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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%)
HELOC: $400 (120K balance 3.9%)
Auto: $533 (28K balance 5yr 1.9%)
Utilities: $470 (average)
Water $125
Sewer: $70
HOA: $120
Alarm: $138
Home phone/internet/cable: $243
Auto insurance: $102
cell phones: $195
Kids sports membership:$400
Gas for cars: $400
Groceries: $1500
Going out to eat: $250
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
401K loan: $11,000 (paid back $400/mo at 2%)
Income: 170K-200K
401K: 158K
Cash in savings:25K
Emergency fund: 0
College savings: 0
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. 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.
Yep, it's real. Knew I didn't have to even ask but figured I would. Wife isn't in love with the home I found and wants to wait it out till something we like better comes along.
I'd still have to sell my current home and as you can see I would need every penny out of the sale!!
OP, those numbers are scary. YES, consider downsizing.
Why do you pay only $150/month on the credit card with the highest interest rate?
How do you spend $1,500/month on groceries? I live alone but have frequent house guests and typically spend $250-300/month on groceries (including meat with most dinners).
Has your wife considered getting a part-time job? I can't imagine putting this kind of financial pressure on my husband/partner. (And she's "not in love" with the cheaper house you found? So what?!! Has she seen your financial numbers?!)
I don't mean to be harsh, but yes, you are living WAY above your means. Think how much better you'll feel when you live BELOW your means and can actually breathe!!
My wife pays the bills. Ironic huh? She's does not disagree that we should move but really does not like the home we've found. It has to be within the same school district and the choices are very limited, especially in our "new" price range. I'm kind of in panic mode and want to get out of this home asap. Other interesting thing will be if we do indeed buy this particular home NOT maxing out a HELOC to renovate the entire home, which my wife wants to do. She's afraid of moving into an older dated home and not being able to afford to renovate everything. To which I reply "that's reality."
OP,
Who is the biggest spender in the house? Your wife?
Neither of us are innocent. The home takes up the majority of the money then comes all the "life" expenses that come with 2 young kids. No excuse as there is plenty of area to trim expenses. I don't mean to pick on her at all but I often say she needs a reality check.
Can you imagine if you sold the house, rented for a couple of years and became debt free. You make a ton of money and you have no real savings ( for the income you have ) and no Er fund.
That house, along with a 1500 dollars a moth grocery bill, is insane.
Yep. But downgrading your standard of living likely means she would divorce you. Put another way, you mortgaged your relationship by virtue of material standards. I take home about 6500/mo single income household with a wife and kid and the fundamental difference is that my spouse does not begrudge our lifestyle choices.
You need to have a SERIOUS sit down with your life partner because it seems that such lavish consumption standards is a pre-condition to your family unit. That's a real killer. I truly wish you luck. These are the constructs that need to be agreed upon BEFORE one marries another person.
I would echo the rest of the advice on this board. Downsize immediately. Stop the credit card spending. Develop a more robust savings plan. I take home less than half what you do, and my savings account more than triple yours. That's just incredible. You could do better.
Good luck my man.
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