[Music] G Max 1999 has a question for you. That's an easy one. It says, Yeah, party like 1999, Prince. Yeah, let's do this. Come on, lay it up. Uh, it says, My wife and I are 25 and 30 and got a car loan outside of the 238 rule. We did 5 years instead of 3 years because we did not know the foo and the money guy at the time. The interest rate is 8%. Do you recommend to pay it off as step three of the financial order of operations, or should we adapt the payments to end it at the three-year mark and then continue on to step four? So, how do you handle it when you just learned about this and you haven't followed 238? Yeah, so for those who are maybe hearing this for the first time, when it comes to buying cars, we think you should adhere to the 238 car buying rule. We want you to put 20% down on the auto purchase. We don't want you to finance for any more than 3 years or

36 months, and your car payment cannot exceed 8% of your monthly gross income. And so, if you run afoul of that, the hard thing you have to do is, Okay, well, how do I get it back inside of that realm? So, real easy, like spreadsheet financial calculator mathematics here, I would figure out, Okay, if I finance it over five years, and I know it's supposed to be financed over three years, what would my payment need to be for me to pay it off inside of that 36-month window? So, that's step one that I would figure out. Now, here's where I think it gets a little tough, and I think this is going to be an unpopular opinion and maybe a hot take. If you do that, and then you determine that, Oh, wow, that payment that I have over three years far exceeds 8% of my gross income, well, then you might have to make some tough decisions. Then you might be in a precarious situation. Well, there's also, there's another element that you could, because you really get two options. You

either increase your payments to get it now within check of 238, or you can actually, if you have a little extra in your cash reserves, you can go ahead and pay down, you know, figure out what your current payment, which if it is 8% of your gross income, figure out what 8% of your gross income is to figure out what you need to do in a lump sum to get this thing caught up. It's a little bit of math. We actually have a great car buying calculator, so if you want to play around with the numbers to kind of help you figure out some of this, go to money.com resources. You can actually use that portal to kind of figure some of this out. But, and there's a few other elements to car buying that I just like to remind people, 'cause 238 is supposed to be your access point to reliable transportation. This is not to get you into that luxury vehicle to impress people who just do not care about your financial life, but you think that they do for some reason when you

when you sign that note that's S8 to $1,000 or more like a lot of people in you know out there doing in the world now. But the key thing is this needs to be your monthly investments into your Roth, your 401k. Those monthly investments need to exceed that monthly car payment absolutely. And then if this is a luxury purchase, meaning that if you have anything that's like you know BMW, Mercedes, Audi, any of these things that you got some of that German engineering in there, by all means you need to pay that off same as cash. You can pay it off within a few months. You don't buy luxury goods or luxury vehicles with 238. Now there this may be the case. You may have bought this automobile and maybe you put down a decent down payment. You have some equity in it and you determine holy cow I don't have an emergency fund. I don't have cash reserves that I can go dump into this thing. And I also if I try to do this

over three years, my payment is going to way exceed 8%. You may have to do an assessment and say, Okay, is the actual best path forward for me to get out of this automobile? Might I be able to still say, sell this car and get into something more affordable, more reasonable, more in line with my financial situation? 'Cuz what you don't want to do is this five-year thing that you've now gotten yourself wrapped into. You don't want it to cause you to put your financial life on hold for five years. That time is just so, so, so valuable. So do a self-assessment, determine where you are and what options are realistically available to you, and then be true to yourself. If you have to make a tough decision and decide, Okay, maybe this car is not the right car for me right now, it's not no forever ever, just know right now.

We Broke the 20/3/8 Car Buying Rule! (What Should We Do?)

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