Case Study: Hair on Fire

[movingalong]

Topic Title: In need of financial advice, particularly pertaining to whether to sell or rent our homes out while we are living abroad.

Life Situation: We are a mid thirties married couple with two teens (one leaving in June). Currently live in our own home in a tourist town and own an investment property in another tourist town about 150 miles away. My husband has applied and received an offer for employment in a large city in Europe with the same cost of living as we have currently. We are excited to go and the move itself would be totally covered, but he would take a pay cut of 40k to go. We will have to fork out about $7k in international school fees for our daughter for 2 years. The upside to this move would be a total lifestyle change. We would like to live simpler and to be in a city with more free things to do that we have in our tiny town. We plan to give up driving and live in a small rental.
We have read the blog for a while now but by the time we got here we felt we were really in over our heads. So we dug deeper. We really see a way out at this point because of the move. I know it's a pay cut but we see a light. A city that is easy to navigate without a car, with sights and things to do for free.
I rounded on some of the numbers but everything is really close.

Gross Salary/Wages: 160k

Rental Income, Actual Expenses, and Depreciation:  Very recently started renting out our second home. It rents for 1375 per month and we pay a management company 137.50 per month. Our mortgage is about 950 (incl. taxes and insurance) and tenants pay everything. There is a current lease that ends in July. We haven't had other expenses thus far except taxes and insurance.

Taxes: In 2014 our total tax was about 20k fed and 10k state.

Current expenses: 
Primary Mortgage: 1148 ---4.75% interest on a 220k loan
Escrow: 354 (64 insurance & 290 taxes)
Investment Mortgage: 635---4.875% interest on a 115k loan
Escrow 310 (80 insurance & 230 taxes)

Big Debt of Shame:       
Credit cards 17,247 total  657/ month varying interest. 6k is on a year long 2.99% The rest is between 6-20%

HELOC
30k
10.49%
302.00

Two Car Loans
13k
5.74%
545/ month total

Student Loans @ 6.81%
44,000
350/ month

Student Loans @ 5.375
106k
607/ month

Car Insurance  100 per month
Fuel                400 per month
Phone             140 - three of us on straight talk, two of which are teens.
Electricity        145
Garbage            40
Gas                  35
Water/Sewer     80
Cable               30
Food             I can't post it here out complete fear. I can only say that we can save an enormous amount of money by purchasing smarter and not eating out.

Assets: 401K 76k with an approximately 15k loan against it
             Primary home could probably sell for about 350k or rent for 1500
             Investment could sell for about 240k
             Both cars worth about 13k together

Specific Question(s): The terrible awful news is that we are hemorrhaging money. Major. Our spending has been out of control, period. Punches are well deserved. We recently refinanced from a 15 year to a 30 year which cut our payment down 500. Also our second home was rented out and that is bringing in money. This should help us for the next few months.
The good news is that we are selling everything and moving to a new city. This will give us a new start. We will have no car. We will rent at first. The cost of living is about the same as where we are now.
I guess what I really want to know is should we sell everything and settle up? Both our homes are increasing in value very nicely. We hoped they would be an asset for us but I know with our debt we may be better off selling one or both.
I kept going back and forth on whether to post this because I am very, very ashamed. I know better and should do better.
Retiring in 10 years would be a dream. If that's not possible we would like to just get on the right track for financial health.

[Eowyn_MI]

First, take a deep breath.

If you have time, go to the library and find Your Money or Your Life by Joe Dominguez and Vicki Robin.  This book really helped to switch my mindset from spendypants to saver.  If you don't have time, remember this "no shame, no blame."  Repeat that to you yourself every time you feel ashamed.  All of your past financial decisions are just that: past.  Do not be afraid; things can and will get better.  Focus on what you can do now and in the future.

The opportunity to move to Europe and get a fresh start sounds awesome!!  Personally, I would sell everything and settle up as many debts as possible.  But that's because I absolutely loathe being in debt; people wiser than me might not see that as the "best" financial decision for your situation.

Just by being here you are already on the right track for financial health.  Keep going!

[former player]

Total assets (not including $75k retirement fund): $604k.  Total debts: $560K.  Selling everything would leave you with $44k and an anemic retirement fund of $75k.

Total income: $10.8k per month net earnings, $1.24k rent, so $12k per month.  Basic expenses per month as listed are $5.2K (4.2k of which is your listed debt repayments - you haven't put in the repayment of the 401k loan) plus groceries.  To have the debt you do, even counting the rental income as only recently started you have been frittering away $7k per month or more on things you don't need.

Your rental is worth $240k.  It has a loan of $115k, income of £1375 and expenses of $1082.5.  Taking into account voids and maintenance, you are about breaking even, which is better than not renting it out but doesn't come close to making it an "investment".  Your main home at a worth of $350k, a loan of $220k, potential rental income of $1500 and expenses of $1954 (I'm including the Heloc and 10% rental management) would be an out and out loss-maker even before accounting for voids and maintenance.

I'm all in favour of working abroad: I've done it myself.  But you are looking at a decrease in income of at least $40k (do you have any earned income at the moment?  If you do you would be losing that too) and an increase in expenses of at least $14k.  Your spending has been out of control, and moving abroad isn't of itself going to make that better, whatever you are telling yourself about a small rental and no car.

I would suggest putting in a couple of years of controlling your spending and paying off debts, getting your younger child off to college and then trying again at working abroad on a much more solid financial basis.  But you've been winging it so far, so who's to say you won't get away with winging it on your adventure abroad?  One thing I would say if you do go abroad: make sure that when you come back you will be able to slot back into a high earning position: you'll need it if you are ever to have a comfortable retirement.

[ZiziPB]

Topic Title: In need of financial advice, particularly pertaining to whether to sell or rent our homes out while we are living abroad.

Specific Question(s): The terrible awful news is that we are hemorrhaging money. Major. Our spending has been out of control, period. Punches are well deserved. We recently refinanced from a 15 year to a 30 year which cut our payment down 500. Also our second home was rented out and that is bringing in money. This should help us for the next few months.
The good news is that we are selling everything and moving to a new city. This will give us a new start. We will have no car. We will rent at first. The cost of living is about the same as where we are now.
I guess what I really want to know is should we sell everything and settle up? Both our homes are increasing in value very nicely. We hoped they would be an asset for us but I know with our debt we may be better off selling one or both.
I kept going back and forth on whether to post this because I am very, very ashamed. I know better and should do better.
Retiring in 10 years would be a dream. If that's not possible we would like to just get on the right track for financial health.

Fresh starts are great, but moving abroad is not going to magically change your ways.  As you admitted yourself, you have bad spending habits.  That is what you need to change.  You may sell everything and pay off your debts, but unless you stop spending and start saving, you will be back to where you started in no time.  Europe will be tempting with spending opportunities: travel, going out, shopping for new and shiny things...  You will be making less money and have fewer saving vehicles (401k?).  You need to honestly look at where your money is going now and how you can reverse the trend before you move.

[SMCx3]

It is a brave step to post all of this information.  The good news is you currently have a large income. The bad news, how is it even a consideration at this time to take a pay cut?  Forget better lifestyle, new experiences, you have a mountain of debt to tackle. 

Make a strict budget, tackle the food cost, cut cable, sell the rental home, have a garage sale, do absolutely all you can to place an extra dollar toward your student loans and credit cards.  If you want a better lifestyle knock out one of these massive weights you are lugging around each month.  You will feel so much better. 

Get everyone in your family involved and working toward the same goal.  You will be able to live anywhere once you get this behind you. 

[Stashing Swiss-style]

Can I ask where in Europe you are going?  $7k for international school is incredibly cheap by Swiss standards! 

I think you should go to Europe - the mentality is very different and it would be an amazing experience for you.  But you have to change your habits immediately - food spending is an easy one to tackle (read any of the Forum threads on grocery spending and you will see.  I've changed my habits significantly since discovering MMM).  Sell everything including both homes and cars and repay as much debt as possible.  You can rent when you return. 

The fact that you have posted your story here and are aware of what you  need to do tells me that you can do this!

[FrugalFan]

This is a tough one for me. You definitely have some spending habits that need to be fixed immediately. But with that salary and your expenses, it's hard to see why you are in so much debt. If it were me, I would focus hard on changing habits and paying off all debt and then consider an international move in a year or two. However, I love to travel and experience new things, and can see how this would be a huge motivator to get your life on track. If you follow that route, you have to sell both homes and get out of debt. Neither would make you money if they are rented. You would get a better return on investment by investing the equity, and a MUCH BETTER return on investment by using the equity to pay off debt.

Also, are you really certain about the cost of living in Europe? In my experience, everything is more expensive there (food, gas, rent, utilities, clothes, etc). Also consider what former player mentioned about your retirement. Could you move to Europe and still save for retirement?

It is difficult to know for sure whether you can afford this because you haven't listed all of your expenses (how much do you spend on food, clothes, gifts, donations, internet, haircuts, gym, etc)? Maybe if you use a case study format you could get more specific advice. A fruitful exercise might be to draw up your current expenses, being realistic about all your expenses, and a well-researched comparison budget for your life in Europe, assuming you sell everything and pay off all of your debt. In your European budget, be sure to include some money for entertainment/touristy stuff, make sure your other budget item items are realistic based on what you have been spending, and make sure there is enough left over to save for retirement. Can you make the numbers work?

[little_brown_dog]

+1 to the idea that a move will not fix things– Europe can be very expensive, and you are taking a 40k pay cut to go there, plus the additional costs of international school fees. Your biggest challenge here will be to change your mindset on spending, because you will easily end up piling on more debt if you don’t get your head straight.

Cutting back on small stuff won’t necessarily make a huge dent in your finances right away, but it is a critical skill to help you practice getting into the saving/efficient spending mentality and will help you immensely in the long run. Those cell phones - the teens can learn to contribute and pay for part of the bill. It builds respect for money, their possessions, and will ease your burden. Every $50 bucks back counts. Gas bills - why so high? Can the teens pay for their own gas? You need to post that grocery number. By hiding it, you aren't acknowledging it. Write it down (even if you don't write it on the forum, write it down on a piece of paper) and stare at it. Let it sink in. Don't run from it. Let the bad feelings hit you - notice them with as little judgement as you can, they are telling you something is wrong and must be done.

Shame is a rough emotion – it tends to just make us hide our bad behavior, instead of actually changing it You need to start thinking like financially stable and wealthy people do – money is a tool, like a hammer. It is neither good nor bad, a measure of moral worth or an indicator of weakness. You can use it efficiently or inefficiently. It can build things up or tear things down. Right now, you have used money inefficiently. You have used it in a way to tear you down. Now it is time to use the same tool to fix things.

I recommend you visit this thread from another poster who is also in a boatload of debt (http://forum.mrmoneymustache.com/ask-a-mustachian/newbie-how-to-dig-out-of-the-giant-hole-we-are-in/). Read through until the last page and see the update and all the amazing changes made. It is badass. They did big and small things. Everything from refinancing for lower interest rates to cutting back on seemingly silly expenses that many spendypants people would have thought to be too small to make a difference.

When are you moving? This matters because it will affect what you should do and when. For example, if you are going to be here for another year, I'd trade in those cars and get something much much cheaper. But if you are moving next month, it's probably not worth it.

[FrugalFan]

Shame is a rough emotion – it tends to just make us hide our bad behavior, instead of actually changing it You need to start thinking like financially stable and wealthy people do – money is a tool, like a hammer. It is neither good nor bad, a measure of moral worth or an indicator of weakness. You can use it efficiently or inefficiently. It can build things up or tear things down. Right now, you have used money inefficiently. You have used it in a way to tear you down. Now it is time to use the same tool to fix things.

I really love this!

+1 on checkout out that other thread. One thing I was impressed by is that although she followed some advice, she also found her own amazing ways of changing things despite that advice coming from many mustachians with loads of experience.

[movingalong]

Hello everyone. Thank you so much for the overwhelming responses of good sense! I was pretty sure people would say not to move to Europe. We're having a hard time justifying the pay cut ourselves. It's a dream to move, but we don't want to make our situation worse.
The main questions I think you all have is what have we been spending our money on. Meals out, health food for a diet we completed, kids' activities, gas for running kids to activities and small trips. We just finished remodeling our primary home's bathrooms and some other minor fixes. Luckily they were all completed by us (my husband is great at remodels), but we probably spent whatever we saved in labor on easy food purchases and getaways related to having a house in chaos. The remodel stress was coupled with emptying the second home and cleaning it up for rental. We have been out of balance for years to put it very simply. We love real estate and "getting a deal" so we bought both of our homes for cheap. The problem is it was hard to keep up with two payments (one being a 15 year loan) so we just ran up the credit cards.

Éowyn MI- Thank you for the words of encouragement. I will absolutely look into that book, I have heard of it before. I am trying not to feel ashamed but really that was my upbringing. I do feel blame because I am the one who deals with the finances. I just haven't had a lot of training on dealing with "extra money". Growing up we had very little and instead of living poor my mom faked it a lot. My dad didn't fake it but he had some really awful financial habits too.

former player- Thank you for your help.
Selling both homes is hard because I know our primary will grow a lot because of the area it's in. I don't quite understand the math on figuring out a profitable rental. I know there is info on here about it and I am researching it today. The second home was such a good deal and that area is growing a lot too. I do know that we are in over our heads with both though and I can't tell you how good it sounds to settle up our debt and just start fresh. Even if our retirement fund is anemic I can see that shifting things.
Yes we have made it so far just winging it, that applies to many areas of our lives. I would like to set ourselves up for success this time and turn over a new leaf when it comes to finances.

ZiziPB- Thank you so much for your input. I am absolutely working on the spending right here, right now. It needs to be under control no matter what. You are so right that moving to Europe will not solve all of our problems. I suppose it's more the idea of settling up that entices me. Selling off everything and getting a fresh start in a place that will certainly keep our minds occupied with all the change.

SMCx3- Thank you so much for your encouraging words. I feel like I picked off a scab. I know I am in good hands here but it's still hard. Big changes ahead for us. I know we can do it. I think selling the rental home is a common theme on here! I have to talk to SO tonight about all the great advice. In the meantime I am working on the budget and a real plan. Garage sale is on the horizon. We have a lot to sell so that should help.

Stashing Swiss-style- Thank you for building us up. We are excited to start and so glad we came here! The international school we are looking at is outside city center, we don't know the quality other than reviews. We are trying to get my SO's employer to cover this but it doesn't look promising. The grocery habits are outlandish and they are the first to be addressed.

Travelling Biologist- Thank you so much for the good advice. I am getting the point. SELL! I have to talk this over with my SO but I'm glad there is a consensus among the gurus. I do think that because moving abroad is a dream it would motivate us. We have made some big changes in the past few months in relation to health and I feel empowered. The food spending was out of control and our health was suffering. We changed it (but spent too much during transition) and are able to make much better choices about what we eat. I know we can tackle the food spending now.
I'm not positive about the cost of living in Europe, but we used a website that shows costs in different cities. That's how we came to the conclusion that it's a wash really. Meals out are more expensive there so we absolutely cannot eat out. Groceries are cheaper than here so that may help our spending.
I will work more on the categories. It was a lot just getting the info I did last night. I am working on it today though and hopefully will have a better picture later in the day.

little_brown_dog- Thank you for linking to the other post, it's a similar situation for sure. I am going to read it more thoroughly but I scanned through and it looks like she's getting it together!
The teens pay for their own gas , we just drive a lot. The phones are something we pay but I'm not opposed to having them chip in. As far as the grocery number I will write it down in big numbers and post it in my house. I will look at it every day. I will also try to hone in on the other specific categories to get a better idea of all the spending.
Shame is awful and I hope as I get a budget worked up today I will feel more empowered and see the money as a tool. Unfortunately it is tied up very much in moral worth for me, right or wrong. I know it will change as things get in better order.
SO could move as early as April. Housing will be paid for two months. My daughter and I will go in June. My son is staying stateside to go his own way. Cars can be sold pretty much right away. SO hasn't accepted the job yet, we're still trying to negotiate. My car will go either way so that will be about $350 saved.

[FrugalFan]

I'm glad we didn't scare you away, movingalong! I do think you need to figure out realistic budget numbers before making this decision, so this exercise you are going through will be worth it. I'm surprised that groceries would be cheaper in Europe (unless it is Spain, Portugal, or maybe Italy). Everywhere else I've been/lived, it's been quite a bit more than here in Canada, which is quite a bit more than the US.

As for evaluating rental properties, fellow forum member iamlindoro has posted a really good evaluation spreadsheet but it is likely more complex than you need, and is more useful when first evaluating the property in terms of returns on the cash you need to initially put in for down payments or repairs. Basically, you just add up all the annual expenses and subtract that from the annual rent and principal paid down on the mortgage and that is your total  return for the year. Your annual return on investment (ROI) is that amount divided by how much equity is in your property. For your expenses, you should include all that apply of mortgage, property taxes, insurance, property manager, utilities, water, garbage, hot water heater rental, vacancies (10% of rent), yard maintenance or snow removal, and maintenance (10% of rent or 1.5% of property). You should not leave out vacancies or maintenance, as you will have to pay for those, it's just a matter of when. If your value is negative, then you are losing money every year. If it's less than 10-15%, then you would do much better paying off your debt. Most people who invest in real estate don't count on appreciation as that is unpredictable and can change suddenly in a crash. Cash flow is king.
 https://docs.google.com/spreadsheets/d/10XGrJTyn-xDbPulj9t3STtshNd3Clx-2Ck1XQbLwd0w/edit?usp=sharing

[ZiziPB]

SO could move as early as April. Housing will be paid for two months. My daughter and I will go in June. My son is staying stateside to go his own way. Cars can be sold pretty much right away. SO hasn't accepted the job yet, we're still trying to negotiate. My car will go either way so that will be about $350 saved.

This timing is super tight.  Sorry to say, but there is no way you will be able to liquidate everything in an orderly fashion with that timeframe. 

As to the cost of living in Europe, can you give us a hint as to the city?  Many of us have traveled extensively and lived in Europe so someone here can give you a pretty good idea of what you can expect.

[movingalong]

I'm glad we didn't scare you away, movingalong! I do think you need to figure out realistic budget numbers before making this decision, so this exercise you are going through will be worth it. I'm surprised that groceries would be cheaper in Europe (unless it is Spain, Portugal, or maybe Italy). Everywhere else I've been/lived, it's been quite a bit more than here in Canada, which is quite a bit more than the US.

As for evaluating rental properties, fellow forum member iamlindoro has posted a really good evaluation spreadsheet but it is likely more complex than you need, and is more useful when first evaluating the property in terms of returns on the cash you need to initially put in for down payments or repairs. Basically, you just add up all the annual expenses and subtract that from the annual rent and principal paid down on the mortgage and that is your total  return for the year. Your annual return on investment (ROI) is that amount divided by how much equity is in your property. For your expenses, you should include all that apply of mortgage, property taxes, insurance, property manager, utilities, water, garbage, hot water heater rental, vacancies (10% of rent), yard maintenance or snow removal, and maintenance (10% of rent or 1.5% of property). You should not leave out vacancies or maintenance, as you will have to pay for those, it's just a matter of when. If your value is negative, then you are losing money every year. If it's less than 10-15%, then you would do much better paying off your debt. Most people who invest in real estate don't count on appreciation as that is unpredictable and can change suddenly in a crash. Cash flow is king.
 https://docs.google.com/spreadsheets/d/10XGrJTyn-xDbPulj9t3STtshNd3Clx-2Ck1XQbLwd0w/edit?usp=sharing

Using your formula:
Expenses -- 14,712 per year
Equity----- 120,000 current equity.
So 12%? Or am I doing it wrong?

[movingalong]

SO could move as early as April. Housing will be paid for two months. My daughter and I will go in June. My son is staying stateside to go his own way. Cars can be sold pretty much right away. SO hasn't accepted the job yet, we're still trying to negotiate. My car will go either way so that will be about $350 saved.

This timing is super tight.  Sorry to say, but there is no way you will be able to liquidate everything in an orderly fashion with that timeframe. 

As to the cost of living in Europe, can you give us a hint as to the city?  Many of us have traveled extensively and lived in Europe so someone here can give you a pretty good idea of what you can expect.

Sorry not trying to be too mysterious! Amsterdam is the city. We would probably live out of town a bit since my SO will have to travel.
The time frame for my daughter and I is flexible. As long as we are there in August we will be fine. I am confident in our town the furniture will go in no time. It saves a trip to the big city. Houses (especially in our well established neighborhood) sell very fast and for a good price. Our only hang up will be the cars :(

[FrugalFan]

Should be:
(rent + principal on mortgage - expenses)/equity

[FrugalFan]

I love Amsterdam! (sorry, I'm no help).

[movingalong]

I love Amsterdam! (sorry, I'm no help).

Enthusiasm is helpful! :D

[movingalong]

Should be:
(rent + principal on mortgage - expenses)/equity

Hopefully this is better:
Rent-                           16,500 /year           
Principle on Mortgage       2,000 / year
Annual Income               18,500

Mortgage/Taxes/Ins        11,400/year
Property Manager            1,656/year
Vacancies                       1,656/year
Annual Expense              14,712

Total Return for the year   3,788   
Equity                         120,000   
ROI                                   3% 

If this is right I get it. Not the best return.

[FrugalFan]

Well at least it's not negative! If you are really attached to keeping the primary residence,  you could sell your second home and use the 115 k or so in equity after selling costs to pay off the credit cards, HELOC, car loans, and student loan 1. That will leave you with an extra 1854 a month. But it doesn't seem like that is enough to make up for the decrease in salary and increased in school costs. It means you still need to find more room in your budget or also sell your primary residence.

[CU Tiger]

It seems to me you are doing some "magical thinking," where you tell yourself that moving to Amsterdam will solve all your problems. But you are taking yourselves and your spendy habits to the Netherlands, and you can use credit cards there too.

And maybe you will live frugally, walk, bike, and use public transport, and cook at home all the time. But chances are you will continue buying, spending, and now you will have the temptation of weekend jaunts to Paris, Berlin, and London. And you will furnish your apartment to make it cozy, and that costs Euros...

You need to adjust your habits, and get a handle on your indebtedness before you try to move away from habits you are just going to take with you.

[Villanelle]

I've lived in Europe.  While in general the everyday life might be cheaper, it is really, really hard to live in Europe (if you know it is going to be a temporary thing) and not travel.  Are you really going the be able to live there and not travel?  (Try to be honest about that answer.  You sound like a family who, up until now, hasn't done much in the way of denying yourself.)  Are you not going to want to fly back to the States once every year or two for Christmas or to see parents?  Also, things like heating oil and electricity can be very expensive, assuming you things are similar to Germany.  We spent considerably more in Germany that we did in the US, though we were admittedly traveling fiends.

Also, you mention not owning a car, but living out of town.  Public transportation is expensive. (I'm ASSuming NL is similar to Germany in that regard.)  And while living away from the city is cheaper, it increases the frequency with which you will want and need to travel in to the city. 

You mention you and your DD not moving until maybe as last as August, with DH going as soon as April.  So you'd be supporting two households for 3-4 months, when you already can't afford one. 

Sorry to say it, but I don't think this works, and I especially don't think it works when you haven't yet proven you can make any of the sacrifices you think you'll magically make when you hit European soil.  Fix your spending problem now, and once you've done that, you'll be in a position to jump on some future opportunity.  Right now, you can't afford this move.

[movingalong]

I've lived in Europe.  While in general the everyday life might be cheaper, it is really, really hard to live in Europe (if you know it is going to be a temporary thing) and not travel.  Are you really going the be able to live there and not travel?  (Try to be honest about that answer.  You sound like a family who, up until now, hasn't done much in the way of denying yourself.)  Are you not going to want to fly back to the States once every year or two for Christmas or to see parents?  Also, things like heating oil and electricity can be very expensive, assuming you things are similar to Germany.  We spent considerably more in Germany that we did in the US, though we were admittedly traveling fiends.

Also, you mention not owning a car, but living out of town.  Public transportation is expensive. (I'm ASSuming NL is similar to Germany in that regard.)  And while living away from the city is cheaper, it increases the frequency with which you will want and need to travel in to the city. 

You mention you and your DD not moving until maybe as last as August, with DH going as soon as April.  So you'd be supporting two households for 3-4 months, when you already can't afford one. 

Sorry to say it, but I don't think this works, and I especially don't think it works when you haven't yet proven you can make any of the sacrifices you think you'll magically make when you hit European soil.  Fix your spending problem now, and once you've done that, you'll be in a position to jump on some future opportunity.  Right now, you can't afford this move.

Thank you for your response. I appreciate you taking the time to help and for the input about costs of living in Europe. I agree that we haven't made the right moves in the past. I only hope that in the future we can do better at denying ourselves because whether we are here or abroad it will be a necessary step moving forward. If I didn't believe we can do it I certainly wouldn't be here.
I don't think these changes will magically happen. I do think sometimes in life we can get stuck and it can be beneficial to have a change in scenery. As for travel, it is a permanent move. We have time to settle in, get the finances in order (made easier by liquidating) and travel when we have the money and proper spending habits to do so. I won't stay until August, I was just saying that is how long I could stay. We will probably leave in June (if we go).

[movingalong]

It seems to me you are doing some "magical thinking," where you tell yourself that moving to Amsterdam will solve all your problems. But you are taking yourselves and your spendy habits to the Netherlands, and you can use credit cards there too.

And maybe you will live frugally, walk, bike, and use public transport, and cook at home all the time. But chances are you will continue buying, spending, and now you will have the temptation of weekend jaunts to Paris, Berlin, and London. And you will furnish your apartment to make it cozy, and that costs Euros...

You need to adjust your habits, and get a handle on your indebtedness before you try to move away from habits you are just going to take with you.

Thank you. However, I have to believe we can change otherwise it won't matter whether we are here or there!

[movingalong]

Well at least it's not negative! If you are really attached to keeping the primary residence,  you could sell your second home and use the 115 k or so in equity after selling costs to pay off the credit cards, HELOC, car loans, and student loan 1. That will leave you with an extra 1854 a month. But it doesn't seem like that is enough to make up for the decrease in salary and increased in school costs. It means you still need to find more room in your budget or also sell your primary residence.

You have been very kind to help us understand real estate investing better. I agree that we probably need to be done with both houses if this is going to work. I know we seem like idiots judging by our situation, but I am channeling my common sense from here on out. I don't have an attachment to our home, we just had the misguided idea that it could make us money by renting it.

[movingalong]

I am working on a game plan and will keep you all posted. Hoping to have a budget and perhaps even a decision about whether we are moving soon. Thanks so much to everyone who was so kind to help us out!

[Stashing Swiss-style]

Amsterdam is a fantastic city!  I lived there for 3 years and my sister has been there for 20 years so I know it very well.  I would be happy to help with working out a good place to live.  YOu will be able to bike everywhere or use public transport easily.  Definitely go!  The dutch are known for their frugality - it will rub off on you!  I think you will change your habits and will get rid of your debt and it will help to be somewhere like Amsterdam where houses are typically small, no need for a car, healthy lifestyle, lots and lots to do for free and cost of living is not too high.

I say go!

[SMCx3]

Movingalong it is great to see you taking in all of this information. 

You must start somewhere and you are already making progress.  Go with your gut, stick to whatever plan you and your SO agree to follow.  Elimintating debt can be done anywhere in the world, just make sure you are not adding any more fuel to the fire.

[FrugalFan]

Well at least it's not negative! If you are really attached to keeping the primary residence,  you could sell your second home and use the 115 k or so in equity after selling costs to pay off the credit cards, HELOC, car loans, and student loan 1. That will leave you with an extra 1854 a month. But it doesn't seem like that is enough to make up for the decrease in salary and increased in school costs. It means you still need to find more room in your budget or also sell your primary residence.

You have been very kind to help us understand real estate investing better. I agree that we probably need to be done with both houses if this is going to work. I know we seem like idiots judging by our situation, but I am channeling my common sense from here on out. I don't have an attachment to our home, we just had the misguided idea that it could make us money by renting it.

I don't think you seem like idiots at all. I know many very smart people in similar situations. But the difference is you now recognize this a as a huge problem and are willing to do something about it.

In terms of the real estate investment, part of the reason your ROI is low is that you have a lot of equity in the properties. New investors are just looking at investing the down payment and closing costs, which makes the ROI higher. In your case, this is actually a good thing! So many people in debt like you are have very little equity in their homes or are actually under water. If you sell both houses and pay off all you debts, that frees up almost $3500 a month! That is about the difference in salary your husband will make (rough estimate). You will still need to cut your expenses to afford school for your daughter and retirement savings but I think you can do it! I was also surprised when looking at Numbeo that Amsterdam does not have as high a cost of living as many European cities. I'm looking forward to seeing how you can make the numbers work. Remember to account for moving costs and any travel back to the US that you might want to do.

[little_brown_dog]

Well at least it's not negative! If you are really attached to keeping the primary residence,  you could sell your second home and use the 115 k or so in equity after selling costs to pay off the credit cards, HELOC, car loans, and student loan 1. That will leave you with an extra 1854 a month. But it doesn't seem like that is enough to make up for the decrease in salary and increased in school costs. It means you still need to find more room in your budget or also sell your primary residence.

You have been very kind to help us understand real estate investing better. I agree that we probably need to be done with both houses if this is going to work. I know we seem like idiots judging by our situation, but I am channeling my common sense from here on out. I don't have an attachment to our home, we just had the misguided idea that it could make us money by renting it.

You aren't idiots - we live in a culture where high debt loads, rampant consumerism, and paltry savings are the norm for most middle class and upper middle class people. Mustachians are the ones swimming against the current, but it is important to remember the majority of us started off blindly following the same path until we wised up. Me personally, I had approx 100k in student loans and a 35k/yr job. Definitely not smart, but we fixed it, and we are now well on our way to a better life. You will be too.

[StacheInAFlash]

I'd sell everything, clear off all your debts, and move! If you saw a move to Europe as something that could save you, but you weren't actually looking forward to it, I'd say don't do it. But your family is excited for this opportunity, and by selling everything you can start fresh and that is an awesome feeling! If you can get your life in order, changing your ways, I think this might actually expedite the process to FIRE...but that is a big IF that you need to really take serious. Best of luck!

[movingalong]

I'd sell everything, clear off all your debts, and move! If you saw a move to Europe as something that could save you, but you weren't actually looking forward to it, I'd say don't do it. But your family is excited for this opportunity, and by selling everything you can start fresh and that is an awesome feeling! If you can get your life in order, changing your ways, I think this might actually expedite the process to FIRE...but that is a big IF that you need to really take serious. Best of luck!

Thank you. That's the direction we are leaning at this point. I appreciate your vote of confidence!

[movingalong]

Amsterdam is a fantastic city!  I lived there for 3 years and my sister has been there for 20 years so I know it very well.  I would be happy to help with working out a good place to live.  YOu will be able to bike everywhere or use public transport easily.  Definitely go!  The dutch are known for their frugality - it will rub off on you!  I think you will change your habits and will get rid of your debt and it will help to be somewhere like Amsterdam where houses are typically small, no need for a car, healthy lifestyle, lots and lots to do for free and cost of living is not too high.

I say go!

Thank you so much for the offer of help! I know we will change things around, it has already started!

[movingalong]

Movingalong it is great to see you taking in all of this information. 

You must start somewhere and you are already making progress.  Go with your gut, stick to whatever plan you and your SO agree to follow.  Elimintating debt can be done anywhere in the world, just make sure you are not adding any more fuel to the fire.

Thank you and I know you are right. I am hoping to eliminate a lot before we go, but I think we can do this from anywhere. There has been a paradigm shift for sure.

[mm1970]

It seems to me you are doing some "magical thinking," where you tell yourself that moving to Amsterdam will solve all your problems. But you are taking yourselves and your spendy habits to the Netherlands, and you can use credit cards there too.

And maybe you will live frugally, walk, bike, and use public transport, and cook at home all the time. But chances are you will continue buying, spending, and now you will have the temptation of weekend jaunts to Paris, Berlin, and London. And you will furnish your apartment to make it cozy, and that costs Euros...

You need to adjust your habits, and get a handle on your indebtedness before you try to move away from habits you are just going to take with you.

Thank you. However, I have to believe we can change otherwise it won't matter whether we are here or there!

True, but it's MUCH safer to PROVE that you can do it - by actually DOING it - HERE, first.

Nobody is saying that you cannot move to Europe.  But maybe right now is not the right answer.