says that we should “live like no one else now so that later, we can live like no one else.” The quicker you pay off your debts, the less you pay in the long run. Make all extra payments on the principal. And when it’s all paid off, you can save faster to pay cash for amazing vacations. You will feel more secure in your future. And your kids will be better provided for using your money to work for you and not someone else.
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