It’s not good to keep secrets in the blogging world. I know that. And it’s not so much a secret, so much as it isn’t really my story to tell. But we have more debt than I’ve previously mentioned. Well, had.
More precisely, Mr. P had more debt. I wrote a post about how we paid off over $18,000 worth of debt last year. And we did. That was mortgage debt. We also paid off another $6,000 towards Mr. P’s car loan.
There.
I said it.
I married someone who took out a car loan. On purpose.
When we were dating, Mr. P expressed interest in buying a new car. And it was time. He had driven his previous car for almost a decade, and he was bleeding money over it. The thing was falling apart.
I was in a similar situation. In fact, six months before Mr. P took out a loan, I bought a new car as well. I could have paid for the whole car in cash–and I did put down a hefty down payment–but I chose to finance it for 0%. The dealer did not care. Whether I paid for the rest of the car in cash or financed it, we had negotiated down to their rock bottom price (thanks, Dad!). So, I made the decision to earn the 0.5% interest on my money and made monthly payments. The real comfort was knowing that I could pay it off at any time if making payments became too tedious.
Conversely, Mr. P chose to finance his car through a credit union with 0.9% interest. I protested some, but really, it wasn’t my place. I was his girlfriend. I certainly had the right to express my opinion on his prospective purchase, but it was still his money. Plus, at that stage in my life, I was doing a pretty bang-up job of squandering my own money on stuff I didn’t actually need. Hello, pot. This is kettle.
Fast forward several years and a wedding later, and this debt was still lurking around. Mr. P had diligently made the monthly payments, but enough was enough. Had we kept on pace, the car loan would have been paid off this summer. This past week, though, we made the decision to pay the remainder of the car loan in full. Now, the only debt we have to focus on is our mortgage.
The monthly money that was allocated towards his car loan is now being diverted to our mortgage debt. That way, there is no temptation to increase our grocery budget, inflate our discretionary spending, or fritter away the money in some other fashion. We’ve lived this long without. By rerouting it to our mortgage, there’s no temptation and a pretty excellent payoff.
It’s tempting to look back on the car loan and shudder. But no amount of what-ifs can undo that decision. We can’t alter financial decisions of the past, but we can make smarter ones moving forward.
So Tell Me…What smart financial decisions are you taking to keep moving forward?
Awesome! To answer your question at the end for me, I’m working on smart financial decisions around spending since I left my job to build Tip Yourself full time.
I previously worked as a consultant and earned a good salary. Since my monthly income has dropped to zero. I’ve been working on cutting spending to the bare bones.
I was never a big spender. (That’s why I was able to save enough to live off savings while I build this company). However, I’ve become more aware of small spending that I can cut.
The biggest one has been bringing a lunch to work. Going out for lunch has always been my break each day. But not anymore! I now bring a lunch each day or score free lunches at networking events when possible. 🙂
Cheers Penny! 24k is a big number. Congrats again.
Thanks for the motivating story, Mike! It was fun to peek behind the Tip Yourself curtain a bit. I’ve always done lunch supervision, so I’ve never had to really fight the eating out battle. A lot of my corporate-world friends talk about what a budget killer it can be. Kudos to you!
I’m not sure i find the car loan that terrible. It’s one of those debts I avoid now, but didn’t when I was younger, and didn’t adjust my perspective on until I was quite a bit older than you guys are now.
I remember being told by my ex-financial advisor that car payments are just a fact of life. (One of the reasons he’s my ex-financial advisor). The sad truth is that buying cars outright isn’t common. And, if you’re used to having lots of expensive car repairs, having a dependable new or newer car with a moderate payment can seem like a much more reasonable choice than buying an older car you can pay for outright but may not be as dependable.
Your perspective on what to do with the money that you’ve freed yourself, that’s what I find impressive and what sets you apart from most of America.
You’re absolutely right. Having a car loan was tolerable, especially since we could always afford the payments. I guess where I kind of kick myself is why we didn’t just pay it off sooner. I know it only 0.9%…but better in our pocket than the bank’s!
Oh we understand this all too well. We decided we didn’t want to rent an apartment and found the perfect house downtown. We looked under all of the couch cushions and did everything short of emptying my Roth IRA to put down 5% only. We had private mortgage insurance due to the low DP. We paid up this spring so we now own more than 20% of the house and don’t pay $200 a month for insurance on our bad decision.
We did the same with the rest of the student loans this year and there is something liberating about knowing you owe no one else money (except the mortgage).
Wow. Kudos to you guys. It is so liberating!
Good for you guys! I love the perspective you take on something as simple as a car loan taken out before you got married. Now you’re in this together and focusing on the debt you got into together. I bet that feels… better? 🙂 Debt stinks. I’m super excited to have all that money free every month to put toward our big savings goals! Down with the mortgages!
Hear, hear! Boooooo to mortgages. We definitely were raised with different outlooks on money, so I didn’t want to butt in too much while we were dating.
I don’t think the key here is that you had more debt, I think the key is that you PAID OFF more debt. Which is incredible!! Good job!
We had more undisclosed debt 😉 But yes, it is exciting. Thank you!
As financial mistakes go, a 0.9% loan certainly isn’t the worst thing I’ve ever heard. Congrats on eliminating that debt!
Thanks so much. It’s really good to know it’s gone!
Amazing progress! I have a whole batch of horrible past financial decisions– all things considered, I think your mistakes have been extremely mild! It’s so easy to get bogged down in regret, and so much healthier to focus on the positive momentum. As one of my coaches used to say, “Progress, not perfection!”
We have been so fortunate in that regard. The missteps we’ve made could have been a lot worse. But I’m also not wanting to use that as an excuse to not work as hard! I love that saying about progress.
Owning a car (purchased a couple years back prior to getting serious about my finances) is the only debt I currently have. My interest rate is low (though not as low as 0.9%!), and after some other major savings goals are taken care of I plan to pay it all off and own it outright for as longggg as I can. When I bought the car – I honestly didn’t know better! I was never taught that financing was a bad thing, and yes – the cliché – everyone was buying new cars (at the time I was driving an old 01′ car that was falling apart on me). It’s incredible the amount I’ve learned in the last year about finances!
Even with a low-interest rate, it must feel amazing to have eliminated this debt. Congratulations! Good luck with the mortgage payoff!
We’re cutting our spending this year in an effort to get rid of all the rest of our debt. We’ll see how this goes. 😉
That was some might wise thinking by you when you decided to save some ‘car payment’ money and earn a small interest rate on it. I can’t believe the car dealer agreed to a 0% installment plan, because there’s nothing in it for them. Kudos to your dad. I would like to know more about your particular debt repayment strategy, Penny. It’s always fun to learn what works for different people.
This is awesome for you. Congrats on eliminating the debt 😉