Liquidating assets to pay debt/changing habits

[Alw1977]

"I don't think enough attention has been paid to your rental property; that's why I focused on it. $1377 covers both mortgages on the property, hopefully tax and insurance, and HOA. Do you really have no other expenses on the property at all? Do tenants pay all utilities including water? You never have any repairs or maintenance at all? Even if this is true, what about the risks if
- tenants move out and you have to cover all costs for a period of time without receiving rent
- any repairs or maintenance costs come up
- interest rates go up... are both mortgages fixed-rate? is one a HELOC? interest-only?"

Thank you for bringing these questions to the forefront.

1. Tenants pay ALL expenses and utilities. Water is part of the HOA fees (for that much, it better be!)
2. Taxes and insurance part of the mortgage payment, so that's covered.
3. We've been renting this unit since 2006. In that timeframe, the longest it has ever stayed vacant is 6 weeks. We've had about 5 tenants. The current tenant has been there 2.5 years and has 1.5 years left on her lease. To date, she's never been late on rent.
4. Both mortgages are fixed. We did a HARP refi a couple of years back.
5. Repairs/maintenance has proved minimal (<$250/year when rented).

Honestly, our tenant has 1.5 years left on her lease, so we'll re-evaluate when she moves out. For now, we write off anything we spend on our tax return.

[Alw1977]

You never responded to my question are you living on $130k/year and saving $52k? Then you should be on track to basically living 50/20/30. But the CC debt came from somewhere. Also your retirement savings is minimal. We too started saving late (2006) because of our educations but we have close to $450k retirement savings and substantial taxable savings on a lower income. And we have two kids and one income.

Seriously if you can live on 50% of your income including montessori, mortgage, rental, everything then you'll probably be fine. The next 1 year perhaps direct the 20% savings to debt and you'll be good.

But the MAIN point is how high are your living expenses? What is your baseline living expenditures?

We've been saving closer to 15% of our income for the last several years. We've got more in our 401ks than I thought, about $250K vs. $200K. So that's good.

Monthly Income (including rent) - $14500 (this already takes my 401k contrib into account, maxed out)
Monthly Bills - $8700
Remaining - $6600

So we're spending 60% on monthly bills, including kids school.

[Alw1977]

You never responded to my question are you living on $130k/year and saving $52k? Then you should be on track to basically living 50/20/30. But the CC debt came from somewhere. Also your retirement savings is minimal. We too started saving late (2006) because of our educations but we have close to $450k retirement savings and substantial taxable savings on a lower income. And we have two kids and one income.

Seriously if you can live on 50% of your income including montessori, mortgage, rental, everything then you'll probably be fine. The next 1 year perhaps direct the 20% savings to debt and you'll be good.

But the MAIN point is how high are your living expenses? What is your baseline living expenditures?

We've been saving closer to 15% of our income for the last several years. We've got more in our 401ks than I thought, about $250K vs. $200K. So that's good.

Here's where I'm having an issue with the 50/30/20 idea. How does one take 401k into account? I thought the idea was to save 20% of our PRE-tax income? Right now, we're spending 60% of our post-tax income on "needs" - bills that don't include food or monthly spending. But, we've already contributed to 401k...

[LivingAlmostLarge]

15% retirement, 5% savings, then 50% needs and 30% wants. Does the 50% = taxes plus mortgage and everything? The extras like cable and cell phones is in the 30%. So how did you run up the credit card bills if you have been saving 20% of your income? Where is the leak?