Friday’s need-to-know money news

Today’s top story: Don’t be afraid to test-drive your car salesperson. Also in the news: How your net worth compares and what matters more, 5 family vacation planning tips learned on the fly, and creative strategies for lowering your debt-to-income ratio.

Don’t Be Afraid to Test-Drive Your Car Salesperson
Switch when you need to.

How Your Net Worth Compares — and What Matters More
It’s just a just a high-level picture of your financial life.

5 Family Vacation Planning Tips I Learned on the Fly
Stay on budget while still having fun.

Try these creative strategies for lowering your debt-to-income ratio
It could be the deciding factor when applying for a loan.

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.

Thursday’s need-to-know money news

Today’s top story: Stocks at a crossroads: 3 things to watch for in June. Also in the news: Why kids should stash summer job cash in a Roth IRA, millennials are stressed about their finances, and why now is the time to buy a used car.

Stocks at Crossroads: 3 Things to Watch for in June
Watching the market.

Why Kids Should Stash Summer Job Cash in a Roth IRA
It’s never too early to save for retirement.

Study: Millennials are stressing about their finances
Feeling worse off than their Baby Boomer parents.

Why Now Is the Time to Buy a Used Car
Getting the most for your money.

Thursday’s need-to-know money news

Today’s top story: Using your tax refund to spring clean your finances. Also in the news: A money conference for women, why the IRS wants their share of your March Madness winnings, and how Millennials can make car buying easier.

Use Your Tax Refund to Spring Clean Your Finances
Tidying up your money.

Lola: A money conference for women.
How to better deal with financial issues unique to women.

You Won! Congratulations — Now Pay Your Taxes
The IRS wants their share of your March Madness winnings.

5 Ways Millennials Can Make Car Buying a Smoother Ride
Making the process easier.

9 Smart Ways to Spend Your Tax Refund
Buying yet another overpriced gadget isn’t one of them.

How Much More It Costs to Own vs. Rent in Your State
Where does your state rank?

Friday’s need-to-know money news

Financial-PlanningToday’s top story: Financial planning for the 21st century. Also in the news: Tips for buying life insurance with a pre-existing condition, mistakes people make when buying furniture, and the best new car deals for Labor Day weekend.

Financial Planning for the 21st Century
Catching up with the future.

7 Tips for Buying Life Insurance With a Pre-Existing Condition
Working your way through a complicated system.

6 Mistakes People Make When Buying Furniture
Pay close attention to financing.

4 best new car deals for Labor Day weekend
Getting the most bang for your buck.

Friday’s need-to-know money news

Today’s top story: Amazon launches a car comparison site. Also in the news: HARP loans get extended through September of 2017, 4 finance apps every college student needs, and what to do if you can’t afford your kids’ school supplies.

Amazon Launches Car Comparison Site
The online giant gets in the car game.

HARP Loan Extended Through September 2017
Struggling homeowners have more time to refinance.

4 Finance Apps Every College Student Needs
Sticking to a budget while on campus.

What if You Can’t Afford Your Kids’ School Supplies?
Don’t be afraid to reach out for help.

Monday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How to close a credit card the right way. Also in the news: Why your financial adviser should understand how your brain works, why compound interest isn’t all it’s cracked up to be, and what to watch out for when test driving a used car.

The Right Way to Close a Credit Card
Tidying up loose ends.

What Your Financial Adviser Needs to Know About Your Brain
The psychology of your money.

5 Reasons Compound Interest Isn’t What It’s Cracked Up to Be
Fees, inflation, taxes, market performance and spending habits will affect your compounding interest.

What to look out for when test driving a new car.
How to make sure you don’t bring home a lemon.

Wednesday’s need-to-know money news

bigstock-U-s-Income-Tax-Return-Form-28476797-e1390508229663Today’s top story: Things to think about before paying your taxes with a credit card. Also in the news: How to collect a bad debt, the essentials for getting a good car deal, and the special tax challenges facing Americans living abroad.

4 Things To Think About Before Paying Your Taxes With A Credit Card
Look out for fees and interest.

5 Simple, Escalating Steps to Collect a Bad Debt
How to get what you’re owed.

5 Essentials for Getting a Good Car Deal
Be prepared to negotiate.

Living Abroad? Expat Taxpayers Face Special Challenges
Taxes are even more complicated for Americans living overseas.

A Guide To The Financial Drawbacks Of Aging
What to expect as you get older.

Friday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: Introducing the new FICO score. Also in the news: What you need to know before car shopping, the best credit cards for earning rewards, and tips on how to supercharge your savings.

The New FICO Score: Better for Debtors?
Medical collection debt will no longer count against your score.

3 Tricks Car Salesmen Use that Everyone Should Know How to Handle
Don’t be caught off guard while car shopping.

The Best Credit Cards for Earning Rewards
Getting the most bang for your buck.

10 Tips To Supercharge Your Savings
Giving your savings a much needed boost.

Friday’s need-to-know money news

imagesToday’s top story: The biggest mistakes car buyers make and how to avoid them. Also in the news: How to land your dream home this summer, saving big on your wedding expenses, and how we can learn from the money mistakes of celebrities.

5 Mistakes Car Buyers Make
Pay attention to how long you’ll pay.

7 Ways to Land Your Dream Home During the Summer
Look for a diamond in the rough.

Easy ways to save $10,000 on your wedding expenses
Location, location, location.

5 celebrity money mistakes we can all learn from
One word: prenup.

Cash 4 Phones: 5 Tricks to Buying and Selling Used Electronics
Turn those dust collectors into cash.