What to do, some advice please.

[future1]

Here is our situatuion:
Newly engaged, wedding in September.
$14,000 in CC debt.
Own a house, currently selling. Hoping to make $10,000. It is not worth it to keep it, constant maintenance, it is definitely a liability.
Current monthly mortgage and equity line add up to about $2500.
Want to move to CO in a year. Should we get an apartment? Currently paying off the credit cards at a steady pace of 2500 a month. Just want to move asap.
Here's some more info:
3500 ING Account
2500 Wedding Account
80000 401K
1000 Target Retirement Fund
I am 30 y.o.
Any Ideas?

[disneysteve]

By selling the house, you will eliminate both the mortgage and equity line, correct? That means you'll have $2,500/month to use toward housing wherever you move.

I'd suggest renting for a year or two, which won't cost you anywhere near $2,500 most likely. Let's say rent and utilities are $1,000/month (is that a reasonable number? I haven't rented for many years). That would let you pay a total of $4,000/month to your debt and have it gone in 4 months. Once the CC is paid off, you will NEVER AGAIN charge anything that you can't afford to pay off when the bill comes. Then you can put that $4,000/month into a high yield MMA. In 18 months, you'll have $72,000 which will make a very nice downpayment.

One question I'm afraid to ask. Who is paying for the wedding? If it is you, how much are you planning to spend and where is that money coming from? Hopefully, you don't anticipate taking on any new debt for that.

[jIM_Ohio]

Originally Posted by future1

Here is our situatuion:
Newly engaged, wedding in September.
$14,000 in CC debt.
Own a house, currently selling. Hoping to make $10,000. It is not worth it to keep it, constant maintenance, it is definitely a liability.
Current monthly mortgage and equity line add up to about $2500.
Want to move to CO in a year. Should we get an apartment? Currently paying off the credit cards at a steady pace of 2500 a month. Just want to move asap.
Here's some more info:
3500 ING Account
2500 Wedding Account
80000 401K
1000 Target Retirement Fund
I am 30 y.o.
Any Ideas?

Lots of ideas...

$2500 payment into $14000 pays it off in 6 months. This is slightly after wedding. Do you realize this?

Why keep $3500 at ING when you have $14k in debt?

Closing on a mortgage costs around 2-12k. I would rent for a year prior to moving. Makes sense to me, would probably save you money.

If you move, will you be switching jobs?

Instead of a dollar dance at the wedding, do a $200 dance, invite 70 people and pay off the debt (just seeing if you were paying attention, LOL congrats on wedding).

The priorities I would suggest are

1) pay off debt, before the wedding (make sacrafices to do this)
2) depending on cost/size of wedding, try paying cash for it
3) make sure 401k gets rolled over if you switch employers on the move to CO.
4) if house is a money pit, get out at a loss. You know you want to move, you have 6-18 months to close the deal.

IF you are keeping the same job, consider a 401k loan to pay off the debt. Set up 401k repayment so the $2500 you pay now to the bank is what you use to payoff the loan. This is a forced garnishment of your paycheck... reduces the flexibility you have with pay, but guarantees "debt is paid off". You will learn to live well below your means.

Pros to this: stop paying banks interest, start paying yourself interest
In the end, there will be more money inside 401k
Cons to this- the 401k money will be taxed twice (right now it has not been taxed at all)
If you switch jobs. loan is due immediately
if market goes up, you'll use my name in vein because the 14k you took out did not grow.

The 401k loan is an idea... I don't think it's a good one because you have 2500/mo to pay this off already. I put it on table as "last resort".

[future1]

wedding is an all cash deal, mostly paid for by my fiance's parents. Thank God! We will definitely rent after we sell the house and when we move to CO until we get established. I also have around 9000 coming back from my tax refund. What would be the best use for that? I am a big fan of the Emergency fund idea, I am in sales and my compensation fluctuates. I used equity in my home and regret it so as for the 401K idea I am real sour on that. I will not touch that until I OFFICIALLY RETIRE. Thanks for the good advice and reassurance on some of our plans.

[tinapbeana]

my only word of caution: depending on where you move in CO the cost of living might be MUCH higher than what you're used to. i agree with renting after you sell the house, but you might want to consider renting once in CO for the first year or two while building a sizeable downpayment.

and, if 'twere me, i'd work on getting 3-6 months of expenses stashed in an emergency fund after the debt is paid, what with your salary fluctuating due to the nature of business....

and congrats on the wedding!

[future1]

COL is definitely cheaper in CO. We live in a big city, think LA, Chicago, NY

[tinapbeana]

just checking even compared to big metro areas, though, prices near the slopes are absurd at best... CO is one of those states with big swings in prices, much like GA

[click4credit]

With your credit cards make sure you pay off the card with the higest interest rate first if you have several cards. You could also look at getting a balance transfer such as 0% for 6 months to reduce your interest payments.
Again, with the wedding you could cut down on some costs, if it's not too late then perhaps trim the guest list down a bit or do a few things yourself such as decorations or invites.

[disneysteve]

Originally Posted by jIM_Ohio

Why keep $3500 at ING when you have $14k in debt?

As an emergency fund. If not for this cushion, if some significant expense were to arise, such as a costly car repair, OP would need to take on additional debt to pay the bill. I think having at least a small EF is a great idea, even when you are in debt.

OP - You say the wedding is being paid for "mostly paid for by my fiance's parents." What does mostly mean? You show $2,500 in a wedding account. Is that all you expect to spend or is there more? What about a honeymoon?

I also want to vote strongly against even considering a 401K loan. I'm one of those people who considers retirement accounts to be sacred. They are for one and only one purpose and that is retirement. If you get in the habit and mindset of dipping into those funds for other reasons, you will greatly regret it when retirement comes along.

[jIM_Ohio]

Originally Posted by future1

wedding is an all cash deal, mostly paid for by my fiance's parents. Thank God! We will definitely rent after we sell the house and when we move to CO until we get established. I also have around 9000 coming back from my tax refund. What would be the best use for that? I am a big fan of the Emergency fund idea, I am in sales and my compensation fluctuates. I used equity in my home and regret it so as for the 401K idea I am real sour on that. I will not touch that until I OFFICIALLY RETIRE. Thanks for the good advice and reassurance on some of our plans.

Lose the CC debt and you "gain" $2500/mo in flexibility.

Take the $3500 ING account and the 9k refund, debt is gone in one month.

Then take the $2500 you would have paid to CC and create the emergency fund.

You need to check interest rate on the CC debt, if it's 20%, that is costing you a considerable sum.

You have a good means to pay the debt, I agree the 401k is not a good idea to use.

[disneysteve]

Originally Posted by jIM_Ohio

Take the $3500 ING account and the 9k refund, debt is gone in one month.

Then take the $2500 you would have paid to CC and create the emergency fund.

Sounds like a good plan to me.

By the way, a $9,000 tax refund is insane! If you will be keeping the same job, definitely change your witholding to eliminate most of that refund next year. If you will be switching jobs, use the calculator on the IRS site to figure out an appropriate number of exemptions to claim to avoid getting a big refund in the future.

[jIM_Ohio]

Originally Posted by disneysteve

Sounds like a good plan to me.

By the way, a $9,000 tax refund is insane! If you will be keeping the same job, definitely change your witholding to eliminate most of that refund next year. If you will be switching jobs, use the calculator on the IRS site to figure out an appropriate number of exemptions to claim to avoid getting a big refund in the future.

I don't remember if there still is a marriage "penalty", the year we got married there was a tax hit because we were single for most of the year, but filed jointly and owed a small bit.

If changing the exemptions, look at "married" status, even if it's a short 4 months away.

[disneysteve]

Originally Posted by jIM_Ohio

I don't remember if there still is a marriage "penalty

I think they got rid of this a couple of years ago if I remember correctly.

[sweeps]

(Off topic) The marriage penalty was really only a problem when the couple had similar incomes. Even before marriage penalty relief, a married couple in which one person earned $100k and the other earned $20k would do better than if the two were not married.

[jIM_Ohio]

which is true... the marriage penalty to my understanding was the standard deduction for two married people was not 2X what is was for the same two people being single.

As stated, I think this "loophole" was removed from the tax code.

[future1]

Thank you everyone for the great responses. Just to answer a few ?'s, Are wedding is completely paid for the $2500 is an EM/Honeymoon Fund. The ING is a "real EF" for catastrophes. I want this to have at least 10,000. I found out the hard way that not planning for the unexpected yeild syou just that, and it always costs money! I will be out of CC soon enough and enjoy looking at this site for advice and just to encourage myself. I have a lot of people around me living way outside their means. I want to live well below mine in order to enjoy the years to come. I transferred my CC debt yesterday, all of it to a card with 0% until May 08. Should I wait to pay it and build my reserves?

[jIM_Ohio]

Between the tax refund and the EF, you can pay off the debt. Once it's paid off, in 4 months you'll have $10k (4*2500 you currently pay on cards).

Be debt free in 4 months and you have reached your goal.

DO NOT delay paying off the debt (just because it's 0%, remember if emergencies happen, you may still have the debt and no EF).

[creditcardfree]

I agree with Jim, just pay it off, regardless of the interest rate. Worst case scenario,while you are building up EF, is that you use your cc, if a catastrophe strikes.

In fact, you'll have the $10000 once your house sell, right? So in 4 months you'll have an EF of $20K, assuming house sells in that period of time. Clean slate and a sum of cash...everyone would love to be in that position.