Financial advice

Pokoloco · February 24, 2020

Looking for some advice from you 1% ers.

Due to a series of unfortunate events, we've racked up $57,000 in CC debt, paying $1450.00/mo

My home is worth $220,000, we owe $78,000 at 3.25%. $1500.00/mo

We're just squeaking by month to month with the extra $1450/mo on top of all our normal living expenses.

I want to refi, squash the debt- still have some equity. My wife wants to sell the house, she has this one track mind on owning a house outright by the time we're 60 and I can't convince her otherwise. We're 52 years old, I'm not looking to uproot and move to a shitty house when we can basically buy our nice(for South OKC) $220,000 house for $135K. We have $372,000 in a 401K that will (should) keep growing, so when I retire I can pay off whats left of the mortgage.

Any input is appreciated.

South Austin · February 24, 2020

One word: Plastics.

Pokoloco · February 24, 2020

I forgot to mention, I'm in plastics.

Fuck Tim Beck · February 24, 2020

No no. Not plastics. You want latex.

Chewbacca · February 24, 2020

Can you get some additional work to help pay down the CC debt? I'm with you that I would not want to sell the house.

EE2B · February 24, 2020

My question would be if you have the 57k in credit card charges paid off, do you/your wife have the discipline to not start charging again? You could come out ahead by doing the refi on the house and getting the card charges at a discounted interest rate, but not if it just becomes 57k of potential/probable debt again. If you do the refi, I would push to keep making the extra $1400 payments, but toward the house instead.

TwiceHorn · February 24, 2020

Not saying this is the thing to do, but you might explore a 401k loan.

The interest on the CC loan is murder. You will lose return on the 57k, but can pay it back on a five-year schedule, or faster if you like. And probably with payroll deductions.

DalTxHornFan · February 24, 2020

1 minute ago, TwiceHorn said:

Not saying this is the thing to do, but you might explore a 401k loan.

The interest on the CC loan is murder. You will lose return on the 57k, but can pay it back on a five-year schedule, or faster if you like. And probably with payroll deductions.

That was my first thought, as well. Way better interest rate on a 401k loan.

idigTexas · February 25, 2020

10 minutes ago, Pokoloco said:

Looking for some advice from you 1% ers.

Due to a series of unfortunate events, we've racked up $57,000 in CC debt, paying $1450.00/mo

My home is worth $220,000, we owe $78,000 at 3.25%. $1500.00/mo

We're just squeaking by month to month with the extra $1450/mo on top of all our normal living expenses.

I want to refi, squash the debt- still have some equity. My wife wants to sell the house, she has this one track mind on owning a house outright by the time we're 60 and I can't convince her otherwise. We're 52 years old, I'm not looking to uproot and move to a shitty house when we can basically buy our nice(for South OKC) $220,000 house for $135K. We have $372,000 in a 401K that will (should) keep growing, so when I retire I can pay off whats left of the mortgage.

Any input is appreciated.

I don't understand. Your wife wants to sell the house on which you owe $78,000, but wants to own a home outright within 8 years? What is her plan for making that happen?

You'll need to do the math on what a refi will truly cost you with closing fees, new interest rates, and such. You will essentially be converting the CC interest rate to whatever your home interest rate is. You may or may not be saving any money, and if you pay less on your total debt per month, it may end up costing you more. That said, it may still be worth it to you you just don't feel that you can keep paying for both.

Cut up your credit cards.

I would not touch my 401K under any circumstances aside from terminal illness.

idigTexas · February 25, 2020

A 401k loan is definitely better than withdrawing funds, but it's still not a great idea if you have other options. Read these before refinancing or doing a 401K loan.

https://www.fool.com/retirement/2019/06/07/pros-and-cons-of-401k-loans.aspx

https://www.nerdwallet.com/article/mortgages/refinance-cash-out

Chewbacca · February 25, 2020

18 minutes ago, DalTxHornFan said:

That was my first thought, as well. Way better interest rate on a 401k loan.

And you're paying yourself interest instead of the credit card company. This is a good choice (and one I overlooked in my previous post) if it's available.

Nice Guy Eddie · February 25, 2020

There is two major flaws in moving to debt to your 401k or pulling off some equity move with your house. In both cases you’re really still in the same situation with your net worth and you didn’t really sacrifice anything to get yourself out of debt.

both might be the best financial move but I think the bigger question is what changes are you starting today to ensure you’re not back in the same situation.

personally i would go with the 401k loans but figure out how fast you can pay it back. No vacations, new clothes, dining out until you do that.

Parliament · February 25, 2020

Regardless of how you get the money to get square (refi, 401k loan, truckstop handjobs, etc) you gotta lock down that spending, Son.

Sounds like those expenses were necessary, and that's OK. Bad luck sucks, but you gotta handle your shit. Turn off the cable, cut up your cards, plant a garden.

Nice Guy Eddie · February 25, 2020

But props on discussing financial problems even in an anonymous forum. Many people have problems but refuse to admit it out of shame. But nothing wrong with getting in a hole, it’s how you get out that matters.

zork · February 25, 2020

Do a home refi on a 10 year fixed for 128k. use any excess from the refi to pay down the credit cards. the rates on 10 year, talk to @UTPhil2006. your payment will be higher with the shorter term but the rate will be awesome and you can do it given your current payments you mentioned.

tx 3 putt · February 25, 2020

2 minutes ago, zork said:

Do a home refi on a 10 year fixed for 128k. use any excess from the refi to pay down the credit cards. the rates on 10 year, talk to @UTPhil2006. your payment will be higher with the shorter term but the rate will be awesome and you can do it given your current payments you mentioned.

utphill will take care of you, he handled my recent home purchase flawlessly

Celery Man · February 25, 2020

4 hours ago, Pokoloco said:

Due to a series of unfortunate events, we've racked up $57,000 in CC debt, paying $1450.00/mo

gmr548 · February 25, 2020

Take on as much debt as you need to to remove yourself from OKC. Good luck.

ROFL BOX · February 25, 2020

The largest problem with the logic you're butting heads on is a refi on the existing house to pay down the CC debt.

What's the APR on the various CC's? Some are insane in the 28% rate.

You're in the 3.25% range for the house if I'm seeing that correctly & I think with your monthly payment of $ 1,400+, you aren't gonna get paid off on those for what... 20 years?

ADDITIONALLY, ain't no way you'll qualify for a new house loan with that kind of debt dragging you down. The smart move is to follow what @EE2B said & "do the refi, then keep making the extra $1400 payments, but toward the house instead." [sic]

If you can keep up that discipline & not go on a ski vacation or buy that badass home theater then you'll have that refi paid back down in a shitload of faster time.... pile that added $$ onto your current house note on a 2 week offset compared to your normal note. Example: Mortgage payment due on 1st of the month & then make a 2nd payment 15th of the month & specify that this monthly 'bonus' payment is going towards the principle.

DalTxHornFan · February 25, 2020

Principle, principal -- whatever it takes.

immamac · February 25, 2020

Uh. Stop spending money and move into an apartment that costs 750 per month and rent your house out to someone to pay the mortgage and possibly cashflow a bit.

If your credit isn't shit apply for every 0% balance transfer card that will take you and start transferring as much as you can to those cards and possibly get a debt consolidation loan for the rest that you can't get to the 0%

fattyflattie · February 25, 2020

4 hours ago, EE2B said:

If you do the refi, I would push to keep making the extra $1400 payments, but toward the house instead.

This is what I would do. Get your effective rates down to 3.25, solidify your staying in the house (which seems to be your goal) and would stop the wife from looking to move. Sounds like the debt was something unavoidable, and I hope you don’t fall into something like that again. You will get it figured out, I hear people call into Ramsey all the time with much worse situations and they get it figured out. Best of luck Poko.

tx 3 putt · February 25, 2020

stop spending money, asap. no eating out, plan cheap meals. cut all expenses to the bone.

think before spending even $5

2nd jobs and/or side gigs, now and asap

Edited February 25, 2020 by tx 3 putt

RMac5 · February 25, 2020

Good luck poko, I know the situation sucks and is causing a lot of stress. You will get it figured out one way or another.

Edited February 25, 2020 by RMac5

Quagmire · February 25, 2020

Would one of you rich assholes just give him 57k

txhorns · February 25, 2020

Am I reading it correctly in that it's not a matter of being undisciplined with spending that got them into this? More so bad luck in something like medicals bills. Either way you could look at driving for Uber or Lyft on the side. I bet if you did that enough on the weekends you could start cutting into that CC debt some.

Leamas · February 25, 2020

Advice for OP to take any concrete steps should also involve knowing the income for he and his wife, no? Ideally, we should also know exact numbers, including the principal and interest rate for each of the debt. For the CC, is it one, or multiple, banks servicing the cards? And if several CC debt spread over different banks, what are the rates for each of them? Finally, he should list out his expenses by necessities/non-necessities so people can recommend where any "excess" may be eliminated.

Personal comment: I'm not saying I agree with your wife, but I lived in Oklahoma City for 24 years and there are nice homes in the NW OKC area that are $50-60K below your current house. That is probably too far from where you would be willing to relocate though.

52-80 · February 25, 2020

15 hours ago, Pokoloco said:

Looking for some advice from you 1% ers.

Due to a series of unfortunate events, we've racked up $57,000 in CC debt, paying $1450.00/mo

My home is worth $220,000, we owe $78,000 at 3.25%. $1500.00/mo

We're just squeaking by month to month with the extra $1450/mo on top of all our normal living expenses.

I want to refi, squash the debt- still have some equity. My wife wants to sell the house, she has this one track mind on owning a house outright by the time we're 60 and I can't convince her otherwise. We're 52 years old, I'm not looking to uproot and move to a shitty house when we can basically buy our nice(for South OKC) $220,000 house for $135K. We have $372,000 in a 401K that will (should) keep growing, so when I retire I can pay off whats left of the mortgage.

Any input is appreciated.

First, you should probably ignore the woman who wants to sell up a house when you've already got 2/3rd equity, where the goal is to actually own a house outright.

Second, the most obvious thing to attack is the (probably) killer CC interest rates. Other suggested 401k loans. But what about home equity loan or line of credit? (heloc). No idea what the rates are, but the easy math is if the rates are < CC rates, you're automatically shaving hundreds per month.

That should be automatic given (1) youre already fully paying your commitments today (2) you dont spend the loan disbursement on hookers and a 2nd wife

Js1 · February 25, 2020

15 hours ago, Pokoloco said:

Due to a series of unfortunate events, we've racked up $57,000 in CC debt, paying $1450.00/mo

That's a shitty way to refer to Trixie

orange dream · February 25, 2020

Almost anything will be better than continuing to send $1,450 / month the the CC companies. Any other option will probably still require ~1k / month to make real headway in paying the debt off. I'd probably choose 401k loan with a 4 or 5 year term first with some form of refi with cash out with a 10-15 year term as a 2nd option.

Assuming it's not a problem that you expect to reoccur, but if overspending is an issue that obviously needs to be dealt with first or this will end up worse than it is now.

Agreed, on the kudos for speaking up. Good luck!!

SquishMitten · February 25, 2020

Why don’t you just pay off the CC debt with part of your rainy day cash savings? That’s what I’d do. It would sort of suck because I wouldn’t like taking out nearly 10% of that account, but it makes sense from a financial standpoint

SquishMitten · February 25, 2020

Double tapa

TwiceHorn · February 25, 2020

I assume that if poko had rainy day cash savings, he wouldn't be in $57k of CC debt.

Or maybe my meter's broken.

DaysOff · February 25, 2020

Do not touch your retirement accounts. That's for you; not the credit card companies. Fuck them. The other option is to stop paying them and see where this goes.

TwiceHorn · February 25, 2020

Here's something to consider.

If you do a home-equity based loan to discharge the CC debt, you still have the debt, owed to a third party and secured by your home. That can be a plus or a minus. It certainly puts the onus on you to service that debt because you'll lose your house if you don't.

On the other hand, if you do a 401k loan, the only debt you'll owe (other than existing mortgage) is to yourself. If you fail to service it, there will be no foreclosure, no wailing or gnashing of teeth. A bad outcome, no doubt, but a quietly bad outcome.

So, in addition to considering your savings and spending patterns, you probably ought to give a good hard look to which kind of debt you are more likely to pay off.

And a flipside of it, what happens if disaster strikes and you can't pay much more than your current mortgage.

Gene Parmesan · February 25, 2020

So is your wife's plan to sell the house and take the proceeds and buy a cheaper house outright, and just keep paying 1450/month to the CC debt? I believe there is a thread for that.

Red Six · February 25, 2020

If you take out a home equity loan at 6%-ish and continue to pay $1,450 a month, then you'll have this paid off in 3 1/2 years. Not insurmountable.

The issue is making sure it never happens again. "Unfortunate events" rarely are unexpected, and their financial impact on your life is determined by how well you plan for them.

This may sound cult-ish, but You Need a Budget did wonders for our household finances. It is software driven by a philosophy, which starts with only budgeting money that you have. We have used it for about a year and a half now, and the impact has been amazing. I cut my owner's draw by a couple thousand a month, yet we have more money in the bank than we ever have before -- much of it waiting to be deployed when an "unfortunate event" hits. The program is similar to Dave Ramsey's, but without the religious aspect and irrational fear of credit cards.

Archer · February 25, 2020

50 minutes ago, TwiceHorn said:

On the other hand, if you do a 401k loan, the only debt you'll owe (other than existing mortgage) is to yourself. If you fail to service it, there will be no foreclosure, no wailing or gnashing of teeth. A bad outcome, no doubt, but a quietly bad outcome.

You’ll owe the IRS 10% + taxes on the loan amount as income. If the cash for the penalty and additional taxes are not available you’d be indebted to the IRS. May be better than the CC or mortgage but I’d prefer not to have the IRS after me.

TwiceHorn · February 25, 2020

8 minutes ago, Archer said:

You’ll owe the IRS 10% + taxes on the loan amount as income. If the cash for the penalty and additional taxes are not available you’d be indebted to the IRS. May be better than the CC or mortgage but I’d prefer not to have the IRS after me.

Not unless you default it.

Nice Guy Eddie · February 25, 2020

Another option is to roll some of the CC debt into a 401k loan/refi but still keep a decent chunk in CC debt to force yourself to attack it.

For example, 57K @10% at $1500 is basically 48 months to pay off. ouch. Somehow move 27K of that to another debt (401k, refi) and then 30K of CC debt can be paid off in ~20 months. 20 months feels do-able and not as overwhelming. I completely realize that a 401k loan would require a monthly payment too.

the point of this plan is to get out of the crushing interest going to the bank but don't wipe the slate clean overnight. Force yourself to have better habits.

another point: some will disagree but I would drastically drop 401k contributions until you get out of this mess. Take advantage of any matching but don't worry about extra contributions.

Archer · February 25, 2020

11 minutes ago, TwiceHorn said:

Not unless you default it.

Correct.

I was referring to the “If you fail to service it” comment. Probably should have put it in bold.

The other big downside is the 60 day payback if you leave the job. Not sure PLs job security but it’d be a big concern for me in O&G right now.

52-80 · February 25, 2020

have you considered selling the house and using the 140k of equity on a law degree so you could REALLY make the big bucks?

Pokoloco · February 25, 2020

6 hours ago, Quagmire said:

Would one of you rich assholes just give him 57k

This is what I was shootin for..

Thank you all for the info, very helpful.

I do have half a mil in life insurance and have train tracks running right next to the office. So there's that.

SquishMitten · February 25, 2020

2 hours ago, TwiceHorn said:

I assume that if poko had rainy day cash savings, he wouldn't be in $57k of CC debt.

Or maybe my meter's broken.

Yeah. You should definitely get it serviced.

MNLonghornFUKM · February 25, 2020

Uh. Stop spending money and move into an apartment that costs 750 per month and rent your house out to someone to pay the mortgage and possibly cashflow a bit.
If your credit isn't shit apply for every 0% balance transfer card that will take you and start transferring as much as you can to those cards and possibly get a debt consolidation loan for the rest that you can't get to the 0%

This.

I have some debt in CC but both are on zero interest balance transfers.ones up in Dec 2020 and the others in like 21 months.

Given you have multiple maxed up cards tho..I give your chances of qualifying for a new card pretty slim but worth a shot.

tx 3 putt · February 25, 2020

4 hours ago, 52-80 said:

have you considered selling the house and using the 140k of equity on a law degree so you could REALLY make the big bucks?

goto law school in Mexico and save mucho dinero

CooterBrown · February 25, 2020

Can you do a cash out refinance? Depending on your rate and current rates you may end up with little difference in your mortgage payment.

Handcruser · February 26, 2020

Do you have anything you can sell to pay off one of the cards? Or Two?

Then use that extra money to pay towards the other debt?

Then get a part time job and attack the rest. You could do this in twelve months. Also once you pay off 1-2 you can try and do a balance xfer.

Borrowing money from your house or 401k would be my last option.

Sent from my iPhone using Tapatalk Pro

TwiceHorn · February 26, 2020

7 hours ago, Archer said:

Correct.

I was referring to the “If you fail to service it” comment. Probably should have put it in bold.

The other big downside is the 60 day payback if you leave the job. Not sure PLs job security but it’d be a big concern for me in O&G right now.

Gotcha yeah. The whole 401k deal would suck multiple ways, most notably blowing advantaged savings. And yeah the job deal could suck.

But if you can count on yourself to service it, it's not a bad deal.

Born a Longhorn · February 26, 2020

3 hours ago, CooterBrown said:

Can you do a cash out refinance? Depending on your rate and current rates you may end up with little difference in your mortgage payment.

This is the best option. My in-laws just did this, with even higher CC debt and less home equity than you.

220k - 78k = 142k equity (let's assume 4k in refinance costs, so 138k)

Pay off CCs and then close them, transition to debit cards and checks

138k - 57k CC debt = 81k refinanced

81k @ 3% for 10 years (they won't give you a great rate with your current score I'm guessing) = $782/month in principal/interest

81k @ 3% for 10 years and add $1000/month extra payment = pay off 71 months (6 years) early i.e. pay off your house in 4 years

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