All Forum Posts by: Nick S.

@Nick S.

I'm not trying to pick on you, but I just want to spread some wisdom so that you don't continue to make bad decisions with money.   I leased a Dodge Ram when i was in my late twenties and it was the worse decison I've ever made.  My payment was $415 a month and I got laid off and couldn't find another job for over 6 months.   I nearly got it repossessed, but luckily my father loaned me the money and I paid it back.   See with a lease they don't care when you lose your job, you still owe and it's near impossible to get out of the contract.  Plus after you overspent for a brand new car and you leased for a period of time, you own nothing at the end.   That's like throwing hundred dollar bills out the window.  

You stated that:  I do want to reiterate the fact that I did not have $6000 to buy a car. If I got the car inspected and had to pay $1500 in repairs, the up front cost of the car would be $7500.  Well your missing the point on the math.  If you had the used vehicle inspected and they found problems, then you wouldn't buy the car.   So if the mechanic ok's the car, then there would be no $1,500 in repairs up front.   Also you can get a loan for $6,000 to buy a used car and make payments.    You can get a 5 year loan on a used vehicle for $110 a month.   Since your affording $320 now on a lease you could have that paid off in less then 2 years.  I've bought every car I've owned since that stupid Dodge Ram and always get the mechanic to check it out and 3 out of the past 4 vehicles have had very little repairs to well under $1,500 a year.   

So take my advice for what it's worth, but just no as in the book "The Millionaire Next Door", the majority of self made Millionaires' to Deca Millionaire's buy used 3 to 5 year old vehicles.   

To me it sounds like you just wanted a new car because the math doesn’t make any sense. The average repair of a used Toyota Camry with 100,000 miles or more is $1500 a year. The average car purchased in America is $32,000. If you bought a $6000 Toyota Camry and you had your mechanics inspect it before you purchased it, then if this car lasted for 10 years, including repairs, the total costs would only be $21000. The total costs of a new vehicles after 10 years old be on average $54,000. Plus after 10 years that new car is worth nothing.

I recommend you connect with Marcus Auerbach.  He’s been investing in Milwaukee for a long time and has a good perspective on the area and investing.

Also, in case the last line of my first post came off as snarky, I apologize. I wasn’t referring to the car.  I just meant enjoy the journey.  It’s fun.

A lease payment of $320 is a losing proposition if your going al is to become wealthy. First, if you go with the 27 payments that you have left, that amounts to $8,640 and at the end of your lease you own nothing. You rented the vehicle. For that kind of money, you could’ve bought a very reliable used vehicle such as a use Camry or accord.
Second if you continue on this path of leasing or buying a new vehicle, you will not achieve. If you were to invest $320 each month for 30 years at a very average interest rate of 8% return on an index fund, you’d have $500,000 tax-free.
Paying for and buying liabilities never achieve your great wealth. Assets make you wealthy.

@Nick S.

A couple of the things to consider:

1. Consolidate and/or refinance your student loans.  This should reduce your monthly obligations as interest rates are still very low. 
2. Use a portion of the funds to purchase a single or multi-family home (house hacking). You may qualify for an FHA loan with a 3.5% down payment. On the $175k home about $6k. This would allow you to keep the balance of the funds as a reserve. Something will go wrong and you want to be prepared.

It’s hard to say not knowing your all of your financial information and your short and long term plans.  Assuming you have no savings, but live an average lifestyle of someone fresh out of college (spend less than $25,000 annually), I would pay off the loan and put $12,000 into a high yield savings account for an emergency fund to cover six months of expenses.  With the rest, I would start saving for a down payment for a house and the costs for repairs and maintenance that homeownership incurs.  I would want to put at least 10% down and have access to another 5-10 k for repairs and upgrades that the property will need (not the emergency fund.

While house hacking would be preferable to paying rent, your rental expense isn’t all that bad.  By having roommates you are saving more than most do on rent.  Conversely, if you buy a house and have no savings, if something breaks how will you fix it?  If you lose your job, how would you pay the mortgage without roommates?

Next, or at the same time, I would save for my next car and vow to NEVER lease or buy a new car again. I would save $10k a lover the next two years and buy a reliable used Honda or Toyota and drive it for the next 10 years.  New cars are a drain on wealth building.  In your situation, you probably had little choice: you needed reliable transportation, had little money, and no credit.  At least you didn’t get an overly expensive car.

While you’re saving money, I would keep researching where you want to live and learn it so when you have your money you can jump on a deal if you see one.

Finally, if I could go back 20 years and be 24 again, I would read everything I could about financial independence.  I did most of the big stuff almost out of accident but I could have been better.  Start with Mr. money mustache for lifestyle frugality.  Read the entire blog.  Read it again.  The Bigger Pockets money podcast is also great.  A couple of great books for investing all of the money you are going to accumulate are “The Simple Path to Wealth” by J. Collins and “Set for Life” by Scott Trench.  Collins gives you a simple plan to accumulate FU money by simply working a job and investing in index funds.  He also explains the stock market along the way. Scott Trench gives you a more complex (but not that complex) plan by investing in real estate and producing other income streams.  It’s more entrepreneurial.  It also probably gets you there faster.

That’s my 2 cents worth.  Enjoy the ride.  

Hello, Nick!   You are on the right track wanting to purchase a home. A lot of people do not realize there are up to four different ways you can make money on real estate.... specifically a home. You are on the right track wanting to use one of the rooms for extra income. Perhaps you can decrease your expenses, overall, by doing this. Paying down  faster anything with a high interest rate is a really good idea.  You can buy the house at a discount, fix it up, refinance it, and absorb the high interest debt (student loan) into the real estate.  Car leases can be useful, depending on what you do for a living.  I would need more information about your monthly payment to compare this aspect.  

I hope this helps.