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what to pay off first??

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    what to pay off first??

    Me-
    Credit: Bad 640 FICO but slowly going up
    Debt: Bad
    $580 k mortgage @ 5.25% (little equity, interest only loan-can't refine until credit improves)
    $6,500k student loans @4%
    $8,500k car payment @9%
    $11,500 credit card @ 3%
    $19,000k IRS due this year

    Income: Good
    I earn $130k/year more or less. Plus earn an extra $2,800k/mo on rental income. What do I pay off first--the credit cards, then the IRS? How small a payment can I work out with the IRS while still paying down other debt?

    Savings: Bad
    $8,500 in money market and anemic retirement- $3k

    #2
    I think you have to pay IRS first. Then the car, then the credit cards. The things with the highest interest first.

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      #3
      I would pay of the IRS first and as quick as possible try to cut down on as much as you can through the month, less eating out etc... then tackle the smallest debt first and each time you pay one off snowball that payment plus your extra money to pay the next and so forth. There is a man by the name of Dave Ramsey who says this is the best way to tackle debt even if the interest rate is higher on another card and yet you're paying off the lower rate first. I used this method myself and it works great! Try searching for Dave Ramsey online and get any material you can from him, you won't regret it! I know I didn't. Hope this helps

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        #4
        Sell the car and buy something cheap for cash.

        You said rental income... do you have a seperate rental property?

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          #5
          I'm fairly certain the car isn't worth what's owed on it. Not sure I could get anything cheaper than an 04 Toyota Corrola...but that's a good idea if I can.

          I have done the "payoff the smallest balance first" tactic in the past and yes, it does work. That is the strategy I've taken up until owing the IRS so much. Now I'm not sure. $4k of the $19k is owed to state taxes then rest is due to the Feds. Yes, I have rental property at full capacity.

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            #6
            is it the property you are living in or could you sell it and make a buck?

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              #7
              It's tricky. It is the property I currently live in (it has separate apartments) however, I may move overseas for work for a year and could rent the entire place out until I return. The rental income would easily pay the mortgage.

              It's not a great time to sell but my neighborhood has remained somewhat insulated. I think if I sold, I could break even MAYBE. I put 10% down ($58k) but I could lose some of that in closing costs if I sell. The flip side is to rent it out and just wait for the market to turn...

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                #8
                i agree with the others who said pay the IRS first. The penalties and interest are nuts, get them paid off, you have a great income. you can do it !

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                  #9
                  I think you should pay off the IRS. They can hurt you by freezing your account to get there money and CC companies can't do but so much.

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                    #10
                    Refi on you mortgage isn't going to help you. Your rate isn't terrible, so you saving won't be much.

                    You need to work on your income side. Raise the rent alittle if you can. Take the job and have a management company handle the rents.

                    Pay the IRS first. Their interest and penalties add up. Call them up and work out a payment plan - they'll work with you.

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                      #11
                      IRS, they scare most people.
                      LivingAlmostLarge Blog

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                        #12
                        IRS, Student loans, car, credit card. If the credit card adjusts from 3% anytime soon, pay that off first. You're not doing yourself any favors with a $160K a year income and this much debt while living in a $600K house. That's what they call house poor. You'd be better off to sell the place, break even, and buy something much cheaper, in the 200 to 250K range and put it on a 15 year mortgage. That will save you money in interest, and pay the principle down faster so if you resell it works out for you.

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                          #13
                          Get the G-man (IRS) off your back first. Then start with the highest interest debts.

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                            #14
                            Definitely get the IRS paid.

                            They should be the first priority - they have so much more
                            power on levying bank accts., etc.

                            Then you can review your list and decide the order of payoff.

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                              #15
                              Always pays IRS first! Best of luck to you.

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