[Music] Next up, we have Ali. She says, I'm just starting my journey on the financial order of operations. Welcome! I'm 29, and I'm trying to course-correct, but I'm struggling with my car. I'm way over at $815 a month. Oof. I'm about 7K underwater, and I'm unsure of how to get out of this. It is technically low interest at 5%, and I'd pay about 7 to 8K in interest over the life of the loan. How should I handle this? How should I think about this? I don't want to miss out on investment time. Well, okay, so first of all, that sucks, right? Like, and a lot of people, Ally, you're not alone. A lot of people find themselves in this situation. I mean, we just talked about this recently, that most new car purchases—not new car, but most new car loans that are issued—actually have some component of negative equity being rolled into them. So, a lot of folks get underwater in their automobiles, and that sounds like

where you are now. Let me give you the good news first. You're 29 years old. 29 years old is not old. Yes, you're in a negative situation that you do need to course-correct, but it's not like you're behind. It's not like you're off-base. It's not like you have to do something crazy. You just got to make some really difficult decisions because what you can't do is allow this car to continue to be a nail for your personal finances. So, you might have to make some really difficult decisions to start figuring out how you knock out that car debt to at least get back to breaking. Did Ally let us know, uh, um, is this how long is it financed? Is it longer than three years? What percentage of her income is this? I mean, but she said that she's going to pay 7 to 8K in interest over the life of the loan. That's kind of the, I get that, but so that means it's probably definitely longer than years.

that's what I took it as longer than there's always you know you have to and I talk about this often is that you have to triage your financial situation because personal finance is definitely very personal and that's why for Ally you you've got to figure out if there's and welcome to this wonderful world of finance and 29 is still young I I know you feel like you're behind but we do need to triage this moment in time how do we get you out of this so you have to look at this car and you have to take our 238 rules that's 20% down don't Finance longer than 3 years and make sure that the the the debt doesn't exceed 8% of your gross income and of course there's the caveats we want your savings and Investments to be greater than your monthly payments and we don't use this for luxury cars because this is supposed to be reliable transportation to get you to your first wealth building engine your job but look at your

situation and figure out if there is a way that maybe you can aggressively pay down a portion of this debt. So then now your monthly payment, assuming it's still within the 8% or close to within horseshoes distance of the 8 of the of 8815 of the 8%, that then you've caught up to the 3 months and you can then get back to saving towards investments. If that doesn't work, I mean, you've got to figure out how you work within that equation to adjust this. It scares me because, you know, there's always the advice just to sell the car and get away from it, but you have a $7,000 eat. You turn that into a loss that you'll have to digest financially, but you're going to have to triage and figure out how you take this bad situation and how you're going to come out on the other side of it. This is no different. A lot of us come into obstacles financially, whether it's

student loan debt, whether it's, you know, the emergency that you weren't prepared for, that you had to go run up a credit card bill, and you've got it. That doesn't mean you're lost. It just means you're going to have to really button down the hatches, not waste a dime of what you have coming into the household, to figure out how you course-correct to get within 238, but also so that you can come out that much sooner into success. Yeah, I think when you're faced in these dire circumstances, you really have two options: cut expenses, increase income. And so you have to cut mercilessly to get your lifestyle as lean as possible so that you can write the ship on this debt, or you might have to figure out how you pick up additional income. Is there a side hustle I can do? Is there something I can do on the weekends? Is there some sort of thing I can do to increase my income? And so I can take 100% of that.

and start knocking out this debt to get me back into a healthy financial place because an underwater long-term car loan, even at 5%, is going to be pretty detrimental. Yeah, so, and I think we got an update that it was around six years on the financing. Yeah, we got to fix that. We got to fix it. Hard decisions. Um, because I know that the interest rate, yes, 5%, is not so detrimental, but it's more of that amount of payment for six years. You're really taking away from your future self. So, we've got to figure out how we front and load getting that car loan paid off as fast as possible or at least get down the negative equity to where it's digestible that you can move into something a little more affordable.

I'm Underwater on My Car Payments (What Should I Do?)

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