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Background Yearly Income: $165,500 ($88,000 me; $77,500 wife) Savings: $33,000 CC Debt: $28,000 Auto and Student Loans: $59,000 Monthly Income: $8,500 Expenses: $5,200 (including the $570 minimum CC payments) Savings: $2,300 CC Payments: $1,570 ($570 minimums plus $1,000 extra) CC Interest: $220 My wife and I want to buy a $500,000 house by the first quarter of 2017. I did some math and it seems to make sense that we pay off the CC debt completely so we stop paying $220 in interest and $570 in minimums. This would also raise our credit scores currently in 700s. But we'd be down to $5,000, and it makes us nervous. However, our careers are very stable and we're on course to receive 2-3% bonuses yearly in addition to 10% bonus for me and 8% for her. I feel like it makes sense for us to use our savings to wipe our CC debt. Instead of savings $2,300 a month, we could be savings minimum of $3,800. Is my math sound or am I missing something here? Is Plan A a financially smart move? Or should I play it safe and go with Plan B?  Also, am I going to be in a giant financial poo poo hole if I don't hit 20% down payment? Is PMI that bad? Zillow says my monthly mortgage will be $2,850 with a $65,000 down payment and 4% interest - is this correct?
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Jul 13, 2015 03:52
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| # ? Apr 23, 2024 15:53 |
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Pay off your debt like you should have done in the last thread.
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Jul 13, 2015 06:35
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Veskit posted:Pay off your debt like you should have done in the last thread. Plan A, right?
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Jul 13, 2015 06:45
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If you can't afford 20% down and you're still carrying credit card debt you're too poor to afford a house, at least at the price range you suggest
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Jul 13, 2015 07:00
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Get rid of your debt dude. Housewise, you're looking at the absolute upper end of what you can afford on your income. It's a dangerous proposition with nearly $90k in debt hanging around your neck. What are your interest rates? Specify by individual debt, don't just lump it together; a 3% interest rate puts you in a situation worlds different from 7+%. If you can't get together a 20% down payment, don't bother. PMI is throwing money away, on top of the extended period that you'll just be paying down interest on your larger mortgage. Nobody can tell you what your mortgage payments will be, it depends on your lending situation. Keep a healthy emergency retainer in savings, something like $10k. Use the rest of your savings to blast the highest interest CC debt, and work at throwing as much money at it until it's gone. Then you can start thinking about a house.
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Jul 13, 2015 13:32
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You can't afford to buy a house. Are those income numbers gross or net of taxes and deductions?
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Jul 13, 2015 14:37
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The $8,500 is obviously the take home after tax number. I make more money than that and the thought of 90K in debt makes me so antsy, my god pay it off gently caress savings for a few months. 2018 is more realistic if you get really aggressive in paying off all those debts. The CC interest rate is averaging 11% if anyone else is curious. Neither of the tables in your spreadsheet really makes sense with the numbers you've given, you made a mistake or left out some info because it's not adding up. Pryor on Fire fucked around with this message at 15:15 on Jul 13, 2015 |
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Jul 13, 2015 15:10
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Drop your savings/emergency fund to $10k and throw it at your CC debt. If you already have a $10k emergency fund that isn't accounted for, just throw all of the savings at it. Pay off the CC debt first, then throw whatever you can at the rest of it. My guess is that you can't afford to buy a house at that price in that time frame. Shortsighted people whine about 'throwing money away' by renting, but it's hard to imagine something that's more 'throwing money away' than PMI. You're also not taking into account property taxes, increased utility bills, or maintenance.
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Jul 13, 2015 16:38
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Pay off your credit card debt now, don't let it creep up again. Plan out to save one more year to 1Q18. You should have enough for a 20% down payment and closing costs by then.
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Jul 13, 2015 16:53
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First things first. Why do you have $28k of credit card debt? Because if you don't change that behavior, you're gonna be here again soon enough.
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Jul 13, 2015 20:09
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I feel like these threads always start in the same place. The OP has $8500 monthly income, of which $4630 is non-credit card payment expenses. So OP should have $3870 a month extra for however long they have had this income. So with that in mind, why do you have a net worth of only $5,000 excluding car and student loan balances? Where has that $3870 per month extra that you are using in your spreadsheet been going for your entire life up until now, and why do you think you can suddenly stop losing it? Did you guys just graduate college and get real jobs in the last few months?
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Jul 13, 2015 20:15
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I don't think we should exclude the car. It's probably a BMW loan at 15%.
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Jul 13, 2015 20:16
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loving someone less lazy than me go dig up the thread from a year ago and you'll find that he's basically in the same spot. I think it was something witty about game of thrones like IN THE GAME OF LOANS YOU WIN OR DIE or some bullshit. This is the guy who moved to LA with his wife with a bigger paying job and was like help I want to buy a house and bought a fancy car a bunch of CC debt. I think he's saved up 15k though in that time so that's a plus.
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Jul 13, 2015 23:46
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Hand of the King ca. April 2014 posted:Income Ahaha, why do you think you're serious this time?? Serious question, because if you're not I'm gassing this farce.
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Jul 14, 2015 00:04
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[in booming sentient volcano voice]: cast this one into the depths of the bad with money thread!
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Jul 14, 2015 00:17
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slap me silly posted:Ahaha, why do you think you're serious this time?? Serious question, because if you're not I'm gassing this farce. I don't get it. I've made progress with those CCs. And I've saved 2x the amount. Just looking continued guidance. Sorry I'm still at work so I'll respond to other posts after.
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Jul 14, 2015 00:20
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In 15 months, your income has gone up by $35k/yr. You should not have any credit card debt after 15 months of $100k+ income. Meanwhile your net worth has . . .what? You're not telling us. Fill us in. How big is the car loan? How much of the student loans have you paid off? What's the interest rate on those things? These are the questions you need to be thinking about, not "when can I buy a house".
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Jul 14, 2015 01:07
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slap me silly posted:In 15 months, your income has gone up by $35k/yr. You should not have any credit card debt after 15 months of $100k+ income. Meanwhile your net worth has . . .what? You're not telling us. Fill us in. How big is the car loan? How much of the student loans have you paid off? What's the interest rate on those things? Here's salary history: July 2014: $145k ($80k me / $65k her) January 2015: $80k (wife laid off after company was bought) June 2015: $88k (I got a raise) July 2015: $165k ($88k / $77k) Mrs. HotK started her new job last week. The first half of 2015 hasn't been smooth at all, but this month is a financial milestone for us so I'm just asking some questions for the future. BMW loan is at $16,500 down from $24,000 in April 2014. Student loans have gone up since my wife and I both enrolled in masters program. I think the loan rates are approx. 5-8% for all. We've only paid off one loan that was $1,300.
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Jul 14, 2015 01:52
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You should sign up for a Mint account and post some screenshots. None of your budget figures make sense, it seems like you're pulling a sleight-of-hand to mask how bad your spending really is. For example, is that extra $1,000 that you put towards credit card accounted for in "Savings" or "Expenses?" How much of your savings is in retirement accounts? Most importantly, why are you not dumping every last extra penny you have into paying off your credit cards? Strictly enforcing a policy of no extraneous spending until you have no credit card debt seems like the way to go in this situation.
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Jul 14, 2015 02:12
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edit: nm
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Jul 20, 2015 00:11
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Hand of the King posted:Here's salary history: Now your income is back up just wipe out the credit card debt quickly. Someone suggested keeping $10k in savings as an emergency fund and that's a good idea. That gives you $23k earning next to no interest that you can pay off all but $5k of your credit card debt. Focus on eliminating the credit card debt first (even though some have lower interest rates you need to get rid of that debt). Next you need to stop carrying a balance on your credit cards, you have the income that you shouldn't need to do that at all. Pay off your credit card balance each month once you have zeroed out those cards. Also given the bad habit you seem to have with those cards you should probably chop up two of the cards leaving only one for transactions. (this all assumes these are cash savings and not in retirement accounts) I'm assuming the car loan is high interest rate so that should be paid off as well provided that they allow early payments and they count towards reducing the interest. In the future you need to look at not buying cars you can't afford. Given the OP you seem to have an obsession with payments based thinking. You need to stop thinking that way and consider the interest future spending money that you've lost to banks/finance companies. Then you need to look at eliminating the student loans. If they are in the 6-8% range that's rather a lot and eliminating both the interest and the payments is really important. Once you get yourself to zero debt it's a good time to think about saving for both retirement and for a house. No point buying a house just to risk losing it because you can't make all the payments on a long list of debts. Devian666 fucked around with this message at 02:57 on Jul 20, 2015 |
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Jul 20, 2015 02:54
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oRenj9 posted:You should sign up for a Mint account and post some screenshots. None of your budget figures make sense, it seems like you're pulling a sleight-of-hand to mask how bad your spending really is. For example, is that extra $1,000 that you put towards credit card accounted for in "Savings" or "Expenses?" How much of your savings is in retirement accounts? That extra $1,000 is currently an expense. It's an amount we could put towards savings, but we've been dumping it into the debt. We have approximately $100k in 4 different 401ks. I have two @ $10k and $35k. She has one @ $55k and another one that just started. Devian666 posted:Now your income is back up just wipe out the credit card debt quickly. Someone suggested keeping $10k in savings as an emergency fund and that's a good idea. That gives you $23k earning next to no interest that you can pay off all but $5k of your credit card debt. Focus on eliminating the credit card debt first (even though some have lower interest rates you need to get rid of that debt). Next you need to stop carrying a balance on your credit cards, you have the income that you shouldn't need to do that at all. Pay off your credit card balance each month once you have zeroed out those cards. Also given the bad habit you seem to have with those cards you should probably chop up two of the cards leaving only one for transactions. (this all assumes these are cash savings and not in retirement accounts) Yes, these are all cash savings - not retirement accounts. I'm leaning very close to wiping out the CC debt entirely so I don't have to ever look at or think about it again. The CCs were cut long time ago. We have 2 that are stuck in a drawer somewhere. The car loan is either at 0.9% or 1.9%. We'll work on the loans after the CC!
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Jul 21, 2015 03:58
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Even at 1.9% the total interest on a standard car loan is rather small so not really worth getting worried about, just keep making the payments. The student loans are a priority as you've indicated and they have a very high interest rate relative to the car loan. I hope you can eliminate all of the high interest debts in the next year.
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Jul 21, 2015 05:02
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I just scheduled payments for $23,000 from the savings. Tomorrow most of my CC debt will be gone. I can't log onto the last CC because I can't remember the password. I need the CC to reset the password but I cut up the card and it's gone. 
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Jul 23, 2015 00:37
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Hand of the King posted:I just scheduled payments for $23,000 from the savings. Tomorrow most of my CC debt will be gone. I can't log onto the last CC because I can't remember the password. I need the CC to reset the password but I cut up the card and it's gone. Call, get replacement card, use new # to use online system. But if youre calling might as well pay over the phone if they dont charge for it. Were you fishing for a response like this or just wanted to sound helpless for fun.
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Jul 23, 2015 01:31
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Hand of the King posted:I can't log onto the last CC because I can't remember the password. I need the CC to reset the password but I cut up the card and it's gone. Might as well declare bankruptcy.
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Jul 23, 2015 02:15
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You should have 20% down when you buy a house. Keep in mind there are additional costs above the actual purchase price. You'll also still a 6 month expenses emergency fund. If I were you I'd want at least 125k in the bank before getting too serious about buying a house.
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Jul 23, 2015 03:59
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Yay.   Next month, I'll clear the last credit card balance.
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Jul 25, 2015 16:39
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n8r posted:You should have 20% down when you buy a house. Keep in mind there are additional costs above the actual purchase price. You'll also still a 6 month expenses emergency fund. If I were you I'd want at least 125k in the bank before getting too serious about buying a house. That is more conservative than required. Their jobs are stable and a 3 month emergency fund is fine. 20% down is nice if you can do it, but not necessary. If you are trying to avoid PMI you can do an 80-10-10 where your first is 80%, you put down 10% and get an equity loan for 10%. If they looked at a $450,000 house vs $500K they could get away with half as much cash and be more than fine.
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Jul 26, 2015 05:50
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Houses can be pretty terrible investments, and 20% down safeguards you against some level of swings in the market. With only 10% down, if the OP needs to sell the house within the first five years there is a very good chance you can be virtually upside down on the house. The house value drops 5% combined with a 6% real estate commission and things can get very tight. If one person loses their job or is unable to work things get pretty tight pretty quickly.
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Jul 26, 2015 11:31
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Even in your scenario they would still be fine. In 5 years, even if they got a 30 year mortgage they would still have paid down their mortgage by 10% just by making their regular payments. I don't think them sustaining a 15%+ decline in the value of their house AND being forced to sell after 5 years is the most likely outcome. If one of them lost their jobs, they would do some combo of cutting back, dipping into their emergency fund, using unemployment/severance, part time/temp work in the meantime. With their incomes, especially if they stay out of consumer debt, they will be more than OK
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Jul 26, 2015 17:37
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Zeta Taskforce posted:Even in your scenario they would still be fine. The problem with your advice is that it's only applicable to finance educated, disciplined individuals, which OP is certainly not. The exercise of saving 20% will give him a great intangible benefit.
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Jul 26, 2015 22:46
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Bloody Queef posted:The problem with your advice is that it's only applicable to finance educated, disciplined individuals, which OP is certainly not. The exercise of saving 20% will give him a great intangible benefit. In the time the OP will pay down the student loans and save 10-20% there is ample time to learn and change habits. If the OP is up for it.
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Jul 26, 2015 23:10
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Veskit posted:loving someone less lazy than me go dig up the thread from a year ago and you'll find that he's basically in the same spot. I think it was something witty about game of thrones like IN THE GAME OF LOANS YOU WIN OR DIE or some bullshit. For some reason it was still in my bookmarks: http://forums.somethingawful.com/showthread.php?threadid=36234824 At a glance, debt is down a tad and income is up, still not great though. Should be able to put a lot more into debt repayment on those salaries, even if it is California.
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Jul 27, 2015 02:38
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My credit score just went up by 52 points and not all of the zeroed out CC balances are reflected yet. 
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Jul 27, 2015 06:25
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Hand of the King posted:Yay. So remember that feeling. When you zero out the last credit card you will have gone from about $280 in interest per month for the cards to $0. The monthly minimum payments for the cards will be gone too. That money can be focused on paying off the student loan principal instead of disappearing as interest. Your credit score will fix itself as you reduce debt, and this will get you to owning a house faster (that is if owning a house is a good idea).
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Jul 27, 2015 08:03
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It's threads like these that make me question how people who make over 100k more than I do somehow have tens of thousands of credit card debt. OP, I wish you the best, I just feel like I'm living on another planet.
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Jul 27, 2015 21:35
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Most people make more money for the express purpose of being able to spend more. See the Slow Mo thread for a particularly good example.
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Jul 27, 2015 21:40
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Most people with large earnings usually have a high work load so there's a work hard spend hard cycle that's easy to fall into. You'd think with all the inflow of cash that it'd be easy to just pay credit cards but often people don't understand that credit cards aren't free money to be spent. There are a lot of businesses that are based purely on extracting money out of people who are rich or have high incomes. I only scratch my head about where all the money has gone. Big screen TVs and consoles are pretty cheap these days. I've wasted many thousands of dollars on high end computers for gaming but even computers and decent GPUs are affordable. 
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Jul 27, 2015 23:08
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| # ? Apr 23, 2024 15:53 |
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Devian666 posted:Most people with large earnings usually have a high work load so there's a work hard spend hard cycle that's easy to fall into. You'd think with all the inflow of cash that it'd be easy to just pay credit cards but often people don't understand that credit cards aren't free money to be spent. There are a lot of businesses that are based purely on extracting money out of people who are rich or have high incomes. https://www.youtube.com/watch?v=AX00Tr7n3vY&t=08m40s
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Jul 27, 2015 23:44
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