Save or payoff?

[kri$ten]

I could use some advice on what I should do with my money. My options are to put money towards my auto loan, my mortgage or save for retirement. Possibly to even refinance my condo (which I am renting out).

I work part time and live with my parents (since my divorce). I have a daughter in preschool and I plan on working more once she is in school full time. I have a condo that I purchased 10 years ago. After selling our house with my divorce I took my half and put $30K towards legal fees (yikes!) and $60K towards my condo. My plan was to pay off my condo ASAP.

Now I owe $21K on my condo mtg. My monthly payment is $920 (738 for P+I) with a rate of 6.5%. (I usually pay at least an extra $100 principal every month) I pay $270/month association dues. I receive $1127 in rent after property management company takes out their cut. Condo expenses are a loss of $63/month plus extra principal paid.

I owe $11K on my auto loan (6.49%) with a monthly payment $374. Blue Book valued at $14K.

With my calculations (which could be wrong) both loans should be paid off in 32 months.

My income is around $1300 after deductions (but can be less since I am Per Diem at work I am first to be canceled when overstaffed) plus $720 child support ($2020 total). I chose to cut back my work hours from Full Time after separating from ex so that I could be home with our daughter (1 year old at that time).

Expenses are the basic auto insurance ($100) and gas ($150), cell phone ($90), half of daughter's school tuition ($75) groceries and other misc. Plus auto and condo exp. I have no CC debt.

My savings are pathetic. I have $14K in my savings. I have $9K in a 401k from 8 years ago (My work didn't match it). I will get around $18K from my ex's retirement once he retires (He is currently 43 and in construction). I am 33 in case my age is needed.

I am leaning towards re-fi my condo (but I change my mind almost daily) so I can save money and get health insurance (my daughter is covered on her dad's plan. I could prob afford it now if I had a super strict budget.) I am just not sure if re-fi is worth it financially. If re-fi is not the best option should I continue paying an extra $100 on condo principal or should I put it towards my car or into savings.

I would like to someday move out of my parents home (True it's rent free with free babysitting while I works nights. But after 3 years it's taking a toll on my sanity.) I do plan on going back to school, I'm currently kicking back on a school waiting list. My dream would be to buy a house and rent my condo as income...some day.

Sorry if I gave way too much info. I tried to be as detailed as possible. Any feedback would be appreciated.

[jIM_Ohio]

I could use some advice on what I should do with my money. My options are to put money towards my auto loan, my mortgage or save for retirement. Possibly to even refinance my condo (which I am renting out).

I work part time and live with my parents (since my divorce). I have a daughter in preschool and I plan on working more once she is in school full time. I have a condo that I purchased 10 years ago. After selling our house with my divorce I took my half and put $30K towards legal fees (yikes!) and $60K towards my condo. My plan was to pay off my condo ASAP.

Now I owe $21K on my condo mtg. My monthly payment is $920 (738 for P+I) with a rate of 6.5%. (I usually pay at least an extra $100 principal every month) I pay $270/month association dues. I receive $1127 in rent after property management company takes out their cut. Condo expenses are a loss of $63/month plus extra principal paid.

I owe $11K on my auto loan (6.49%) with a monthly payment $374. Blue Book valued at $14K.

With my calculations (which could be wrong) both loans should be paid off in 32 months.

My income is around $1300 after deductions (but can be less since I am Per Diem at work I am first to be canceled when overstaffed) plus $720 child support ($2020 total). I chose to cut back my work hours from Full Time after separating from ex so that I could be home with our daughter (1 year old at that time).

Expenses are the basic auto insurance ($100) and gas ($150), cell phone ($90), half of daughter's school tuition ($75) groceries and other misc. Plus auto and condo exp. I have no CC debt.

My savings are pathetic. I have $14K in my savings. I have $9K in a 401k from 8 years ago (My work didn't match it). I will get around $18K from my ex's retirement once he retires (He is currently 43 and in construction). I am 33 in case my age is needed.

I am leaning towards re-fi my condo (but I change my mind almost daily) so I can save money and get health insurance (my daughter is covered on her dad's plan. I could prob afford it now if I had a super strict budget.) I am just not sure if re-fi is worth it financially. If re-fi is not the best option should I continue paying an extra $100 on condo principal or should I put it towards my car or into savings.

I would like to someday move out of my parents home (True it's rent free with free babysitting while I works nights. But after 3 years it's taking a toll on my sanity.) I do plan on going back to school, I'm currently kicking back on a school waiting list. My dream would be to buy a house and rent my condo as income...some day.

Sorry if I gave way too much info. I tried to be as detailed as possible. Any feedback would be appreciated.

A few further questions- how stable is the income? What are your current expenses?

Assuming income is higher than expenses (meaning you have a surplus), I would set aside something for retirement now- probably shoot for about 5% of income because income is low right now. As you get raises, increase this (shoot for about 15%).

If you can save 5% for retirement, and still have money left, I would do the following:

1) build up savings account with 3 months expenses
2) pay off car
3) pay off condo

are you going to live in the condo? Or is it rental only? If only rental, I would do a few things:

1) refi the condo, taking cash out (leave about 30% equity)
2) take the cash out and save at least 90% for retirement
3) In general, about every 5-10 years, refi the condo
4) do NOT pay extra on the condo

If you rent, why risk losing money on the condo (this is why I suggested refinancing it). If the building burns down, you only need to cover the balance on loan, you do not need to concern yourself with getting your money back...

If you plan to live there, I see value in having the condo paid for based on your situation.

[Scanner]

I like JimOhio's advice - I know it's pending some input from you though.

SIDE POINT:

I am not sure the details of your divorce but there is no reason that anyone should pay $30,000 in legal fees for a divorce (that's not including yoru ex's) unless there is really a bad, bad cause (like the ex takes flight with cash or kidnaps kids or something, which does happen I realize).

Your lawyer has little to do with the outcome of your case. Child support formula's are determined by state guidelines, property settlement is probably the most contentious, but there are usual guidelines on that, available by FREE GOOGLE. NOt only that, divorce isn't an outcome. . .it's a process. . .you'll revisit custody arrangemetns, child support distribution over the course of raising your children and you may learn to file motions on your own, if you can't reach an ongoing collaboration with your ex.

So far, I have spent about $2500 in mediation fees and legal advice. My stb-x will probably spend a little more.

All in all our divorce between the two of us will run around $5000-6000 maybe.

It's hard enough on the family. . .there's no reason to have anybody any more financially ruined than it has to be (and that includes your ex too - if he's financially ruined than you get no child support, which is about 40% of your income).

I want anybody on the forum, male or female, feel free to shoot me a private message on this.

Other than getting married, divorce has been the most financially significant event in my life and it's a subject that probably deserves more attention here rather than where you can buy a bag of rice for $1.00.

I try to sweat the big stuff, not the small.

Okay, back to your situation. . .

[kri$ten]

Thanks Jim.

My income can be unstable. I am a nurse (LVN) and since my status is per diem I am the first to be canceled when census is low. I just went over my pay from July through Dec and my paychecks (for a two week period) ranged from $335 (one shift) to $875 with an average of $581 per check take home.

My monthly expenses are around $1400 with $800 for bills, plus groceries and personal expenses (not including condo). I realize that I need to keep better track of my money since I appear to be spending more then I am aware of. Quicken here I come!

I never thought to re-fi and take out money for retirement. As far as saving for retirement, where should I put the money?

[kri$ten]

Scanner, I can buy rice for a dollar? Kidding.

True, my divorce did not have to cost that much. But given the situation I felt it was best for me to get an attorney to handle the details. After three long, emotional years and numerous trips to court I do not regret my decision.

[jIM_Ohio]

Thanks Jim.

My income can be unstable. I am a nurse (LVN) and since my status is per diem I am the first to be canceled when census is low. I just went over my pay from July through Dec and my paychecks (for a two week period) ranged from $335 (one shift) to $875 with an average of $581 per check take home.

My monthly expenses are around $1400 with $800 for bills, plus groceries and personal expenses (not including condo). I realize that I need to keep better track of my money since I appear to be spending more then I am aware of. Quicken here I come!

I never thought to re-fi and take out money for retirement. As far as saving for retirement, where should I put the money?

Kristen- step 1 would be getting a handle on expenses. You need to be spending less than you earn month over month. Without that aspect, retirement saving could be a poor man's game- retirement saving should only start once your budget is balanced.

See this thread for some questions which might get you on right track

http://www.savingadvice.com/forums/investing-banking/50669-questionaire-people-starting-retirement-planning.html

Notice that question 1 is knowing your budget. Focus on how much you spend per month.

For example if you can budget based on the $335 and child support only, then focus any additional earnings to short term savings (emergency fund of $4200) then split money to a larger cash cushion (1/3) and retirement (2/3). When you have 2 years cash ($34,000), focus more on retirement.


Measure 3 things
1) Monthly income
$720 child support
plus
$350 income from work
plus
$200 income from rent

2) Monthly expenses
$1400
could you outline how this $1400 is spent per month?

3) retirement contributions/ savings/ debt management
20% of gross is $254, so your goal is to save $254 into savings account per month.


You want more than 3 months expenses in emergency fund because
a) you have a rental unit
b) your income is not stable
so the "guidelines" of 3 months is low for someone in your situation. 24 months expenses should be good enough.

I would not pay extra towards any debt until your cash cushion was 6-12 months of expenses.
I would not contribute to a retirement plan until you have 3 months expenses in the bank (unless their is a match on a 401k).

[kri$ten]

I'll do my income/expenses on Quicken tonight and get more specifics.

[kri$ten]

I started up Quicken to track expenses. Which is real scary...perhaps b/c I only went back to Nov so Xmas is on it. Unfortunately the store I shop at the most is Target where I do some grocery shopping as well as clothes shopping. And since my receipts have been trashed I'm not really sure what was for groceries, clothes or gifts. But I will keep track from now on. I did notice that my fast food expenses ran around $100/ mo.

For this month (which includes $230 for my portion of a quick stay-cation) I have $420 left after all expenses with an income of $3313 ($1465 from work).

I will definitely use your worksheet as well as establish an accurate budget.

$920- Condo mtg
$550- Car (payment, gas, insurance)
$270- Rental Association Dues
$300- Groceries
$90- Cell Phone
$90- Daughter's Preschool ($75 was incorrect)
$2220 Total

Plus for this month:
$180 on clothes for me
$80 for clothes and shoes for my daughter
$150 for my Birthday gift, flowers, dinner (I went overboard this year)
$50 for two friends bday
$115 for two unknown Target trips.
$240- Mini Vacation
$50- Work Expenses (Continuing Education for License)
$865 Total
Which is way embarrassing and and will change!

A grand total of $3085

[amarowsky]

1) refi the condo, taking cash out (leave about 30% equity)
2) take the cash out and save at least 90% for retirement
3) In general, about every 5-10 years, refi the condo
4) do NOT pay extra on the condo

If you rent, why risk losing money on the condo (this is why I suggested refinancing it). If the building burns down, you only need to cover the balance on loan, you do not need to concern yourself with getting your money back...

If you plan to live there, I see value in having the condo paid for based on your situation.

Why not pay extra on the condo if she can afford it? Wouldn't that passive income from rent be a good thing?

[jIM_Ohio]

Why not pay extra on the condo if she can afford it? Wouldn't that passive income from rent be a good thing?

You quoted me out of context
took me 5 minutes to research and make sure I had this right...

are you going to live in the condo? Or is it rental only? If only rental, I would do a few things:

1) refi the condo, taking cash out (leave about 30% equity)
2) take the cash out and save at least 90% for retirement
3) In general, about every 5-10 years, refi the condo
4) do NOT pay extra on the condo

If she is renting condo only, she should focus on keeping her cash somewhere else... (retirement account for example) and leave rental unit financed.

The portion you quoted was if she was renting unit only, and not living there... if you read earlier in thread you quoted you would see this as well

If you can save 5% for retirement, and still have money left, I would do the following:

1) build up savings account with 3 months expenses
2) pay off car
3) pay off condo

which implies she is living in condo herself.