Driving Your Salary

Matthew is driving a nice car around ... and with the car loan on it, maybe it's a little too nice.

QUESTION: Matthew is a pastor who lives rent free in a parsonage. He makes $24,000 a year and has a $13,000 van loan along with $19,000 in credit card debt. He could sell it for $23,700 and wants to get out of the van, but his parents are worried because they don’t want him to be stuck in an unreliable car. He also has $10,000 in cash. Should he sell the van?

ANSWER: I’d sell the van tomorrow. You can’t prosper when you have a year’s income tied up in something going down in value. You can get a quality vehicle for $10,000 and not have payments. That will free up money to attack this credit card debt. You can’t afford to turn $23,000 into $10,000 in the next few years, and that’s what you’re doing.