N00b needs basic grown-up financial advice

[Usehername]

In two weeks, I'll be a Canadian in AZ, USA for graduate studies. I'm trying to figure out the pros and cons of different financial decisions during my 7 years of studies.

The PhD I am pursuing is in high demand in Canada, so if I follow through with my choice (which I plan to) I can expect to find a job rather easily. And though I plan to fully support myself, I do have the cushion of an affluent family should the unthinkable happen (my worst-case-scenario is not nearly as bad as others' scenarios).

I have a TAship (full tuition remission, medical insurance, and a barely-liveable stipend). I also have a $45 000 student line of credit that I can make use of for anything on top of that.

The loan is at 19%, and is not frozen while I study. So obviously I don't want to dip into it beyond what I need. However, as mentioned, I am in a position to take a calculated risk without the worst-case-scenario being as strenuous as it might be for others.

The crossroads decision:
Option (1.): Live quite frugally, accrue as little debt as possible, and live without a car in the Phoenix metro area (which is difficult to do)
Option (2.): Dip into the loan for a quality vehicle since I'll be there 7 years, and get out and do things (take a car to go hiking in the mountains, road trip to places I've never been like San Diego, etc.), since part of my motivation for moving countries is to get out and experience as much as I can.

Basically, I don't know enough about this subject to properly map out my pros and cons, and I'm looking for any sort of feedback.

TY!

 

[MacGuffin]

Financially, the smart thing to do is limit your costs as much as possible.

Lifestylewise, yeah that's a word(!), I think you are underestimating just how much Americans rely on cars for transportation. Can you really suffer in the heat like that? Not to mention missing out on what there is out there.

 

[mmhmm]

how about wait 6 more weeks,
then decide again?

living without a car for a month
should suffice in helping you make your decision?

 

[MacGuffin]

how about wait 6 more weeks,
then decide again?

living without a car for a month
should suffice in helping you make your decision?

That's a good idea.

 

[FDG]

Well, since you chose to get a 7-year PhD, the smart thing to do would be to live as frugally as possible for one year (or less, depends on how much you can manage to save) and perhaps get a very part-time (less than 20 hours a week) job on the side to save enough money for the car (I suppose you should manage to save around 9'000 dollars). Alternatively, ask your family for a loan with a more decent interest rate. 19% is a sky-high rate, actually it would be considered usury around here, so in my opinon you shouldn't touch that line of credit. Possible compromise: ask for a loan from another bank, and contemporarily ask your family to lend some collateral, this way you might get a 2-3 percent loan, for a real interest rate of around 0.

 

[Tiltyred]

However you do it, you need a car, no question.

 

[Usehername]

Well, since you chose to get a 7-year PhD, the smart thing to do would be to live as frugally as possible for one year (or less, depends on how much you can manage to save) and perhaps get a very part-time (less than 20 hours a week) job on the side to save enough money for the car (I suppose you should manage to save around 9'000 dollars). Alternatively, ask your family for a loan with a more decent interest rate. 19% is a sky-high rate, actually it would be considered usury around here, so in my opinon you shouldn't touch that line of credit. Possible compromise: ask for a loan from another bank, and contemporarily ask your family to lend some collateral, this way you might get a 2-3 percent loan, for a real interest rate of around 0.

Excellent advice. As it happens, I totally misunderstood my rate doh: for skimming), and it is actually prime (CDN is 2.5% right now) + 2%. The 19% was referring to the credit card attached to the line of credit if I don't pay off the interest.

Financially, the smart thing to do is limit your costs as much as possible.

Lifestylewise, yeah that's a word(!), I think you are underestimating just how much Americans rely on cars for transportation. Can you really suffer in the heat like that? Not to mention missing out on what there is out there.

Yeah, Phoenix would be super tough to live without a car. I'm from Winnipeg, MB, which is the coldest city in the world with a population over 600 000, and we tend to have the same situation in reverse. Most everyone drives around here.

how about wait 6 more weeks,
then decide again?

living without a car for a month
should suffice in helping you make your decision?

Simple and wise advice! Thanks.

However you do it, you need a car, no question.

I think it's going to come to that.


Thanks for the advice, everyone!

 

[Randomnity]

Excellent advice. As it happens, I totally misunderstood my rate doh: for skimming), and it is actually prime (CDN is 2.5% right now) + 2%. The 19% was referring to the credit card attached to the line of credit if I don't pay off the interest.

Nice, that's waaay better. Getting close to 45000 on 19% would be a killer. Hopefully the stipend/etc will be enough that you don't need to use it much, even still.

I don't know anything about cars but I've heard late model used are usually the best value, especially reliable brands. I agree it's a good idea to wait a month or so to see (well unless it's completely awful), plus it'll give you some time to shop around without any pressure.

You sound like you're in a great position now to go experience things, though maybe not to the excess of going too far into debt.

 

[stalemate]

Will you have any source of money other than dipping into the line of credit? You would not have to work long to afford to buy a decent car with cash, you just have to shop around.

I found my car on craigslist for $7000. It was used but well taken care of. I've been driving it for 2 and a half years now with no problems at all. It is well within reach to save up for a decent car if you work at all or have any other access to money. It isn't like you need a luxury vehicle or something, you just need to get around comfortably.