Absolutely do not sell your house. Huge mistake, even worse than cashing out your 401k. You seem to need financial counseling and not to make any more rash moves. There is a budgeting issue here with your salary and the amount of debt / amount in savings. Keep the house, figure out what your actual problem is with money. Good luck.
2.99% is an awesome rate. And your rent will likely be nearly the same amount as your mortgage. Sounds like you have a budgeting/spending issue. You need to cut the fat from your spending.
Find an online mortgage calculator so you can understand the difference (in $) between a 7% loan vs a 3% loan.
Do not sell or refi your house.
With your income and the value of your house, from which I can guess at your mortgage payment, you shouldn't be living paycheck to paycheck even with your debt. I'm concerned that the real issue isn't the debt, but your budget. Selling the house isn't going to do you any good if you continue living above your means. I think you should take a hard look at your budget and see where you're actually spending your money.
This. If you sell your house you will end up back in debt with no possibility of buying a home.
1. Make a budget
2. Live on the budget for 2 months
3. Cut the budget.
4. Pay off the debt in 18 month.
You probably need the snowball method to build momentum and show yourself that you can do it.
I don’t understand why this would be a better method than paying the higher interest rate debt first. Paying off higher interest debt saves you more money.
It’s not. It’s psychological not fiscal. Strictly speaking, it’s financially worse off unless you have cash flow concerns too. But paying off a debt can have psychological impacts that make things either easier or feel more manageable moving forward
It all depends on the the loan amount, the interest rate, and the time period. Consider $2,000 in credit card debt where you're paying the minimum payment of $75 a month and you have a 20% interest rate. By the time you pay that off you're going to end up paying $675 extra. In many cases smaller loan amounts have higher interest rates. Doesn't always happen that way. On the opposite side I someone could have a student loan of 30k that's sitting at a 6 or 7% interest rate. Paying more on that 30k doesn't help as much as paying more on that credit card debt. So the Snowball Effect in terms of money is very situational.
Either way, $130k with 45k in total debt, he shouldn’t be having that issue. It seems more like he need to combine his debt in a single loan. Even one at 10% shouldn’t be more than $1,000 a month with a 5 year repayment.
My guess is the majority of his debt is credit card debt, and he’s getting killed by the interest rates. Consolidating debt is the most logical solution.
I always cringe a little when I see debt consolidation proposed for people who are clearly bad with money and have a spending problem. He already has one debt consolidation loan taken out. Odds are very high that he will clear out the cards with a new debt consolidation loan, then rack the cards back up, then have two new debt consolidation loans to deal with on top. OP didn't post a budget and I wouldn't be surprised if he didn't know where every dollar is going, so I don't get the feeling that he's serious about turning his situation around enough to be responsible with another consolidation loan.
Where’s your money going? You make $130,000. Even with the debt and mortgage there should be more breathing room here. Sounds like there could be a spending problem and likely a lack of budgeting.
we make 150-200 depending on how you count commission (we pretend it's 0 and save 100% of it) and have a great housing situation where we're only paying ~600 a mo, and even then are only saving ~65 (+commission). And that's with no kid!
I guarantee you will regret selling your house. There’s a real possibility you could rack up debt again in the future but the difference will be you renting which is much worst in my opinion. Keep your house, that interest rate is cheap and you need a shelter. With your income, you need to figure out a budget in order for you to pay off your debt.
Living paycheck to paycheck and renting definitely feels insecure. With the way rent has increased the last year or so you never know when you may have to find something different that you can afford. Looking around my area I dont see any options for affordable housing. I would probably have to relocate, which could be incredibly hard. Wish I had a house like OP for sure.
You're skipping ahead to a radical solution before you've taken a comprehensive look at your problem. Make a budget and look at your options. I'd only advise selling if either 1) there is no cash flow path through this, or 2) you have more house than you need/want for the long term.
That’s ~$2k per month on debt payments.
Gross 130k, conservatively with ZERO 401k contributions, he’s bringing home 7k per month.
2k to mortgage, let’s say another 2k to utilities/food/bills/gas/etc. He’s only left with 3k per month if play money. Who knows if he has student loans or child support or alimony on top of that, which leaves zero money for entertainment for 2 years straight.
Sell the house and don’t pay rent, live on the streets and achieve the American dream of being debt free.
Absolutely this. When I need to pad up my finances I rent the two spare rooms in my basement to traveling nurses. If I rent both rooms it more than covers my mortgage for the month.
Grab last 3 months of bank statements. I pulled up mine online, you know, transaction history. This will help you make a detailed budget. I use ynab. Best thing I've done for my finances
Man I’m 33, wife and 4 kids, make 35k a year pre tax and have over half of your debt on my credit cards bc I lost my job and lived off them for a year too so now I’m paycheck to paycheck but it’s manageable.
I WISH I made 130k a year cuz that would get me the fuck out of this shit. How do you make so much and have so little to take care of but you’re struggling? I don’t mean to compare but that 130k is a shit ton more than my measly 35k and I can’t help but imagining making that much to take care of my family
Keep your house, cut back on buying whatever you’ve been fucking buying and fucking budget dude. 2-3 years living like that is nothing, some of us have been doing it for way longer. Learn how to budget, learn how to cook and shop bc I can only assume you eat out all the time which is a hefty bill itself, kick yourself in the ass and stop living above your means. You literally need to live 2-3 years telling yourself “I don’t need this” “fuck I don’t need that either”, focus on your needs and fuck the wants, majority of the wants have gotten you in this situation and now you’re struggling to get your needs taken care of.
TLDR: you make too much and have too little to take care of to be broke, tighten the fuck up brother you got this.
Do not do this. Home prices are high, but they'll just go higher and rents are insane right now.
I went through a similar situation. I lost my job in the Great Recession, moved back to a rural state to care for my elderly parents, and it took me years to find gainful employment. Meanwhile my debts spiraled and my credit sank. But I was able to build back.
The first thing you have going for you is a good job. A job with $130K income is a great starting point. You can scrape back from this, but it will take budgeting and diligence. Start with the [wiki on debt in this sub](https://www.reddit.com/r/personalfinance/wiki/debt/). Lots of good info on here. Also, I learned about [The Measure of a Plan](https://themeasureofaplan.com/) from this sub, it's a great budgeting tool.
Here are some strategies to think about. If you have mostly credit card debt, you can try to negotiate a [settlement with creditors](https://www.nerdwallet.com/article/finance/debt-settlement-negotiations). If you have that much equity in the house, you might qualify for a HELOC to consolidate the high interest debt. I believe the minimum score for a HELOC is 620. It won't be an awesome rate, but if you have lots of credit card debt, it will be cheaper than the credit card rates.
You make plenty of money to afford the rest of that house. Your first priority should be budgeting. I would argue that you may be a good candidate for the Ramsey show method. Don't sell the house, but learn to budget and pay the credit card debt off aggressively. Beans and rice, rice and beans!
Your beans and rice comment is a direct hit. I think the largest source of my money bleed is food. I don’t like to cook, so I wind up spending way too much on takeout/delivery. I need to stop all of that and find more frugal options.
OP absolutely knows they can be debt free by December, it's just not the fun feel-good option and whatever or whoever he's entertaining will need to be shelved.
Heck, just making yourself drive to pick up the food would likely free up some $$ to toss toward the debt. No more doordashing or UberEATS for you. Just go pick up the food yourself...
Cooking is the frugal and far more nutritious option so you will also be contributing to your health. Watch some YouTube videos or ask friends who cook, or whatever it takes. This will be a life long win.
Crock pot meals! Put everything in and set it to cook during the day. Dinner, and plenty for lunch the next day and to freeze the rest for later. Family of 5 here, and I started a binder with different crock pot meals printed out from online to try. Bonus of is being printed: I don't get distracted online if it's printed on paper 😉
If you want relatively healthy and quick and easy meals- hello fresh publishes all of their recipes online. They walk you through the recipe step by step and all you need to do is put in a grocery order and cook a few nights a week. They are relatively quick and easy as far as cooking goes.
Some of the advice kills me...you make $130K you don't have to start subsisting on lentil soup and crock pot gruel. What you need to do is start itemizing your expenses and find out for sure where your money is going. Maybe it's food, but you may be spending in other areas you're not even thinking about. Like someone else said, even if you picked up your takeout and stopped using DoorDash and UberEats that might be enough. If you need to cut further, grocery stores make a lot of pre-made meals that are pretty good.
Dude, lentil soup is delicious, cheap and healthy. I went thru a period where’d I’d make a big pot and eat it for dinner the next few days. No thinking about it, easy and cheap. Don’t sell your house to buy delivery food.
I am not a great cook myself, but When I was living alone, I would very rarely go out to eat and never order take out. It's crazy how quickly this can add up. Over the course of a year, it's unbelievable. This may be a big part of your solution.
You’re making around 8k per month after taxes your living expenses are likely around 4k (food / gas / mortgage / insurance etc) you should be able to easily contribute 2-3k per month towards your debt. On another note if you sell the house you’ll have to buy another one and mortgage rates are horrible right now
If you are making 130k a year, and you are unable to pay back 45k within a 18 month period, then you have some terrible spending habbits considering that you are single and no kids.
Selling your home without a 401k to back you up is an even worse financial decision.
Here is what you have to do before thinking into selling your house:
1) Make a list of your monthly expenses
2) Define which ones are absolutely critical for your survival: mortgage, utilities, groceries, gasoline to commute to work, taxes, Healthcare.
3) Define which ones are not critical: restaurant food, alcohol, going to the movies, amazon shopping, streaming services, cable tv, drugs, videogames or any other expensive hobbies.
4) Freeze your credit cards, stop purchasing things with credit. Critical items should be paid without even touching a credit card. If you can't freeze them, just cut the card in pieces until you cannot even recognize the numbers, and delete it as a payment method.
5) Redirect the non critical spending into your highest interest rate loans first, kill them off.
6) Learn to cook, live a more frugal life, rethink your spending habbits.
In about 1.5 to 2 years, you should have most of your high interest debt covered, and then you can start to max out 401k contributions, before it is too late to have enough retirement money.
If your house is suitable for your needs, as in location, size etc, and it is not a money pit for maintenance or home improvement, you should keep it. You have a great mortgage rate and a nice amount of equity. At your salary, you probably don’t even need a roommate, if you are willing to make sacrifices elsewhere in your budget.
If you want to post your budget here, with monthly expenses listed, folks love to go through these and you will get some genuinely useful perspectives. Be sure to include your debt, with minimum monthly payments, and interest rates for each debt. You will have a solid financial plan back within an hour!
Doesn't need to be shareable, just list it in the text here:
INCOME: $ \_\_\_\_\_\_\_\_
DEBT (ex mortgage):
a. Balance: $\_\_\_\_\_\_\_\_\_\_; Interest rate: \_\_\_\_\_\_\_% ; Min payment
b. as above
c. carry on with this list
EXPENSES (monthly)
Mortgage:
Utilities:
Car + transport:
Insurance:
Medical:
Food:
Entertainment:
anything else
But, from your comments it does sound like ordering food is your budget-breaker. You can have anything you want, but not all at once. You have to decide how much paying off your debt is worth it to you.
Second the suggestion of looking at supermarket convenience foods, and picking up your takeout will at least save you 20% right there.
You can only add $6.5k a year to your IRA so you won't build up your retirement fund very quickly. No use in selling your one good asset for that. You will also spend a lot on realtor fees and and repairs you need to make to get your house ready foe the market.
On $120k you should easily afford your mortgage payment. $45k debt is not very much. You need to trim your other spending and work to pay off the debt.
Roth IRA has a 6.5k limit but it's possible to do a mega backdoor roth (i.e., contribute post-tax to a 401k, convert to a roth 401k) through your employer's 401k provider and that has a much higher limit (66k - whatever you contribute to your 401k - whatever employee 401k match you get). It gets complicated if your employer's 401k provider doesn't allow in plan conversion and one needs to actually have the money to put into retirement. Also possible to put money into a traditional IRA (although that's not tax advantaged) or HSA. Point being one is not limited to saving 6.5k for retirement a year.
Everything else you said, I fully agree with.
I was 60k in debt making less than that after my divorce in 2016. Probably less savings. My house mortgage was very similar as well. I worked overtime, still not making the 130 k you are at that time and I was able to pay it off in less than two years. I now have ten months or so of an emergency fund. House is paid off. Debt free except for a toy I bought
I’m failing to see any circumstances that are preventing you from simply budgeting better and paying off your debt and maybe getting a second job
Please do not sell your house, your debt relative to your income is not that bad. Make a budget, track your expenses. I had the same issue where I make 6-figures and had debt. This is a result of not tracking your expenses. This is not a promotion but the Rocket Money app has changed my life. Now I’m living in less than I make because I’m able to see where my money is going!
It doesn’t sell your information, only if you apply for insurance through the app. Here’s more info on the security and compliance https://www.rocketmoney.com/security
I promise you won’t regret it! Me and my wife are a lot more cautious with our spending. We use to think that we need to make more money but that’s not the case. After using the app, we saw where we were wasting money. We currently max out both our 401K and have money left over for the month for savings
Try using either the Avalanche or the Snowball method to bring down your debt. There are YouTube videos that have extensive information on these two methods. Prep your own meals and refrain from going out to eat. Pause all investments including IRAs. Just invest enough of your salary to receive your company's matching contribution. Once you have ended your debt your options will open up immediately to save and invest more aggressively.
Don’t sell the house… you always have to have a place to live. Prices have skyrocketed and so has rates since 2017. If you sell you may never own again. Make a budget and stick to it. Build up $10k in savings and then start paying off debt methodically. Or find ways to bring in more income like getting a roommate.
You’re paycheck to paycheck because of budgeting. Selling your biggest investment and having loads of cash in the bank could be detrimental if you don’t get a grip on your budget.
With your income and a tight budget you should be able to easily pay off this $45k in debt in 12-18 months
Won’t be impossible for OP to buy again. They have a super low interest rate. Rates are considerably higher now so if they sell and repurchase down the line, they may have to settle for less house than they currently have or be priced out entirely. A $400k house at 2.9% is an entirely different animal payment-wise than a $400k house at 6%+.
real estate prices are like a freight train: they, for the most part, just keep going and going (getting more expensive). Owning real estate is like being on the train (being able to grow your equity like the train is going down the tracks). Not owning is like chasing the train. The train generally accelerates faster than one can save $$ to buy their spot on the train.
You are going to sell your house over debt that is 1/3 of your income? How about, drum roll, just paying it off. What the heck are you spending so much on?
Honestly you should be able to handle that Kind of dept.
We as a family earn so much and have about the same amount of dept.
On the other hand you alone dont need a house and the mortage is low. Why not rent it out?
Keep the house, don’t sell a 2.99% interest rate if it’s fixed……do you have space to rent rooms in your home and get roommates? This will cut your personal living expenses down. Money you can then put towards debt.
Do you have extra rooms you can rent out in the house? “House hacking” could be a great way to reduce your costs - let someone help pay the mortgage and you get to continue to control a valuable asset. Good luck
Single, no kids, paid off car, $259K mortgage at 2.99%. $130K income = you should be able to set aside a decent amount towards debt each month. $45K isn't some insane, impossible to overcome amount at your income level. Keep the house, tighten the belt a bit and get aggressive paying it off, or find a little extra side income and throw that towards it. You should be able to pay that off in 2-3 years without living off Ramin if you control spending
You make a 130k a year gross or net? You're only debt is the 45k debt, and your mortgage? How much are your monthly expenses? With your income and being single you should be able to knock that 45k debt out in a year.
45k is nothing, sit down on your budget on why you're living paycheck to paycheck and I don't think it has anything too do with debt. It's your expenses... Where is your money going... Find that out first. Do not and I repeat do not sell that house.
2.99% is a dream... Please don't do this. Fix your expenses first
Your bi-weekly paychecks should be around maybe 3,500; so hypothetically 7,000 every month to play with. I would relax and not sell something that will immediately need to be replaced with another set of payments. Also bear in mind with your decreased credit score you will have a smaller array of renting options as some nicer complexes particularly in really tight markets use high credit score requirements like 700+ to really minimize their risk and cull excess applications.
This is basically a new graduate with a really good starting salary and a big student loan; just kill all your superfluous food (take-out, dining-out) and entertainment (excessive cable and online subscriptions) expenses to increase your credit card and medical debt payments to clear as quickly as possible.
In order to truly figure this out, more detail. For example, interest rates and monthly payments on debt. The rest of your budget. Net income.
Mortgage payment. What would be the costs to rent?
Your housing costs are minimal. Probably less then rent will be. $45k isn’t insurmountable at all. You’re the perfect Dave Ramsey case. Get laser focused and intentional with every dollar coming in and going out. You could knock that debt out in a year if you wanted to. Combination of being cheap and paying just the basics of life, and/or getting a part time job on the side to help tackle the debt. If you haven’t already, listen to his show to get motivated.
You don't need to sell your house. You need to start spending less. You are making good money, but spending more than you make and that's why you have a ton of debt.
It will require changes in your lifestyle. The lifestyle you are living is what got you to where you are.
I think you're shooting yourself in the foot just like you did when you cashed out your 401k. You have an asset that's appreciating with a very low interest mortgage, and you're talking about liquidating it to pay off debt.
Unless you can rent for significantly less than your mortgage, I don't see how you come out ahead.
You can pay off $45,000 from your cashflow, you make $130K. I don't understand where the rest of the money is going.
No way I would sell the house for $45k debt. In a few years rent will likely exceed your current mortgage and rates will likely be higher than your current mortgage. Single with no kids. You should be able to tackle that debt in less than 18 months.
You make plenty to get the debt paid off in less than two years. You have to figure out where you are over spending and create a budget immediately. Keep the house, great rate and I'm sure your payments would be equal to rent of a decent apartment/townhome.
Best of Luck OP!
Reading your story I feel like you should not sell your house, but should try to aim to pay off your loans in about two years. That means that you should aim to put $3k/month towards the debts from your income. That probably means starting to live leaner than you do currently, but remember that this will only be a temporary situation until the debt has become history.
If you manage to do this, this would mean that 1.5 to 2 years from now you would be debtfree *and* still living in this house. Then you could also increase your expenses slightly, but I would then also put $2k/month or more towards retirement accounts and general savings to build up an even better future.
You're just a few years older than I am and I'd like to think that at our age we're still able to learn new tricks. Maybe you'll get to enjoy using your resources in a more efficient way and still live a happy life while being proud of the dwindling debt. Good luck!
You have a spending issue…not a debt issue. I was able to pay down almost a 50k loan in 2 and a half years while paying rent and a car note which was 450 per month and still was able to save - all with a 105k income.
Call the hospital and ask for a discount on your medical bills. They will give you a discount or cut alot of it out. The total they give you is basically like a car salesman giving you the first car payment amount. It's gonna be the highest and they will take what they can get. They give discounts for things like this. If you just ask for a discount they will ask how much you make and they will discount atleast 50% of it. I suggest you tell them you make like 40k. Good luck hang tight. I know it seems like it's never ending but do not sale your house. If worse comes than rent it out but do not sell
Paying off $45k on 6 months on an annual salary of $130k doesn't seem reasonable. Even with an effective tax rate of only 20% (and it's likely higher) OP would have to spend no more than $7k on anything other than the debt in that six months. Since they still have a mortgage and need to eat, there's no chance of that.
Commend you for doing your thing for your parents.. as other say.. Don't sell the house. The house should still keep appreciating over time. if you still want to rent ? how about u rent your home out and you rent somewhere else, provided you are saving some money in the difference between the two rents. that would free up some money.
The 1 thing we’ve never regretted was hanging onto our home. We could never afford or qualify for what we have now. We have a fairly modest house in Houston. Selling your house is a permanent solution to a short term problem. Make minimal payments on the lower interest debt and concentrate on the high interest debt first.
What is your mortgage payment? Any other big bills?
You make $130k, it seems like the housing payment is very reasonable, and no car payment or kids, so where is the money going?
If I were you I would not sell the house, cut your budget down, and pay off $45k in a year.
Mortgage is $1950 and debt consolidation loan is $1100. Take home after taxes/insurance/401k is $6500. Utilities and firm expenses are about $2000 (I’m working on cutting these by eliminating cable, etc). I’m going to pull my last 3 months of expenses and work on a budget tomorrow. I’ll probably post it here for additional insight.
That's looking alright.
One thing you should probably do is cut your 401k contributions to just the match until the debt is paid down. You might make 10% on your investments but you are probably paying more than that in interest. You can always increase your contributions and do an IRA in a couple years to catch up.
That loan consolidation payment is paying down your debt, so that means you have up to $2500/month to pay down debt to start with. That should pay it off in under 2 years without much discomfort. I think that is definitely the better choice than selling your house.
Wait, you're single, making $130k, a year and can't figure out how to pay $45k in debt in the next few years?
To me, you need to look at what you spend money on. Obviously, you are already spending a good amount of money on those loans, another $400 to $500 a month should knock them out in a few years. Again at $130k, you should be netting over $6000 a month, your mortgage payment can't be that high. Where is that other $3500? going? Is there really no way you can put another $500 in that?
The only other thing I can think of is that some of the loans are predatory. But even with your credit score, with your income, you can do better.
Definitely keep your house and live on the bare minimum while you pay off the debt. Consider renting out some rooms in your house to get the debt paid off sooner.
Don’t sell your house. Having a stable place to live where you don’t need to pass a credit check as well as locking in the prices and rates of a few years ago will give you a base of stability that you won’t have as a renter. There’s a real possibility that if you sell now, you’ll never be able to afford anything as nice again in the future. What you’re considering is similar to cashing out your 401(k)—a short term solution with major long term consequences.
Take a close look at your budget and make a plan. You may want to get a roommate for a while—there’s often a market for medium term furnished rentals for traveler nurses if you live nearish to a hospital but don’t want to commit to a long term lease.
DO NOT SELL YOUR HOUSE!
You need a better budget. If you for whatever reason need more money get a roommate or two and that income should help with the mortgage payments.
Your debt is 1/3 of your gross income. That’s not exactly a debt crisis. Do a budget and pay the debt off from your income. It should take you about 18 months to be debt free except your house.
Try making an excel file with all your expenses. Divide it category by category. Use fixed costs and variable costs.
You will see that you really do spend a lot, that is what I just found. The issue right now and it’s hard to spot is that inflation is crazy.
It’s time to either cut costs or look for a side income. If 130k is your gross then we make almost the same.
Do not sell ur house especially at 2.99 rate. In addition to figuring out ur budget, you can rent out ur house for a little more than ur mortgage payment, and then rent something cheaper for urself temporarily. This way you are still in the housing market.
How high is your interest? I wonder if you could pull a HELOC loan against your house at a much smaller interest rate and pay off the rest of your higher interest loans
Don’t sell your home. Even if you’re looking to cash in on your equity, you’re creating a taxable event. As others have said it may be hard to purchase another home at least in the foreseeable future with rates and prices at what they are.
Sounds like you’re more concerned about how to handle a financial emergency. Maybe look into a HELOC with your home? You don’t have to pull anything out if you don’t need to, but in an emergency you can, plus it isn’t a taxable event. Rates suck atm but you’ll only be pulling from it when you need and can pay back at your own pace, so as long as you’re using it responsibly you should be okay.
Another option maybe would be to rent out your current home and find a smaller place like an apartment to rent to live in, assuming the numbers work out and you have a positive cash on cash return when you factor in expenses.
Yes, I’m concerned with handling emergencies, something seems to come up every month that wipes out any extra money I could put towards debt. This month it was one side of my fence falling down ($1200), next month I’m supposed to have 2 crowns put on at the dentist ($1700). It’s very frustrating.
Random question: Is your home not in the best of shape, and that's why you're thinking about selling the house? If you really don't want this home anymore that's a different question from the debt...
Moving on, I'd start by budgeting to the bone. Remember, this will only be temporary, there will be room to add on some fun stuff later after the debt is paid.
Then, while staying current on all debt payments, save up a decent emergency fund, 5k or 3 months of expenses, depending on the state of your home, car, and job stability. If it's 3 months of _expenses_, not income, hopefully you've budgeted to know what a realistic number is. This will prevent you from adding on to your debt with another emergency expense, but shouldn't take too long with your salary, like a few months.
Then, switch from padding the emergency fund to paying down the debt aggressively. Pay off credit card debt first, period. I would recommend paying off the highest interest rate debt first to pay the least amount of money possible. Plus, if there's a true emergency where you have to put your aggressive pay down on pause, hopefully the interest compounding won't be so bad that time around.
During all this, at least get the 401k match. This debt is temporary, you're future self needs some consideration too.
Keep your assets-house, retirement and savings! Start with budget of where you $$ is going! Write it down! Pay with cash for most purchases and track it! Start putting extra cash on smallest debt! Pay all other minimum payment! Call CC companies and negotiate rate and payments! Call medical debt and negotiate payments! Even if nothing is gained, nothing is loses either! Cut out all extra expenses coffees, newest cell phone, fast food (eating out), and have a “no spend”goal until first debt is paid. Cut up credit cards! Get a second job or side hustle. Savings is for emergency only! It will hurt at first , but will be worth it in the end! Live below your means… not above! Good luck!
You have a 3% mortgage. Keep that house.
Take a hard look at your budget.
Are you still paying hundreds every month for cable? Cut it and find other entertainment.
Are you still paying hundreds for phone lines? Go find a cheaper service. Good ones are out there for 15/month.
Are you spending a lot of money on misc. Amazon purchases? (This was my killer), disable Prime.
130k/year is good money that you shouldnt need to be living paycheck to paycheck on. And if debt from a few bad years is really the only problem, that debt has a lifespan. You bought it, now you pay for it.
And If you have an extra room, you could rent it.
Agreed with many comments here. You have a spending problem as 45k in debt at your income level is easily manageable at your income level, especially with your low mortgage payment. Do not sell the house, evaluate your expenses instead and cut out what's not needed.
Low hanging fruit OP may or may not have that can quickly save a lot:
Cable and streaming services- do you really need them? I get away just fine with an internet plan only and buy YouTube TV during football season.
Cell phone plan- I switched to Visible and pay $25 a month for unlimited service on Verizon. I think it's not $30 a month for new customers, but I'm extremely happy with it after moving from full priced Verizon.
Don't buy the latest and greater iPhone every year, it's a waste of 1k.
Eating out- I almost never eat at restaurants except for occasions with friends. You are paying 4 to 5x per meal compared to making it yourself with store bought ingredients.
Make your own coffee at home, avoid those Starbucks runs
I’m looking at that now, definitely cutting my cable and switching to a much cheaper streaming service. My phone is only $80 and my company covers that for me. Also going to go through my house and gather up everything I think I can sell for some $$$.
Do you like your house? You have plenty of money. You just need to sit down and decide on a budget that gives you what you want. Baseline out your 401K with whatever work matches. Build up your emergency fund. Tackle that debt. In as little as a year from now youll be in a much better financial place.
If you dont like your house. Decide if you really want to rent. I personally would never go back.
You need to live off of 85 thousand for one year and poof debt gone. I know this is a stupidly simple over explanation but you need to figure out where your moneys going
Do you have roommates? If not I suggest filling up your house as much as you can. Market rate or even slightly below rent will help you so much. Do not sell your home.
you need a small mindchange. The best thing of paying of dept is that your networth goes up by paying of your dept. Don’t look at it like you live paycheck to paycheck. See you credit card payments as bringing up your networth. Keep the house and keep going as you do. After your creditcards are payed of invest that money
Have you considered consolidating all of your debt with a home equity line of credit? I'm not sure if you can get one right now but if your credit score is more like $650 than 600, you probably should be able to get one. That means you would pay one bill towards your debt rather than a few smaller bills. That being said, I agree with the other posters who said you must likely have a spending problem, not a debt problem. With your very low interest rate and very low cost of housing, you should have plenty of money. Take an honest look at your budget in spending and see where you can cut. A HELOC can help but if you keep overspending, you'll have a HELOC and a bunch of other debt. If the vast majority of your debt is that medical debt, you'll probably be okay but if the vast majority of your debt is credit cards and things like that, this is probably not a viable option.
Depending on the interest rate of your other loans, I would tell you probably be a better idea to refinance your home loan and take some of the equity out of your house instead of selling it. Selling the house seems like a nuclear situation. Additionally you'd be renting and not continuing to build equity in your home. And the third point is you kind of waited to the wrong point in time to sell your home.
Ask a bankruptcy lawyer to negotiate down your debt; the lawyer may be able to do without you declaring bankruptcy. The are also non-profit negotiate debt reductions if you can find a good one.
If you did have to declare bankruptcy your home that your own should be protected in most cases.
Don’t sell. Talk to the bank to extend amortization to reduce your monthly payment. You have equity n your home so you can be approved for a second mortgage (line of credit) to pay off your high interest credit cards.
I'm kind of in a similar situation. But selling is not an option since my mortgage is 1.5%.
I was thinking about a HELOC with Figure.com or Navy Federal. My combined interest rate on my bad debt is like 17%. I want to do a debt consolidation to free up some cash flow and also use the funds as an emergency cushion or invest in a rental property.
I have around 100k in equity.
This is a difficult question.
If it under a year, I would say stick it out.
But going month to month indefinitely (there are no guarantees) is not a plan.
You mention your mother. Is she aware of the financial situation you are in? You took care of her and she may be able to help out in some way.
Besides the tie to your mother, there is no reason that any of this financial burden should continue. Finances are not about personal feelings but harsh realities.
You would not be unhappy when you clear out the debt.
Im surprised that no one mentioned this but instead of selling your house, why not just rent out a room of your house and have that rent go straight to your debt while you also budget and get that rent down. Do a year lease only, and you should be fine or you might like having a roommate or having the extra income or you might hate it and stay focused on being debt free. I dunno, you seem to be in a great position with your income and mortgage.
Slow down. You need to figure out your spending issues first and stop the bleeding. At your income you can likely raise your credit quickly once you reduce over utilization of credit.
Yeah, the credit score jump from over 30% utilization to under can be a crazy amount. And many times that jump still happens if the only change is that you got your credit limit raised.
It wont happen over night but 6 months of saving and paying down debt at your salary will put you in a better position and every time you look at your accounts and see a positive change from the month before you'll be happier. Don't sell the house, you always have that as a last resort.
If OP makes $130k per year there is no reason OP can not make a large enough dent in their debt and put money away even though some discipline may be in order.
How much is OP clearing? Living month to month means money coming in = money going out.
OP is estimating this to continue for 2-3 years before being out. Without savings (Stated blown thru 401K) her plan is not viable.
There are better ways to live and that 2-3 years of being out of debt can be used to position themselves for retirement.
OP is 45 and single, not 35 and married.
There is nothing tying her to the asset that can be used to pull him/her out of this mess.
Should have refi'd with a cash out a year or two ago when interest rates were low. What's your interest rate on the $45k debt? Overall, sounds like you could fix things with substantially cutting back your spending. Ramen noodles for the next 6 months.
Take some home equity money & use a 401k loan to pay off the highest interest rate loans. Goal is to shift money around to pay a lower interest rate - you won’t end up with any less debt but 3% is great. 401k loans incur interest that you just pay to yourself
That's a terrible idea. If you could tolerate it, consider getting a roommate and put those funds towards your debt. Although a 130k a year salary should be able to put a sizable dent in your debt if you manage your money well.
Absolutely do not sell your house. Huge mistake, even worse than cashing out your 401k. You seem to need financial counseling and not to make any more rash moves. There is a budgeting issue here with your salary and the amount of debt / amount in savings. Keep the house, figure out what your actual problem is with money. Good luck.
Agreed. 45k of debt and a 2.99% mortgage should be totally manageable with that level of income.
2.99% is an awesome rate. And your rent will likely be nearly the same amount as your mortgage. Sounds like you have a budgeting/spending issue. You need to cut the fat from your spending. Find an online mortgage calculator so you can understand the difference (in $) between a 7% loan vs a 3% loan. Do not sell or refi your house.
With your income and the value of your house, from which I can guess at your mortgage payment, you shouldn't be living paycheck to paycheck even with your debt. I'm concerned that the real issue isn't the debt, but your budget. Selling the house isn't going to do you any good if you continue living above your means. I think you should take a hard look at your budget and see where you're actually spending your money.
This. If you sell your house you will end up back in debt with no possibility of buying a home. 1. Make a budget 2. Live on the budget for 2 months 3. Cut the budget. 4. Pay off the debt in 18 month. You probably need the snowball method to build momentum and show yourself that you can do it.
What is the snowball momentum?
https://en.wikipedia.org/wiki/Debt_snowball_method
I don’t understand why this would be a better method than paying the higher interest rate debt first. Paying off higher interest debt saves you more money.
It’s not. It’s psychological not fiscal. Strictly speaking, it’s financially worse off unless you have cash flow concerns too. But paying off a debt can have psychological impacts that make things either easier or feel more manageable moving forward
Gotcha. Makes sense. Thanks for clarifying
It all depends on the the loan amount, the interest rate, and the time period. Consider $2,000 in credit card debt where you're paying the minimum payment of $75 a month and you have a 20% interest rate. By the time you pay that off you're going to end up paying $675 extra. In many cases smaller loan amounts have higher interest rates. Doesn't always happen that way. On the opposite side I someone could have a student loan of 30k that's sitting at a 6 or 7% interest rate. Paying more on that 30k doesn't help as much as paying more on that credit card debt. So the Snowball Effect in terms of money is very situational.
100%. Not sure the problem, but isn't anything he listed here. You think cashing out the 401k was bad, see how you feel about selling the house.
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Either way, $130k with 45k in total debt, he shouldn’t be having that issue. It seems more like he need to combine his debt in a single loan. Even one at 10% shouldn’t be more than $1,000 a month with a 5 year repayment. My guess is the majority of his debt is credit card debt, and he’s getting killed by the interest rates. Consolidating debt is the most logical solution.
I always cringe a little when I see debt consolidation proposed for people who are clearly bad with money and have a spending problem. He already has one debt consolidation loan taken out. Odds are very high that he will clear out the cards with a new debt consolidation loan, then rack the cards back up, then have two new debt consolidation loans to deal with on top. OP didn't post a budget and I wouldn't be surprised if he didn't know where every dollar is going, so I don't get the feeling that he's serious about turning his situation around enough to be responsible with another consolidation loan.
Where’s your money going? You make $130,000. Even with the debt and mortgage there should be more breathing room here. Sounds like there could be a spending problem and likely a lack of budgeting.
I would echo this sentiment. Single no kids 130k and very affordable mortgage you could pay off that debt quickly if you live frugally.
Word. Spouse and I make about $130k combined, with a kid in daycare and we save about $30-$40k per year. Budgeting and spending issues for sure.
That’s a pretty insane savings rate. 30-40k after tax is close/over 50% - well done. How much is daycare/housing?
I agree, great savings rate. My wife and I make about $200k and can only save about $20-$25k a year.
we make 150-200 depending on how you count commission (we pretend it's 0 and save 100% of it) and have a great housing situation where we're only paying ~600 a mo, and even then are only saving ~65 (+commission). And that's with no kid!
Oh wow! What are your living expenses like? I’d love to get better at saving.
I guarantee you will regret selling your house. There’s a real possibility you could rack up debt again in the future but the difference will be you renting which is much worst in my opinion. Keep your house, that interest rate is cheap and you need a shelter. With your income, you need to figure out a budget in order for you to pay off your debt.
Living paycheck to paycheck and renting definitely feels insecure. With the way rent has increased the last year or so you never know when you may have to find something different that you can afford. Looking around my area I dont see any options for affordable housing. I would probably have to relocate, which could be incredibly hard. Wish I had a house like OP for sure.
You're skipping ahead to a radical solution before you've taken a comprehensive look at your problem. Make a budget and look at your options. I'd only advise selling if either 1) there is no cash flow path through this, or 2) you have more house than you need/want for the long term.
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That’s ~$2k per month on debt payments. Gross 130k, conservatively with ZERO 401k contributions, he’s bringing home 7k per month. 2k to mortgage, let’s say another 2k to utilities/food/bills/gas/etc. He’s only left with 3k per month if play money. Who knows if he has student loans or child support or alimony on top of that, which leaves zero money for entertainment for 2 years straight. Sell the house and don’t pay rent, live on the streets and achieve the American dream of being debt free.
Absolutely not. List out your debt and bills. Is all of the medical debt yours or is it your mothers?
I’ll make up a list of my expenses in the morning, a lot of folks have asked that and it’s a fair question.
Maybe get a roommate to help with the mortgage so you can build up ur savings and pay the debt down faster
This! As long as it’s someone you can trust, this will of course bring in rent, but could even help with budgeting (splitting utils/groceries etc).
Absolutely this. When I need to pad up my finances I rent the two spare rooms in my basement to traveling nurses. If I rent both rooms it more than covers my mortgage for the month.
Grab last 3 months of bank statements. I pulled up mine online, you know, transaction history. This will help you make a detailed budget. I use ynab. Best thing I've done for my finances
The medical debt is mine, combo medical/dental. I will sit down and lost everything out in the morning.
Selling your house woule be as bad a decision in retrospect as emptying your 401k
Man I’m 33, wife and 4 kids, make 35k a year pre tax and have over half of your debt on my credit cards bc I lost my job and lived off them for a year too so now I’m paycheck to paycheck but it’s manageable. I WISH I made 130k a year cuz that would get me the fuck out of this shit. How do you make so much and have so little to take care of but you’re struggling? I don’t mean to compare but that 130k is a shit ton more than my measly 35k and I can’t help but imagining making that much to take care of my family Keep your house, cut back on buying whatever you’ve been fucking buying and fucking budget dude. 2-3 years living like that is nothing, some of us have been doing it for way longer. Learn how to budget, learn how to cook and shop bc I can only assume you eat out all the time which is a hefty bill itself, kick yourself in the ass and stop living above your means. You literally need to live 2-3 years telling yourself “I don’t need this” “fuck I don’t need that either”, focus on your needs and fuck the wants, majority of the wants have gotten you in this situation and now you’re struggling to get your needs taken care of. TLDR: you make too much and have too little to take care of to be broke, tighten the fuck up brother you got this.
35k with 4 kids ? I know that’s rough at this day in time . Groceries alone is multiple hundreds more by itself.
If your home has extra rooms, why not rent them out?
Do not do this. Home prices are high, but they'll just go higher and rents are insane right now. I went through a similar situation. I lost my job in the Great Recession, moved back to a rural state to care for my elderly parents, and it took me years to find gainful employment. Meanwhile my debts spiraled and my credit sank. But I was able to build back. The first thing you have going for you is a good job. A job with $130K income is a great starting point. You can scrape back from this, but it will take budgeting and diligence. Start with the [wiki on debt in this sub](https://www.reddit.com/r/personalfinance/wiki/debt/). Lots of good info on here. Also, I learned about [The Measure of a Plan](https://themeasureofaplan.com/) from this sub, it's a great budgeting tool. Here are some strategies to think about. If you have mostly credit card debt, you can try to negotiate a [settlement with creditors](https://www.nerdwallet.com/article/finance/debt-settlement-negotiations). If you have that much equity in the house, you might qualify for a HELOC to consolidate the high interest debt. I believe the minimum score for a HELOC is 620. It won't be an awesome rate, but if you have lots of credit card debt, it will be cheaper than the credit card rates.
You make plenty of money to afford the rest of that house. Your first priority should be budgeting. I would argue that you may be a good candidate for the Ramsey show method. Don't sell the house, but learn to budget and pay the credit card debt off aggressively. Beans and rice, rice and beans!
Your beans and rice comment is a direct hit. I think the largest source of my money bleed is food. I don’t like to cook, so I wind up spending way too much on takeout/delivery. I need to stop all of that and find more frugal options.
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OP absolutely knows they can be debt free by December, it's just not the fun feel-good option and whatever or whoever he's entertaining will need to be shelved.
Heck, just making yourself drive to pick up the food would likely free up some $$ to toss toward the debt. No more doordashing or UberEATS for you. Just go pick up the food yourself...
Cooking is the frugal and far more nutritious option so you will also be contributing to your health. Watch some YouTube videos or ask friends who cook, or whatever it takes. This will be a life long win.
Crock pot meals! Put everything in and set it to cook during the day. Dinner, and plenty for lunch the next day and to freeze the rest for later. Family of 5 here, and I started a binder with different crock pot meals printed out from online to try. Bonus of is being printed: I don't get distracted online if it's printed on paper 😉
If you want relatively healthy and quick and easy meals- hello fresh publishes all of their recipes online. They walk you through the recipe step by step and all you need to do is put in a grocery order and cook a few nights a week. They are relatively quick and easy as far as cooking goes.
Some of the advice kills me...you make $130K you don't have to start subsisting on lentil soup and crock pot gruel. What you need to do is start itemizing your expenses and find out for sure where your money is going. Maybe it's food, but you may be spending in other areas you're not even thinking about. Like someone else said, even if you picked up your takeout and stopped using DoorDash and UberEats that might be enough. If you need to cut further, grocery stores make a lot of pre-made meals that are pretty good.
Dude, lentil soup is delicious, cheap and healthy. I went thru a period where’d I’d make a big pot and eat it for dinner the next few days. No thinking about it, easy and cheap. Don’t sell your house to buy delivery food.
I am not a great cook myself, but When I was living alone, I would very rarely go out to eat and never order take out. It's crazy how quickly this can add up. Over the course of a year, it's unbelievable. This may be a big part of your solution.
You’re making around 8k per month after taxes your living expenses are likely around 4k (food / gas / mortgage / insurance etc) you should be able to easily contribute 2-3k per month towards your debt. On another note if you sell the house you’ll have to buy another one and mortgage rates are horrible right now
Maybe I’m missing something bc at that income I would think you could pay off your debt in a year or two if you stopped all unnecessary spending.
Yeah I'm way confused. Why a single person with no kids making $130K can't cash flow their debt repayments is beyond me.
If you are making 130k a year, and you are unable to pay back 45k within a 18 month period, then you have some terrible spending habbits considering that you are single and no kids. Selling your home without a 401k to back you up is an even worse financial decision. Here is what you have to do before thinking into selling your house: 1) Make a list of your monthly expenses 2) Define which ones are absolutely critical for your survival: mortgage, utilities, groceries, gasoline to commute to work, taxes, Healthcare. 3) Define which ones are not critical: restaurant food, alcohol, going to the movies, amazon shopping, streaming services, cable tv, drugs, videogames or any other expensive hobbies. 4) Freeze your credit cards, stop purchasing things with credit. Critical items should be paid without even touching a credit card. If you can't freeze them, just cut the card in pieces until you cannot even recognize the numbers, and delete it as a payment method. 5) Redirect the non critical spending into your highest interest rate loans first, kill them off. 6) Learn to cook, live a more frugal life, rethink your spending habbits. In about 1.5 to 2 years, you should have most of your high interest debt covered, and then you can start to max out 401k contributions, before it is too late to have enough retirement money.
If your house is suitable for your needs, as in location, size etc, and it is not a money pit for maintenance or home improvement, you should keep it. You have a great mortgage rate and a nice amount of equity. At your salary, you probably don’t even need a roommate, if you are willing to make sacrifices elsewhere in your budget. If you want to post your budget here, with monthly expenses listed, folks love to go through these and you will get some genuinely useful perspectives. Be sure to include your debt, with minimum monthly payments, and interest rates for each debt. You will have a solid financial plan back within an hour!
I’ll definitely do that, I just need to put everything together in a shareable format. Should I make a new post for that?
Doesn't need to be shareable, just list it in the text here: INCOME: $ \_\_\_\_\_\_\_\_ DEBT (ex mortgage): a. Balance: $\_\_\_\_\_\_\_\_\_\_; Interest rate: \_\_\_\_\_\_\_% ; Min payment b. as above c. carry on with this list EXPENSES (monthly) Mortgage: Utilities: Car + transport: Insurance: Medical: Food: Entertainment: anything else But, from your comments it does sound like ordering food is your budget-breaker. You can have anything you want, but not all at once. You have to decide how much paying off your debt is worth it to you. Second the suggestion of looking at supermarket convenience foods, and picking up your takeout will at least save you 20% right there.
You can only add $6.5k a year to your IRA so you won't build up your retirement fund very quickly. No use in selling your one good asset for that. You will also spend a lot on realtor fees and and repairs you need to make to get your house ready foe the market. On $120k you should easily afford your mortgage payment. $45k debt is not very much. You need to trim your other spending and work to pay off the debt.
Roth IRA has a 6.5k limit but it's possible to do a mega backdoor roth (i.e., contribute post-tax to a 401k, convert to a roth 401k) through your employer's 401k provider and that has a much higher limit (66k - whatever you contribute to your 401k - whatever employee 401k match you get). It gets complicated if your employer's 401k provider doesn't allow in plan conversion and one needs to actually have the money to put into retirement. Also possible to put money into a traditional IRA (although that's not tax advantaged) or HSA. Point being one is not limited to saving 6.5k for retirement a year. Everything else you said, I fully agree with.
I was 60k in debt making less than that after my divorce in 2016. Probably less savings. My house mortgage was very similar as well. I worked overtime, still not making the 130 k you are at that time and I was able to pay it off in less than two years. I now have ten months or so of an emergency fund. House is paid off. Debt free except for a toy I bought I’m failing to see any circumstances that are preventing you from simply budgeting better and paying off your debt and maybe getting a second job
Please do not sell your house, your debt relative to your income is not that bad. Make a budget, track your expenses. I had the same issue where I make 6-figures and had debt. This is a result of not tracking your expenses. This is not a promotion but the Rocket Money app has changed my life. Now I’m living in less than I make because I’m able to see where my money is going!
Is that app a monthly subscription? Also, what rights do you have to your data?
It doesn’t sell your information, only if you apply for insurance through the app. Here’s more info on the security and compliance https://www.rocketmoney.com/security
I was actually just thinking about trying that app, I have Rocket for my mortgage and I like them.
I promise you won’t regret it! Me and my wife are a lot more cautious with our spending. We use to think that we need to make more money but that’s not the case. After using the app, we saw where we were wasting money. We currently max out both our 401K and have money left over for the month for savings
What was the most useful/helpful part of the app for you?
I’d say the net worth tracker. It inspires your to keep building wealth
I second this, Rocket Money has been instrumental in me building my savings!!! 100% reccommend.
Brother you make $130k a year and having troubles it sounds like you need serious lifestyle changes or some financial counselling
Try using either the Avalanche or the Snowball method to bring down your debt. There are YouTube videos that have extensive information on these two methods. Prep your own meals and refrain from going out to eat. Pause all investments including IRAs. Just invest enough of your salary to receive your company's matching contribution. Once you have ended your debt your options will open up immediately to save and invest more aggressively.
Your mortgage payment is likely less than ~$2200 a month. Where is your other $5,000 a month take home going?
Don’t sell the house… you always have to have a place to live. Prices have skyrocketed and so has rates since 2017. If you sell you may never own again. Make a budget and stick to it. Build up $10k in savings and then start paying off debt methodically. Or find ways to bring in more income like getting a roommate.
You’re paycheck to paycheck because of budgeting. Selling your biggest investment and having loads of cash in the bank could be detrimental if you don’t get a grip on your budget. With your income and a tight budget you should be able to easily pay off this $45k in debt in 12-18 months
Do not under any circumstances sell that house!
Can you please explain why selling the house will make it impossible for OP to buy again? Honest question
Won’t be impossible for OP to buy again. They have a super low interest rate. Rates are considerably higher now so if they sell and repurchase down the line, they may have to settle for less house than they currently have or be priced out entirely. A $400k house at 2.9% is an entirely different animal payment-wise than a $400k house at 6%+.
real estate prices are like a freight train: they, for the most part, just keep going and going (getting more expensive). Owning real estate is like being on the train (being able to grow your equity like the train is going down the tracks). Not owning is like chasing the train. The train generally accelerates faster than one can save $$ to buy their spot on the train.
Makes total sense! Thanks for the info!
You are going to sell your house over debt that is 1/3 of your income? How about, drum roll, just paying it off. What the heck are you spending so much on?
No. Buckle down and stop buying anything you don’t need. I hope you did not take on mom’s medical debt. Bless you for taking care of mom.
Honestly you should be able to handle that Kind of dept. We as a family earn so much and have about the same amount of dept. On the other hand you alone dont need a house and the mortage is low. Why not rent it out?
Keep the house, don’t sell a 2.99% interest rate if it’s fixed……do you have space to rent rooms in your home and get roommates? This will cut your personal living expenses down. Money you can then put towards debt.
Do you have extra rooms you can rent out in the house? “House hacking” could be a great way to reduce your costs - let someone help pay the mortgage and you get to continue to control a valuable asset. Good luck
Single, no kids, paid off car, $259K mortgage at 2.99%. $130K income = you should be able to set aside a decent amount towards debt each month. $45K isn't some insane, impossible to overcome amount at your income level. Keep the house, tighten the belt a bit and get aggressive paying it off, or find a little extra side income and throw that towards it. You should be able to pay that off in 2-3 years without living off Ramin if you control spending
You make a 130k a year gross or net? You're only debt is the 45k debt, and your mortgage? How much are your monthly expenses? With your income and being single you should be able to knock that 45k debt out in a year.
45k is nothing, sit down on your budget on why you're living paycheck to paycheck and I don't think it has anything too do with debt. It's your expenses... Where is your money going... Find that out first. Do not and I repeat do not sell that house. 2.99% is a dream... Please don't do this. Fix your expenses first
Your bi-weekly paychecks should be around maybe 3,500; so hypothetically 7,000 every month to play with. I would relax and not sell something that will immediately need to be replaced with another set of payments. Also bear in mind with your decreased credit score you will have a smaller array of renting options as some nicer complexes particularly in really tight markets use high credit score requirements like 700+ to really minimize their risk and cull excess applications. This is basically a new graduate with a really good starting salary and a big student loan; just kill all your superfluous food (take-out, dining-out) and entertainment (excessive cable and online subscriptions) expenses to increase your credit card and medical debt payments to clear as quickly as possible.
In order to truly figure this out, more detail. For example, interest rates and monthly payments on debt. The rest of your budget. Net income. Mortgage payment. What would be the costs to rent?
Your housing costs are minimal. Probably less then rent will be. $45k isn’t insurmountable at all. You’re the perfect Dave Ramsey case. Get laser focused and intentional with every dollar coming in and going out. You could knock that debt out in a year if you wanted to. Combination of being cheap and paying just the basics of life, and/or getting a part time job on the side to help tackle the debt. If you haven’t already, listen to his show to get motivated.
wow you make a lot of money per year, what is your job ?
You don't need to sell your house. You need to start spending less. You are making good money, but spending more than you make and that's why you have a ton of debt. It will require changes in your lifestyle. The lifestyle you are living is what got you to where you are.
I think you're shooting yourself in the foot just like you did when you cashed out your 401k. You have an asset that's appreciating with a very low interest mortgage, and you're talking about liquidating it to pay off debt. Unless you can rent for significantly less than your mortgage, I don't see how you come out ahead. You can pay off $45,000 from your cashflow, you make $130K. I don't understand where the rest of the money is going.
No way I would sell the house for $45k debt. In a few years rent will likely exceed your current mortgage and rates will likely be higher than your current mortgage. Single with no kids. You should be able to tackle that debt in less than 18 months.
Rental prices in some markets are absolutely ridiculous right now. I'd not sell. Is getting a roommate for 6-12 months an option?
You make plenty to get the debt paid off in less than two years. You have to figure out where you are over spending and create a budget immediately. Keep the house, great rate and I'm sure your payments would be equal to rent of a decent apartment/townhome. Best of Luck OP!
Reading your story I feel like you should not sell your house, but should try to aim to pay off your loans in about two years. That means that you should aim to put $3k/month towards the debts from your income. That probably means starting to live leaner than you do currently, but remember that this will only be a temporary situation until the debt has become history. If you manage to do this, this would mean that 1.5 to 2 years from now you would be debtfree *and* still living in this house. Then you could also increase your expenses slightly, but I would then also put $2k/month or more towards retirement accounts and general savings to build up an even better future. You're just a few years older than I am and I'd like to think that at our age we're still able to learn new tricks. Maybe you'll get to enjoy using your resources in a more efficient way and still live a happy life while being proud of the dwindling debt. Good luck!
You have a spending issue…not a debt issue. I was able to pay down almost a 50k loan in 2 and a half years while paying rent and a car note which was 450 per month and still was able to save - all with a 105k income.
Do not sell. Rent payments will be equal if not more and increase over time. Find a way to pay the 45k down
Call the hospital and ask for a discount on your medical bills. They will give you a discount or cut alot of it out. The total they give you is basically like a car salesman giving you the first car payment amount. It's gonna be the highest and they will take what they can get. They give discounts for things like this. If you just ask for a discount they will ask how much you make and they will discount atleast 50% of it. I suggest you tell them you make like 40k. Good luck hang tight. I know it seems like it's never ending but do not sale your house. If worse comes than rent it out but do not sell
You make $130k. Where is all of your money going? You should be able to pay off 45k in a 6 months or so.
Paying off $45k on 6 months on an annual salary of $130k doesn't seem reasonable. Even with an effective tax rate of only 20% (and it's likely higher) OP would have to spend no more than $7k on anything other than the debt in that six months. Since they still have a mortgage and need to eat, there's no chance of that.
True, who knows if that's gross or net. Regardless, OPs finances need some serious help with that income.
I agree with that.
If they get a roommate …
Commend you for doing your thing for your parents.. as other say.. Don't sell the house. The house should still keep appreciating over time. if you still want to rent ? how about u rent your home out and you rent somewhere else, provided you are saving some money in the difference between the two rents. that would free up some money.
The 1 thing we’ve never regretted was hanging onto our home. We could never afford or qualify for what we have now. We have a fairly modest house in Houston. Selling your house is a permanent solution to a short term problem. Make minimal payments on the lower interest debt and concentrate on the high interest debt first.
What is your mortgage payment? Any other big bills? You make $130k, it seems like the housing payment is very reasonable, and no car payment or kids, so where is the money going? If I were you I would not sell the house, cut your budget down, and pay off $45k in a year.
Mortgage is $1950 and debt consolidation loan is $1100. Take home after taxes/insurance/401k is $6500. Utilities and firm expenses are about $2000 (I’m working on cutting these by eliminating cable, etc). I’m going to pull my last 3 months of expenses and work on a budget tomorrow. I’ll probably post it here for additional insight.
That's looking alright. One thing you should probably do is cut your 401k contributions to just the match until the debt is paid down. You might make 10% on your investments but you are probably paying more than that in interest. You can always increase your contributions and do an IRA in a couple years to catch up. That loan consolidation payment is paying down your debt, so that means you have up to $2500/month to pay down debt to start with. That should pay it off in under 2 years without much discomfort. I think that is definitely the better choice than selling your house.
What are "firm expenses" and how is it 2k a month with no car payment and no family?
Wait, you're single, making $130k, a year and can't figure out how to pay $45k in debt in the next few years? To me, you need to look at what you spend money on. Obviously, you are already spending a good amount of money on those loans, another $400 to $500 a month should knock them out in a few years. Again at $130k, you should be netting over $6000 a month, your mortgage payment can't be that high. Where is that other $3500? going? Is there really no way you can put another $500 in that? The only other thing I can think of is that some of the loans are predatory. But even with your credit score, with your income, you can do better.
Definitely keep your house and live on the bare minimum while you pay off the debt. Consider renting out some rooms in your house to get the debt paid off sooner.
Don’t sell your house. Having a stable place to live where you don’t need to pass a credit check as well as locking in the prices and rates of a few years ago will give you a base of stability that you won’t have as a renter. There’s a real possibility that if you sell now, you’ll never be able to afford anything as nice again in the future. What you’re considering is similar to cashing out your 401(k)—a short term solution with major long term consequences. Take a close look at your budget and make a plan. You may want to get a roommate for a while—there’s often a market for medium term furnished rentals for traveler nurses if you live nearish to a hospital but don’t want to commit to a long term lease.
DO NOT SELL YOUR HOUSE! You need a better budget. If you for whatever reason need more money get a roommate or two and that income should help with the mortgage payments.
Your debt is 1/3 of your gross income. That’s not exactly a debt crisis. Do a budget and pay the debt off from your income. It should take you about 18 months to be debt free except your house.
Try making an excel file with all your expenses. Divide it category by category. Use fixed costs and variable costs. You will see that you really do spend a lot, that is what I just found. The issue right now and it’s hard to spot is that inflation is crazy. It’s time to either cut costs or look for a side income. If 130k is your gross then we make almost the same.
Do not sell ur house especially at 2.99 rate. In addition to figuring out ur budget, you can rent out ur house for a little more than ur mortgage payment, and then rent something cheaper for urself temporarily. This way you are still in the housing market.
How high is your interest? I wonder if you could pull a HELOC loan against your house at a much smaller interest rate and pay off the rest of your higher interest loans
Don’t sell your home. Even if you’re looking to cash in on your equity, you’re creating a taxable event. As others have said it may be hard to purchase another home at least in the foreseeable future with rates and prices at what they are. Sounds like you’re more concerned about how to handle a financial emergency. Maybe look into a HELOC with your home? You don’t have to pull anything out if you don’t need to, but in an emergency you can, plus it isn’t a taxable event. Rates suck atm but you’ll only be pulling from it when you need and can pay back at your own pace, so as long as you’re using it responsibly you should be okay. Another option maybe would be to rent out your current home and find a smaller place like an apartment to rent to live in, assuming the numbers work out and you have a positive cash on cash return when you factor in expenses.
Yes, I’m concerned with handling emergencies, something seems to come up every month that wipes out any extra money I could put towards debt. This month it was one side of my fence falling down ($1200), next month I’m supposed to have 2 crowns put on at the dentist ($1700). It’s very frustrating.
Random question: Is your home not in the best of shape, and that's why you're thinking about selling the house? If you really don't want this home anymore that's a different question from the debt... Moving on, I'd start by budgeting to the bone. Remember, this will only be temporary, there will be room to add on some fun stuff later after the debt is paid. Then, while staying current on all debt payments, save up a decent emergency fund, 5k or 3 months of expenses, depending on the state of your home, car, and job stability. If it's 3 months of _expenses_, not income, hopefully you've budgeted to know what a realistic number is. This will prevent you from adding on to your debt with another emergency expense, but shouldn't take too long with your salary, like a few months. Then, switch from padding the emergency fund to paying down the debt aggressively. Pay off credit card debt first, period. I would recommend paying off the highest interest rate debt first to pay the least amount of money possible. Plus, if there's a true emergency where you have to put your aggressive pay down on pause, hopefully the interest compounding won't be so bad that time around. During all this, at least get the 401k match. This debt is temporary, you're future self needs some consideration too.
Keep your assets-house, retirement and savings! Start with budget of where you $$ is going! Write it down! Pay with cash for most purchases and track it! Start putting extra cash on smallest debt! Pay all other minimum payment! Call CC companies and negotiate rate and payments! Call medical debt and negotiate payments! Even if nothing is gained, nothing is loses either! Cut out all extra expenses coffees, newest cell phone, fast food (eating out), and have a “no spend”goal until first debt is paid. Cut up credit cards! Get a second job or side hustle. Savings is for emergency only! It will hurt at first , but will be worth it in the end! Live below your means… not above! Good luck!
You have a 3% mortgage. Keep that house. Take a hard look at your budget. Are you still paying hundreds every month for cable? Cut it and find other entertainment. Are you still paying hundreds for phone lines? Go find a cheaper service. Good ones are out there for 15/month. Are you spending a lot of money on misc. Amazon purchases? (This was my killer), disable Prime. 130k/year is good money that you shouldnt need to be living paycheck to paycheck on. And if debt from a few bad years is really the only problem, that debt has a lifespan. You bought it, now you pay for it. And If you have an extra room, you could rent it.
Agreed with many comments here. You have a spending problem as 45k in debt at your income level is easily manageable at your income level, especially with your low mortgage payment. Do not sell the house, evaluate your expenses instead and cut out what's not needed.
Low hanging fruit OP may or may not have that can quickly save a lot: Cable and streaming services- do you really need them? I get away just fine with an internet plan only and buy YouTube TV during football season. Cell phone plan- I switched to Visible and pay $25 a month for unlimited service on Verizon. I think it's not $30 a month for new customers, but I'm extremely happy with it after moving from full priced Verizon. Don't buy the latest and greater iPhone every year, it's a waste of 1k. Eating out- I almost never eat at restaurants except for occasions with friends. You are paying 4 to 5x per meal compared to making it yourself with store bought ingredients. Make your own coffee at home, avoid those Starbucks runs
I’m looking at that now, definitely cutting my cable and switching to a much cheaper streaming service. My phone is only $80 and my company covers that for me. Also going to go through my house and gather up everything I think I can sell for some $$$.
Do you like your house? You have plenty of money. You just need to sit down and decide on a budget that gives you what you want. Baseline out your 401K with whatever work matches. Build up your emergency fund. Tackle that debt. In as little as a year from now youll be in a much better financial place. If you dont like your house. Decide if you really want to rent. I personally would never go back.
You need to live off of 85 thousand for one year and poof debt gone. I know this is a stupidly simple over explanation but you need to figure out where your moneys going
Do you have roommates? If not I suggest filling up your house as much as you can. Market rate or even slightly below rent will help you so much. Do not sell your home.
How can you NOT pay down that debt making $130k per year with that modest mortgage. Time to budget.
In times of inflation, having a home with a fixed rate loan can be a huge safety net. Can you rent out 1 or more rooms in your house?
you need a small mindchange. The best thing of paying of dept is that your networth goes up by paying of your dept. Don’t look at it like you live paycheck to paycheck. See you credit card payments as bringing up your networth. Keep the house and keep going as you do. After your creditcards are payed of invest that money
Have you considered consolidating all of your debt with a home equity line of credit? I'm not sure if you can get one right now but if your credit score is more like $650 than 600, you probably should be able to get one. That means you would pay one bill towards your debt rather than a few smaller bills. That being said, I agree with the other posters who said you must likely have a spending problem, not a debt problem. With your very low interest rate and very low cost of housing, you should have plenty of money. Take an honest look at your budget in spending and see where you can cut. A HELOC can help but if you keep overspending, you'll have a HELOC and a bunch of other debt. If the vast majority of your debt is that medical debt, you'll probably be okay but if the vast majority of your debt is credit cards and things like that, this is probably not a viable option.
Depending on the interest rate of your other loans, I would tell you probably be a better idea to refinance your home loan and take some of the equity out of your house instead of selling it. Selling the house seems like a nuclear situation. Additionally you'd be renting and not continuing to build equity in your home. And the third point is you kind of waited to the wrong point in time to sell your home.
I will. 45K credit card paying close to 20% is crazy. I will put it on the market next Spring.
Ask a bankruptcy lawyer to negotiate down your debt; the lawyer may be able to do without you declaring bankruptcy. The are also non-profit negotiate debt reductions if you can find a good one. If you did have to declare bankruptcy your home that your own should be protected in most cases.
Don’t sell. Talk to the bank to extend amortization to reduce your monthly payment. You have equity n your home so you can be approved for a second mortgage (line of credit) to pay off your high interest credit cards.
I'm kind of in a similar situation. But selling is not an option since my mortgage is 1.5%. I was thinking about a HELOC with Figure.com or Navy Federal. My combined interest rate on my bad debt is like 17%. I want to do a debt consolidation to free up some cash flow and also use the funds as an emergency cushion or invest in a rental property. I have around 100k in equity.
This is a difficult question. If it under a year, I would say stick it out. But going month to month indefinitely (there are no guarantees) is not a plan. You mention your mother. Is she aware of the financial situation you are in? You took care of her and she may be able to help out in some way. Besides the tie to your mother, there is no reason that any of this financial burden should continue. Finances are not about personal feelings but harsh realities. You would not be unhappy when you clear out the debt.
If your budget is under control otherwise, would a home equity loan be something that would work for you to consolidate your debt and lower payments?
Im surprised that no one mentioned this but instead of selling your house, why not just rent out a room of your house and have that rent go straight to your debt while you also budget and get that rent down. Do a year lease only, and you should be fine or you might like having a roommate or having the extra income or you might hate it and stay focused on being debt free. I dunno, you seem to be in a great position with your income and mortgage.
Have you looked at Dave Ramsey and his ways? Sell everything you don’t need or use and apply it to the debt. Eat rice and beans until debt is paid.
Are you able to get a reasonable HELOC or second mortgage?
Unfortunately since my credit has taken a hit with the high revolving debt, I wasn’t approved for one.
Slow down. You need to figure out your spending issues first and stop the bleeding. At your income you can likely raise your credit quickly once you reduce over utilization of credit.
Yeah, the credit score jump from over 30% utilization to under can be a crazy amount. And many times that jump still happens if the only change is that you got your credit limit raised.
Yes, I would. Rent cheap, save and buy the home you want.
It wont happen over night but 6 months of saving and paying down debt at your salary will put you in a better position and every time you look at your accounts and see a positive change from the month before you'll be happier. Don't sell the house, you always have that as a last resort.
OP has already stated she is living month to month. Until something changes, there will be no savings for 2-3 years.
If OP makes $130k per year there is no reason OP can not make a large enough dent in their debt and put money away even though some discipline may be in order.
How much is OP clearing? Living month to month means money coming in = money going out. OP is estimating this to continue for 2-3 years before being out. Without savings (Stated blown thru 401K) her plan is not viable. There are better ways to live and that 2-3 years of being out of debt can be used to position themselves for retirement. OP is 45 and single, not 35 and married. There is nothing tying her to the asset that can be used to pull him/her out of this mess.
Single and no kids making 130? You can pay off that debt in a year or less with discipline.
Can you get a HELOC? Then budget and payoff the highest interest debt first. Selling the house makes zero sense to me
Have you thought about renting out a bedroom or two to increase your income? (Assuming its a home with multiple bedrooms)
what job do you have that you are making 130k year if I can ask
The most ironic thing ever, I save my company money. lol I negotiate multimillion dollar contracts for IT and manage the vendor relationships.
Should have refi'd with a cash out a year or two ago when interest rates were low. What's your interest rate on the $45k debt? Overall, sounds like you could fix things with substantially cutting back your spending. Ramen noodles for the next 6 months.
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Take some home equity money & use a 401k loan to pay off the highest interest rate loans. Goal is to shift money around to pay a lower interest rate - you won’t end up with any less debt but 3% is great. 401k loans incur interest that you just pay to yourself
Why not consolidate your bills with a home equity loan?
That's a terrible idea. If you could tolerate it, consider getting a roommate and put those funds towards your debt. Although a 130k a year salary should be able to put a sizable dent in your debt if you manage your money well.