Irresponsible finances- advice?

[Douglas]

So a lot of background for my question-

I am 53 and was married for the first time last year. As a bachelor that made good money I never worried about the future financially. We currently live outside of Boston.

My wife (age 50) and I started dating in 2005 and we were married one year ago. In 2008? I was making $125K a year and had $40K in savings and no 401K. I owned a house worth $340K but had only $50K equity in the house. I ended up quitting my job to spend more time with my sick mother and do repairs on my house to sell it and move to a smaller place. Leaving the job was immediately greeted with the mortgage crisis and long term depressed job market. I couldn't sell my house and I ended up being out of work longer than I expected, and after more than a year I found a job that paid only $75K a year, which was my only option. In the next two years my meager savings turned into $25K in credit debt.

In 2010, I returned to my previous job and have made $135K a year since (no 401K through company). My girlfriend/wife and I have not been shy on spending money and I have not lowered my credit debt in the time since, it is now $35K. Still no 401K or savings.

We purchased a house together in 2015 for $422K with 20% down. Current inflexible living expenses are pretty high. I have tried unsuccessfully to sell my first house on and off since, but have had good renters to cover the mortgage. I will try to sell it again in the spring to pull out my equity which should now be $80K. This would solve a lot of my short term financial issues that I am discussing.

My wife makes $25K a year, owns a condo that she bought for $250K at the height of the market in 2007? and maybe has regained most of the current mortgage ($225K). I desperately want her to sell it but she now likes the rental "income", which covers the rent and a little more. I deal with any issues. I am afraid its value will plunge in the next recession. She also inherited $37K 20 months ago, but that has been spent on our new house. She has $60K in a 401K account, no appreciable savings.

So yes, I may be the most financially irresponsible person alive. But my wife has known our finances, makes some poor decisions as well, and we argue about how to proceed. It would not help to know what I should have done in the past, we are looking for advice to some current questions. Any advice is greatly appreciated.

1) my wife thinks that I should set aside money each month in a 401K. I believe that is unwise while we have significant credit debt (~15% rate) that should be dealt with first. Opinions?

2) my wife thinks her condo is a good investment, I see it as a burden that has a lot more downside than upside.

3) my job is pretty secure so if I don't sell my house to get the equity to solve the short term issues, I see our plan of action to get some safety savings while paying the credit debt. I think this could easily be done in 2 years if we have spending restraint. Maybe start the 401K savings when credit debt is down to $10K.

Thanks so much for any advice!

[GoodSteward]

*I wrote this and didn't realize the post (or thread) wasn't approved yet so it wasn't visible. Still getting used to the mod options.

We are going to need to see more details about your finances. Monthly expenses and income. You need to make a budget if you do not have one and if you do you need to share that as well for everybody here to really give accurate advice. I'm going to let some others chime in on this one to break it down some more, but I will start with a few observations and thoughts.

So yes, I may be the most financially irresponsible person alive.

You are not "the most financially irresponsible person alive." You have made some bad choices, but we all have. Also, you are here looking for outside opinions to help clean it up. That's above average, so a great start!

But my wife has known our finances, makes some poor decisions as well, and we argue about how to proceed.

You and your wife will need to agree on how to proceed to make real progress, and all blaming should stop. We all suck at times and make bad choices. We all help clean it up afterwards. Whether or not you can come together on this is going to be either the success or failure of your attempts to change. As you hear suggestions and look over the numbers make sure you discuss it with her. More than likely the change will come in strides, and you may need to be willing to give on some things to start with until she sees progress.

The first thing I see here is you have no emergency fund, so top priority will be getting enough of one to cover so you can stop using credit cards. You must stop digging into that hole.

The second thing is at your age you must start retirement ASAP. I understand from a numbers point you will not make as much interest as you are paying out on credit cards, but you do not have time to worry about that anymore. Every year you wait to start you loose any benefit compound interest will have in your favor, and you can't go back and make up for not putting into retirement accounts. With that being said, you only have an IRA as an option it looks like that is Tax deferred. 401ks are through jobs only (I couldn't tell if yours doesn't have one or you just don't use it.)

Make sure your wife is paying into her 401k to the match. She has a low income, so the match won't be much.

As a side note, I am liking the idea of keeping the condo as long as you are able to not loose on it while you do the rest. You need cash flow for retirement, and if you can have that condo paid off by the time you retire that can be a supplemental income for you.

This is all just some thoughts without knowing the real numbers, so take them with a grain of salt. I suggest looking into Dave Ramsey for the motivational help to get aggressive with this.

[Fishindude77]

It's pretty obvious from your detailed explanation that you understand your financial situation, yet for some reason you fail to take any action to correct it.

First thing that needs to be done in a critical situation is stop the bleeding.
My advice would be to cut up credit cards and quit using credit, unload all three houses, get rid of a bunch of unneeded "stuff", rent an apartment and then start rebuilding. No more big mortgages, no more car loans, no more credit card use, etc. until you have established a lengthy pattern of financial responsibility.

You have adequate income to get this straightened out pretty quickly and get things turned around, but you need to take action.

[creditcardfree]

Yes, you should be saving for retirement! That is an emergency, you won't have anything if you don't ever start.

[GoodSteward]

It's pretty obvious from your detailed explanation that you understand your financial situation, yet for some reason you fail to take any action to correct it.

First thing that needs to be done in a critical situation is stop the bleeding.
My advice would be to cut up credit cards and quit using credit, unload all three houses, get rid of a bunch of unneeded "stuff", rent an apartment and then start rebuilding. No more big mortgages, no more car loans, no more credit card use, etc. until you have established a lengthy pattern of financial responsibility.

You have adequate income to get this straightened out pretty quickly and get things turned around, but you need to take action.

I was thinking similar on some of it, but from what he has mentioned offloading the houses may not be so easy. He has been trying to sell the one for a long time. If both houses are covering their own debts I wouldn't worry about that immediately unless he can sell the second one to make up a lot of lost time.

[Fishindude77]

I'd get away from those houses, even it you had to take a little loss.
What happens when one needs a new $10,000 roof, or $4,000 furnace?

[scfr]

You said "no 401K through company" but you also said that your wife thinks you should start putting money in to a 401K.

Does your employer offer a 401K? Do they offer a match?

What was the reasoning for buying the 3rd residence after marriage rather than moving in to one of the 2 residences that you already owned between the 2 of you? Understanding the "perceived necessity" for the 3rd residence may help is in coming up with suggestions.

[disneysteve]

My wife makes $25K a year, owns a condo that she bought for $250K

How did that happen? How did someone making 25K manage to buy a condo for 10 times her income? Or was she making a lot more at the time?

[tripods68]

Both of you will end up in Divorce if keep blaming each other. You guys need to work "TOGETHER" as one.

I recommend www.daveramsey.com.

Taking FPU class will greatly benefit you and your wife finance's and hopefully built trust again.

[LivingAlmostLarge]

Is she looking for better paying work? And why is her condo in Boston underwater? It's been awhile since the recession which hit there early in 2005 it started and now it's past peak a lot in some areas. Sell her condo and your house. You need to focus on saving and one hit to the renters losing their jobs and squatting and you'd be in debt again. You don't have the assets or ability to carry all these liabilities on your books at this time.

Maybe others more experienced in RE will disagree with me, but I think personally you can't afford the risk of having 3 mortgages, 50, no savings for retirement or Emergencies. Even if the renters cover the mortgage now.

What's the monthly budget look like including the rentals?

[TexasHusker]

Yes, you should be saving for retirement! That is an emergency, you won't have anything if you don't ever start.

I've never understood that. It's like retirement is some holy grail. Do you have to be retired to be happy? Doubt it.

[GoodSteward]

I've never understood that. It's like retirement is some holy grail. Do you have to be retired to be happy? Doubt it.

It's about financial security when you can't work anymore. Most people can't work and make proper incomes until death. Retirement is really a glorified savings. Being self insured and self sustaining regardless of what happens to you. Freedom to no longer work if you don't want to. Lots of things.

The opposite is being broke and I know you don't want that for theses people. I guess to your point retirement is meant to indicate savings, not so much quitting work.

[Outdoorsygal]

Hi Douglas, nice to meet you

I’ll jump in with my two cents which isn’t much compared to the other wiser ones here

1. If your wife’s employer is matching the 401k, then that is perfect. Money contributed beyond the employer match should be diverted to your 37K CC Bills. If her employer contributes 4% she can match it by 4% but no more.

2. Your wife’s Condo is holding its own and even making a small amount of money. Not sure why you desperately want her to sell it. Let it be unless you don’t want to continue to handle those minor issues. Cheap Condos here are one of the few home structures that held its own or increased in value during the 2008 housing crisis. She’s done ok with it, worked hard for over a year (at 24K earnings) to pay off 25K.

3. You have a 400+ thousand dollar home for just two people to reside in. Either make it worth 400K plus by somehow making it pay for itself or downsize. That is your only two options. Downsize and use the extra money to pay off your loans/CC Bills.

Ideas for making house/property pay for itself- Rent out any pastures, any extra storage spaces, create a place for a few RV’ers to live illegally on your property (obviously if you live in a private area) while providing the basics-extra storage shed, water, trash, share your PO Box as mailing address, and a little bit of power to charge a cell phone/computer. This is what we did and made $275 then increased it to $300 a month easy cash w/one tenant.

4. You and/or your wife get a better paying job or an additional side job. Somehow get another income stream or two coming in

If you own any property you forgot about, sell that. I just listed some property I bought in my twenties (against my husbands will). I forgot all about it for years until this week. It went up in value pretty high due to the off-gridders. More folks are going Vagabond now residing in RV’s temporarily or for some years due to the economy. We just placed a bid on home w/property that has two RV hookups & two good sized storage sheds. We will rent out part of that property to RVers. My husband is going to spend $500 on each space to provide solar power. Sun is just 9 months out of the year here so the remaining 3 months their own their own.

[msomnipotent]

My best advice is for both of you to write down what your financial goals are, and what you think you need to do in order to meet them. It will help you find out if you are arguing because you don't have the same goals, you have the same goals but differ on how to get there, or one of you is just mad at the other and isn't done complaining about it. Then both of you decide what the main goal is and work from there. Keep it in writing, and keep it in plain sight so you both are constantly reminded of it.

I know your wife thinks her condo is a good investment. Is it really? Has it been appraised recently? Is the rent in line with other rents in the area? Can it be raised even a little? Does she have savings to repair the appliances, pay for special assessments, and a cushion for when the assessments are raised? Have the assessments been raised recently, because if they haven't, they probably will be very soon. Why are you dealing with any issues? She may change her mind about how great of an investment it is if she has to solve all the problems it generates and set all of the extra money aside for future repairs.

You don't have to wait until all of your debt is paid off to start saving. If your employer offers a 401K, start with as little as 2%. You probably wouldn't even notice it being taken out of your paycheck. Gradually raise it after your other financial milestones are met, until you are maxed. Same for your wife.

[GoodSteward]

It's been nearly 48 hours and he hasn't come back. Hopefully, we didn't run him off.

I don't see too much need to keep going until he gives more details.