Buying Car for Side Hustles

[christiangirl_96]

I’m 29 and looking to get some side hustles off the ground to pay off mine and my partner’s debts without sacrificing our emergency fund.

We had twins right after my partner finished nursing school (not planned at all) and put us in a situation where we’re getting by on my salary but kinda house poor. Im praying Jerome Powell can be our savior to refinance.

Our goal is to get as close to paying off most debts except her student loans so that all of her disposable income can go toward destroying those when we can put the boys in pre-k and she’s back working (they’re currently 1 1/2). Then I’d be putting more into both our retirements (currently contributing the minimum for employer match).

My uncle offered to sell me his pickup truck for 5,000. It’s kinda a beater, but I work from home in my main job so wouldn’t be driving too much outside of my side work and we’ve wanted a truck for the utility anyway. We went down to a one-car household as I sold mine before it went to shit. The work my side hustle would be doing (woodworking, small-time hauling/moving, and some other random stuff) requires something bigger than what we have.

My question is if it’s worth it to dive into the e-fund to pay for it or take out an auto loan. So far have been pre-approved for a 5-year loan at 8.3% (so about 102/month). I’d make extra payments again once she’s back at work to pay it off sooner.

Here’s our current situation:

Monthly Post-tax income: 5,500

All mandatory expenses: 4,650

Emergency Fund: 14,000 in a HYSA

Credit Card Debt: 13,000

Personal Loan: 9,000

All disposable income has been thrown at this debt and have already gotten leads for about $500/month of income from the side hustles. Hopefully can get another couple hundred more from referrals.

It’d be mostly night work and some weekends as I don’t want to sacrifice too much time with my kids.

Any advice would be appreciated

 

[mondeb]

@christiangirl_96 You would probably be better off just using your emergency fund to pay off the debt. High interest CC debt is an emergency in my book.

The 13k in CC debt if it had a 20% interest rate is costing you more than $200 per month. Putting your emergency fund into your CC will net you a $200 profit every month for no work or risk on your part.

 

[christiangirl_96]

@mondeb Yeah I’ve seen some advice saying having a 1,000 savings would suffice. It’s just I’m beyond paranoid of my job security to the point it’s affecting my mental health (not performance related concerns. Rave reviews each year for 3 years). And I feel like it’d break me if we spent the e-fund and it happens.

It’s mostly trauma from being laid off from my first job out of school (laid off literally the day I came back from a planned vacation) and I’m in therapy for it. But I guess I could rebuild it decently quick with the extra income?

 

[mondeb]

@christiangirl_96 So your so worried about going into CC debt if you loose your job and don't have an emergency fund that your willing to just live in CC debt now? This logic makes no sense. Definitely build back up your emergency fund after the CCs are paid off and don't go back into debt but your basically paying to borrow money ahead of time and just sit on cash that isn't doing anything.

 

[bluewren2]

@christiangirl_96

So far have been pre-approved for a 5-year loan at 8.3% (so about 102/month). I’d make extra payments again once she’s back at work to pay it off sooner.

Feels like the last thing you can afford to do right now is take another loan. I understand the theory behind it from a P&L perspective towards your business (with some decent tax benefits might I add) and it's great you can fix it yourself. But what if those leads run dry? Or you make less than your car payment monthly? Or something happens that causes you to be unable to do manual labor. Then you're stuck with that truck.

Life comes at you fast (as you've seen now with the twins).

Would you be able to work some payment plan out with your uncle?

 

[christiangirl_96]

@bluewren2 He’s pretty adamant about getting the money upfront. He says he’s giving me a deal so would want the cash in full. I don’t see what that has to do with anything (like he’d take payment plans with someone else?). He’s an odd guy. But has helped me plenty in the past

 

[bluewren2]

@christiangirl_96 I'm assuming he just needs the money right away while also helping his nephew out.

I'd probably follow @daffers234 's advice with your emergency fund and your side gigs.

I understand your anxiety about your job. But if you've had good reviews with your current place, I'm sure you'd have zero issues finding something else (that hopefully pays more). And that feeling of the credit card/personal loan monkeys off your back will be euphoric.

 

[daffers234]

@christiangirl_96 I would NOT recommend financing a $5000 "beater"... let alone on a 5 year loan. Taking out a loan to try to pay off other loans isn't a good idea.

In your "mandatory expenses" are you including loan payments? What are the current payments and interest rates on those loans?

 

[christiangirl_96]

@daffers234 I guess when I mean beater it’s more like has 180k miles on it. Still in decent shape and I’d do all the repairs on it. I’m hoping to get another 100k out of it as I’m anal about car upkeep. But noted nonetheless.

Mandatory expenses does include my minimum payments on the personal loan and cc debt.

CC is 21.25% APR (so like 360ish minimum)

Personal Loan was originally 14,000 at 12.6 interest rate, 5 years (316 per month)

 

[daffers234]

@christiangirl_96 I think I would probably do a snowball method. Use your emergency fund to pay off the personal loan 100%. That would leave you with ~1 month emergency fund but also free up an extra $316/month. Then, I would be putting your $1166/month that you now have towards your credit card debt. CC would be paid off in 12 months.

Take on whatever side gigs you can without the truck and pay off the cc quicker if you can.

 

[newton3005]

@daffers234 I find the proposed approach to be a poor choice. The peace of mind benefit from only having one debt would be insufficient to me to cover the additional cost of carrying high cost debt. Putting 9 grand against the credit card instead of the personal loan would save around $65 per month.

If you are unsure about spending down all your emergency fund, pay down a portion of the credit card debt and then reevaluate in another couple months. I would suggest paying down $7k to $10k and next month still pay the same amount as your current payment. Making minimum payments is a poor idea on expensive debts. Are you disciplined enough that you won't just spend the money when you have credit available? If so, talk to your card issued about lowering your credit limit to only have maybe another $2k of credit above the current balance.