I love the sometimes-weekly Ask the Readers feature, even if I’m not great about sticking to my intended schedule. And usually I’m able to work with folks to condense their questions to a small space, which leaves me plenty of room to share my thoughts. This week, Martina sent me a lengthy e-mail that does a better job of laying out the pros and cons of her situation than I could. Read on to hear her dilemma.

I’m wondering if I should sell my 2007 Honda Fit. Or will this be a quick fix that may not pay off in the long run?

For the last several years, I’ve been trying to make it as a part-time adjunct community college instructor living in San Francisco. As everyone is likely aware, the state of California is experiencing a major budget crisis and education is suffering. As a result, I decided in 2007 to take a relatively low-paying but secure office job during the day and to continue teaching in the evenings at one of the two colleges at which I had been working. This has been a wonderful way to have some financial peace of mind, do the job I love, steady my budget, and get on with paying down $30,000 in consumer debt.

Last week, I was told by my college that, due to budget cuts, I won’t be offered classes for the summer or fall semesters. Beginning in June, this leaves me with just my trusty day job which covers only my rent, utilities, and groceries. Period. No saving, no paying down debt. Nothing beyond survival. And I’ve only got a $500 safety net in savings. If anything unexpected should happen, I’m deeper in the red.

At this moment, I can only see three ways to improve my financial situation:

  1. Get a higher-paying job, or a new second job;
  2. Get a cheaper apartment; or
  3. Sell my car.

#1 is something that I’ll be working toward. Finding a better-paying job in this economy is a tough proposition at the moment, but not an impossibility. I would also like to go back to school one night a week in order to get an additional credential that will better position me for more solid, full-time teaching jobs (and, uh-oh, it’s going to cost me for that weekly class). This additional schooling will take 12 to 18 months.

#2 is non-negotiable. Although it costs 55% of the take-home salary from my day job, my apartment is my home, and I love it dearly. I’m in an super-walkable neighborhood that’s three blocks from my day job. Most everything a person could need is within a five-block radius, and I’m three blocks from a major streetcar line. It provides great quality of life. My place is right next to Golden Gate Park — lots of free fun and exercise!

#3 is very attractive to me at the moment. I bought this car in 2007 because the main college that I worked at is 30 miles from S.F. Now that I don’t see myself making this commute through the rest of 2010, I feel foolish paying for insurance (about $125/mo.), parking tickets (sometimes $0, sometimes $110/mo.), and for the car itself. (I should mention that a parent loaned me the money for the car, and I pay $200/mo. for that.) I could sell this car for about $10,000, which is almost exactly the total of my remaining credit card debt.

So, here’s my question: Is it better to keep a good, fairly new economy car in the long run as things could improve next year and I may want to be driving again and have this good car? Or should I sell it for what I see at the moment as having greater financial freedom? I live in a very pedestrian-friendly city, and I don’t plan on leaving San Francisco in the foreseeable future. Would selling this car be cutting off my nose to spite my face, or would it be a sound money move?

Thanks for your time and consideration. Any input is very, very appreciated.

To me, it almost sounds like Martina knows what she should do. Based on my own personal experience and preferences, and based on what she’s shared in her story, I’d sell the car, too. It sounds as if her apartment contributes greatly to her quality of life, so she’s probably best served my keeping it for now.

But I also think she should absolutely do what she can to boost her emergency savings as soon as possible. Maybe even take a weekend job working retail specifically to save for a rainy day.

If at some point in the future Martina decides she does need a car, it might make sense to pick up a beater as a stopgap. (Or join Zipcar.)

What do you folks think? Should Martina sell her car or keep it? What’s her best bet in this situation?

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