GMR 130: Answering Your Financial Questions
Sometimes knowing the right answer to a financial question is difficult, especially when financial stress is high and money is tight. In this episode of Getting Money Right, we’re answering your financial questions so that you’re better prepared to manage through budget challenging situations.
Show Notes
Financial Questions:
1. I blew the engine on my car, what’s the least expensive way to get back on the road?
Know that there is always more than one option. Take your time, seek wisdom before you make a decision.
How much is your car worth?
How much will it cost to repair the engine?
If too much, can it be replaced with a used engine?
$1,500 to $2,000 is cheaper and easier better for your budget then adding a car payment for the next 5 to 6 years.
If the car is not repairable, find a “beater” to get you through the next 2 years and save like mad to replace the car with a better one in 2 to 3 years.
Extra Tip - This is a great chance to look at why it’s so important to spend on purpose and save before you spend. Unexpected expenses will pop-up, even really “expensive” things like an engine replacement or car replacement. But if your budget has a savings fund built into it for car replacement and repairs, even expensive costs won’t hold you back from getting on the road again.
2. My brother and sister in law are asking my wife and me to co-sign for a car loan. What should we do?
Don’t sign
50% of people who co-sign a loan for someone ends up paying for the loan.
The bank knows more about your brother and sister in law’s finances than you do. If they refused to take the risk, so should you.
Be kind but be firm. Tell them you care too much about your relationship to put it in jeopardy, which it will most likely be if you co-sign.
“Do not be one who shakes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.”
3. We’re on a really tight budget and it seems like every month there’s at least one unplanned wedding, birthday, or special event that we’re having to spend on. What is the best way to manage these kinds of unplanned expenses so they don’t wreck our budget?
Gift-giving can be overdone. The best way to plan for these events is to determine ahead of time who you will buy gifts for and cap the gift to a reasonable amount. This will give you a yearly amount that you can budget for each month.
It’s also a good idea to set aside an additional amount each year for those invitations you just can’t say no to (grandma’s 90-year birthday party!).
An additional $100 to $200 per year set aside monthly ($9 to $13 per month) is easier to budget and manage than it is to come up with that money at one time.
You have to be willing to say, “No” to save your budget, even if it will upset some people. Your financial well-being is on the line.
Extra Tip - Increase Margin - having margin allows you to adjust for these kinds of expenses because sometimes there’s no “extra” money to take from other areas. Margin gives you the option to get through the expense and the resource to add to the budget when necessary.