Looking for some advice to save more, and be more fiscally responsible.

[TFFT]

Hi! I hope you don't mind me just unloading here and asking for some advice.

Quick background about myself before I get into specifics. My credit is really good (810). I have no credit card debt, and non-house loans. We have two cars that we own outright, with low mileage and well maintained. I had gotten into some credit card debt in the past throughout my life. Twice I've had huge debt, but managed to work my way out of it again without bankruptcy, or help from any organizations or anything. Simply just buckling down and not spending any money. I recently just came back from this AGAIN. I'm in GOOD shape right now, but I seem to fall off the wagon now and then. While I am still somewhat young, I REALLY want to make it last this time.


So here's where I stand:
1 - I have a home mortgage. I currently owe 65% left of my mortgage. The home is not upside down, and is worth substantially more than what I originally paid for it. (30 year fixed). I'm 10-11 years into the loan.

2 - I also have an equity line of credit which is worth about 1/3rd the value of the home. Adding the equity line and the mortgage principal left, I am JUST under what the original purchase price of my home is. Although arbitrary, it's worth mentioning that the home is (as I said) "worth" substantially more than what I originally paid.

3 - No other debt, I'm completely free of any debt... COMPLETELY free. Just my mortgage and my equity line. I have a solid income, but the budget is moderately tight. I have about a little less than 1/6 of my income that I actually take home AFTER deductions which includes charity, retirement, etc. This is money that is after paying all the bills for the month.

4 - With respect to current savings, I only have 1 month of actual savings.

5 - With respect to retirement, I've got another 20+ years before I can early-retire. I have about two times my current annual income in retirement savings (401k).

6 - I am also funding 529 for my child who is still in day-care. I think I have the equivalent of 1 year of community college saved up.


So, typing all this out, it really doesn't seem like I've got it made, but I keep finding myself in the same damn situation every 5-6 years, and I'm trying to figure out what I need to do to make it stick this way. Most of it hasn't been all irresponsibility. The equity line I took out helped pay for a new roof, and a few other things. I'd say maybe 1/2 of it was pure irresponsibility. Other debts (credit card or whatever) that I had accrued in the past was as a result of other things, moving the family for job opportunities (still kept the house), or getting my Masters degree, other things like that.


I'm trying not to ramble... but let me focus it here. What are some things that I can do to keep myself from repeating my past mistakes? With respect to the two debts that I do have, mortgage and a home equity. Which should I be trying to pay off first? Should my focus be on savings?

For the record, I do invest in the stock market with my 401k and a separate account, but I'd rather keep that separate from the discussion.

Any help would be greatly appreciated!

[LivingAlmostLarge]

How old are you? Are you married?

So you basically consolidated your non-mortgage debts into a home equity line of credit? What are the numbers? You need to write down a budget and stick to it.

The reality is you owe 65% mortgage and 33% home equity line on house. What are the rates?

[TFFT]

How old are you? Are you married?

So you basically consolidated your non-mortgage debts into a home equity line of credit? What are the numbers? You need to write down a budget and stick to it.

The reality is you owe 65% mortgage and 33% home equity line on house. What are the rates?

Thanks LAL! I appreciate the response. I don't want to give too much personal information but I'm fairly young, and yes.

The equity line wasn't a consolidation of debt... it was used to repair my home after a hurricane (amounts that the insurance company wouldn't cover), and to make improvements like a home addition. The other 25% of the equity line was irresponsibility, or foolish investments.

Mortgage is 5.23%, but it's only as high as it is because I got it over 10 years ago when that was considered a good rate. My understanding is that with how much I've already paid, doing a re-fi makes a nearly negligible difference in principal repayment.

Equity line is 3%.

Thanks!

[bigdaddybus]

If "fairly young" is 30-35 you are doing great
If "fairly young" is 35-40 you are doing ok
If 'fairly young" is 40-45 you are doing meh
If "fairly young" is 45-50 you have some work to do, and your not "fairly young"

my .02

[LivingAlmostLarge]

But you owe how much on the house? Details? Do you own 35% and have just a 65% mortgage? What are the numbers? You don't want to share details but are here asking for help.

It'll help if you just tell us what you owe, what it's worth, and what you borrowed.

[J.Apple902]

Most people will tell you that one month of savings is an inadequate sized emergency-fund. For someone your age, most people would have 6 months, at the very least 3.

It should be clear to you which of the lines of credit to pay out first. The mortgage is probably a fixed rate, and I would hope the equity line is as well. Depending on these rates (which you should provide), it may not be worthwhile to aggressively approach either. Your $$ could be better off in a mutual fund or other investment tool which accrues better than the interest on the debts.

I think you need to provide a little more info for people to help you, but my biggest piece of advice to you is track how you spend. Do an experimental month where you keep a spreadsheet and track every single purchase. Consolidate these purchases into categories:

Debt
Bills
Groceries
Transportation
Healthcare
Housing/Automotive maintenance

And whatever else you have that is a mandatory expense. Non-mandatory or luxury expenses would be: personal effects purchased that is not necessary clothing, eating out, entertainment, any foods/drinks that are unnecessary, etc.

All look at the excess that could be either contributed towards debt, or invested for retirement. Knowing how you spend is the best way to kick your personal finance into a better situation. If you already do this sort of thing, great. You require more specific aid in this case.

Good luck!

[snafu]

I suggest you re-evaluate spending to determine percentages spent on needs, wants and savings. The rule of thumb is 50% Needs [food, clothing, shelter, utilities, transportation], 40% Wants [CC, entertainment, restaurants etc], 10% savings. It helps to take savings right off the top as in 'pay yourself first.'

3-6 months Emergency savings is suggested dependent on the stability of employment. The sum reflects what is needed for bare bones basic month-to-month expenses like mortgage, taxes, utilities, food, insurance, CC/auto payments etc. It is presumed that if you lost income you'd cancel extras and work with creditors.

I notice you don't have a ROTH and since it's funded with after tax dollars making withdrawals of 'contributions' without penalty [not earnings/capital gains] an instrument you might consider. I would compare various lenders details for re-fi mortgage. Have you explored on-line lenders like Quicken for example?

What are the fees for 529 ? I find the ads questionable. Post secondary education costs have increased so dramatically in the last 5 yrs.

...just some thought

[Gailete]

One of the things that I noted is that you repeated that you have no debts other than the mortgage and the equity debt. I would consider that equity debt as debt no matter what the interest rate. I think this is how some people get themselves into trouble. You didn't mention real numbers but as an example, if you make $100K a year, you go around thinking I make $100K a year I should be able to afford this whatsit that I want. In reality due to taxes and SS coming out of a check, the person making $100K is only bringing home what $75K? So your attitude changes a bit when you see a whatsit you want to buy, you tell yourself I only make $75K and things are tight and then you walk away. I've noticed on this board that the more people seem to earn, the more they seem to have expensive necessities and high cost bills and I think this is the trouble. It is a mental thing. Someone that 'makes' $250K a year is thinking in their mind 'I make 1/4 million $$ a year'. A 1/4 million dollars a year used to buy a lot but not anymore. Now with taxes and SS and 401K programs your take home pay could be well south of $200K and that makes a difference in your mental attitude of what you have to spend.

So first things first:
1.Recognize that the home equity debt is a debt and you aren't out of debt yet.
2. Be realistic with what your take home is and recognize that that is your income to spend not the amount you make before taxes.
3. Make a list of necessary expenses, such as your mortgage, debt payments, average utilities, any monthly bill that can't be cut, and a reasonable amount for groceries and personal expenses, and setting aside an amount to save. Pay those first.
4. What is left can go towards those things you want but don't really need. Are you paying for cable? Are you paying for Netflix? What other monthly or yearly bills are coming up that could be cut or eliminated to make room for more savings and paying off debt ahead of time, or even making sure the necessities get paid.
5. Make it a fun game to find all the fun free activities in your area to be able to go out and about without spending a wad of cash. Clip coupons if that helps, but lately I don't see the sorts of coupons that used to be in the papers and it might be better to just focus on following sales in the grocery stores and a drug store like CVS where you get great sales and bonus bucks with your loyalty cards. I used to think that cereal or such on the shelves at the drugstore would be really old stock, but now knowing how often I wipe out their cereal when it is on sale, I know it is rotated as well as anything in a grocery store. This past week they had the big can of Folgers for less than $7 which is a great coffee price these days. thrift store shopping is all the rage now also. And upcycling those thrift store finds is even a bigger rage. Just checkout Pinterest for ideas.
6. One of the biggest things, is get rid of any idea that says you have to keep up the Jones' or the neighbors. They may be in worse debt than you! Live on less than what you make consistently and you will find that eventually your lifestyle is a habit and that you have money tucked into accounts all over the place.