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Just pay off the loan and put that 220 bucks a month back into your EF. in two years your back where you are now, but without the debt load.
You are right. Everyone has been good about making suggestions and I appreciate it. I have one last thing to do and that's call the bank about early payment penalties. Should've done it already but wasn't there yet. lol
Yes, I know. All my funds are "liquid". And I guess I shouldn't call it my EF if it's just a plain ol' savings account. lol It's for whatever I need it for. Vacations and road trips come out of it, sometimes. The money is there to pay for it before I leave the driveway.
I like to have about a years worth in savings. $3,000 would last me three months but with my SS checks I could stretch it to six. I did it for nine months once so I know I can.
I'd say you're fine then. Pay off the loan. Your SS check isn't likely to just up and leave on you, right?
Should I take 1/2 of my savings and buy a car for cash to save $20 a month in interest? Is basically what you are asking. Spending half my savings in a car is too much.
If your liquid assets are sitting in a savings account it doesn't make sense to pay 4% on a car loan. I would also look into getting those funds into a better account, still low risk but you are losing money doing what you are doing.
I don't actually HAVE a designated EF. It just all goes into one account and accumulates there. I use out of it as needed, which is rare. It's there for just in case I need to replace something but so far I haven't had to use it. So far I've replaced a swamp cooler and paid over $800 for some serious plumbing issues but didn't use EF funds. Also had a $500 deductible for a car repair. So the EF is 'just there'...in case I don't have the money in checking. The loan is about 4% interest. My EF is lucky to garner 1%!!
4% rate, i would either pay it off, or look into transferring it to a local credit union for about 1.5%-2% if you do a term < 36 months. 4% is very high to be paying if you've got cash on hand above and beyond at least a 6 month emergency fund amount.
Should I take 1/2 of my savings and buy a car for cash to save $20 a month in interest? Is basically what you are asking. Spending half my savings in a car is too much.
No. That isn't accurate because the OP already bought the car. Your scenario implies that they have a choice of whether or not they are going to make the payments. The OP is basically asking if they should liquidate half of their savings to save $242 a month, not including the amount they are currently losing to inflation.
No. That isn't accurate because the OP already bought the car. Your scenario implies that they have a choice of whether or not they are going to make the payments. The OP is basically asking if they should liquidate half of their savings to save $242 a month, not including the amount they are currently losing to inflation.
I think that is a pretty good deal.
It is just a mental game, your net worth isn't increasing $242 a month. All you are doing is moving your cash from sitting at the bank to moving it to your car where you don't have easy access to it anymore. Interest is the cost of the money, the rest is principal.
I'll rephrase, I can use 50% of my saving to pay for a car all cash or spend $20 a month more in interest so I don't have to use 50% or my savings. Even if the car is already bought the situation is the same, when you pay off the loan, you are buying the car from the bank.
If you pay off 1/2 of the loan to $2500, the rate stays the same but the amount interest will be reduce to 1/2 so instead of $20 a month , your cost is $10 a month in interest. Monthly loan payment won't change, you just pay it off sooner with less total interest.
Lets look at it another way - If the OP loss his/her job tomorrow, should they 1) pay off the car and save $242 a month or 2) not pay it off and keep the $5000
50% of your saving is just too much to blow on a car to save $20 a month in interest.
Why would 6 months of reserves be acceptable, why not way until you have 12 months of reserves?
I'd rather not touch on inflation in this situation because the OP is not taking any steps to counter it .
Should I take 1/2 of my savings and buy a car for cash to save $20 a month in interest? Is basically what you are asking. Spending half my savings in a car is too much.
BUT that car payment would still be getting paid. It would be going back into savings rather than to an auto account. Basically I would be putting over $700 in savings every month as opposed to $500+.
If your liquid assets are sitting in a savings account it doesn't make sense to pay 4% on a car loan. I would also look into getting those funds into a better account, still low risk but you are losing money doing what you are doing.
I know. I get a lot less interest on my savings than I'm paying on my car loan.
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