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So here is the story...My wife and I have been throwing around the idea of selling our home to pay off all of our debt. Some details, I'm 31 and she is 30, one son and a second child on the way. We both are safe in our careers and have an annual household income of 220k that will continue to rise with step increases each year. Both have solid credit scores, mine is 819 and hers is 790. We bought a beautiful home that we love on 5.25 acres for $470k--which when when you include taxes and insurance equals approximately $2700 monthly which was well below what we were approved for. We previously had a rental that we sold and and made a profit so were able to knock out a fair amount of debt and use the rest for a down payment on our current house.
Our total bring home dollar amount each month after taxes is approximately $11,000 per/mo.
Our current debts are as follows;
Home: 408k--payment of $2700 per/mo.
Solar: 38k--payment of $294 per/mo
Truck: 70k-payment of $1000 per/mo.
Car: 20k--payment of $280 per/mo.
Boat: 29k--payment of $260 per/mo.
Student loans: total balance for combined loans 49k--total minimum payments of $400 per/mo. (although we pay extra on them so we actually pay around $550 per/mo.
Groceries: approximately $1300 per/mo.
Life Insurance: 2x 850k policies--$117 per/mo.
Cell phones: $200 per/mo.
Home/auto insurance: $175 per/mo.
Braces: 3000k--$200 per/mo.
No Credit card debt
Total: $7076 each mo.
+11,000
-7076
-------------
= $3924 approximate left at the end of each month for entertainment, dining out, projects, etc.
We have approximately 10k in savings, contributing 350$ per/mo.
I have approximately 50k in my pension with monthly contributions.
My wife has approximately 18k in a 401k with max contributions.
We currently have 200-250k of equity in our current home. Option 1: Sell our current home and downsize to a house we could pay cash for and own outright with no financing. Option 2: Use the profit to pay off all debt, live with family for approximately 6 months to save for a down payment for a similar house we are in now with approximately the same monthly payment however have 0 debt other than a mortgage/insurance and basic living expenses
We feel comfortable in our situation now however we feel that its rare to hear of anyone who owns their home outright and has no monthly debt or at the very least have no debt other than their home...especially with a solid income. We feel it would be a great example to our children as well as open up endless possibilities for future opportunity and absolute financial freedom. Wanted to get thoughts, opinions, and possible other options to help us decide if these options are the best options for us or if we just stay status quo and pay off our debts over time while staying in our current house. Much appreciated!
Why is your saving so low? The house was the best purchase that you made. You have too many toys. What are you doing with the extra $3000 each month?
He and his wife are early 30s so I wouldn't live it up just yet on 100k in toys banking on a pension
Oh I agree I would've done it differently but I know folks who work in some good government jobs (some dual incomes in them), for three letter agencies, who live a pretty good life on their income because their jobs will always be there. It's so much different of a world than the rest of us live in, we just can't wrap our heads around it.
Personally, I'd sell the things you are in debt for first, before selling the house to pay for that debt. $70k truck? Boat? $1300 for groceries?.
This is what I was thinking, too. Plus, there seems to be an awful lot spent dining out, etc.
I think you can afford to keep the house as long as you get rid off all the other stuff, which seems a lot less extreme. Moving out of one property and into another is also going to be very expensive with real estate commissions, etc.
What is with that 70k truck? Plus a boat? And loans on both? That is hard to fathom.
Oh I agree I would've done it differently but I know folks who work in some good government jobs (some dual incomes in them), for three letter agencies, who live a pretty good life on their income because their jobs will always be there. It's so much different of a world than the rest of us live in, we just can't wrap our heads around it.
I have a public sector job and I still think it's a bad idea to live it up. Doing so essentially means you're locking yourself into being dependent on that pension. I work for a city with a high credit rating. Yet our pay was cut 6 years ago and I will only be exceeding my previous pay (barely) come July. Of course, we put a lot more into the pension fun now, so my net pay will still be less. Our future pension liability is only 56% funded, which is not very good.
Even if the pensions are well funded and there are no pension/pay cuts, he might not want to do his job forever...but with low retirement savings, he's stuck working for the government whether he wants to or not.
I just think buying yourself flexibility is so much more important than buying overpriced toys.
You bought a truck with 7 + years of $1000 payments??? That's the issue, not the house, IMO. I wouldn't sell the house. In the long run, it will increase in value. Get rid of the truck.
The truck is a 2016 2500 Chevy Duramax diesel--unfortunately brand new full sized diesel trucks run around the 60-75k range. We use it to tow our boat and pulling trailers. We could have bought used but we felt that having a good truck that hasn't been abused and we know the service history was worth it since we have the income to afford it "comfortably"
You can't afford it comfortably if you are here asking if you should sell your house. Sell the boat, too.
You can't afford it comfortably if you are here asking if you should sell your house. Sell the boat, too.
Well said. "Afford" implies that it doesn't cause financial stress of significant consequence, such as forcing an undesired change in family, jobs, retirement, or housing. In other words, if you have to derail central aspects of how your life is set up so that you can pay for something, then you can't "afford" it.
I have a public sector job and I still think it's a bad idea to live it up. Doing so essentially means you're locking yourself into being dependent on that pension. I work for a city with a high credit rating. Yet our pay was cut 6 years ago and I will only be exceeding my previous pay (barely) come July. Of course, we put a lot more into the pension fun now, so my net pay will still be less. Our future pension liability is only 56% funded, which is not very good.
Even if the pensions are well funded and there are no pension/pay cuts, he might not want to do his job forever...but with low retirement savings, he's stuck working for the government whether he wants to or not.
I just think buying yourself flexibility is so much more important than buying overpriced toys.
State is very different then federal. I wouldn't work a state job, all the downsides and none of the upsides of the public sector.
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So we let the professionals do it for us.
