If you recall from Part 1, we have just started our Total Money Makeover. It is June 2009, we are flat broke spending somewhere between $600-$1000 per month more than our income and somewhere in the neighborhood of $50,000 in debt. Let me rephrase that just to make sure you didn't miss anything here, financially we are up a creek without a paddle. This is no ordinary creek either, it's a Mississippi River sized creek with a whole lot more pp's in it than you see at first glance.
We had just acquired a pair of golden handcuffs as I borrowed $9,000 on my 401(k) in an attempt to borrow our way out of debt. Everyone knows the best time to go into debt is when you're in a financial crunch. And when you're in a financial crunch that's the absolute best time to essentially lock yourself into your job or face a large loan payment being due, or a heavy tax bill for early withdraw on retirement. Oh, I digress, we were there and I can't change that now.
A funny thing happened at this point, we stopped for a moment and decided we should plan out how we were going to best utilize the 401k loan. As a moment of full disclosure, if you asked me today if you should borrow on retirement, or if I would do the same thing again, I would say, "Absolutely not!" Without hesitation, I would recommend you not travel this path. Had I the clarity then that I do now, we would not have cashed the 401k loan check, we would have sent it back and canceled the loan. Again, I digress, we cashed that check, and in our situation it probably worked out better than it should have.
We needed a vehicle, pronto. I was now an expert on beaters, you know, a garage sale car. I had read Dave's book and listened to him on the radio and seriously, aren't all cars less than about 3 grand a piece of junk anyway? So, we quickly located and found a car that seemed like it would work. We got a STEAL of a deal. And by steal I mean, we were stolen from. Not really, but eventually that's the way it felt. On July 12, 2009, we bought our beater, a 1998 Volvo V70 station wagon with 209,234 miles. We paid $2000 cash, literally cash, for the car. I didn't mind driving it, but it certainly wasn't a head-turner. Here, have a look.
The big mistake we made is we didn't have it checked out first. So, for the next 4 months we watched it slowly fall apart. First, one of the back windows wouldn't roll down. Next the other back door wouldn't open from the inside. Then, it needed the coolant filled at least once on a roundtrip to work. Then, I don't know, make something up, it doesn't matter, over the Thanksgiving weekend in a puff of white smoke, literally, the head gasket blew and she was done for. We held onto that car for another 2 months and sold it January 17, 2010 to a local body shop to use for parts. We got $500 for it when we sold it.
Think about that. We bought the beater for $2000 and sold it for $500 after driving it for 4 months. That's $1500 for 4 months. While it isn't exactly a nice car or great deal, $375/month is essentially a car payment so it wasn't a totally bad deal, and it kept us from continuing to accumulate miles on the VW Passat that was coming due on it's lease. In October we had turned in the Passat, and with the mileage overages we had accumulated, we owed $5232.26 at lease termination.
That Thanksgiving marked the start of a totally new era for us, the era of having a single car. Another full disclosure here, I also owned, and by owned I mean had a loan on, a motorcycle. So while we really did only have one car, I did use the motorcycle for my work commute when the weather was acceptable.
How to you operate a family of 4 on a single car? Easy, the same way my parents did. You carpool, plan your schedule, communicate on who needs to go where and when. Was it a challenge? Sure. Was it easy? Nope. Is it possible? Absolutely! Suzanne and I lived the single car family life for 3 years and don't regret it, not one bit.
Damn, we still need a car... The lease on our Acura TL was coming due in March. With our Total Money Makeover well underway we were forced with a dilema. What do we do about a car? We had a really bad taste in our mouth about getting a beater (again), but had committed to quit borrowing money. By March 2010 our credit was so far gone borrowing wasn't even really a choice. However; we had managed to clear a LOT of debt so we had income to cover the bills. With this in mind, we borrowed a few thousand dollars from an individual and moved them to the top of our repayment list. That vehicle was a little more than a beater, for $7750 we purchased our 2007 Saturn Vue with 91,325 miles on it on March 8, 2010. This vehicle was paid for in a combination of cash and direct bank transfer. Again, no lien on the title, but we did have a unsecured personal loan with an individual.
This ends the saga of our vehicles during our Total Money Makeover. I didn't expect this post to be entirely about cars, but once headed that road, I figured I might as well continue. In Part 3 of Surviving Debt I will back track a little bit and take you on the road with us as we started our Total Money Makeover and started attacking our debts and getting our financial life back in order.
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