Spinning in the Stupidity

Jonathan's car loan situation would just about blow the doors off of everyone else's.

QUESTION: Jonathan in Alaska bought a $48,000 car and rolled his previous car loan into that payment. He now owes more than $60,000. He can make the payments, but he says his head is spinning over the stupidity. This answer is pretty easy for Dave.

Dave's ANSWER: I think you know that you need to sell it as soon as you can. It's going to be painful because when you do stupid stuff, it costs you money. It's going to hurt. I'm sorry you're going through this.

The good news is that if you learn from it, it can be the last time you'll go through it. Every time I do something stupid that costs me money, I look at it and say that it's the last time I'll make that mistake. You'll think about this a little differently from now on.

You impulse-purchased here, and the chances of you doing that again instead of slowing down, talking to your wife, praying and thinking about the long-term implications of the decision, taking a few days and looking at it are low. If you had done that, you’d have walked away from this deal.

One time, I was talking with a guy I considered to be very wise. He said the way he got to be very wise was that he used to be a fool.

You talked about selling your house and having that bring $20,000 or $30,000 in equity. If that's the case, great. List your debts from smallest to largest, which includes the amount that you're in the hole for on the car, and then apply your equity to those debts. Then sit in an inexpensive rental property while you keep your costs low and clean this debt up as soon as you can so you can buy again.

Let's start the process over. Sell the car, sell the house, throw all the money in a pile and let's get out of debt while you rent. Then once you build your emergency fund back up and are debt-free, you can build up your down payment and buy.

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