Need Financial advice

Payoff car loan and be debt free or get a rallycross car and have some social interaction?

I've been going back and forth with this for a while.  I know the correct answer is to pay off my car loan in 12 months which is doable.  I have just been going stir crazy since there isnt really all that much to do socially that I like here.  I will be the first to admit that I am not the most socially outgoing person in the world but I really need something social to do.  My friends have moved away or are married with kids now so they are busy most weekends or 750 miles away.  My closest coworker(that does what I do) is 150ish miles away, my boss is 5 hours away.

I could do autocross but its not really my thing, no cart tracks like k1, etc.  I'm not the biggest on exercise related activities like biking, hiking, etc.  I have been going to the gym and eating better and am down 25lbs this year so far though.

I would like to start rallycrossing and that is why I sold the 95M cause it was too nice and the ND1 RF is a better car in every way.    I know the NB that I would be looking for will be in the $4k-6k range(plus offroadster kit plus FM turbo...).  

Breakdown

28 Single, with a stable State Gov't job

64k/year  Pretax 6% to pension(cant change), 20% to 401k

7k in a Roth IRA(70% VFFVX/30% PGTAX), 401k(no match)(85% to VV/15% to a VO/VB combo fund) is at 13.2k, 10k in my pension, 3k in a taxable investment account(95% BRK.B/4% CGC/1% SPTM), and a 11k emergency fund.

only debt is my loan on the ND RF which is at 22.3k at 5.5% w/58 month left(i plan to pay it off sooner than term so interest rate doesn't matter).

Expenses are rent at $500/mo and food/etc at $500/mo. 

My car payment is $475 or something like that, ever since my Fiesta I have always paid $600/month at least toward my car payments.

I sold my 95M to BoxheadTim and put $2500 of that into my car loan on the ND.(I also put $1900 into a new mazda hardtop for a NA/NB which I dont own yet)

I plan to throw another $1250 at my car loan this month as well.

Buy something cheap for around $1000 to rallycross and get out there. Also pay off the car loan.

Payoff loan.  

Your Financials look good but with all that I am surprised you have not bought a house vs renting. 

I also find it odd that you are comfortable with a car payment higher than your rent payment. 

Buy the second car only if you can pay cash for it. 

John Welsh said:

Your Financials look good but with all that I am surprised you have not bought a house vs renting. 

I also find it odd that you are comfortable with a car payment higher than your rent payment. 

Buy the second car only if you can pay cash for it. 

I rent an floor of a house from my grandmother, My parents live 1 house up the street, I think the house will be put into my name soon. So i have no need to buy a house. Plus if i lose my job I cannot find one here, i will have to move to find any similar employment.

And yes I would be paying cash.

Get a cheap rallercrosser - stock miata performs amazingly. No need for offroadster kit (what’s that?) or a turbo. 

Just googled offroadster-believe me, that lift kit will hurt your performance in RallyCross. 

Lof8 said:

Get a cheap rallercrosser - stock miata performs amazingly. No need for offroadster kit (what’s that?) or a turbo. 

 

Just googled offroadster-believe me, that lift kit will hurt your performance in RallyCross. 

oh I know, It would be a future fun thing.

John Welsh said:

Your Financials look good but with all that I am surprised you have not bought a house vs renting. 

Careful with this talk.  Especially to someone who is looking for social interaction.

Similarly, avoid a beater you'll just be working on all the time instead of racing.  Been there done (doing?) that.

I spent 600$ on a bicycle to get me out of the house. Let me tell you, walls creep. If you want a car, get a car. Life is too short be pragmatic all the time, and it seems like you have it together. 

What about RC car racing?

glueguy said:

What about RC car racing?

That might be more expensive than a real rallycross car...

Your emergency fund is way too high for your current situation. 3 months expenses. $4,500.

Assuming you can, bump your 401k contribution to 25%. Or higher. Now may be the only time in your life you’re able to do that, take advantage because now is when it will help the most.

Put most of the emergency fund into something that is going to earn to earn interest or pay off debt. Especially at 5.5% interest. Which seems really high, incidentally. Call up PenFed Credit Union. See what rate they can get you. Unless you plan to pay it off in 8 months, the rate does indeed matter and you’re getting  bad deal. 

For the car, buy a beater to rally cross or make friends with someone who will let you codrive and buy them a set of tires. 

In reply to mtn :

yet again, If i lose my job I cannot find one that pays anywhere near what I make now here. I would have to move to a larger city at a minimum. Thus my emergency fund is low IMO. It is in a money market getting 1.5%  If i would have bought an 18  or 19 ND instead of a new 17 i could have gotten 0.9 or 1.9% but they weren't offering that on 17's. I refinanced with my CU(mainly for no prepayment penalty and easy of paying it online) and that is why its so high. It doesn't matter cause I will pay it off in less than 2 years either way which is at most $200 in interest.

Once the ND is paid off I am going to max my 401k(20% is already $1070/mo), that was already planned. I plan to retire at 55 with 30 years of state govt employment which means full pension(at minimum based on my current salary is $35k/yr/life)

Edit I also live in the most expensive place in the state that also has the worst job market in the state.

What are your financial goals for the next 5-10 years? You obviously have long term goals like early retirement, but is there anything medium term that you'd like to accomplish? Other than the rallycross car, that is.

While making sure you'll be OK financially with a job loss is important, I think you're in a better position than a lot of us when it comes to job security. Either way, I think you're pretty close to having a 6 month emergency fund if my tired mental calculation is correct. I'd probably bump that up to six month and then leave it alone, redirecting the additional emergency savings to your Roth IRA (remember, you can always pull your contributions out of the Roth, and you already have a pretty big emergency fund so putting the additional money to work in the Roth is IMHO a good thing).

Honestly, as someone who's not always that good at treating himself (and thus don't necessarily follow my own advice), this is what I would do:
 

• Am I correct that you don't have a student loan? If so, congrats. That's rare these days and puts you in a much better position.
• Refi the ND loan with PenFed - currently they show 36 month at 2.49%, which is a far cry from where you are (assuming good credit). Then pay mostly as agreed.
• Use the "savings" from the refied loan to buy a rallycross car and/or do some other things to get out of the house and kickstart your social life. From all of the above I get the impression you're pretty good with money so I may even go so far as to suggest to take some money out of savings to buy the rallycross car and then replenish the savings.

You're in much better financial shape than I was at your age, and IMHO it's a balance of making sure you are in good shape for the future vs enjoying life. I'd dial it back a little towards the "enjoy life" part.

I remember hearing this once:

"Remember yesterday, plan for tomorrow, live for today.  Life is trying to balance all three"

It sounds like you're doing a decent job with the first two.  Buy the NA.  Live a bit. 

In reply to BoxheadTim :

No student loans, no real 5-10 year plans, the savings would only be like $300 with a refinance and my current payoff rate. I was going to payoff the loan out of the emergency fund once it hit less than $7.5k anyway. 

I dont want to buy a house because I will get the one I live in now anyway, I don't want to be a landlord.

I will know how fast I can pay off the ND this month since this will be my 1st normal check after the refinance without the extra money from a car sale.

Also I hate being paid monthly, it has been 4 years at this job and I still hate only being paid once a month. Yes it is easy to budget but I still hate it.

I really need to make a 5-10 year plan, idk what I want to do other than rallycross.

Javelin said:

glueguy said:

What about RC car racing?

That might be more expensive than a real rallycross car...

Quoted for truth. I have one in my closet that I have double my dd purchase price into. 

Mental health takes precedence over paying off a car loan early.  Get the rallycross car and go slide around.  

MrChaos said:

In reply to mtn :

yet again, If i lose my job I cannot find one that pays anywhere near what I make now here. I would have to move to a larger city at a minimum. Thus my emergency fund is low IMO. It is in a money market getting 1.5%  If i would have bought an 18  or 19 ND instead of a new 17 i could have gotten 0.9 or 1.9% but they weren't offering that on 17's. I refinanced with my CU(mainly for no prepayment penalty and easy of paying it online) and that is why its so high. It doesn't matter cause I will pay it off in less than 2 years either way which is at most $200 in interest.

Once the ND is paid off I am going to max my 401k(20% is already $1070/mo), that was already planned. I plan to retire at 55 with 30 years of state govt employment which means full pension(at minimum based on my current salary is $35k/yr/life)

 

Edit I also live in the most expensive place in the state that also has the worst job market in the state.

Bolded parts are the relevant ones. 

You're effectively living at home. Your COL is super cheap. That isn't going to change immediately if you lose your job, and from your last sentence, it could theoretically get cheaper. You're planning as if you expect to lose your job. Do you expect to lose your job? Based on the "retire at 55" part, you don't. Your emergency fund is too high; you effectively have 25% of your net worth in cash making 1.5%. Put that in your [Roth] IRA, 401k, HSA, whatever. At your age, the potential earnings you're giving up is crazy. 

Hell, I'm your age and while I won't give you my exact situation, I will say that I have MUCH higher expenses every month, and I don't even have $11k liquid. Sure, I could get it quick (Roth IRA contributions, guitars, emergency credit cards, and company stock make up my emergency fund), but it isn't in cash. 

One last thing on your loan: Call up PenFed. Seriously--they're at 3.5% right now. You could likely save $200-$500 by doing so (not doing the math right now to figure it out). I was just quoted at 3.75% from them, when rates in general were slightly higher, for an 18 year old car with 300k miles for more than I paid for it. 

I too have a loan from PenFed and recommend them highly.  You can even get a loan on a car that you already own.  

In my case I first paid cash for the car, $6k, and then borrowed the money, $7k.  At the time it was 1.99% rate for used.  It is now a little higher but still good.  For me, at 1.99% there is really little incentive to pay it off early.  

John Welsh said:

I too have a loan from PenFed and recommend them highly.  You can even get a loan on a car that you already own.  

In my case I first paid cash for the car, $6k, and then borrowed the money, $7k.  At the time it was 1.99% rate for used.  It is now a little higher but still good.  For me, at 1.99% there is really little incentive to pay it off early.  

Yes, this. Debt is a powerful tool. Like any powerful tool, it can cause great harm, but it can also help to build great things. For someone as conservative as Mr. Chaos, I would NOT be afraid of holding that debt for a long while IF he gets it down to that 3.5% (or close). Put the money somewhere useful--like your 401k.

MrChaos said:

In reply to BoxheadTim :

Also I hate being paid monthly, it has been 4 years at this job and I still hate only being paid once a month. Yes it is easy to budget but I still hate it.

I can see that. I'm paid twice a month, 15th and the last day of the month. If either falls on a weekend, it's the Friday before. So I can have paychecks with 9, 10, 11, 12, or 13, 8 hour days. 

Good on you for not needing to buy a house. I really wish I hadn't purchased my current house, we probably would have already been able to move out of Oklahoma if I hadn't.

z31maniac said:

MrChaos said:

In reply to BoxheadTim :

Also I hate being paid monthly, it has been 4 years at this job and I still hate only being paid once a month. Yes it is easy to budget but I still hate it.

I can see that. I'm paid twice a month, 15th and the last day of the month. If either falls on a weekend, it's the Friday before. So I can have paychecks with 9, 10, 11, 12, or 13, 8 hour days. 

Good on you for not needing to buy a house. I really wish I hadn't purchased my current house, we probably would have already been able to move out of Oklahoma if I hadn't.

I mean it's the same 12 paychecks a year(salary). They pay on the last workday of the month, except for December which is like a week and a half early. So you are having to stretch a paycheck 6 weeks into January.

Also the real estate market in my area is insanely bad. Because I live in a Hip, Trendy, Popular City where everyone moves to except they bring no jobs and are retired from FL or NY.

I guess the main issue is the social aspect.

I'm fairly introverted and live in a town of maybe 15k people. I work in a city of 100k people but it is solid 35-40 mins(35-40miles) from home. My politics are significantly different for the area but I dont talk about that anyway. Not religious like most here are. Only child so no siblings, never been close to my cousins, though they like in Oklahoma anyway. Everyone here has gone to school together since elementary school. Dont drink, not into the bar/club scene, not outdoorsy.

Consider the rally car as a health investment. Sounds like the worse that can happen is that it is a waste of money. Your overall financial instincts seem like they are geared to keeping you out of trouble.

Pete