Finance help needed!!! Major changes needed. Sell home???

[startover40]

Our initial plan is to payoff the one CC and 401k loan and trim the fat. I'm just not sure if moving is feasible right now. Although once we clear some debt and pay down the HELOC and my oldest is in middle school then look at moving. I don't see us being in this house more than another 7 years at most. I don't want to be knocking on 50yrs old with a $5300 mortgage and possibly some HELOC.

We will use just one CC for our daily expenses yet we will have a budget. I will stay up to date on my expense reports and pay the CC off every month. What I do not want to happen is for us to eliminate this CC and 401k debt and then just tread water. Seems like an impossible task to pay down the HELOC or the mortgage....120k in HELOC and 640K in mortgage is very daunting!!!

So after the CC and 401k debt is paid should we save for EF or pay down the auto loan? Do I up my 401 K contributions? I'd feel a bit irresponsible just doing the 3%.

Thanks again.

[Goldy]

After you pay off all your CC debt and the 401k loan I would recommend you attack the house loan to get that to a manageable amount that would allow you to refi the loan. Your car loan is small at 1.9% and didn't you say that your job refunds you for it?

After the house is refied the. I would start looking at investing in your retirement.

[startover40]

I think that is a good plan. Get rid of the debt and attack the HELOC. I just hope that after the CC and 401k debt is gone there is serious effort to working on the HELOC. Gotta get the wife on the same page! We have a great track record of paying down debt, freeing up cash flow and it getting absorbed into our spending habit. That can't happen this time.

[theduc]

I would agree with the others who do NOT recommend you buy the hybrid... as artwest mentioned, there are plenty of other fuel efficient cars out there that could cut your monthly fuel cost without costing you an additional $2K. Or if you have to have the hybrid, try to find a nice used one that you could pay cash for and possibly talk them down a little more in price.

The point would be to not add an additional $2K in debt to save $200 when you could easily save the $200/month without spending $2K on a hybrid.

[feh]

The good news is that your aren't 50+ and you make a lot of money. You can dig yourself out of this mess, if you are diligent.

I won't repeat all the advice above, but I do have one question - do you live in a high cost of living area? You talk about downsizing to a $600K house, which is still extremely expensive. Are you thinking about how much house you need, or how much house you can afford?

As you start to get serious about your budget, that's the question you need to repeatedly ask yourself every step of the way- "what do we need", not "what can we afford".

[startover40]

I think it's pretty expensive around here. The tradeoff is the fantastic schools as they are rated #4 in the entire state. Otherwise we'd be moving out of the district and paying for private schooling. We've discussed moving but even at that it would be within the district. Believe me, 13K in taxes I think is insane but with 2 kids getting a great education I can't complain too much.

We are committed to getting out of debt and realize it won't happen overnight. What I'm not willing to do is completely uproot the kids to a different school and area. I'd much rather sacrifice in other areas.

[feh]

I think it's pretty expensive around here. The tradeoff is the fantastic schools as they are rated #4 in the entire state. Otherwise we'd be moving out of the district and paying for private schooling. We've discussed moving but even at that it would be within the district. Believe me, 13K in taxes I think is insane but with 2 kids getting a great education I can't complain too much.

We are committed to getting out of debt and realize it won't happen overnight. What I'm not willing to do is completely uproot the kids to a different school and area. I'd much rather sacrifice in other areas.

Does the average house for a family of 4 cost $600K in the school district?

[startover40]

Does the average house for a family of 4 cost $600K in the school district?

For a house that we would consider, yes. There is one development where houses sell very quickly that are generally 515-530 with an occasional 550. It would represent a huge change for us, going from new construction, 5700sq/ft to 3100sq/ft and 14 years old. I'm not even sure all of our belongings would fit in 3100sq/ft. Not proud of that just stating the obvious!

[feh]

For a house that we would consider, yes. There is one development where houses sell very quickly that are generally 515-530 with an occasional 550. It would represent a huge change for us, going from new construction, 5700sq/ft to 3100sq/ft and 14 years old. I'm not even sure all of our belongings would fit in 3100sq/ft. Not proud of that just stating the obvious!

Ok, this gets back to my earlier comment about changing your thought process. Think about what you need, not what you want, can afford, or are used to.

3100 sq ft is more than enough for a family of four.

[riverwed070707]

For a house that we would consider, yes. There is one development where houses sell very quickly that are generally 515-530 with an occasional 550. It would represent a huge change for us, going from new construction, 5700sq/ft to 3100sq/ft and 14 years old. I'm not even sure all of our belongings would fit in 3100sq/ft. Not proud of that just stating the obvious!

Ditto feh. What's more important to you, a huge house to fit all your belongings you purchased beyond your means or living comfortably so you can enjoy life with your family while planning for a secure future and retirement? The fact that you just balked at a 14 year old 3100 sq ft house says a lot about what got you into this mess. Money, "stuff", big houses, nice cars -- these things dont create happiness, in fact they often lead to unhappiness, especially when they are paired with a mountain of debt. Think you need to sit down and do some priortizing about what is really important in your life and then decide how you're going to adjust your lifestyle to align with those goals.

[theduc]

Another source of income could be selling the belongings that won't fit into the 3100 sq/ft house... your kids are still very young and will adjust. As will you and your wife (which may be the harder part).

[startover40]

I am not disagreeing with the advice at all. My gut tells me we need to move anyway, I've felt this way for about 2 years now. Realistically how can we get ahead when the mortgage is $5300 then add in the other bills.

First thing is first, get rid of the debt and then turn attention to HELOC. Then we will need to plan a move and not do it as a knee jerk reaction. Regardless of what happens if we decide to move it's very doubtful we would have 20% to put down. The market has really hurt the value of my home. I would welcome selling this and putting 3% down on a 500-600K house and immediately reducing my mortgage by about $1500/mo and my overall house debt by 150K.

[witchkizzle]

Can you explain why you bought such a large expensive house on a 200k a year salary in the first palce?

[startover40]

Can you explain why you bought such a large expensive house on a 200k a year salary in the first palce?

Don't really have a great answer for that. In the 9 years of marriage this is house #3 for us. Number 1 we were in for under two years and made 205K on, second house essentially the same. Should have never bought this much house.

I feel completely stuck. Wife drove around tonight and looked at 2 houses to get a feel for things. The first doesn't fit us because it is not in a development. The second one is interesting....within a 15 yr old community of homes (honestly they all look a little run down and could use some TLC for curb appeal) a builder bought 1 acre and built a home. It's been completed and for sale for over 3 years. The price just keeps coming down on the house. So here are my initial thoughts on this particular home. It sticks out in the development, it's a different style compared to the others and obviously is brand new. Never buy the nicest, biggest or most expensive home of the neighborhood, right? Well this house is all of those because it is new. Aside from that it is still beyond our budget. There have been some pre foreclosure sales in the neighborhood for 490. This house started at 750, then 740, then 725, then 700, then 695 and now is 665. It's still owned by the builder who is a small family semi-custom home builder.

Here is why I feel stuck. Even it 625K we would only be able to put down the minimum, 3%. That makes the mortgage about 4100 and "only" $1600 less than my current situation. Brand new house would need some things, blinds, a room or two painted, etc. I'd be worried that the 1600 difference in mortgage would get put right back into the house. Not to mention within the 4100 is $500 of PMI. I hate that!

I know, I am sure the obvious is don't kid yourself and think you can afford a 600K home. Not many options at all in this area.....

Thanks for letting me vent!!!

[Snydley]

"The tradeoff is the fantastic schools as they are rated #4 in the entire state. Otherwise we'd be moving out of the district and paying for private schooling. We've discussed moving but even at that it would be within the district. Believe me, 13K in taxes I think is insane but with 2 kids getting a great education I can't complain too much."

I'm curious about this statement because I moved to a new state and found the "all-important" district rankings to be the primary force driving the housing price. My first thought was of course the goal should be to be the best district possible, but top rankings can equal high pressure to succeed (memorize! memorize!) and miserable, anxious, depressed kids. I don't know what state you are in, so maybe the "middle of the road" districts really are not good (by not good = most kids don't go to any type of college).

Given your situation and big decisions coming up, I highly recommend reading "The Price of Privilege: How Parental Pressure and Material Advantage Are Creating a Generation of Disconnected and Unhappy Kids." Great book.

-Jen