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My gut instinct says we need to downsize, sell the house and get into a more manageable mortgage. Here is the bio and info. 40yr old, married, 2 kids ages 4 & 8 and wife stays at home. My income varies but has never dropped below 170K and typically is between 180-205K. We've got a ton of debt, big mortgage and apparently live way beyond our means.
Background. Bought this house 4 years ago for 892K.
Mortgage: $5350 (625K balance 30 yr fixed at 5.75%)-Sell and purchase a 1500-2000 sq. ft. home.
HELOC: $400 (120K balance 3.9%)
Auto: $533 (28K balance 5yr 1.9%)
Utilities: $470 (average)
Water $125
Sewer: $70
HOA: $120
Alarm: $138-Get a big mean-looking dog. Put sensors on your ground floor windows if it would make you feel better about leaving your family alone at home. Still, paying as much as you do, you are probably in a very safe neighborhood with few or no home break-ins.
Home phone/internet/cable: $243-Ditch the cable TV. Use Hulu.com & Netflix instead. Get a Roku Streaming Player to transmit programs/movies to your TV.
Auto insurance: $102
cell phones: $195- Get no-contract plans from TMobile, Net10, or whatever is best in your area.
Kids sports membership:$400- NO WAY!!!! How about a jungle gym in the back yard? Do your kids have bikes? Do you and your wife take them to the park? Do you have a community swimming pool, ice skating rink, etc?
Gas for cars: $400
Groceries: $1500- Seriously, $375 a week for what, mostly processed/high chemical additive/ sugary/high fat/high sodium foods? Get back to basics and cook from scratch. Use th leftovers for lunch. Brown bag it everyday and make your lunch the night before.
Going out to eat: $250- It's fun to go out, but make it special and just do it once a week; at least until you are debt free.
Credit card: $15,500 (0% till May 2014) typically pay $1200/month
Credit card: $15,000 (0% apr)
Credit card: $25,000 (13.25%) pay $150/month-Increase the monthly payments on this high interest card.
401K loan: $11,000 (paid back $400/mo at 2%)
Income: 170K-200K
401K: 158K
Cash in savings:25K
Emergency fund: 0- Use forced savings with automatic deductions.
College savings: 0-Ditto
I feel like the this home is killing us. The mortgage, HELOC, the 15K/yr taxes is just too much for a single income family.
Found a smaller less expensive (very dated) 3100sq/ft home for sale. Why do you need such a large home? Could probably buy for 520K and immediately reduce the mortgage and overall debt burden. Not to mention 1/2 the taxes and a significantly lower APR on the mortgage.
I probably don't even need to ask this but I will....should I consider selling this home and buying a less expensive one? Seems pretty obvious to me that we are living above our means.
I also commend you for being brave enough to put your finances out there for public scrutiny. I mean this to be taken in a constructive way, but you and your wife sound like out of control spendaholics. It helps if one person in the marriage is the designated financial driver, but it sounds like this just isn't the case with you two.
Sooo, someone has to really concentrate on assuming this role, while you both make a commitment to changing your attitudes/easy spending habits. You might want to get one of Suze Orman's no-nonsense financial guides and develop a new way of looking at money.
BTW, making at least $170K a year does not mean that you should buy as much house as you possibly can. Just get a nice home with good schools in a safe neighborhood.
I know selling the home and moving to a less expensive home is not going to solve everything. I do view it as the single largest action we can do towards the direction of changing how we live, spend and save.
I know selling the home and moving to a less expensive home is not going to solve everything. I do view it as the single largest action we can do towards the direction of changing how we live, spend and save.
That's one very important step, but you guys also need to adjust the way you look at money and spending. Self-discipline is key because the old saying that you can't buy happiness is definitely true. Keep acquiring things, things and more things, and you eventually end-up empty inside.
I think you should rent until your debt is gone. I'm sure for 1500 you can find a nice place for a while. After a couple off years you are debt free and can buy a new house.
We are at the point where we realize moving would be best but not 100% sure on this particular house. Problem is our required location is very small, limited budget and little home inventory available. I've looked for about 3 years and kind of feel that this particular home is as good as it gets. It's a hard pill to swallow, especially for my wife who is used to a huge new construction home decorated in Ethan Allen furnishings. Gotta admit, I'm pretty used to it as well but am ready to make a conscious change for the better of our finances and future.
You know what? I don't think I have ever suggested this to anyone (for obvious reasons), but yours sounds like a case that might benefit from your taking her to a Financial Peace University course.
Try some local churches.
Sometimes it takes other people to open your eyes.
We are at the point where we realize moving would be best but not 100% sure on this particular house. Problem is our required location is very small, limited budget and little home inventory available. I've looked for about 3 years and kind of feel that this particular home is as good as it gets. It's a hard pill to swallow, especially for my wife who is used to a huge new construction home decorated in Ethan Allen furnishings. Gotta admit, I'm pretty used to it as well but am ready to make a conscious change for the better of our finances and future.
You are both big spenders, but your wife has to put on her big girl pants and you need to learn to say,"No."
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