Thursday’s need-to-know money news

Today’s top story: Plug into your car’s computer to save money and drive safer. Also in the news: How to reset retirement plans to weather a downturn, the easiest way to earn 6,000 Rapid Rewards point, and why you should pay off all of your debt before investing in stocks.

Plug Into Your Car’s Computer toonboardney, Drive Safer
Your on-board computer can tell you a lot about your driving habits.

How to Reset Retirement Plans to Weather a Downturn
Making the adjustments.

Quite Possibly the Easiest Way to Earn 6,000 Rapid Rewards Points
All it takes is a newsletter.

Pay off all your debt before investing in stocks
Credit card debt is the worst.

Thursday’s need-to-know money news

Today’s top story: 7 tactics to help car-buying newbies bargain like a boss. Also in the news: 5 ways to save energy during the dog days of summer, what you need to know about buying a house in 2018, and how a freelancer turned dog sitting into a successful side gig.

7 Tactics to Help Car-Buying Newbies Bargain Like a Boss
Don’t be intimidated.

5 Ways to Save Energy During the Dog Days of Summer
Staying cool.

Buying a House in 2018: What You Need to Know
Things have changed a bit.

How a Freelancer Turned Dog Sitting Into a Successful Side Gig
Getting your side hustle on.

How to profit from someone else’s financial mistake

Most of us have wasted money on ill-considered purchases or stuff we really couldn’t afford. As we get more financially savvy, that happens less often. But we can still profit from other people’s bad choices.

People who prize the latest and greatest, for example, quickly need to upgrade to the next shiny thing. That leaves plenty of lightly used cars and electronics for sale at a discount.

People who can’t look beyond cosmetic damage also provide buying opportunities for those who can, since surface flaws can ding price without hurting functionality. Then there are the “d’oh” mistakes: the stuff that didn’t fit or turned out to be the wrong shade of robin’s egg blue. That stuff gets returned so it can be discounted and snapped up by frugal buyers.

In my latest for the Associated Press, three ways to profit from others’ mistakes.

Q&A: When buying a car, be strategic with your money. Here’s how

Dear Liz: My son, 27, has a 2009 car that needs a new engine and is not running. The engine would cost $6,100 to replace, which is money he doesn’t have. He owes $10,000 on his car loan at 6% interest. The car would be worth only about $4,500 if it were running.

Should he sell the car to a junkyard for $200? Should he refinance the car loan for the remaining months he’ll make payments and also try to get the interest rate reduced?

He also wants to buy a 2016 car for around $18,900. He needs the car to get to work every day. Should he buy this car and have two car loans? Or should he look for an older car for now, until he gets the “upside-down” loan paid off?

Answer: It’s unfortunate that your son’s response to overspending on one car is to overspend on a replacement.

Let’s go over some basics of smart vehicle ownership. In general, we should avoid borrowing money to pay for assets that lose value — and a car is pretty much the definition of an asset that loses value. New cars depreciate by about 20% as soon as you drive them off the lot and lose roughly half their value in the first three years. The vast majority continue losing value until they’re sold for scrap. Only a handful of classic cars ever appreciate.

That means paying cash for cars is usually the smart move. Since most people can’t swing that, at least at first, the next best policy is to make large enough down payments so the cars we buy aren’t upside down, or worth less than what we owe.

When people are upside down on vehicles, the best practice is typically to “drive out” of their loans. That means continuing to make payments until they own the cars free and clear. Ideally, they would then keep the cars until they’ve saved enough to make substantial down payments on the replacement vehicles or buy a replacement outright.

Pouring more money into this particular car probably doesn’t make much sense. Your son probably won’t be able to refinance, since he has no equity in the vehicle. He might be able to roll the negative equity into a loan on a new car, but that would leave him in an even worse financial position: more deeply upside down and probably paying a higher interest rate.

Your son should consider getting a personal loan, perhaps from a credit union, to pay off the balance. Instead of spending nearly $20,000 on a 2-year-old replacement, he should aim to spend $3,000 to $5,000 on a good, reliable older car. If he can pay cash, great. If not, he should work to get both loans paid off as quickly as possible and start saving for the next car.

Friday’s need-to-know money news

Today’s top story: 5 ways to drive a car without owning one. Also in the news: Tax refund loans for early filers, the pros and cons of senior checking accounts, and the return of triple-digit interest rates on payday loans.

5 Ways to Drive a Car Without Owning One
Ditching the car doesn’t leave you without wheels.

Tax Refund Loans Give Cash Now to Early Filers
Interest free loans can get you your money sooner.

Checking Accounts for Seniors
The pros and cons of Senior Checking.

The Trump administration brings back triple-digit interest rates on payday loans.

Wednesday’s need-to-know money news

Today’s top story: Americans don’t know much about taxes – or that they might get them done for free. Also in the news: 19 ways to save on a wedding, why you shouldn’t buy a salvage title car, and 8 tax tips for people with disabilities (and their caregivers).

Americans Don’t Know Much About Taxes — or That They Might Get Them Done for Free
Stop paying unnecessary tax expenses.

19 Ways to Save on a Wedding
Saving on the wedding means more money for the future.

Why You Shouldn’t (Usually) Buy a Salvage Title Car
Proceed with an abundance of caution.

8 Tax Tips for People With Disabilities (and Their Caregivers)
Maximizing your deductions and making the process easier.

The never-ending car payment

Car payments have morphed from a temporary nuisance into a permanent part of many people’s budgets. Whether that’s a bad thing depends on what you do with the rest of your money.

One-third of millennial car buyers chose a lease last year, which helped push auto lease volume to a record of 4.3 million and 31 percent of all new auto purchases, according to market research by Edmunds.com.

“There is a greater percentage of people who view car ownership as a monthly payment like their cell phone or cable or Wi-Fi,” says Jessica Caldwell, executive director of strategic analytics at Edmunds.com. “It’s just the way we live our lives.”

In my latest for the Associated Press, why millennials are looking at cars the same way they look at cell phones, and the financial implications.

Q&A: Letting car be repossessed will make debt problem worse

Dear Liz: I own a car that I can no longer afford. Unfortunately, buying it was a poor decision and came with terrible interest rates and terms. I’ve been 30 to 60 days late on the payments for close to a year and have other debts that I haven’t been able to pay. Because of this, my credit is already in the basement. I’m underwater on the car (by about $7,000) and am feeling like the only option is to have it “voluntarily” repossessed. I really feel that if I didn’t have this $400 payment and another $200 a month in car-related costs, I could get my other debts squashed, build some savings and get in a much better place financially. I should mention that I have another (free!) car available to me when I need it and live in an area with reliable public transit, plus I have carpooling options that can get me to and from work at little to no cost. I have no major plans for anything that would require amazing credit scores. I have a stable job and rent an apartment with my boyfriend, who has strong credit but not a huge capacity to help financially. Am I insane? How would I even begin to recover from a repossession?

Answer: Having your car repossessed won’t relieve you of the debt. In fact, your debt is likely to increase.

Repossession costs such as storage, preparation for sale and attorney fees can be added to your loan balance. You’ll owe the difference between that amount and the price the creditor gets for the vehicle when it’s resold, often at auction.

If you don’t pay what you owe, your creditor can sue you — and probably will, given that nice steady job with reliable wages that can be garnished.

So yes, you probably would be insane to think repossession is the answer to your situation.

Usually the best solution when you owe more than a car is worth is to “drive out of the loan” — in other words, to own the car at least until the loan is paid off. In your case, the best solution may be to park the car while you pay it off. A parked car doesn’t need much gas or maintenance (as long as you start it occasionally). You may be able to get discounts on insurance and registration if you don’t operate it.

If you still can’t make ends meet, then get a second job that will bring in some extra cash. Pay off the loan as quickly as possible and then start saving to pay cash for your next car. Also work on repairing your credit so that if you want loans in the future you’ll be able to get decent rates and terms.

Wonder Why You’re Broke? Look in the Driveway

Rockhead126's_1951_Mercury_CustomIf you’re struggling to make ends meet, your problem may not be too many lattes or dinners out. It may be sitting in your driveway.

Your monthly car payment is the tip of the iceberg.

Counting gas, registration and taxes, depreciation, tires, insurance and finance charges, Americans spend $8,700 a year on average — $725 a month — for the privilege of owning a typical midsize sedan, according to AAA, and more than $10,600 a year for an SUV. If you’re struggling with bad credit, the increased cost of financing and insurance will push those numbers even higher.

In my latest for NerdWallet, how to determine if you have too much car in your driveway.

Thursday’s need-to-know money news

medical concept -  stethoscope over the dollar billsToday’s top story: How many accounts are too many on your credit report? Also in the news: What your car is really costing you, how to manage your money in your 30’s, and it’s time to spring clean your finances.

Do I Have Too Many Accounts on My Credit Report?
The answer may surprise you.

What your car really costs you
Has your car turned into a money pit?

How to Manage Money in Your 30s
This decade could be pivotal to your financial future.

5 Ways to Spring Clean Your Finances
Winter is finally over!

3 Health Myths that Cost You Money
Not taking care of yourself could be costing you money.