Sell a Car?

Ryan and his wife are in a big hole. Dave helps him sort through the mess of his situation.

QUESTION: Ryan is a brand new listener.  He and his wife have $60,000 in student loans, $4,000 on a credit card, and $24,000 in car loans, plus their mortgage.  Their household income is $55,000, they have $3,000 in savings and he’s about five years from graduation from graduate school.  Should they sell one of the cars? 

ANSWER: You have to sell the most expensive car.  The car is worth $13,000, so you’ll be $3,000 in the hole, but $3,000 in the hole is better than $16,000.  Save $1,000 or so for a “get-around” car that you can buy with cash. 

Then pay off the credit card.  Finally, start attacking the student loans.  And pay cash for graduate school.