Need Some Advice

[eric448503]

I am not offended by anyone's suggestions, we have 2 moderately priced vehicles that we like and we are not getting rid of them. And I am certainly not putting out 46k to pay both of them off. For some reason that seems to be incomprehensible, so let's try this route. I will be paying off the overly luxurious Nissan Altima at 16k. Should buying a home be my next priority?

[autoxer]

Should buying a home be my next priority?

Either that or beefing up your retirement savings. Are you willing to rent for another year, or are you dead set on buying a house in march?

[bjl584]

I will be paying off the overly luxurious Nissan Altima at 16k. Should buying a home be my next priority?

Buy only when you are ready financially.

20% down payment.
6 month emergency fund in place.
No consumer debt.

[bjl584]

I am not offended by anyone's suggestions, we have 2 moderately priced vehicles that we like and we are not getting rid of them. And I am certainly not putting out 46k to pay both of them off. For some reason that seems to be incomprehensible,

You will find that most people on this forum are very conservative with money and that they don't like non essential debts. If there is an opportunity to get rid of debt of any kind, then they will throw that suggestion out there.

I hear you on liking your cars. Liking things are good. Wanting things are good. You have to live a little. I get that. Just be careful that you don't let your likes and your wants stand in the way of larger or longer term goals.

[riverwed070707]

I am not sure where this should go, so if it needs to be moved I apologize. I am about to receive a $60,000 windfall and not sure what the smart things to do with it are. I am 29 and my wife is 33. We have $0 student loan debt, about $2500 in revolving credit card debt, one auto loan at 0% that has about $16k and 4 years left at $333/month. A second auto loan that has about $30k and 66 months left at 0% at $454/month. We have no other outstanding debt as far as medical bills or anything of that nature. We have about $11k in personal savings and we both have retirement accounts in $40k-$50k range. We make about $85k a year between the two of us. We also have a baby on the way due in January. The lease on our condo is up in March and we would like to buy a home. My question to the community is, what should we do with the money? I would like to find a low risk method to grow some of the money. I also plan on keeping a few months worth of bills in a separate account in case of emergency. Do we pay off one of the cars to free up some more money every month to put into savings? I appreciate any and all help, let me know if more info is needed!

Thanks
Eric

I am familiar with the inner workings of the car business as I used to be in it, that's how we are so far ahead. Neither of us have "luxury" vehicles and those will not be going anywhere. I am damn determined to not pay PMI and will certainly be putting a good amount of money down on a home. We will probably find somewhere a little further from our jobs than originally planned as the savings can become drastic.

I'm concerned about your perception that you are "so far ahead". You aren't in a terrible spot (primarily because you don't have a mortgage payment on top of those outrageous car payments, and frankly I'm shocked people are suggesting you should consider one while carrying that debt load)but you certainly aren't what most people on this forum would consider ahead. Your retirement savings is behind, your efund is insufficient and you have half of a years salary in debt on depreciating assets. I'm younger than both of you, make less, have less debt and have more in retirement and I wouldn't consider myself ahead compared to most here and where I'd like to be. If you dive into a mortgage with your current situation -- not even considering the added baby and daycare costs you have coming (do you have an extra $1k for daycare each month? -- you're going to be struggling.

My suggestion is 1) Don't spend your money before the check even comes. Its a lot and there's lots of potential to get ahead with it. Put it in a savings account or maybe some revolving CDs and sit on it awhile. Work on bettering your spending habits and start a plan for paying down those car loans ahead of schedule with yoru current income. 2) Increase your retirement savings with your current income. Min. 10% each. If you're already at 10%, I'd bump to 15% until you catch up to recommended levels for your age and salary. I would *maybe* take enough from your windfall to fully fund Roth IRAs for both of you this year. That will be a good leap in your retirement plan. 3) Spend some time determining your goals. 6 months or so down the road you can take a less eager look at your windfall and make a smart financial decision on what to do with it. Its easy to jump the gun and spend it, and then wish you did it differently later. You'll be happier with the decision if you hang on to it a bit and make it untouchable until you're sure of what you want to do with it.

Reiterating... I definitely would not buy a house until you've paid down those car loans and have a clear picture of what your budget will look like post baby. Right now you're in a spot to make some good choices that will make things easier on you down the road. If you launch into everything at once you're going to be back here in 6 months asking us how to free up some cash because you're in teh red every month.

[eric448503]

You will find that most people on this forum are very conservative with money and that they don't like non essential debts. If there is an opportunity to get rid of debt of any kind, then they will throw that suggestion out there.

I hear you on liking your cars. Liking things are good. Wanting things are good. You have to live a little. I get that. Just be careful that you don't let your likes and your wants stand in the way of larger or longer term goals.

Thank you. Your two most recent posts is the advice I was seeking. I really feel like I am wasting money with paying rent and not building equity with a mortgage. My wife has been renting since she was 22 and we really feel like its time, especially while rates are relatively low. While this may not be what most people would suggest on here, we are going to pay off one loan, make sure we have a nice emergency fund in case of a job loss and hopefully buy a house. We may find that we need to wait another year before we buy, no matter how ideal we think it may or may not be. Luckily my in-laws have done very well for themselves and have just offered to cover all daycare costs for a few years and to match whatever amount we put on the down payment of our home. A gesture we are truly grateful for and will really help us out.

[JoeP]

I am not sure where this should go, so if it needs to be moved I apologize. I am about to receive a $60,000 windfall and not sure what the smart things to do with it are. I am 29 and my wife is 33. We have $0 student loan debt, about $2500 in revolving credit card debt, one auto loan at 0% that has about $16k and 4 years left at $333/month. A second auto loan that has about $30k and 66 months left at 0% at $454/month. We have no other outstanding debt as far as medical bills or anything of that nature. We have about $11k in personal savings and we both have retirement accounts in $40k-$50k range. We make about $85k a year between the two of us. We also have a baby on the way due in January. The lease on our condo is up in March and we would like to buy a home. My question to the community is, what should we do with the money? I would like to find a low risk method to grow some of the money. I also plan on keeping a few months worth of bills in a separate account in case of emergency. Do we pay off one of the cars to free up some more money every month to put into savings? I appreciate any and all help, let me know if more info is needed!

Thanks
Eric

So if you put that 60k toward a house, you will have monthly expenses for two cars in the amount of $787 plus the mortgage. You'll also have taxes, insurance, utilities to name a few. Have you run the numbers to determine if you are comfortable spending this much of your combined income?

The reason some people question your desire to hold onto the cars is because they represent a liability. You could very easily sell them and buy two reliable cars for about $12k total in cash. Then those car payments you used to make of $787/mo (~ $10k/yr) can be diverted directly into a house fund along with the $60k. I know I am simplifying a bit.

Also people here tend to think worse case: if one of you were to lose your job tomorrow, could you still make ends meet? Would that situation change if you went and bought a house? What would your marital stress level be? Much of the advice is geared toward protecting people, not tearing down their dreams, but sometimes the latter is inferred.

[snafu]

Of course we know nothing about your relationship with in-laws, but suggest your proceed with caution, there are always pressures however well meant. In your shoes, I'd look for the best paying CDs or on-line savings [they usually pay a few points higher than brick 'n mortar] and safely park windfall sums. It's is helpful to keep up-to-date with the housing market and interest rates in your area if buying a house is on your radar relative to your lease ending in March 2015. I'm wishing your wife a happy, non eventful pregnancy and easy delivery but I sure hope you'll both modify spending to create an Emergency Fund. What small, short term changes would you be willing to make to get revolving credit paid off?

Most individuals walk into homeownership woefully unaware of the financial and emotional pitfalls. Everything costs more than expected. Mortgage is a small hurdle and you will need to fight for every point reduction. It makes a giant difference in payout over all the [30] years. If you print out a mortgage amotorization table, you will see that only a dollar or two are applied to the loan each month. Early years most of your payment is applied to front loaded interest. To make it easy the financial institution also collects property tax for the municipality. If you don't choose/afford at least 20% DP, you're tagged with ghastly expensive Mortgage Insurance. Add to that regular house and personal effects insurance, heat, electric, water, trash, cell phone services. Have a good look at your skill sets. What can you repair, fix, put together, paint, decorate, hang, install and more. The list of landscaping costs, equipment and work is endless and repeats each season. All this is added to your roles as daddy, husband, bread winner CFO. DW is in a quad role as mom, wife, breadwinner and homemaker/nurse.

At that point people often find 5.5 years of car loans and revolving credit gets onerous. Things happen, life challenges us with problem washing machines, dishwashers dumping water, plumbing issues, roof leaking, fireplace smoking, well researched, convenient day care service shuts down etc.

sorry this got so long

[krantcents]

I would pay off the revolving debt before investing the windfall. I woul dalso make sure I have sufficient life insurance to cover your liabilities.

[eric448503]

My in laws do nice things for big lift events. We got 10k as a wedding gift for example. They expect nothing in return. He is a fairly high net worth individual and likes to help his 2 daughters out and has no other grandkids. We went ahead and got universal permanent life insurance about a year and a half ago at 100k each. Since we were young it only costs us about $40/month for both of us. My wife is the breadwinner here and will probably be that way forever as she has a degree and 11 years of management experience, which is fine by me. I can be fairly handy around the house and have a couple of friends who are handy as well.