Hello ~! I have been reading this website for the last few months. I am inspired by the financial stories people share and would like to share my own progress!
My biggest financial mistake has been buying a car I could not afford. Here is how it happened and what I am doing to fix it:
In 2011 - I moved back to my home town from living in a city with great public transportation where I hadn't needed a car for at least 3 years. At the time of the move, I had no savings, no car, no home of my own, no investments of any kind, however I had no debt. Moving home wasn't easy, but I left an abusive relationship and I was willing to start over from scratch without lining up a job before relocating.
Unfortunately, I had a great deal of trouble finding a job once I was back home and was unemployed for almost 6 months. When I finally got a job I felt like I had to take it - just to take anything to get going again. However, it required a 50 mile a day commute / 25 miles one way. Rather than reconsidering taking the job, I thought my solution was to buy a car. I did not have any money to buy a car with cash... so I went to a dealership.
In the past, I had always bought used cars with high mileage but in good condition from people I knew and had never had a car loan. (Cars I previously owned: 1992 Ford Focus/ 1988 Toyota Camry/ 1991 Mazda Navajo.) But this time I went ahead and financed it, thinking that it would be ok because I was finally working again. I didn't have credit tho - I lived most of my adult life under the radar paying cash for stuff and didn't use credit cards (up until I got into debt with my car - that's another story.). The loan company at the dealership put limits on the type of car I could buy, since I didn't have credit.. they said I had to buy something with fewer than 60k miles on it that was no older than 4 years.. and my dad had to co-sign for the loan... I guess so they could resell it in case they had to repossess it... I needed the car that Monday to get to work so I went to the car lot Sunday morning and I left the lot that day with a 2008 Mitsubishi Lancer GTS with 40k miles on it. The price on the windshield said 16k, but I had to pay 21k once taxes and everything else was added on. I thought that bringing my father with me would help, but he didn't know any better than I did.
It took me about 9 months to realize I had made a huge financial mistake. I was having trouble paying my basic bills, even though I was working full time and not spending money on anything but living expenses. I was paying more to keep my car than for rent. I didn't consider the true cost to own: insurance, maintenance, and gas, and I had never calculated the amount I was going to owe for interest. So dumb.
My loan is for 7 years with an 8% yearly interest rate. ... I hate to admit this, but I really didn't understand about the interest, I had to figure it out on my own. I've never taken on so much debt in my entire life. It feels horrible. I wouldn't have done this if I really understood what I was signing for. I can only imagine how different things would be if I hadn't done this.
Once I realized the mistake I had made, I thought about letting the loan company repossess the car... but I couldn't bring myself to do that because that would affect my dad's credit since he co-signed for it... so I have stuck at it and am doing everything I can to pay off the loan.
I moved back home. ALL of the money I would have paid towards rent now goes towards my car, plus anything extra that I can afford. I realize that I am very lucky to have this opportunity to live at home, otherwise I wouldn't be able to pay back the loan.
I've been upside down on the loan the whole time, but I am making progress. I am now at about 7k left on my original 21k loan... for a car that is now worth about 5k. I currently pay about 1k per month on the car payment, trying to beat the interest. As long as I can keep making these large payments, I should be able to pay off my car by July 2015. I make about 1800 a month (but I have $300 a month health insurance paid through my employer!) working full time Monday-Friday 7-4. I have been applying for a second job (weekends and evenings) for the last 3 months but have yet to find anything. I was never a person with a lot of consumer debt, I don't spend money on a lifestyle that I can't afford... but I made a massive error and I am trying hard to fix it.
If I could go back, I would never have bought that car. I realize I need to educate myself to make better financial decisions for the future. I hope to make some positive progress in the months ahead. This is my new year's resolution... to pay off my car loan and educate myself about finances so I can build a future where I do not live paycheck to paycheck forever.