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:
- Get a higher-paying job, or a new second job;
- Get a cheaper apartment; or
- 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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Thanks to everyone for your input — lots of ideas. I am feeling more confident about going into private tutoring and consulting on the side *and* more confident about going car-free.
#68 (Nancy L.) and #91 (Missy): thank you. While I am working toward becoming financially sound, I like to live by design and not by default. I’m currently in a studio at market rate and have never been happier in my life after having lived with roommates for many years. This is the right choice for me. And while teaching + doing the day job, the rent is much less than 55% of my total income.
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I went through this 5 years ago. Sell the car! I did and never regretted it. Zipcar gets me through anything I need and it’s saved a lot of money and hassle.
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I agree with a million others who say sell the car. And if we lived closer together, I might buy it off you. I’d love a Honda Fit
I’d also be wary of spending too much money on education to be a teacher (if you’re looking for public school K-12 teaching). Salaries are not great, and right now with all the cutting, there are more teachers than positions. Check into your urban schools – many of them have alternate route programs that allow you to teach and get certified at the same time, or take a few-week intensive class in the summer and teach in the fall.
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Re: tutoring. In my experience it often dries up in the summer, unless you can get hooked up with prep programs for people who need to pass a summer algebra/English/Spanish etc. class before going to a Cal-state in the Fall. Keep that in mind as you budget.
Also with tutoring, put up advertisements at the bulletin boards in the departments of community colleges/colleges of your subject area ASAP. Sometimes college students will hire a tutor as a group to help them prep for midterms and final exams (both of which are coming up soon!)
With K-12 tutoring, it’s usually found by word of mouth. If you can do a great job with one person, often you’ll have a ton of other folks clamoring for your services, but that snowball can take a while to get rolling.
Also figure out payment penalties in advance for if the person flakes and doesn’t show. It sucks to rearrange your schedule, show up some place, and then not get paid.
Good luck!
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I’m curious about West-coast adjunct teaching jobs and what kind of commute is required. As I understand it, while San Francisco has a great transit system, outside the city transit is/was spotty for most of California?
Here on the East coast, you’re really limiting yourself if you have to rely on public transportation to get to community college teaching gigs– it certainly means you can’t take gigs at more than one college at a time, unless one or both are online.
Having known several people in travel-dependent fields whose ownership of “beaters” ended up costing them jobs when those beaters ate up their money and their off time, I’m curious about the recommendation to buy a beater if she gets a decent job. My experience is that you have to have money in savings in order to survive as a single woman driving a beater– or have reliable public transit. But perhaps the Zipcar would solve that problem.
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#105 (Jenne): That’s exactly how I ended up going for the new car — I had been through too many beaters. In California, community college adjuncts often call themselves “freeway flyers” because we’re always in the car going from one college to the next, sometimes quite a haul.
Less car time and more security was another factor in balancing out the teaching with a 9-5. My thinking is that it would make life more livable as I hunt down the elusive full-time instructor gig at my local community college.
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Sell the car. Easy.
I have been trying to go car free for over a year but I am only down to a reduced amount of vehicle usage. Being car-free would be a dream — get a decent bike for transit.
If you need a car after you sell the Fit then just rent one if it is short term. But figure the thing costs $200/month-ish just to own would have me questioning it. And also paying off debt and no longer having those minimum payments would also clean up cash flow.
Furthermore, you will need less EF for this. How many “emergencies” are car-related? If you don’t have the car, you won’t have the ‘emergencies’ Also figuring the cost of gas and maintenance on top of this I’d drop it.
But before I sold it I would send some resumes out to see if you have a use for it because you might find a new job. Then MAYBE I’d consider keeping it.
A penny saved is a penny earned. So you won’t have the expenses. 20 hours a week at minimum wage is around $475 take home. If you sell the car, you’ll be in the ballpark (factoring 2% min payment on the credit cards at $10000).
SELL IT!
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Ditch the car. The only reason to keep it is if you need it for a job. Reduce your expenses as much as possible and start getting rid or the debt.
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I rent in the bay area and lived nearly a decade in your neighborhood. I’m sorry; I sympathize, but between #2 and #3, I’d say give up the apartment. The high cost of housing will just continue to be a drag on your finances. I know it’s daunting, but yes, you can find a compatible roommate. It’s just reality in SF that people have roommates through their 30s (or live with SO’s) and so there are plenty of decent, respectful people with whom to share. There’s no reason to think you can’t find another living situation with all the same amenities.
Selling the car seems like a quick fix, but, in my opinion, will cost you more in the long run. I am very happy that I kept my inexpensive, cheap to run car even during all those years that I only put 3000 miles/yr on it. (It’s now 16 years old, low mileage, still runs great.) Every person I know who went without a car in that neighborhood, insisting it wasn’t needed, completely reversed their opinion once they bought one.
Good luck and remember that rental prices have come down in the last year so that some people will be looking for roommates in apartments for which they are overpaying.
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I understand her predicament since I live in Alameda, which is just across the Bay. I moved to the Bay Area five years ago and chose not to live in SanFran because of the high rent. I sugeest moving to a cheaper place (in Alameda I pay $1075 for a single bedroom with covered parking, part utilities paid for, and a 15′x15′ fenced patio). Sell your car and buy a bike. SanFran has very bike friendly mass transit so getting to anywhere in the city is pretty easy plus you get exercise. I would seriously look outside of SanFran for a better apartment or follow the suggestions of several readers above about getting a roommate.
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SELL THE CAR! I’ve lived in Chicago for 10 years without a car. I take either the L or bus to work everyday. And when I need one a car, I either rent one or get a zipcar (which I’ve been a member of for about 5 years). The savings in no car payment, insurance, city sticker, gas, maintenance, tickets, etc has been huge and I wouldn’t have been able to afford my life here if I had kept a car. Free up your money and budget a small amount each month for car expenses and then if you don’t use it all, throw it toward debt or savings.
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sounds to me like the highest priority is finding a second job! it sounds like your situation was workable when you had both the teaching and the secretarial work. $10,000 will not be that useful to you if you still have to pay back your loan to your parents and if your living expenses are too high. selling the car might be part of a solution, but i don’t think it is the most important factor – it might be enough to stop driving it for a while, as some have suggested.
i would make several different budgets for different scenarios – i.e. if you make x amount with a second job, how soon can you pay off your debt; or can you afford the course that you want to take; or would selling the car allow you to “refinance” in a significant way by paying off the credit card debt.
i would take a long view and try to sketch out a couple of likely financial scenarios over the next two or three years. it will probably be apparent whether the cash from selling the car will make a significant difference to you.
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I agree with JD – you are in SF, join Zipcar! It’s very convenient. Supplement it with a bike – workout and commute at the same time
However – my boyfriend has a similar situation as you – I would say he drives around 6 times a year from Boston to PA. The rest of the time he just takes the T and walk everywhere. We have off street parking so that is not a problem. I told him a few years back to get rid of the car but he was too attached. He ended up going back for grad school and the school is 1.5 hrs away. So now the car is becoming useful. My point is if you are seriously considering going back to school, and it’s not within the city, then you should probably keep the car.
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I live across the bay from San Francisco, I commute to SF three times a week and never take my car. I’ve learned between Muni, Bart and Taxi’s I can get every where I need to in SF.
My vote is to sell you car, and look into Zipcar and even renting a car if you need to.
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Sell the car. Maybe buy a scooter if you really need some convenient motorised transport. It may be a little easier to park it in some quiet place off the street, too.
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I think until she has a new job she should not sell the car. Her new job hunt is going to be difficult with this economy and having a car widens her options. So work the job to increase the income as much as she possibly can and then if her job is 100% WALKABLE,,well then consider losing the car but not until she has the new job lined up.
d
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If I were Martina and determined to teach college courses for minimal pay, I would look for adjunct work or adjunct-like work in the form of online courses at out-of-town or out-of-state institutions, and at proprietary schools such as the University of Phoenix. The UofP hires people to teach fairly Mickey-Mouse courses through the school’s own course software, which they will train you to use. Pay on the face of it is less than a community college’s, but the courses are so much shorter and the workload so much lighter that the per-hour rate works out about the same.
If Martina has a master’s or a Ph.D. in a subject that colleges teach and she can use a computer, she should be able to work remotely for colleges in states that are not as hard-hit as California.
However, as other readers have pointed out, adjunct teaching and low-paid day jobs won’t cut it in San Francisco. Adjunct work is nothing more nor less than slave labor, especially if you’re teaching writing-intensive courses. If she’s going to get a second job, she should look for work that’s less exploitive. Working at Walmart would fit that description.
In any event, whether the second income stream is from adjunct teaching or some other low-paid enterprise, she should get rid of the car whether or not she has two jobs. In San Francisco, you don’t really need a car, but you do need an income of around $50,000 to $60,000 to maintain what would be regarded as a lower-middle-class lifestyle in most other parts of the country. If she can’t swing that, then she’s looking at paring back the amenities to a bare minimum. For what she’s paying on the car and for parking, gas, and maintenance, she could rent a car on the rare occasion when she needs one.
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I would say sell the car. Living in walking distance of the steady job and being in a city with good public transportation options tip the scale in favor of selling the car, in my opinion. Then what to do with the proceeds from the sale? I would probably pay down as much of the credit card bill as possible and try to pay off the loan with the parents.
Cars are money pits, yes indeed.
To make some extra cash, would it be possible to try to pick up some overtime work at the steady job? OT would likely pay better than a part time job after work, plus she’d already be there physically so no need to pay for transportation to get to work.
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How much do you use the car? That’s the first question. If you are looking for a second job, and find one that is not within walking distance, you will need the car. If you find a job that is within walking distance, then you probably won’t need the car. My opinion is keep the car until you find that second job.
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I’d say sell the car and get a Zipcar membership for when you need something besides transit. I’ve been carfree in Portland for over a year now and I’ve found it easy enough with the Zipcar membership to fill in the gaps.
I would also say look at your hobbies and assets for other things you can sell or market on the side. You probably won’t make much at first but it would give you another source of income. Sites like Etsy.com can help with hobbies and Ye Ol Ebay can help with just plain selling your stuff.
I would recommend a new housing situation soon or another job simply because you’re riding pretty close to the wire where you’re at right now but I understand that living situations are not as malleable as other areas, particularly if you factor in the cost of moving, and the job market is nasty right now.
Best of luck!
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I’d sell the car since you can always pick up another one later. Move to a cheaper place.. 55% is crazy, I aim for 25%, AND try to get a second job.
Think about were these decisions would put you a year out.
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Absolutely sell the car! it will alleviate a financial burden and it will alleviate stress (no more tickets). I lived in Philadelphia for most of my life, and never needed a car, that’s the advantage of a big city.
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I wouldnt sell the car just yet. It’s great that you have a pedestrian neighborhood and lifestyle but without a car your job prospects will be more limited.
I would focus on getting another job or a second job 1st and hold on to the car in case you need it to commute to a new job opportunity.
Get your income to a comfortable place and then decide about the car. Of course, as others mentioned you may want to sell the car and buy something less expensive. Again, I’d make that decision after the job/income situation is known.
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Sell the car! The apartment is also a much larger percentage of take home pay than it should be, but one justification for it is that it’s close to everything. She’s basically paying for convenient transportation twice by having the well located apartment AND keeping the car. I would definitely eliminate one of those costs, and it sounds like the car is more easy to let go of.
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Sounds like you need to do: all of the above.
1)You are living in an apartment you can’t afford. 2)The car is a financial burden. 3)You don’t make enough money to support your lifestyle and pay down debt.
Sounds like you are very young and want to have it all …. NOW!. Your debt load prevents you from moving forward no matter how you crunch the numbers. The car is not the problem.
Once you fix those three issues (and get out of debt) you will have more choices.
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I agree with #9, #23, and a whole host of others which think you should do all three. Sell the car, find a roomate, and get a part time job.
30% rent, 20% savings, 15% long term expenses, 20% monthly expenses, 5% emergency fund, 10% investment. That has been my magic recipe for awhile now and it has been working really well. If you followed this with your main job and used your part time job for only paying down your debt, you will so much happier within a year.
I live in the NYC area as well so I know it can work in expensive areas. Of course I don’t go out much, but as you said there a lots of almost free things to do in a city.
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I think that the car should be sold. It appears that it is not even needed for transportation to employment or any other recreational needs. It’s just an unnecessary bill.
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The solution is quite obvious: Find a teaching job and move to where it is.
As CA offers no teaching jobs and likely will not offer any in the near future, you must move to another state.
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Martina’s 2nd job? As the registrar at a community college in NC, I know that CC are looking for faculty who can teach on-line. We employ people from all over the world. Has Martina searched for on-line teaching positions at CCs?
Should Martina sell the car? I would encourage this if she has an alternate means of transportation….
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If you will stay where you are, sell the car.
If you move to another state, you will need to drive there. And most likely drive once you get there.
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Going and buying a beater is a bad idea. You will have to put in a significant amount of money just in repairs. Keep the car if you plan on moving anywhere else that doesn’t have a great public transit system. Also getting a new car or even a new used car is a pain. Plus with all that debt it makes it that much harder to buy one. I don’t live in the bay area so I can’t comment on the rent situation but if the rent is swallowing a good portion of your income and you’ve cut costs to the bone you might have to get a cheaper place or leave to a city where you can teach and still have some money left over. Just my lengthy 2 cents.
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My initial response was to get rid of the apartment — 55% of your take-home pay is too much (even for the Bay Area which is where I live). But because you love your home, you must be willing to stay in on most evenings and make huge sacrifices to your Wants budget: no pricey vacations or day trips, no big-ticket items (nice clothing), no extra food items (limited to Two-Buck Chuck).
Also, you’ll be improving your income so the percentages won’t always be this off.
If you are really set on staying put in SF, sell the car, but hang onto the cash. You have a lot of uncertainly going on at the moment, and while it might feel great to offload it immediately onto debt, you just lost a job and need to hang on to it in case things get crazy in the next couple of weeks as leverage. You might decide you actually really do need a car, which means you will have to go out and buy a $500-1000 beater.
Once the situation stabilizes and you master a life without a car, take the money out of the savings account and pay off some debt.
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Sell the car. Definitely. Not only will you be able to pay off the rest of your debt, but the payments you make now on your debt, car insurance, etc. will go a long way toward increasing your emergency fund.
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Sell the car.
No-brainer. It seems like a tough choice, but it’s not. I’m a huge car enthusiast, I love to drive, but I went without a car for a year in San Francisco with no issues when finances were tight. In fact the first thing I did when I lost my job was to ditch the car, followed closely by ditching my expensive apartment.
I biked to work, or took the bus/BART. I rented a car once when I really needed to go somewhere. Eventually I picked up a motorcycle, then once I had a job that required a commute I bought another car.
And that was before Zipcar. $10k will pay for years of Zipcar membership.
Don’t forget you’re not only paying $125 a month or $1500 a year for insurance, you’re probably paying $1000 a year in ticket, and losing about $1000 a year in depreciation.
That’s $3500 a year! And this is all assuming you own the car outright, and doesn’t include maintenance and your time spent dealing with it.
Sell it.
And once you’ve sold it I would seriously consider finding cheaper digs. 55% of your income on rent? Wow.
Good cars are easy to come by, it’s not
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I like where #4 is going. Chances are, your college wants to retain experienced teachers like yourself. See if you could use this as leverage to get employment in the summer/fall – e.g., a computer science prof working hourly at the computer help desk or an english lit prof taking a shift at the writing lab.
I’m with everyone who said that you should reexamine your “non-negotiable” apartment. 55% is very high…consider some alternatives now just in case the worst-case scenario develops.
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My suggestion is to see if she can get a reduced insurance rate (low milage) or store the car and remove the insurance until she starts driving it again (if possible). I think that if she gets a better job or decides to go to school, she may need the car and it would be better to have it already than have to buy something after her savings are sapped.
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I’m with all of the other readers wondering about how much is owed on the car and how it was financed. If someone is paying a loan on that car and it’s upside down, there’s a big problem. Plus, that loan needs to be repaid before you go and pay anything else.
I’m also with the team “non-negotiable is a no no” team. Sorry hon but in your situation EVERYTHING is negotiable and you need to really get a grip on expenses. That place has got to go OR you need to manage a roommate. With a better economic picture comes a better opportunity for a better place.
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Sell the car, or just stop driving it. Parking tickets, gas, etc eat up a big portion of your salary that could be going towards repaying your debt.
Also, think long and hard about returning to school. Will you really see a financial return on that investment (Other than the tax credit)? Can it be put off until your income rebounds a little?
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What about having a discussion with your employers at your low paying but steady job? Is it possible to take on more responsibility now that it has become your primary job? Is it possible to therefore earn a bit more money?
What are you teaching? Is this something that you can actually do on the side to earn money? For example, if you’re teaching photography, can you start taking wedding photos? Or if you’re teaching accounting, can you take on some bookkeeping tasks?
If you have a neighborhood that you love, try asking around for part time work. If you know the owners of various small businesses, they may have some cash work for you to do that might help you with your savings.
What about the building in which you live? Can you take on some maintanence tasks in exchange for either a rent discount, or offstreet parking? My husband & I lived in a neighborhood that was heavily ticketed, and our ‘job’ net us money off our rent, and parking that kept us from accruing tickets.
If you decide to keep the car, maybe consider getting a second job that uses said car. Work as a courier, or a pizza delivery person? The pizza delivery part is good b/c you’ll walk home with cash after every shift. This means you’ll have the psychological benefit of putting cash into savings or into paying off your consumer debt DAILY or weekly.
Good luck
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KEEP THE CAR!!
It’s the cheapest car you’ll ever buy, it’ll last at least 200k miles — maybe 20 years, and you’ll just end up replacing it later.
You used to work at night. Do it again. Wait tables if you have to.
And if your parents are the bank, you’ll prob never get a better rate.
Good luck.
Ian
P.S. I like the idea of parking it and canceling the insurance. See what it’s like with no car. If it sucks turn the insurance back on.
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I live in SF; definitely get rid of the car, at the very least. I lived here for ten years without a car, and it never caused me any problems.
Also, if I only had $500 in savings and owed $30,000 in consumer debt, I’d be looking for a cheaper place to live. This is a good time right now; many people are leaving the city because of the job market and the high rents. As a result, rents are going down. Unless she’s had her current apartment for a long time, and she has rent control, she could probably find a better deal.
As for getting a higher-paying job–good luck. About 1/2 of my highly educated, youthful but experienced, hardworking friends are currently out of work or underemployed. It’s a buyer’s market right now for labor. The third biggest employer in SF has frozen hiring for the next two years.
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