The beatles Case Study

[Zoot]

Agreed.

I was just leaving something in case of emergency.

Just be sure that eating out isn't an emergency.  :)  (Been there, done that, got the t-shirt!)

Also check out my revised post above with my new payment plan suggestion.  You can do this!

[ketchup]

I don't think it's been brought up specifically, but what is the "cameras" $25 line item?

[rpr]

Assuming that the most recent budget is accurate and that the OP has a further $100 in addition to the minimum debt service payments of $1384/month, a Dave Ramsey snowball should get them out of all debts (other than the OPs parents loan of $30K) in about 19 months. That is not too bad. If the OP has truly learnt from this thread, then the OP has $1484/month to add to savings once the debts are paid off.

https://www.vertex42.com/Calculators/debt-reduction-calculator.html

Edit: Zoot beat me to it ;)

Edit2: The situation gets better if you add the auto loan to the snowball as well. Can get done in 17 months instead of 19. Now the amount available to save goes up to $1877/month  after debts are paid off.

[The beatles]

Where is your health insurance?

http://forum.mrmoneymustache.com/ask-a-mustachian/the-beatles-case-study/

[The beatles]

I don't think it's been brought up specifically, but what is the "cameras" $25 line item?

Security cameras.

[Cranky]

Of course you could make this work temporarily.  People quite literally do this all the time because they HAVE to.  There is a journal on here by a woman who moved into a one-bedroom apartment with her two children after a divorce.  You could take take care of all your problems and babysitters nearby when cabin fever sets in.  This is an absolute gift.  Take it, save up some money, and never go back to your old lifestyle.

Where does everyone sleep!?!?

Either way, would have to wait until August at the minimum for the tenants lease to be up.

Umm, your kids sleep in the bedroom, and the Elder Beatles sleep in the living room. Because y'know, 1000 square feet is about the size of my 3 bedroom house.

I realize that you are used to Nice Things, but do you honestly not see that this whole mess could collapse on you and you'd have... nothing?

[The beatles]

This our updated budget.

Now we're getting somewhere!  :)

Looks like we still need to find things to cut.

At $4,948 --- We only have $100 to put towards debt repayment that isn't property tax.

First thing I'd cut:  eating out.  Dave Ramsey says that when you're in debt, the only reason you should see the inside of a restaurant is because you're working there.  More here:
http://www.daveramsey.com/askdave/posts/124444

Next thing I'd do:  find $500 worth of stuff in your house that you can sell.  Books and CD's, fancy purses, power tools, whatever it is.  Use Craigslist.  Have a yard sale.  Whatever it takes, get $500 from somewhere.

Next thing I'd do:  Pay off CC4 (your lowest rate card) with the $500 from what you sold.  Transfer as much of your ~25% debt to this card as you possibly can.  This lowers the overall interest rate on your debt and makes your payments that much more effective at killing principal.

Next month, you have the $100 surplus, plus $100 from not eating out, plus $25 that you are now not paying to CC4, for a total of $225.  Pay off half of CC3.  If you can find another $250 that month (sell more stuff, mow a yard or two, economize on groceries, whatever), pay off CC3 totally.

Next month, you have $100 + $100 + $25 + $25 for $250.  Target CC1 next.  You can pay this off in 3 months (or less if you economize more--see how it works?), and then roll that $194 into your snowball.

Now you have $100 + $100 + $25 + $25 + $194 for a total snowball of $444.  CC6 can be history in a month or two.

You really can do this.  It just requires focus, discipline, and having the whole family on board.  I believe you have the skills to do it, and we are all here to help.

Now go for it!

It'll be a bummer but I do have a drone I can sell for probably $350.

I'm also trying to find some sort of online work. Even for just a couple hundred per month, that could really add to the process you listed above.

[Zoot]

It'll be a bummer but I do have a drone I can sell for probably $350.

I'm also trying to find some sort of online work. Even for just a couple hundred per month, that could really add to the process you listed above.

Now THIS is what I've been hoping to see.  :) 

Selling stuff, AND a side hustle! 

Your inner gazelle is starting to RUN.  Go, go, go!  That first credit card is HISTORY!  :)

[With This Herring]

You current budget has no room for:

• an IRS repayment plan when it is settled
• the next property tax bill for the rental
• the new roof for the rental
• insurance for the rental

You need to sell car and house type assets, but the drone is a good start.

[Goldielocks]

Beatles,  after so many pages and pages,  I felt a need to get back to basics.   I will post my response in two parts -- a summary of your position, and then a new look at the forward position (my opinions).

/-------

--  I have recombined the below from the original post and a few other comments...  my math may be off.
Wanted to show cashflow (Income - expenses)  and Assets - Liabilities grouped together...

Life Situation: Married, 30, 2 Kids

Gross Salary/Wages: $5128.12 / month
Pre-tax deductions: $634.46 / month   (including Health coverage and $600/yr contribution combined to 401k and ROTH, I assume work also contributes a match of some sort)
 *Excludes $67/month - 401k Repayment on loan taken off Salary, moved to expenses
Taxes: $619.93 / month (SSI, Federal tax on employment income)

Employment Income NET $3941/month   NET $47,292/year


Rental Income, Actual Expenses, and Depreciation:  $1,100 rent
* Not discounted for maintenance and repairs or vacancies or back taxes repayment, if any *   

In-law Residence and Apartment Rental Income $0  (Apartment rent claimed by inlaws who personally cover the full property mortgage and taxes,  rental leased for 1bdrm apartment through to August)


Adjusted NET Income: $5041 / month    $60k per year!!



Expenses:
Monthly Spend
Monthly purchases (food, entertainment, utilities, fuel, etc) $2480,
  *rapidly declining as cost cutting happens*
 
Mortgage, taxes, insurance on primary property: $1761
*primary residence is valued at $175k, owing $164k, mortgage at 5.125%
* this includes insurance and ppty tax, and a late charge payment of $38/month*

Rental Property - HELOC and Taxes currently paid  $505
* Note - missing insurance on rental property and maintenance / vacancy adjustment.
*  guessing around 6% interest on HELOC , no other mortgage, interior in excellent condition, needs roof*

CC's (7) and Furniture Loan  $849
*Total owing is $11,767 at avg 23.7% interest, will pay off in 18 months at this rate,  interest payments are currently $2789 per year*

Auto Loan  $393
* Total Owing is $3591, value of car is over $15k at 6.54%,   second car is wifes and paid off*

401k Loan $67
* payroll deduction, unknown total outstanding

Residence :In-law mortgage, insurance, Property tax $0
-- covered by in-laws -- see above note.

Total Monthly Expenses   $6055

CASH FLOW DEFICIT:  $1014/month    *Hair on fire* 
[/size]   *** Note that getting rid of CC debt and auto loan would fully cover this deficit, but other loans would also need payment... through reduction in expenses.... ****

Assets:
REAL ASSETS
Primary home – Owe $164,717, worth $175k
Rental – Owe $25k HELOC (+ $9k back taxes), worth $70k to $80k
In-Law Residence and apartment :  Owe $200k, worth $300k

Total Real Property Asset Value:  $550k   (minus 6% realtor fees, or $30k = $520k)
Total Mortgage / HELOC : $390k
Real Property NET Equity:  (excluding back taxes): $160k

OTHER ASSETS
Car – worth $15k to $17k
Cash - $850
401k - $5,000
Total Other Assets (approx) : $21k
Total All Assets:  $181k

Immediate Liabilities:
Income tax - $40k  URGENT
Property tax on rental - $9k  URGENT
CC(7) and furniture loans - $11,767
Car Loan  $3,591
Parent Loan $30k
Roof* For Rental  $5k  URGENT 
  * this is an immediate liability so recorded here

Immediate Liabilities Total:  $99,358   of which $54k is URGENT


REAL Property Asset Equity:  $160k
Minus realtor / transfer fees  $30k
Plus other assets  $21k

NET ASSET VALUE:  $169k

IMMEDIATE  LIABILITIES : $99,358  plus 401k loan

NET Worth (if all property is sold) $69,642 minus 401k loan ---- ^^^ HOORAY!?!^^^   
Danger points & Key Risks:[/size]
[/color]$1014/ month cash flow negative (income too low and / or consumer debt too high, and/or expenses too high)
..Average 23.7% on consumer loans (CC's)
..URGENT repayments needed for $54,000   (Back Taxes, Property Tax, Roof)
..Can't lose job or 401k loan impact is severe.
..No insurance currently on rental.
..Primary housing costs (mortgage, ins, ppty tax, heat) is 37% of gross employment income. 
..Total Debt to income including all residences is approx 68% ***
     (***I included the inlaw property at 5.15% interest plus $1000 ins and taxes in both the income and the debt load side, for gross income of $9115 versus debt load of $6200)

[Dagobert]

This is very unmustachian of me again. Here in Holland you can get a loan from the city for a small interest if you agree to go into budgetmanagement (you bassicaly get an allowance at minimumwage). With the new loan, all other debt is payed of so it's central, easy to manage and lower interest.

Is it possible for you to get a loan of 70k on your wifes property? You can pay of the IRS (it isn't listed in your budget?), taxlien, carloan, all of the creditcards, and pay for the roof. With the interest and monthly minimum saved you can pay of this new debt in little time.

Not as rewarding as watching the monthly snowballeffect of eliminating the small debts, but you can keep both rentals and renters staying there as you desire.
Pitfall is, you did this before with the creditcardbailout from your parents. So you need to keep this level of motivation to pay this debt down and not fall back in old habits this time. Lots of advice here to help you with that.

But in essence: Going back to basics as you said it somewhere earlier. Thats mustachian

[Iplawyer]

You current budget has no room for:

• an IRS repayment plan when it is settled
• the next property tax bill for the rental
• the new roof for the rental
• insurance for the rental

You need to sell car and house type assets, but the drone is a good start.

Right - his house is on fire and burning down.  He has an uninsured property with $4K+ in property tax due in a couple of months that he has no way to pay.  He has $40K in IRS debt with no way to pay.  He said he owes for something not paid for Escrow soon.  He probably owes income tax for 2016. 

Beatles -what are you going to do about selling a rental or two to get beyond this?  You don't have enough shit to sell to pay those things.  You are a second away from financial ruin.  And the IRS probably really wants the house with $100K of equity ....

What are you waiting for to make  a read decision that matters?

[Goldielocks]

Okay,  I saw your updated expenses.  Excellent progress!   .... although a few of the outstanding amounts increased slightly, and the property tax interest rate appeared.

Cutting costs like this so suddenly is very expensive, and very stressful and hard to do.  Frankly, my head is spinning with all that you are trying to keep juggling, and then trying to massively cut expenses on top of it.


Question -- how much is your 401k loan for?

[Laura33]

This our updated budget.

Expenses:

ITEM MONTHLY | TOTAL | INTEREST RATE GARBAGE 36 CALE/INTERNET 114 WATER 50 GEICO AUTO 135 AUTO LOAN 393 3591 6.54% MORTGAGE 1761 164,717 5.125% FUEL 150 GAS/ELECTRIC 150 GROCERIES 650 EATING OUT 100 CAMERAS 25 PARENTS 0 30,K CC1 194 856 25.24% CC2 134 4495 24.49 CC3 25 505 23.24% CC4 25 452 10.23% CC5 20 692 18.49% CC6 75 797 24.15 CC7 (STORE CARDS) 100 2020 25.24 Furniture Loan 276 1950 25.00 Property Tax 535 11,380 18% TOTAL 4948 59,720 Looks like we still need to find things to cut. At $4,948 --- We only have $100 to put towards debt repayment that isn't property tax.

Definite progress!  But I suspect there are a few things that may have slipped through -- any kid expenses (e.g., new shoes), little ongoing subscriptions (Netflix?  Hulu?  Spotify?  Amazon Prime?  Newspapers?  Etc.), minor home repairs (do you have a sufficient stock of lightbulbs?  What if your toilet handle breaks and you need to replace it?  Just to name 2 things that happened in my house in the last 2 days).  Etc.  Not that these things need to be expensive at all, but one or two would easily eat up that $100 extra you have budgeted. 

I would also suggest revising your drone plan up by a factor of 10 -- you need sufficient cash on hand to pay the property taxes in, what, 6 weeks? 

This will get you over the immediate hump.  But you still do need a plan to tackle the IRS debt as soon as your CPA negotiates a deal, the roof repair of the rental, and insurance for that property.  So I would encourage you to keep cracking at it -- you need both current cash and more space in your current budget.

[Zoot]

He has an uninsured property with $4K+ in property tax due in a couple of months that he has no way to pay.  He has $40K in IRS debt with no way to pay.  He said he owes for something not paid for Escrow soon.  He probably owes income tax for 2016. 

Beatles, you said in your original case study data that the rental income was $595 net, and that $375 of the $1100 rent was for taxes.  (See?  I did go back and read your case study tonight!)  Have you in fact been putting this money away, such that you can pay the $4K tax bill for 2017 when it comes due in March?  Or is this an additional liability?

For the IRS debt, Beatles, you're still working with the accountant to get the amount lowered, right? 

Do you expect to have to pay more to the IRS for your 2016 tax return?  If you are due a refund, would IRS then just apply the amount of the refund to the taxes in arrears?  (Not sure how this works.)

I believe you mentioned that you might be getting a bonus check or some kind of other windfall-like payment from your employer in a couple months. Is that still on the table, and if so, how much would it be?  With that information, we can offer advice on how best to apply those funds to your situation.

Keep going!  You can do it!

[The beatles]

You current budget has no room for:

• an IRS repayment plan when it is settled
• the next property tax bill for the rental
• the new roof for the rental
• insurance for the rental

You need to sell car and house type assets, but the drone is a good start.

Right - his house is on fire and burning down.  He has an uninsured property with $4K+ in property tax due in a couple of months that he has no way to pay.  He has $40K in IRS debt with no way to pay.  He said he owes for something not paid for Escrow soon.  He probably owes income tax for 2016. 

Beatles -what are you going to do about selling a rental or two to get beyond this?  You don't have enough shit to sell to pay those things.  You are a second away from financial ruin.  And the IRS probably really wants the house with $100K of equity ....

What are you waiting for to make  a read decision that matters?

I think we have no other choice than to sell the rental (70k rental).

I wonder what the closing cost would be on it.

I could use Redfin.com but that's only saving 1.5% so it may make more sense to just list it with a local realtor who knows buyers.

[Zoot]

I think we have no other choice than to sell the rental (70k rental).

I wonder what the closing cost would be on it.

I could use Redfin.com but that's only saving 1.5% so it may make more sense to just list it with a local realtor who knows buyers.

GOOD FOR YOU.  You eyes are open now.  :)

A good realtor is worth her weight in gold.  Find one who will help you with a quick sale to an investor looking for a deal.  Start making the calls tomorrow morning and get the thing sold.

I am so proud of you!  :)

[ketchup]

That's great! Go for it! When you talk to the realtor, you can ask about an estimate of closing costs in your area and in your situation. That'll help you solidify your numbers there.

[Goldielocks]

Second part of my post...  ideas to turn things around.

This is a tricky puzzle, because one good action (selling the rental) results in a reduced cashflow, and selling inlaw property results in a lot of relationship problems...

Let's start at the top -- Goals.  My assumption for Mr. B goals includes in sort of priority order:
1) Getting a positive cashflow each month immediately.  Stop digging a hole.
2)  keeping inlaws in their home.
3)  resolving the roof and property tax issue (to avoid foreclosure / add insurance)
4) Paying off IRS or starting an aggressive repayment plan.
5)  Keeping wife in current home
6)  Starting new business venture


My first instinct is that the Beatles need a fresh slate.  All of this agonizing over debt and payment and expenses is taking a lot of time away from focusing on a new business venture and enjoying life.  In fact, some of the extra spend (TVs) may be related to respite from the stress of dealing with all of this.

A)  Cut expenses by at least $1000 (getting there!)  This is an urgent short term need.

B) Earn more income
In addition to cutting expenses, you need to net quite a bit more income... or slash your current home costs and move to a rental.

This is the basic problem in your situation.  For too many years,you have been living like you earn more, and taking from IRS, Property taxes and 401k to allow you to spend more each month.  Now you don't have a lot of options left.

Quite frankly, making $60k per year, gross, for a family of 4, who wants to live in a nice family home, while buying TV's and furniture, renovations, starting businesses, thinking about vacations, owning cars worth more than 20k, supporting your parents (sometimes)..just isn't going to cut it.  You can afford, like, ONE of these "extras" on your income.   You are far from the income level you need to support your lifestyle as is.

------------------------BIG NEW IDEA ----->  one idea to solve all problems!  ---------
Move the in-laws in with you in your home, and sell the big place.  Charge them a low rent.  That 100k in equity would go a long way to clearing the over $55k in property tax, IRS, new roof, plus $15k or so of consumer debt, plus pay down your mortgage to get rid of the extra mortgage insurance on your primary home, etc.

 Sell it as a way for your wife to not have to work while the kids are young.   They may also choose to rent elsewhere, on their own costs, too.

You keep your car, wife does not need work, you still need to cut expenses but to real life levels instead of cutting to the bone...   your parents will need to wait a while (until wife can work?) before getting repaid, I am afraid.

So -- Can you move your kids into a shared room and free up a room for the In laws?  Because the second place option is to have them give you up to 100k in capital (the equity in the home), which they may not actually have.

[The beatles]

Second part of my post...  ideas to turn things around.

This is a tricky puzzle, because one good action (selling the rental) results in a reduced cashflow, and selling inlaw property results in a lot of relationship problems...

Let's start at the top -- Goals.  My assumption for Mr. B goals includes in sort of priority order:
1) Getting a positive cashflow each month immediately.  Stop digging a hole.
2)  keeping inlaws in their home.
3)  resolving the roof and property tax issue (to avoid foreclosure / add insurance)
4) Paying off IRS or starting an aggressive repayment plan.
5)  Keeping wife in current home
6)  Starting new business venture


My first instinct is that the Beatles need a fresh slate.  All of this agonizing over debt and payment and expenses is taking a lot of time away from focusing on a new business venture and enjoying life.  In fact, some of the extra spend (TVs) may be related to respite from the stress of dealing with all of this.

A)  Cut expenses by at least $1000 (getting there!)  This is an urgent short term need.

B) Earn more income
In addition to cutting expenses, you need to net quite a bit more income... or slash your current home costs and move to a rental.

This is the basic problem in your situation.  For too many years,you have been living like you earn more, and taking from IRS, Property taxes and 401k to allow you to spend more each month.  Now you don't have a lot of options left.

Quite frankly, making $60k per year, gross, for a family of 4, who wants to live in a nice family home, while buying TV's and furniture, renovations, starting businesses, thinking about vacations, owning cars worth more than 20k, supporting your parents (sometimes)..just isn't going to cut it.  You can afford, like, ONE of these "extras" on your income.   You are far from the income level you need to support your lifestyle as is.

------------------------BIG NEW IDEA ----->  one idea to solve all problems!  ---------
Move the in-laws in with you in your home, and sell the big place.  Charge them a low rent.  That 100k in equity would go a long way to clearing the over $55k in property tax, IRS, new roof, plus $15k or so of consumer debt, plus pay down your mortgage to get rid of the extra mortgage insurance on your primary home, etc.

 Sell it as a way for your wife to not have to work while the kids are young.   They may also choose to rent elsewhere, on their own costs, too.

You keep your car, wife does not need work, you still need to cut expenses but to real life levels instead of cutting to the bone...   your parents will need to wait a while (until wife can work?) before getting repaid, I am afraid.

So -- Can you move your kids into a shared room and free up a room for the In laws?  Because the second place option is to have them give you up to 100k in capital (the equity in the home), which they may not actually have.

First, I appreciate both your posts.

They were awesome.

However, if we sell the rental, I don't think we will need to do anything else.

Selling the rental will reduce our expenses $1,777 per month.

We have already reduced our food expense by 1,000 per month.

This changes our situation in the following way:

> Our take home pay will be reduced to $3,941 /month
> Our expenses will be reduced to $3,246 / month

This will result in a surplus of $695 / month.

If I am missing something, please let me know.

[Jakejake]

Move the in-laws in with you in your home, and sell the big place.

If it were just about the math, I'd agree this makes sense.

But I think a large percent of the beatle problems stem from the beatle parents, with one set doing the economic outpatient deal, and the others modeling the absolute worst in terms of living beyond their means and not being responsible for their actions or debts. (Note: I am not saying they are bad people or unloving parents - but specifically in terms of finances, they didn't set you guys up for success.)

I worry that the influence of living in the same house would send Mrs. Beatle back into the same bad habits she grew up with, and I think the dynamics would get infinitely worse, with her parents guilting them into spending more money on luxury outings or consumer goods.

[MDM]

> Our take home pay will be reduced to $3,941 /month

Have you checked this number with commercial tax software, or at least the case study spreadsheet?

For what you are doing here, ignore the amount you are currently withholding.  Instead, predict your actual annual income tax liability and use this for budgeting.  Then adjust your W-4 so your actual withholding matches your actual tax liability.

[larmando]

I don't know what i'm going to tell my parents about netting $30k from a house they have been $120k into.

You're *not* netting 30k, 30k is what's left over after using some of the money you will net to cover debt (HELOC, property tax debt, broken roof which is also a liability). Anything you'd have to pay if you didn't sell but you won't pay after selling is part of what you're netting. Plus interest.

All in all it's a comparison: open excel and in column A you simulate your NW year by year if you don't sell, if column B if you sell, with the same family spending level. If selling allows you to get out of debt much faster, start accumulating much faster, and at "the end" you are richer, then selling is a no brainer.

From a different pov: If selling then getting out of debt and then building a portfolio that can generate the same income as the rental is faster than not selling, getting out of debt, and actually enjoying that income then you're better off selling.

[larmando]

btw, MMM has an article in which he laid out the math on a decision to rent rather than sell a house that he renovated.  His conclusion was that he should have sold and put the money into the market even though he would have sold the house at a loss.  It's worth a read re: your math on your own rental house.

I've seen it.

But don't forget; He would have put it into the market. Not paid off debt.

Paying off debt has a higher rate of return than putting in the market. The market doesn't consistently return 18%, 25%, etc.
After paying off debt you can redirect the debt payment to the market. In his case he didn't have debt to pay off, but had he had some he would have been *even better off* selling.

[Iplawyer]

Second part of my post...  ideas to turn things around.

This is a tricky puzzle, because one good action (selling the rental) results in a reduced cashflow, and selling inlaw property results in a lot of relationship problems...

Let's start at the top -- Goals.  My assumption for Mr. B goals includes in sort of priority order:
1) Getting a positive cashflow each month immediately.  Stop digging a hole.
2)  keeping inlaws in their home.
3)  resolving the roof and property tax issue (to avoid foreclosure / add insurance)
4) Paying off IRS or starting an aggressive repayment plan.
5)  Keeping wife in current home
6)  Starting new business venture


My first instinct is that the Beatles need a fresh slate.  All of this agonizing over debt and payment and expenses is taking a lot of time away from focusing on a new business venture and enjoying life.  In fact, some of the extra spend (TVs) may be related to respite from the stress of dealing with all of this.

A)  Cut expenses by at least $1000 (getting there!)  This is an urgent short term need.

B) Earn more income
In addition to cutting expenses, you need to net quite a bit more income... or slash your current home costs and move to a rental.

This is the basic problem in your situation.  For too many years,you have been living like you earn more, and taking from IRS, Property taxes and 401k to allow you to spend more each month.  Now you don't have a lot of options left.

Quite frankly, making $60k per year, gross, for a family of 4, who wants to live in a nice family home, while buying TV's and furniture, renovations, starting businesses, thinking about vacations, owning cars worth more than 20k, supporting your parents (sometimes)..just isn't going to cut it.  You can afford, like, ONE of these "extras" on your income.   You are far from the income level you need to support your lifestyle as is.

------------------------BIG NEW IDEA ----->  one idea to solve all problems!  ---------
Move the in-laws in with you in your home, and sell the big place.  Charge them a low rent.  That 100k in equity would go a long way to clearing the over $55k in property tax, IRS, new roof, plus $15k or so of consumer debt, plus pay down your mortgage to get rid of the extra mortgage insurance on your primary home, etc.

 Sell it as a way for your wife to not have to work while the kids are young.   They may also choose to rent elsewhere, on their own costs, too.

You keep your car, wife does not need work, you still need to cut expenses but to real life levels instead of cutting to the bone...   your parents will need to wait a while (until wife can work?) before getting repaid, I am afraid.

So -- Can you move your kids into a shared room and free up a room for the In laws?  Because the second place option is to have them give you up to 100k in capital (the equity in the home), which they may not actually have.

First, I appreciate both your posts.

They were awesome.

However, if we sell the rental, I don't think we will need to do anything else.

Selling the rental will reduce our expenses $1,777 per month.

We have already reduced our food expense by 1,000 per month.

This changes our situation in the following way:

> Our take home pay will be reduced to $3,941 /month
> Our expenses will be reduced to $3,246 / month

This will result in a surplus of $695 / month.

If I am missing something, please let me know.

Yes- you are. How are you going to pay the $40K to the IRS and $60K in high interest credit cards?  Why are you still considering letting your in-laws stay in the big house and enabling them to continue to leach off of your immediate family, teach your kids that they must provide a swanky home for their parents while struggling themselves, enabling them to evade what they owe to the IRS (and teach your kids that is okay too),and have your parents subsidize her parents.

If you wfe is the one that doesn't want to kick the parents out - she needs to get a job, drop the kids off there everyday for childcare, and help you pay down all of that debt.  Why isn't that a good daycare solution if you are enabling them to live in the lap of luxury that you cannot afford?

[larmando]

For fucks sake...

The other rental is a home we owned in the past.

I actually mentioned it in this very thread, several pages ago, but left out the part that we still own it.

It's worth about $300k, and with mortgage/heloc included we owe about $200k.

It is a 2,500 sq foot house with a 1,000 sq foot apartment that is detached from the primary home, but shares a driveway.

The monthly payment was simply too much which is why we moved out.

We were going to sell the property but then my wifes family needed a place to live so a deal was worked out where they could live and just assume the bills for that property.

So we pay NOTHING over there.

It's all on them.

That's why it doesn't matter and it wasn't worth bringing up.

Fuck.

Ok, so they pay the mortgage, heloc, property tax, upkeep, etc. But you're still financing them to live there to the tune of 100k*(interest rate) to live there, since you don't have a return on equity. (ok you might if by paying down the mortgage they increase your equity). Either way it's not an entirely "free" situation and your current cost of equity is about 18-25%. It might still be that you can't afford to let them live there.

[Friar]

However, if we sell the rental, I don't think we will need to do anything else.

I believe this is part of the problem. You don't appear to have a plan to maintain a good state of affairs once you're out of the "hair on fire" emergency.

From what I read you're not treating your situation with the gravity that it respects. Perhaps because your parents/in-laws have been helping (read: bailing you out) for years you feel that's always an option in the future. It's not guaranteed.

Without changing your habits for the better you're almost guaranteed to fall back into the same routine and potentially back to the situation you find yourselves in currently.

Sorting out the taxes/debt etc. is only the first step.

Imagine not having to rely on the parents, not having to feel indebted to them for bailing you out, not having to go to bed with the, very real, concern that your family could very quickly end up homeless. This is what financial freedom gives you. This is why you need to be looking long and hard at your priorities.

[former player]

Acknowledging that you need to sell the rental is a big step: congratulations.  How soon can you call an estate agent and get it on sale?

I am sorry that the $100k which would get you out of all your debt and kick-start an investing habit is being held hostage to your in laws' desire to save face and live large at your (and the taxpayers') expense.

[The beatles]

Second part of my post...  ideas to turn things around.

This is a tricky puzzle, because one good action (selling the rental) results in a reduced cashflow, and selling inlaw property results in a lot of relationship problems...

Let's start at the top -- Goals.  My assumption for Mr. B goals includes in sort of priority order:
1) Getting a positive cashflow each month immediately.  Stop digging a hole.
2)  keeping inlaws in their home.
3)  resolving the roof and property tax issue (to avoid foreclosure / add insurance)
4) Paying off IRS or starting an aggressive repayment plan.
5)  Keeping wife in current home
6)  Starting new business venture


My first instinct is that the Beatles need a fresh slate.  All of this agonizing over debt and payment and expenses is taking a lot of time away from focusing on a new business venture and enjoying life.  In fact, some of the extra spend (TVs) may be related to respite from the stress of dealing with all of this.

A)  Cut expenses by at least $1000 (getting there!)  This is an urgent short term need.

B) Earn more income
In addition to cutting expenses, you need to net quite a bit more income... or slash your current home costs and move to a rental.

This is the basic problem in your situation.  For too many years,you have been living like you earn more, and taking from IRS, Property taxes and 401k to allow you to spend more each month.  Now you don't have a lot of options left.

Quite frankly, making $60k per year, gross, for a family of 4, who wants to live in a nice family home, while buying TV's and furniture, renovations, starting businesses, thinking about vacations, owning cars worth more than 20k, supporting your parents (sometimes)..just isn't going to cut it.  You can afford, like, ONE of these "extras" on your income.   You are far from the income level you need to support your lifestyle as is.

------------------------BIG NEW IDEA ----->  one idea to solve all problems!  ---------
Move the in-laws in with you in your home, and sell the big place.  Charge them a low rent.  That 100k in equity would go a long way to clearing the over $55k in property tax, IRS, new roof, plus $15k or so of consumer debt, plus pay down your mortgage to get rid of the extra mortgage insurance on your primary home, etc.

 Sell it as a way for your wife to not have to work while the kids are young.   They may also choose to rent elsewhere, on their own costs, too.

You keep your car, wife does not need work, you still need to cut expenses but to real life levels instead of cutting to the bone...   your parents will need to wait a while (until wife can work?) before getting repaid, I am afraid.

So -- Can you move your kids into a shared room and free up a room for the In laws?  Because the second place option is to have them give you up to 100k in capital (the equity in the home), which they may not actually have.

First, I appreciate both your posts.

They were awesome.

However, if we sell the rental, I don't think we will need to do anything else.

Selling the rental will reduce our expenses $1,777 per month.

We have already reduced our food expense by 1,000 per month.

This changes our situation in the following way:

> Our take home pay will be reduced to $3,941 /month
> Our expenses will be reduced to $3,246 / month

This will result in a surplus of $695 / month.

If I am missing something, please let me know.

Yes- you are. How are you going to pay the $40K to the IRS and $60K in high interest credit cards?  Why are you still considering letting your in-laws stay in the big house and enabling them to continue to leach off of your immediate family, teach your kids that they must provide a swanky home for their parents while struggling themselves, enabling them to evade what they owe to the IRS (and teach your kids that is okay too),and have your parents subsidize her parents.

If you wfe is the one that doesn't want to kick the parents out - she needs to get a job, drop the kids off there everyday for childcare, and help you pay down all of that debt.  Why isn't that a good daycare solution if you are enabling them to live in the lap of luxury that you cannot afford?

Please explain where you got $60k in credit cards from.

Seller our lesser rental would pay off every debt we have except for IRS (which is in the process of being taken care of).

[Iplawyer]

Second part of my post...  ideas to turn things around.

This is a tricky puzzle, because one good action (selling the rental) results in a reduced cashflow, and selling inlaw property results in a lot of relationship problems...

Let's start at the top -- Goals.  My assumption for Mr. B goals includes in sort of priority order:
1) Getting a positive cashflow each month immediately.  Stop digging a hole.
2)  keeping inlaws in their home.
3)  resolving the roof and property tax issue (to avoid foreclosure / add insurance)
4) Paying off IRS or starting an aggressive repayment plan.
5)  Keeping wife in current home
6)  Starting new business venture


My first instinct is that the Beatles need a fresh slate.  All of this agonizing over debt and payment and expenses is taking a lot of time away from focusing on a new business venture and enjoying life.  In fact, some of the extra spend (TVs) may be related to respite from the stress of dealing with all of this.

A)  Cut expenses by at least $1000 (getting there!)  This is an urgent short term need.

B) Earn more income
In addition to cutting expenses, you need to net quite a bit more income... or slash your current home costs and move to a rental.

This is the basic problem in your situation.  For too many years,you have been living like you earn more, and taking from IRS, Property taxes and 401k to allow you to spend more each month.  Now you don't have a lot of options left.

Quite frankly, making $60k per year, gross, for a family of 4, who wants to live in a nice family home, while buying TV's and furniture, renovations, starting businesses, thinking about vacations, owning cars worth more than 20k, supporting your parents (sometimes)..just isn't going to cut it.  You can afford, like, ONE of these "extras" on your income.   You are far from the income level you need to support your lifestyle as is.

------------------------BIG NEW IDEA ----->  one idea to solve all problems!  ---------
Move the in-laws in with you in your home, and sell the big place.  Charge them a low rent.  That 100k in equity would go a long way to clearing the over $55k in property tax, IRS, new roof, plus $15k or so of consumer debt, plus pay down your mortgage to get rid of the extra mortgage insurance on your primary home, etc.

 Sell it as a way for your wife to not have to work while the kids are young.   They may also choose to rent elsewhere, on their own costs, too.

You keep your car, wife does not need work, you still need to cut expenses but to real life levels instead of cutting to the bone...   your parents will need to wait a while (until wife can work?) before getting repaid, I am afraid.

So -- Can you move your kids into a shared room and free up a room for the In laws?  Because the second place option is to have them give you up to 100k in capital (the equity in the home), which they may not actually have.

First, I appreciate both your posts.

They were awesome.

However, if we sell the rental, I don't think we will need to do anything else.

Selling the rental will reduce our expenses $1,777 per month.

We have already reduced our food expense by 1,000 per month.

This changes our situation in the following way:

> Our take home pay will be reduced to $3,941 /month
> Our expenses will be reduced to $3,246 / month

This will result in a surplus of $695 / month.

If I am missing something, please let me know.

Yes- you are. How are you going to pay the $40K to the IRS and $60K in high interest credit cards?  Why are you still considering letting your in-laws stay in the big house and enabling them to continue to leach off of your immediate family, teach your kids that they must provide a swanky home for their parents while struggling themselves, enabling them to evade what they owe to the IRS (and teach your kids that is okay too),and have your parents subsidize her parents.

If you wfe is the one that doesn't want to kick the parents out - she needs to get a job, drop the kids off there everyday for childcare, and help you pay down all of that debt.  Why isn't that a good daycare solution if you are enabling them to live in the lap of luxury that you cannot afford?

Please explain where you got $60k in credit cards from.

Seller our lesser rental would pay off every debt we have except for IRS (which is in the process of being taken care of).

How is it being taken care of?  Sorry if I missed the solution to that problem.

And, again, I don't know why you are letting your in-laws leach from your immediate family and the US tax payers.

[Jakejake]

I have a small question from the first post, insignificant in the big picture, I know.

"AUTO LOAN   393   3591   6.54%"  From that it looks like you still owe $3,591 on the car.

But lower in the same post I see this: "Car – Owe $4,500"

Why's it off by a thousand?

[larmando]

The kids sleep in sleeping bags in a an area you set aside for them - or in a corner of your room.  A 1000 sf apartment is huge for one bedroom.  If it has a dining room and a breakfast room - turn the dining room into their bedroom and curtain it off.  It is quite doable.  Make sure your wife goes to work and then the in-laws can do the day care as part of their living arrangements.  Get creative.  99% of the world sleeps with large families in a fraction of that space.

Indeed, wow! My 2-bedroom is smaller than that, and I have pretty big rooms.

[FrugalFan]

I agree with Beatles that selling the smaller rental makes sense right now. It will take care of a lot of the problems, and to me is the biggest risk. The risk of liability from lack of insurance, and the risk of losing all the equity in it due to back taxes owed. It does not come with complicated family relationships. Obviously, the larger rental will be an issue to deal with in the future, but just selling this rental will take care of a lot of the high interest debt and increase cash flow. It's the easiest route to a big change in your financial picture.

[LadyMuMu]

I second the idea of selling the lesser rental.

But beatles, one word of caution. I think you have a habit of taking part of an action and considering the problem solved. Example, you said you've cut your grocery budget by $1000. You've only been here a few weeks. You may have changed the number on a spreadsheet but you haven't actually LIVED with a lower grocery budget. The steps of cutting a budget are:

1. Evaluate spending and cut fat (done)
2. Set new goal (done)
3. Set up milestones for checking in to see if spending matches budget--ideally daily or weekly until you're used to the new habit
4. Do a comprehensive evaluation at the end of a month or two weeks.
5. Evaluate spending and cut fat
6. Set new goal...

The fact is that it often takes several cycles to actually make your original goal. Old habits creep in, you forget about certain big necessary items, you run out of stores in your pantry/freezer, etc. Just look at how many of us money hippies have admitted that this thread makes us realize that our own grocery budgets have crept away from our goals--and we're the money hippies!! Also, once you've economized, then you may see easy ways to economize further with ease. Why not? In any case, it requires vigilance and periodic evaluation.

Same is true if you sell the rental. Yes, you will cut out a bunch of bills hanging over you right now. But past behavior is the greatest predictor of future behavior. In the past when your parents have solved problems with an influx of cash, you've slipped back into debt spending, right? To avoid that again with the influx of cash from the rental sale, you'll need to keep goal setting, keep evaluating, keep meeting milestones. You asked earlier why it should take so much TIME to economize that you couldn't do other ventures--this is why.

I know you can do this--you're just going to need to be vigilant. This board is here to help you with that. Oh, and anyone who can create an index to his own thread on the first post can absolutely manage working with a debt repayment plan! That was awesome!

 

[The beatles]

How is it being taken care of?  Sorry if I missed the solution to that problem.

And, again, I don't know why you are letting your in-laws leach from your immediate family and the US tax payers.

No worries.

My accountant said he could negotiate it lower and then split it into a 4-5 year term.

[The beatles]

I second the idea of selling the lesser rental.

But beatles, one word of caution. I think you have a habit of taking part of an action and considering the problem solved. Example, you said you've cut your grocery budget by $1000. You've only been here a few weeks. You may have changed the number on a spreadsheet but you haven't actually LIVED with a lower grocery budget. The steps of cutting a budget are:

1. Evaluate spending and cut fat (done)
2. Set new goal (done)
3. Set up milestones for checking in to see if spending matches budget--ideally daily or weekly until you're used to the new habit
4. Do a comprehensive evaluation at the end of a month or two weeks.
5. Evaluate spending and cut fat
6. Set new goal...

The fact is that it often takes several cycles to actually make your original goal. Old habits creep in, you forget about certain big necessary items, you run out of stores in your pantry/freezer, etc. Just look at how many of us money hippies have admitted that this thread makes us realize that our own grocery budgets have crept away from our goals--and we're the money hippies!! Also, once you've economized, then you may see easy ways to economize further with ease. Why not? In any case, it requires vigilance and periodic evaluation.

Same is true if you sell the rental. Yes, you will cut out a bunch of bills hanging over you right now. But past behavior is the greatest predictor of future behavior. In the past when your parents have solved problems with an influx of cash, you've slipped back into debt spending, right? To avoid that again with the influx of cash from the rental sale, you'll need to keep goal setting, keep evaluating, keep meeting milestones. You asked earlier why it should take so much TIME to economize that you couldn't do other ventures--this is why.

I know you can do this--you're just going to need to be vigilant. This board is here to help you with that. Oh, and anyone who can create an index to his own thread on the first post can absolutely manage working with a debt repayment plan! That was awesome!

We actually have!

We have not shopped for groceries since I started this case study.

Well, we did buy milk, applesauce, bread and a couple other staples. But that's it.

We skipped last weeks shopping and ate what we could out of the pantry and freezer.

Today is our 1st shopping trip since joining, and my wife is bringing $100 to spend.

[Malum Prohibitum]

However, if we sell the rental, I don't think we will need to do anything else.

Selling the rental will reduce our expenses $1,777 per month.

We have already reduced our food expense by 1,000 per month.

This changes our situation in the following way:

> Our take home pay will be reduced to $3,941 /month
> Our expenses will be reduced to $3,246 / month

This will result in a surplus of $695 / month.

If I am missing something, please let me know.

The beatles,

Buddy, hey, is there something you are not telling us?  Selling the small rental is a GREAT step in the right direction, and I commend you for waking up and smelling the coffee, but selling the large rental, too, would literally solve all of your problems.  Literally. You could pay off everything to everybody.  You could keep your cars, furniture, televisions, and garage full of stuff, and it would all be paid off.

You could even keep your current house.  You would still have a mortgage.

What would THAT do to your monthly expenses???

But there is something else, and we need to know what it is.  The first time I brought this up as the solution to your financial problems, and an immediate one at that, you said your wife would divorce you.

So what is the back story? 

I cannot imagine my wife wanting to divorce me for liquidating six figures of cash when we are trying to survive and owing multiple tax authorities in ways that could bring everything crashing down, even IF her parents were involved.  She, quite simply, would never see our obligation to them as tying up six figures of cash to keep them in marble, heated floor, luxury.  Also, the fact that they have the money each month to pay all of the expenses for that place, which YOU could NOT afford, means that they will be ok. 

If you or your wife think they will not be ok, then help us understand WHY they won't be ok?  The first excuse, they owe the IRS, is not going to matter one bit to most real estate investors, who will be happy to rent them a place.  Is this just a matter of the inlaws being whiny and your wife not wanting to hear about it from them?  Are the inlaws controlling over their daughter?  What?

So what is the deal?  Your wife's one post, above, really did not illuminate the situation any further.  You mentioned she was upset by reading this thread.  So what is going on?

[RamonaQ]

Are you 100% certain that your in-laws are up-to-date on the mortgage and property taxes for the house they are living in? If they have a $100k tax bill they've clearly not paid on obligations before. I'm sure they have good intentions but I'd be very nervous having my finances and credit depending on them. It could be a really nasty surprise for you if they got behind. Not that they'd try to screw you over, but I could see them getting behind, intending to catch up, not telling you, and having it snowball out of control.

[Malum Prohibitum]

We have not shopped for groceries since I started this case study.

Well, we did buy milk, applesauce, bread and a couple other staples. But that's it.

We skipped last weeks shopping and ate what we could out of the pantry and freezer.

Today is our 1st shopping trip since joining, and my wife is bringing $100 to spend.

  I noticed that, and it is a good investment in your future.  Pay attention to what others are telling you, though.  It is going to take weekly reassessment on where you are at on the grocery budget and where you are going, or old habits will creep back in more quickly than you might guess.  How does the wife feel about the new budget for groceries?  Is she fully on board, or does she have reservations?  Her attitude toward this part of the venture is going to be more important to success than yours, since she is the stay at home mom.


Also, eating out?  A hundred bucks a month?  If I am reading correctly, your budget has only a hundred  bucks of wiggle room, and that is IF you do not have to buy kids' shoes or anything else that the budget does not account for.   Let's assume everything goes as planned for the first month.  Simply staying the hell out of restaurants for that month will DOUBLE your wiggle room to $200.  This is a 100% increase, instantly.  Think about it. 

As somebody else posted, Dave Ramsey saying, the only time you should see the inside of a restaurant is when you are working your side job there earning money.

[Iplawyer]

Second part of my post...  ideas to turn things around.

This is a tricky puzzle, because one good action (selling the rental) results in a reduced cashflow, and selling inlaw property results in a lot of relationship problems...

Let's start at the top -- Goals.  My assumption for Mr. B goals includes in sort of priority order:
1) Getting a positive cashflow each month immediately.  Stop digging a hole.
2)  keeping inlaws in their home.
3)  resolving the roof and property tax issue (to avoid foreclosure / add insurance)
4) Paying off IRS or starting an aggressive repayment plan.
5)  Keeping wife in current home
6)  Starting new business venture


My first instinct is that the Beatles need a fresh slate.  All of this agonizing over debt and payment and expenses is taking a lot of time away from focusing on a new business venture and enjoying life.  In fact, some of the extra spend (TVs) may be related to respite from the stress of dealing with all of this.

A)  Cut expenses by at least $1000 (getting there!)  This is an urgent short term need.

B) Earn more income
In addition to cutting expenses, you need to net quite a bit more income... or slash your current home costs and move to a rental.

This is the basic problem in your situation.  For too many years,you have been living like you earn more, and taking from IRS, Property taxes and 401k to allow you to spend more each month.  Now you don't have a lot of options left.

Quite frankly, making $60k per year, gross, for a family of 4, who wants to live in a nice family home, while buying TV's and furniture, renovations, starting businesses, thinking about vacations, owning cars worth more than 20k, supporting your parents (sometimes)..just isn't going to cut it.  You can afford, like, ONE of these "extras" on your income.   You are far from the income level you need to support your lifestyle as is.

------------------------BIG NEW IDEA ----->  one idea to solve all problems!  ---------
Move the in-laws in with you in your home, and sell the big place.  Charge them a low rent.  That 100k in equity would go a long way to clearing the over $55k in property tax, IRS, new roof, plus $15k or so of consumer debt, plus pay down your mortgage to get rid of the extra mortgage insurance on your primary home, etc.

 Sell it as a way for your wife to not have to work while the kids are young.   They may also choose to rent elsewhere, on their own costs, too.

You keep your car, wife does not need work, you still need to cut expenses but to real life levels instead of cutting to the bone...   your parents will need to wait a while (until wife can work?) before getting repaid, I am afraid.

So -- Can you move your kids into a shared room and free up a room for the In laws?  Because the second place option is to have them give you up to 100k in capital (the equity in the home), which they may not actually have.

First, I appreciate both your posts.

They were awesome.

However, if we sell the rental, I don't think we will need to do anything else.

Selling the rental will reduce our expenses $1,777 per month.

We have already reduced our food expense by 1,000 per month.

This changes our situation in the following way:

> Our take home pay will be reduced to $3,941 /month
> Our expenses will be reduced to $3,246 / month

This will result in a surplus of $695 / month.

If I am missing something, please let me know.

And that still leaves the IRS debt - which is likely to suck up that supposed surplus.  Can your wife deliver pizzas?

[Poundwise]

I haven't read the last few pages that closely, but I would like to applaud Mr. Beatles for coming at last to the very uncomfortable decision to sell one of his properties (and applause to the very giving people who have cajoled and pummeled him to this decision, as well!)

Along with others, I would also  like to suggest that the Beatles add to their list

Our goal is to:

1) Pay off every ounce of debt we have.

2) Save a lot of money and feel finanically secure (at least $25k in readily accessible funds).

the following goal:
3) Never live beyond our means again.

Please keep us updated on the steps you are taking to make the sale (i.e. contacting realtors, contacting tenants,  talking to your parents, etc.) Your focus should now be on figuring out how to get the most profit out of your rental sale.

Mrs. Beatles can help today by calling up CC companies and negotiating lower rates, if she can. I personally find that when I make "squeaky wheel" calls, it can be helpful to have the sound of babies in the background.  CSRs are often charmed by little kid voices, and feel sorry for me if the children are crying! I get good deals. :)

[mad9q]

You might want to read the book Boundaries by Henry Cloud.  From what you have shared, it sounds like you have boundary issues with both sets of parents. 

You sound like a loving and caring father and husband that needs to really look at what his wife is saying with her actions about that house.  If my DH would not even entertain the idea of selling to alleviate our financial crisis, I would seriously question his loyalty to me and our children.  It may be that your wife does not see this as a crisis (perhaps because her own family owes six figures to the IRS) but her opinion does not change reality.   

My best to you.  I hope you can get a plan in place so you can have peace.   

[Iplawyer]

You might want to read the book Boundaries by Henry Cloud.  From what you have shared, it sounds like you have boundary issues with both sets of parents. 

You sound like a loving and caring father and husband that needs to really look at what his wife is saying with her actions about that house.  If my DH would not even entertain the idea of selling to alleviate our financial crisis, I would seriously question his loyalty to me and our children.  It may be that your wife does not see this as a crisis (perhaps because her own family owes six figures to the IRS) but her opinion does not change reality.   

My best to you.  I hope you can get a plan in place so you can have peace.   

+1000000  But I have to bow out now.  I think that the beatles have so many emotional issues tied to their finances and financial entanglement with family  that they are going to be unable to resolve the financial issues until they resolve the fundamental emotional issues first.  And they have to want to resolve those.

1.) I would feel betrayed if my husband even suggested having family move into a house we could not afford to make payments on and that has $100K in equity in it - especially in a situation where our immediate family has its hair on fire.  I would go so far as to say it would be a matter of divorce for me.

2.) It would be divorce on the spot if my husband suggested enabling his family members to avoid paying legitimate IRS debt under any circumstances. - and especially so when it meant our immediate family suffered.

3.) I wouldn't want my children around grandparents that are evading paying taxes they owe to the IRS - it suggests so much else unethical about their character - including not bucking up and working out a plan to pay.

4.) I couldn't take money from any family member no matter how wealthy to bail me out.  Ever.  And I could not respect my husband if he did it.  How can a adult MAN or adult WOMAN command respect from their spouse or anyone else when mommy and daddy are paying their bills?  I don't want to crawl in bed each night with a child.  I want an adult as my partner.

5.) I think Mrs. Beatles thinks that her in-laws are rich and that they should just take the money they need from them. That is what I got out of her pathetic, woe is me, blame everyone else post.  As long as she thinks this no budget effort is going to work.

6.) Mrs. Beatles could work nights and weekends but isn't.  If we were in this position I would be working every hour I could when my spouse were home.

Given all of this - no amount of help here will resolve their issues.  And I've spend way too much time and emotional energy in it already. 

Good luck.  I do hope you guys make it be sincerely doubt you will.

[Malum Prohibitum]

Very good observations, IPLawyer.

[Tyson]

As someone that struggled with debt in the past and who has accepted help from my parents, my advice is to divest everything, sell it all, pay everything you can and stop accepting help from your parents.

Here's the problem I noted when I was accepting help and why it fed my debt problem.  It created the illusion for me that our family was better of than it actually was.  So we'd get cool things or nice bits of $$ and we'd buy things that made us feel "well off", and that fed our overall spending and led to lifestyle inflation. 

Also, every time you accept help, theres an obligation created, an emotional one.  As you see here.  Nothing is ever free or 'no strings attached', even with well intentioned givers.  As you see here.  Cut ties, sell everything you can and start living within your actual means.  It's a bit of a shock at first, but you'll never dig out of this hole otherwise.

I say this as someone that had a lot of debt, paid it off (with help), and then promptly ran up debt again.  It was only when I stopped taking help that the budget stuck and our financial situation improved for the long term.

[The beatles]

You might want to read the book Boundaries by Henry Cloud.  From what you have shared, it sounds like you have boundary issues with both sets of parents. 

You sound like a loving and caring father and husband that needs to really look at what his wife is saying with her actions about that house.  If my DH would not even entertain the idea of selling to alleviate our financial crisis, I would seriously question his loyalty to me and our children.  It may be that your wife does not see this as a crisis (perhaps because her own family owes six figures to the IRS) but her opinion does not change reality.   

My best to you.  I hope you can get a plan in place so you can have peace.   

+1000000  But I have to bow out now.  I think that the beatles have so many emotional issues tied to their finances and financial entanglement with family  that they are going to be unable to resolve the financial issues until they resolve the fundamental emotional issues first.  And they have to want to resolve those.

1.) I would feel betrayed if my husband even suggested having family move into a house we could not afford to make payments on and that has $100K in equity in it - especially in a situation where our immediate family has its hair on fire.  I would go so far as to say it would be a matter of divorce for me.

2.) It would be divorce on the spot if my husband suggested enabling his family members to avoid paying legitimate IRS debt under any circumstances. - and especially so when it meant our immediate family suffered.

3.) I wouldn't want my children around grandparents that are evading paying taxes they owe to the IRS - it suggests so much else unethical about their character - including not bucking up and working out a plan to pay.

4.) I couldn't take money from any family member no matter how wealthy to bail me out.  Ever.  And I could not respect my husband if he did it.  How can a adult MAN or adult WOMAN command respect from their spouse or anyone else when mommy and daddy are paying their bills?  I don't want to crawl in bed each night with a child.  I want an adult as my partner.

5.) I think Mrs. Beatles thinks that her in-laws are rich and that they should just take the money they need from them. That is what I got out of her pathetic, woe is me, blame everyone else post.  As long as she thinks this no budget effort is going to work.

6.) Mrs. Beatles could work nights and weekends but isn't.  If we were in this position I would be working every hour I could when my spouse were home.

Given all of this - no amount of help here will resolve their issues.  And I've spend way too much time and emotional energy in it already. 

Good luck.  I do hope you guys make it be sincerely doubt you will.

You show bow out of this thread because you keep giving false facts and figures. Therefore it's impossible to listen to your advice.

[The beatles]

However, if we sell the rental, I don't think we will need to do anything else.

Selling the rental will reduce our expenses $1,777 per month.

We have already reduced our food expense by 1,000 per month.

This changes our situation in the following way:

> Our take home pay will be reduced to $3,941 /month
> Our expenses will be reduced to $3,246 / month

This will result in a surplus of $695 / month.

If I am missing something, please let me know.

The beatles,

Buddy, hey, is there something you are not telling us?  Selling the small rental is a GREAT step in the right direction, and I commend you for waking up and smelling the coffee, but selling the large rental, too, would literally solve all of your problems.  Literally. You could pay off everything to everybody.  You could keep your cars, furniture, televisions, and garage full of stuff, and it would all be paid off.

You could even keep your current house.  You would still have a mortgage.

What would THAT do to your monthly expenses???

But there is something else, and we need to know what it is.  The first time I brought this up as the solution to your financial problems, and an immediate one at that, you said your wife would divorce you.

So what is the back story? 

I cannot imagine my wife wanting to divorce me for liquidating six figures of cash when we are trying to survive and owing multiple tax authorities in ways that could bring everything crashing down, even IF her parents were involved.  She, quite simply, would never see our obligation to them as tying up six figures of cash to keep them in marble, heated floor, luxury.  Also, the fact that they have the money each month to pay all of the expenses for that place, which YOU could NOT afford, means that they will be ok. 

If you or your wife think they will not be ok, then help us understand WHY they won't be ok?  The first excuse, they owe the IRS, is not going to matter one bit to most real estate investors, who will be happy to rent them a place.  Is this just a matter of the inlaws being whiny and your wife not wanting to hear about it from them?  Are the inlaws controlling over their daughter?  What?

So what is the deal?  Your wife's one post, above, really did not illuminate the situation any further.  You mentioned she was upset by reading this thread.  So what is going on?

Nope, nothing hidden.

It's just not something she is willing to do to her family.

[Malum Prohibitum]

Nope, nothing hidden.

It's just not something she is willing to do to her family.

  Can you share with us any idea why?  I ask because I gather the following from what you wrote.  They have plenty of money coming in each month.  Indeed, they are paying more than a couple grand a month to live there, between mortgage payments, taxes, utilities, and so on.

Indeed, this place was so expensive to live in that you could not live there, right?

So what is it exactly, that your wife thinks you would be doing to her family to have them seek another high priced (or low priced) place to live?

How long does this obligation they have on you and your wife and your children continue?

That last one is a very important question, but they all are.  Help us understand, please.

[CheapScholar]

Those are some good observations, although I'd say let's not be so critical of Mrs. Beatles considering it was Beatles himself who came on here looking for advice.  Mrs. Beatles may not have realized how bad her financial situation is until recently.  Honestly, I suspect she still doesn't have a clear understanding of just how BAD this is, so maybe cut her some slack.  In her mind, having some debt issues is just the typical American way.  Most Americans don't save anywhere near the rate of people on this board, many don't think about retirement until their fifties.  I can see how some people with massive money problems like the Beatles clan just try to stop thinking about money and hope the IRS or county, or creditors, doesn't take it all away on any given day.  Me, I'm a little prone to anxiety.  If I were in their position I would honestly freak the eff out and probably need to be hospitalized. I'm not "financially independent" under the MMM definition, but I'm pretty comfortable considering I own nearly half the value of my home, and have about 175K in retirement accounts/investments/cash.  I'm 36 and I have a realistic chance of retiring before 50.  And I've made my share of blunders.

I think what happened is Beatles himself started to do a little math in his head.  He started to realize he is in a very precarious space.  I suspect maybe he had trouble sleeping at night.  I suspect that every bankruptcy commercial on tv scared the living sh#t out of him.  I suspect that he had visions of telling his kids there will be no money for college.  So he wised up and sought advice.  Until the Mrs. is willing to accept how bad the situation is, nothing will change.  It's a total mess and it's tangled up with 2 sets of inlaws.  One set is ostensibly subsidizing the other.  There's just no other way to look at it.  Mrs. Beatles, if you're still reading this thread, please consider reading a book by Dave Ramsey as others suggested.  There's a lot of noise here.  Some of it is harsh, but it's mostly good.  You desperately need to have a hard conversation with your parents.  You need to help save every cent you possibly can over the next 5 years, and you need to help bring in revenue somehow. 

[Tyson]

If the inlaws are paying all the bills to the big house, why not just sell it to them?  Their costs will remain the same every month and you get your equity out.