Stacy and her boyfriend would like to downsize to one vehicle. But they’re collectively $14,500 underwater on their car loans.
Stacy owes $11,000 on her car, but its trade-in value is $7,200. She’s paying a 12.74% interest rate and her payoff date is 2021.
Her boyfriend is in worse shape. He owes $18,500 on his vehicle, but its trade-in value is $7,800. He’s paying a 21.5% interest rate and his payoff date is 2022.
Theoretically, they could sell Stacy’s car to a private party, and she could pay off the rest of her loan. But the boyfriend’s car is not in great shape, and probably won’t survive for the next couple of years. And neither of them have found better refinancing deals.
What should Stacy and her boyfriend do?
Rachel earns $65,000 per year. She’s 27 years old, contributes 20 percent to her retirement account, and holds $5,000 in savings.
She owes $19,000 on a car loan, at a 4 percent interest rate, and $170,000 on student loans, all with different interest rates, but the highest at 7.9 percent.
She’s hesitant to consolidate her student loans, because she’s currently on a government plan that gives her flexibility, and she doesn’t want to switch into a plan that requires her to make a fixed monthly payment.
She’d like to know if she should use her savings to invest, or repay her loans.
Misty is 40 and has no retirement savings. She lives overseas and is able to save about $20,000 per year. She plans on living overseas for a couple more years before returning to the United States.
Her employer doesn’t offer any retirement benefits or match, and her health insurance accounts are not HSA eligible.
She’d like to contribute to index funds. Is this a good strategy? Does the fact that she lives overseas change her considerations?
Nicole is from New York and is living in Abu Dhabi. She’s been living there for three-and-a-half years and makes good money. She’s repaid her student loans and has a lot of cash saved. She’s single.
She wants to become financially independent. What should she start doing now?
Karen is 32 and lives in Los Angeles. Her take-home pay is $4,300 per month. She supports her parents financially, which costs $1,200 per month; she also lives with them.
She paid off $60,000 in student loans in 5 years. She’s has $100k in a high-yield savings account and $100k in 403b. She holds $12k in student loan debt from graduate school.
She wants to make 20 percent downpayment on a home with the cash that she’s saved. She’d like to live there, but also have the potential to rent out this home if, at any point, she decides she doesn’t want the burden of a mortgage anymore. She’d like to keep her mortgage to $2,000 per month.
Given that the housing market is so high, should she buy a home? Or should she wait for a market crash and keep saving in the meantime?
Former financial advisor Joe Saul-Sehy and I tackle these questions in this episode. Enjoy!
- The E-Myth, by Michael Gerber
- The Goal, by Eliyahu M. Goldratt
- Steal Like an Artist, by Austin Kleon
- Originals, by Adam Grant
- Why You’re Not as Busy as You Think – Interview with Laura Vanderkam
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