40 years old. am i in good financial shape?

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hey all - i'm 40 and at a loss at where i should be at this point in my life. i have almost nothing saved up and just need some financial guidance on what to do.

-40 years old, 4 kids
-$9,000 cash in savings
-$110,000 in a retirement/pension fund
-bought home in 2005 for 165,000. Probably only worth 155,000 now.
-refi'd 2 yrs ago, 13 years left on mortgage one. 133,000 left @ 3.8% fixed
-10 years left on equity loan. owe 17,000 @ 8.8%
-owe $7500 in credit card debt
-owe $23,000 on two cars.
-no investments

i was thinking of consolidating mortgage and equity and extending loan term back to 30 years. that would get me about 500 a month. should i pay off the credit card from savings? that will only leave me with 1500 left for emergencies. my monthly net is about 5500, so i can recover in a few months, granted no other big expenses. any advice is appreciated. thanks

[riverwed070707]

hey all - i'm 40 and at a loss at where i should be at this point in my life. i have almost nothing saved up and just need some financial guidance on what to do.

-40 years old, 4 kids
-$9,000 cash in savings
-$110,000 in a retirement/pension fund
-bought home in 2005 for 165,000. Probably only worth 155,000 now.
-refi'd 2 yrs ago, 13 years left on mortgage one. 133,000 left @ 3.8% fixed
-10 years left on equity loan. owe 17,000 @ 8.8%
-owe $7500 in credit card debt
-owe $23,000 on two cars.
-no investments

i was thinking of consolidating mortgage and equity and extending loan term back to 30 years. that would get me about 500 a month. should i pay off the credit card from savings? that will only leave me with 1500 left for emergencies. my monthly net is about 5500, so i can recover in a few months, granted no other big expenses. any advice is appreciated. thanks

Are you the only income in the house? Why so much debt? What are your plans for retirement? If you refi that means you'll be paying on the house until your 70... I suspect you don't want to do that. You make a decent income but you have a lot of payments. My initial thought is you need to setup a snowball plan for getting rid of the equity loan, credit card payments and car loans but we would be able to give more specific suggestions if you posted a full list of your monthly expenses.

Can you sell one of the cars and get something cheaper to get the ball rolling?

[dczech09]

According my own research, at age 40, you should have between 2.70 and 3.90 times your annual income in retirement savings. With a savings of $110k, you are probably behind. But that is not too much of a problem as you have about 25 years left until retirement (assuming retirement at age 65).

If you save $5,000 per year for retirement from now until age 65, you should be able to top $1.2 million. With that, you could produce a $5,000 per month income in retirement. Please note that this is based on certain assumptions regarding investments.

You have $9,0000 and a $5,500 monthly income. I would pay off the credit card and then rebuild that emergency fund.

What does your budget look like? Would you be able to rebuild that emergency fund AND save for retirement at the same time?

I would try not to refinance for additional years. Sure, you can reduce your PAYMENT, but you will ultimately increase your time in debt and increase the amount you pay overall. Most people want to do the exact opposite of that.

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thanks for the input guys.

riverwed070707 - yes, i am the only income in the home. i have a lot of debt because of issues that came up earlier in life. let's just say those things are behind me. selling a car isn't really an option at the moment.

dczech09, i should be able to pay off the cc and then start rebuilding the EF. my monthly expenses ~ $3,500 which gives me about 2,000 for savings. i am putting away about 20k a year towards retirement. i guess i can continue on the current mortgage plan too.

[TheShopMyCloset Project]

40 is the new 20!

First, I would like to congratulate you on what you have in place so far. I would focus on your successes: $9,000 in savings, a home, a fairly well paying job, and a family. Some things that I thought about as I considered your question.

1.) Because you have children you may want to keep a higher amount in your Savings account. Maybe you should save $1,000 more. This may give you piece of mind and will keep "Murphy" at bay. If you had a problem with your car, an illness, etc. you would be able to deal with it.

2.) I absolutely think that you have too many outgoing payments. Once you hit $10,000 in savings start throwing all your money at your debt. Am guessing that you have between $500-$700 in credit card payments? Once those are gone that frees up the $500 that you would receive after consolidating everything. Without the fees to do the consolidation. Then, once that money is freed up, throw everything at your HELOC.

3.) Is there a way to change one of your cars? Sell it or trade it for a less expensive (but reliable) model?

4.) I am curious about the following expenses: groceries, entertainment, travel, anything that you're paying for the kids. I am thinking that there may be ways to cut expenses in those budget categories to free up even more money

5.) Could you commit to 6 months of aggressively cutting expenses? Then re-evaluate your progress at the end of the 6 months to see if you could continue?

7.) You are young enough to really turn this around within the next 2 years and really accumulate some serious money. But, the debts have to go. Think about what you're willing to do.


Wishing you success! Good luck.

[jpg7n16]

selling a car isn't really an option at the moment.

Why not?

What are the cars worth? What rate are you paying on the car loan?

my monthly expenses ~ $3,500 which gives me about 2,000 for savings. i am putting away about 20k a year towards retirement.

With that being the case, I'd pay off your CC immediately. Like 'open a new browser window and schedule the payment from your account' immediately.

You can easily build back up a cash buffer, while using the CC as a temporary EF. Not a permanent solution, but saves you tons of interest in the meantime.

I'd also run through this calculator:

AARP Retirement Calculator - How to Retire, Plan for Retirement

i guess i can continue on the current mortgage plan too.

I would not pay extra on your 1st mortgage, but only on the 2nd (8.8% loan).

While the others are against refinancing because it extends the life, I don't think that matters at all really. A lower interest rate is a lower rate. If you want to pay it off on the same schedule, keep making the same payments and you'll pay it off faster - with less interest.

In fact, depending on the rate of the new loan, I'm likely strongly in favor of the refi. Gives you lower cashflow requirement. Allows you to free up more funds for paying off other debt and/or boosting lacking retirement savings. Saves you on interest costs each year. IMO it's a great deal for anyone planning to live in the same home for years to come.


What are the specs on the refi?

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TheShopMyCloset Project - Thanks for the kind words. I spent over a decade in higher education and spent years paying off school loans and expenses. In the end I have two graduate degrees to show for it, so I can't really complain too much.

jpg7n16- As for the cars, there are too many drivers now in the home. If I were to sell off the newer vehicle, I could pay off the loan and have about 9K left from the sale. For now though, I think I will have to wait and see on that. I think I'm going to take the leap and pay off all CC. It's constantly on my mind and paying it off would let me breathe easier. The refi back to 30 years would be ~ 3.7% fixed. I would be able to roll both loans into one. But I think you've made a valid point about paying down the 2nd loan. I'm probably at 90% LTV so I can't get the rate on that one any lower (or at least that's what they're telling me).