Relocated to new state - lots of ???'s

[sammy1113]

Last month we moved from IL to PA due to my spouse's job transfer and I had to leave my job of 24 years.
We also had to sell our home thru short sale as it was still so far underwater. From what I understand it will be 2 yrs until we can purchase again. We currently have approx 40K in 401K savings and 30K in regular savings we also have 30K in debt basically due to 2 auto loans. My question is: do we save what we have in hopes of buying another house in 2 yrs or do we pay off or down the car loans which would save us interest and help our credit scores which have taken a beating since the short sale?
We are both in our 50's and are renting a home for $1300/month right now.
Thanks

[bjl584]

The broader goal is to get your finances in order, i.e. become debt free.

Buying another home right now should probably be the furthest thing from your mind. You are better off renting for the time being.

As for the cars, can you provide some details? How much are they worth? Can you sell them? I wouldn't spend all of my savings to pay them off. You need some emergency money.

What is your income? Can you pick up extra work? Can you cut expenses?

Only after clearing up the auto debts should you start the process of saving up for another house. When you do that you will want to save up 20% for a down payment. That will make the chances of you being underwater again almost nothing. Also, don't buy a house that costs more than 2.5 to 3 times your income.

This thread may help you:

http://www.savingadvice.com/forums/general-discussion/76695-20-down-payment-realistic-today.html#post386293

[sammy1113]

Thank you. My husbands income is $72K and I am looking for a new job here but have only been here 1 month.
Car 1 2013 bal 16,400 pymt $340
Car 2 2011 bal. 11,200 pymt $290
My husband basically said the same thing you did in that I am just mourning the loss of our other home and thinking about replacing it as fast as possible. I am just afraid if I don't hold onto the cash we have when the time comes we won't have any or the option to buy again. IDK

[bjl584]

Your husband is making a good income. Once you find a job your household income will be such that paying off your debts will be more than doable.

Being that your cars are so new, you will most likely have a hard time selling them for the price that you want. It may be best to pay them off and keep them for at least 10 years.

Do you have any other debts? Do you know what your monthly expenses are?

[AnotherReader]

Do either of you have a pension? After 24 years on the job, will you get anything for retirement?

If $40k in a 401k is your only retirement savings, your problem is not buying a house, it's avoiding living under a bridge and eating cat food when you retire. You are in your 50's, and you don't have a lot of time to build up your retirement investments. Your first concern should be funding two 2014 IRA's, one for you and one for your husband. Is the 401k still with the old company? That money would likely be better off in a rollover IRA.

What are your employment prospects? Are you sending out resumes and applying for jobs? Getting your income up is going to help a lot. When you get a job, make the company retirement plan a "pay yourself first" priority.

The cars are not reasonable for someone that has so little in savings. In your shoes, I would try to sell at least one. Buy something a lot less expensive and pay cash.

[LivingAlmostLarge]

Take savings and open 2 Roth IRAs if you haven't already. At 50+ I think it's $21k/year for a married couple over 50. Then roll the old 401k into a Rollover IRA and consider converting it to a Roth IRA. Depends on income for the year.

Then keep the $10k in cash savings and focus on paying off the cars. You could sell them if you wanted, or you can just focus on paying them off.

You can't look to buy right now. You need to start saving for retirement and you should be trying to maximize your retirement savings. Using 401k and Roth IRA.

How much do you expect to make? Depending on what you make you need to be maxing out your 401ks and IRA every year and not debt.

A house would be great, but you sold a house in your 50s you were underwater with. How did that happen? Did you just move there? Not put anything down? Or just cash out refinancing?

You've been living years above your means if you only have $40k in retirement savings. Time to change your spending habit.

Hope you take this opportunity to look at your new life and budget.

[bjl584]

The cars are not reasonable for someone that has so little in savings. In your shoes, I would try to sell at least one. Buy something a lot less expensive and pay cash.

While that would be ideal, OP is going to have a hard time finding a private buyer with the ability or willingness to pay what those cars are worth. And, being that there are still loans attached to both of them, it adds an additional layer of complexity. The private used car market can be tricky. Selling a used car for $3000 of $4000 is easy. Selling a used car privately for $20,000 is a whole different story. OP may be better off keeping the cars and just focusing on paying them off.

[autoxer]

While that would be ideal, OP is going to have a hard time finding a private buyer with the ability or willingness to pay what those cars are worth. And, being that there are still loans attached to both of them, it adds an additional layer of complexity. The private used car market can be tricky. Selling a used car for $3000 of $4000 is easy. Selling a used car privately for $20,000 is a whole different story. OP may be better off keeping the cars and just focusing on paying them off.

I disagree. You are just giving the OP excuses. I sold two cars privately last year, a used pickup truck for $25k and an even more used VW for about half that. When I decided to start saving for a house in 2006, I was saddled with a car loan for a 2004 subaru. I sold that car privately even though there was still a lien on it. The buyer paid off my loan and the title was forwarded to him. I then went out and bought a older nissan for $1,750.00 and drove that for the next five years. Getting rid of the car loans could be very beneficial to their finances and a little determination is all it takes.

OP could easily pay off one car with their cash, wait for the title, and then sell it privately and put that money back into savings. OP doesn't need newer cars right now, they need a more long term outlook.

[bigdaddybus]

I agree to in some extent to both of you. I have recently sold several vehicles $17,500, $12,500, and $25,000.
In my experience, when people need to finance most go to dealerships. If they are paying in cash then private party is appealing. My vehicles for 17,500 and 12,500 sold quickly and I was paid in cash. The 25K vehicle took along time with just a few lowball offers.(all under 20K) All vehicles were equally priced compared to KBB/NADA etc.

[bjl584]

I disagree. You are just giving the OP excuses. I sold two cars privately last year, a used pickup truck for $25k and an even more used VW for about half that. When I decided to start saving for a house in 2006, I was saddled with a car loan for a 2004 subaru. I sold that car privately even though there was still a lien on it. The buyer paid off my loan and the title was forwarded to him. I then went out and bought a older nissan for $1,750.00 and drove that for the next five years. Getting rid of the car loans could be very beneficial to their finances and a little determination is all it takes.

OP could easily pay off one car with their cash, wait for the title, and then sell it privately and put that money back into savings. OP doesn't need newer cars right now, they need a more long term outlook.

I'm not making excuses for anyone. I'm simply stating that trying to sell may not be as easy as someone simply saying "you should sell the cars." As if it will magically happen over night. It might take months and months or not at all.

I don't know where OP lives, but if the area is depressed economically, then good luck selling a $20,000 plus car with a loan attached to it on the private market. Unless they advertise nationally, they might sit on it for a long time.

I agree that selling is the best option, but it isn't the easiest. In the end, either option will work long term. Paying the cars off and keeping them for 10 plus years each as I originally suggested isn't what I'd call an excuse. I'd say that it's a pretty smart idea if selling isn't an option.

[sammy1113]

Thank you all for your advice and helping me open my eyes to the bigger picture which is our lack of retirement savings.
In the past as mentioned we were living beyond our means and I truly need to make better decisions especially at our age. My previous job was with a private office and I do not have a pension so we need to work with what we have. In the job market here in PA I am expecting ( hoping) to get a job making approx. $40K .
I am not sure what we will do with the cars yet but I do know now that I want to really focus on maximizing our retirement as 10-15 years is not that far off and I certainly don't want to spend it "living under a bridge eating cat food" !
Thank you for pointing me in the right direction as I've been a bit overwhelmed by it all and not thinking straight.

[Petunia 100]

I agree to in some extent to both of you. I have recently sold several vehicles $17,500, $12,500, and $25,000.
In my experience, when people need to finance most go to dealerships. If they are paying in cash then private party is appealing. My vehicles for 17,500 and 12,500 sold quickly and I was paid in cash. The 25K vehicle took along time with just a few lowball offers.(all under 20K) All vehicles were equally priced compared to KBB/NADA etc.

I have bought private party cars and financed them. It's no big trick, you simply arrange your financing first then meet the seller at your bank or credit union. The paperwork is processed and they are issued a bank check.