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

[Petunia 100]

The home I am interested in was built in 1976 and nothing has been updated at all. Honestly, it'll be hard to go from new construction McMansion that is flawless to a home built in the 70's with no updating at all. So there are some things that we would want to renovate. Gotta steer the wife away from the pool with pavers and pool house! Admittedly, we are pretty spoiled but realize it's because we live beyond our means.

Your current home and this particular "for sale" home are not your only two housing options.

I understand HCOL, but you have a 5300 sq ft home. That is going to be relatively expensive in every locale.

Financial security does not come from a big income; it comes from having sufficient assets and passive income to provide for basic needs and cushion one from life's curveballs. As long as you are willing to spend more than you make, you will never build financial security for yourself and your family.

Several times, you have mentioned receiving large income tax refunds. If you fix your withholding, you will have more take home pay each month.

[Baby_nurse]

What about selling the current home and renting until you find something affordable in your current area that you feel will work well for your family?

[startover40]

Renting isn't an option, especially within this school district. I can't drag the kids through another move. We've timed the real estate market really well as this is our 3rd home in 10 years. I just feel like it's time to downsize and comfortably afford things. We'd be able to sell this home and walk away with enough to put 20% down on the home we are considering and get a conventional loan.

[riverwed070707]

I've read all the books on finance from those various authors.

Guess I live in an expensive area, but we are going to stay here. All of our family is here, kids in school (ranked #3 in state) and we do like it here.

The home I am interested in was built in 1976 and nothing has been updated at all. Honestly, it'll be hard to go from new construction McMansion that is flawless to a home built in the 70's with no updating at all. So there are some things that we would want to renovate. Gotta steer the wife away from the pool with pavers and pool house! Admittedly, we are pretty spoiled but realize it's because we live beyond our means.

I can take the comments and criticism, that's why I am here. We've never been late on a payment, have great credit,etc., but want to make a conscious decision to change how we live and spend. What I don't want to do is to move to this dated home and be absolutely miserable and feel like it was a mistake. But, can I really afford to stay where I am...I think not.

I think you need to evaluate why a house makes or breaks whether you are happy. Happiness isn't about what you own. I don't mean this to be rude, I mean it sincerely, I really think you and your wife should consider counceling -- financial counceling but also a couples counceling that can help you understand why these material attachments are controlling your life. You make good money and you have the means to put yourself and your family in a great, solid position for the future and you're choosing not to for a pool and some granite counters. When your kids are grown, the car your drove and the size of the garage you put it in is not going to be what is important or memorable to them about their childhood. Also, what values are you teaching them through your behavior? Do you want them to learn money management from the actions you're taking now and find themselves in the same position 20 years from now? Something to consider.

[autoxer]

The home I am interested in was built in 1976 and nothing has been updated at all. Honestly, it'll be hard to go from new construction McMansion that is flawless to a home built in the 70's with no updating at all. So there are some things that we would want to renovate.

You may live in an expensive area, but you don't NEED to make it more expensive by renovating and upgrading. That is an endless cycle, because the styles will change every decade. Does a stainless steel fridge work any better than a white fridge? You need to address the habits that lead you to excessive spending. Your happiness doesn't need to hinge on the curb appeal of a house. Find some articles about happiness vs income. Once the basic needs are covered, like food and shelter, large increases in income don't equal large increases in happiness.

[JoeP]

My wife argues that we knew this when we bought the house and now just deal with it. I want to be more practical and live within our means, even of that means doing so for the first time in a decade.

Not knowing the dynamics of your marriage, it sounds as if you are not both on the same page as far as finance goes.

The home I am interested in was built in 1976 and nothing has been updated at all. Honestly, it'll be hard to go from new construction McMansion that is flawless to a home built in the 70's with no updating at all. So there are some things that we would want to renovate. Gotta steer the wife away from the pool with pavers and pool house! Admittedly, we are pretty spoiled but realize it's because we live beyond our means.

I don't know you, but it sounds a lot like you and your wife are into prestige and want to have tangibles to express your success, even if those tangibles are actually out of reach and founded on debt. Your language suggests that moving into this other house would be a giant step backwards for you; I suggest you look at it as where you should have been in the first place.

My 2c: You and your wife need to do a root cause analysis on how you got here. Like: what prompted you to buy that much house? Why the HELOC? Why the expensive phone? WTF where we thinking paying that much for cable? Without knowing those factors, you might find yourself in this situation again (as in "Hey, now that our mortgage payment is less, let's go out to dinner every night!"). I suspect you got money drunk and felt your salary could absorb it all without consequence. Then make a budget where you account for the essentials first: mortgage, insurance, food, utilities, retirement, college. You are fortunate that your kids are young, because they can adjust to changes easier than teens.

edit: One more thought. Think of your kids. Most parents generally want their kids to have things a little better when they become adults. Most kids see this as well and have this goal. I know I wanted a bigger newer house and nice cars and steak more than once a month. If you already live in a McMansion filled with goodies, your kids might feel compelled to go even bigger, and without the valuable money management skills you could be teaching them now, they may end up being in a far worse place than you are, financially speaking.

[bigdaddybus]

Wow, sounds like your family has dug yourselves quite a hole.

I suggest you come up with a budget with your wife. Taking a course like Dave Ramsey's "Financial Peace University" sounds like it would do you both alot of good. I took this class with my wife (we make $180-190K a yr) and it has done us alot of good.

We were both guilty of feeling pretty damn entitled, and money was a huge stress in our life....and honestly its not anymore. Once we started living off a budget and saving we are so much more comfortable and relaxed.

Honestly, there will never be enough if you have poor money management, and you my friend have it bad!

Here is a sample of what a decent after tax budget "could" look like for someone making 200K a year. First assume $60K for taxes so that leaves you with 140K.
Monthly budget:
life (20%) $2330 (food, cell phones, kids sports, gym, pool,etc.)
housing(30%) $3500 (including all utilities, taxes, ins)
transportation(10%) $1166 (payment, fuel, insurance, all of it)
retirement(15%) $1750
savings(5%) $585
debt repayment(5%) $585
Giving(10%) $1166
college savings(5%) $585

From your first post, the life and housing categories are literally kicking your butt. That is FINE only if you realize what you are giving up....savings, college savings, retirement,and giving.

I hope you and you wife find the courage to tackle this head on, cause the future can be alot less stressful

[LivingAlmostLarge]

I like bigdaddybus budget I think it's a very doable realistic budget for $200k without scrimping or living "frugally". Yes it could be a lot more savings or a lot more on a house but I think it's a great starting point.

FWIW $800k on a 5300 home is NOT HCOLA. You bought a huge house. Where I live friends just bought a home for $1M for 2000 sq ft 1959 and old. That's HCOLA. You just bought something so over the top for the area you think it's expensive. I don't quite understand how 3100 sq ft and $600k doesn't seem adequate. I spent that on my townhouse and it's around 1600 sq ft and over 100 years old. And I don't feel luxurious by any stretch. I shudder that trying to buy a home and we make a very good living as well.

[thomasdan]

everyone here has gave you great advice, but the thing is.. we're not in your position/situation. You were bless to have a job that pays you 200k. What i personally believe is that the problem starts with you and your wife. You both need to get on the same page.

Priority over needs over wants.

Its a life style change. Your kids are young enough to adapt to change.

My wife and I make 108k combine. Do i wish i made more.. OF COURSE. But we don't struggle every month because i know every penny that comes and leaves our bank account. we live in Orange County CA, its a pretty expensive place to live. With team work, it can be done. living on a budget isn't living poor, its living smart.

[Petunia 100]

You may live in an expensive area, but you don't NEED to make it more expensive by renovating and upgrading. That is an endless cycle, because the styles will change every decade. Does a stainless steel fridge work any better than a white fridge? You need to address the habits that lead you to excessive spending. Your happiness doesn't need to hinge on the curb appeal of a house. Find some articles about happiness vs income. Once the basic needs are covered, like food and shelter, large increases in income don't equal large increases in happiness.

Good advice.

Also, consider waiting on the renovations until after your non-mortgage debts are paid in full AND you have saved the cash to pay for the desired renovations.

[dawnwes]

If your wife is not on board with you, that is the biggest problem. Have you sat down with her and gone over your entire income and budget and shown her exactly what kind of hole you will be in down the road?

Could you get her to consider taking a Dave Ramsey type class or a Crown Financial class? My husband and I teach Crown Financial at our church and the more we teach it, the better we stay on track!

One thing it helps with is actually looking at categories and percentages and where you are over and could cut back.

Looking at your budget, there are many places I would slash immediately without (what I consider to be) much impact, but it sounds like your wife may view it differently.

Just a perspective, when I was working, and we had two incomes, our salary together was what you currently make (right around 200K). Our budget was about less than half of yours. No pool membership, $280K house loan, less than $1000 for food and we didn't even budget food much back then, and so on.......

You need to get a handle on this somehow. I haven't seen you answer the question of the food bill and why you pay $1,700 for two adults and two rather small children. Without even really budgeting I would be able to take that down $700-$800. Pool membership, another $400.

Without even selling the car or the house, that would bring your budget down $1,200.

Dawn

[dawnwes]

Another thing I thought of that may have already been mentioned, but could you refinance?

Current rates of 3.8% on a 30 year loan would get you a mortgage of around $3,000-$3,300 and would save a couple of thousand per month.

Of course, you could refi to a 15 year 2.8% and keep paying basically your current monthly cost but be finished much earlier and save around $325,000 over a 30 year at 3.8% and even MORE off your current mortgage. That might be enough savings to send the kids to college!

Dawn

[FrugalSensei]

You seem to have a millionaire's mindset but you're no millionaire. And as many lottery winners can tell you, even having millions doesn't mean you don't have to watch how you spend.

After reading your initial post and your replies it is evident to me that you really do need to work on the long term too or else the big fires you put out will just flame up again and those small fires will keep burning. You seem to understand the big errors you have made and I believe you will try hard to not repeat them but debt and saving are largely about the small things that build up over the long term. Your stated monthly bills are big but the credit card and loan debt stands out to me.

Choosing to live within (or even below) your means is not about living a miserable and cheap life, though I get the feeling you and your wife might think that is the case. Like everything else it is about moderation and balance. Cut back on what you don't need so that you can afford the things that are truly important, and make luxuries an occasional treat rather than a necessary staple.

Make the right changes in your mindset as a couple, before your kids grow up thinking they are entitled to the luxuries that you can't even afford now.

I say this with all due respect and with best wishes for you financial success

[startover40]

Can't refi due to HELOC balance. Silly statement here, but if I didn't have the HELOC balance and the credit card debit my mortgage wouldn't be the end of the world since it's balance is 623K and could easily be lower than the 5.75% I'm at now.

Had a home appraised today and looking to move.

[LivingAlmostLarge]

Did you take your $65k cash and wipe out your 401k loan and credit cards? I would start there before selling the home. That will leave $10k and I'd start to focus on paying down the HELOC.

Give yourself one year to live in the house I bet you'll be surprised how much money you'll lose selling the house and buying a new one. I think your better off staying put and belt tightening.

Did you see big daddy bus budget? Without changing much you'll be able to use giving and housing = 40% and be at where your mortgage is. I would also cut groceries, $1700 is a lot for a family of four in moderate cola.