Author Topic: Liquidate assets to pay off debt??  (Read 10926 times)

regambale

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Liquidate assets to pay off debt??
« on: February 19, 2012, 06:29:47 AM »
Fellow MMM Blog readers,
 
I am hoping that someone can help me answer this question. I orginally asked in the comments section of the bolg, but figured that was the wrong spot to post.  This particularly has to do with real estate.  Without rambling on into too much detail, here is the short story: I own three homes. Two are rentals, and one is a primary. The rentals have no mortgage and bring in a combined $2475/mo. in rent payments. Cost for ONLY taxes, insurance and HOA fees is about $700/mo. (combined). Our primary residence has a mortgage (just purchased in Sept. 2011). Monthly mortgage is $1520 ($243k loan, 4.25% interest). The only debt I have is the home, and a student loan ($14k at 6.8% int.). But there is currently no extra money to save/invest (except in husbandís 401k). Should I sell the two rentals (despite the houseing market) and pay off all debt to be completely debt free and begin investing extra money elsewhere (both homes should bring in about $360k, not including closing and other costs)?? Or hang on to the rentals for the income and try to sell later?? My gut tells me to sell now because just taxes, insurance and interest on the primary home is costing about $20k/yr. which seems to outweigh what the homes could increase in value over the next few years. Thoughts/suggestions??
 
appreciated!! thank you!

MEJG

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Re: Liquidate assets to pay off debt??
« Reply #1 on: February 19, 2012, 06:43:02 AM »
Hi Regambale,
     
I don't have enough information to give you a detailed answer yet.  What your monthly budget looks like, and if you've made other Mustachian changes in order to float the whole affair.  Plus 4.25% seems a bit high to me with how rates have been.  Did you put 20% down? or are you paying PMI; is it a 30 year or 15 yr mortgage? Do you have an emergency fund?

Based on what you've said I would NOT sell the rentals.  They are paid off and netting you a decent Mustacian living right there.  Mr.MM himself lives on less that $30,000 a year with a family of three.  If your primary is costing you almost $20,000 a year I'd be more apt to look seriously if it is time to sell your primary, rather than your rentals. 

I would also seriously look to see if there is any extra money to save.  We almost all have places we could tighten down more.  Think outside the box.  Can you rent a small place for under $900 a month and then rent out your primary? Can you move into one of your rentals and rent out your primary?  Can you rent out a room or a floor in your primary?  Do you own two cars? Do you ever eat out? etc

If you are still paying PMI, and once you can pay off your student loans the cash flow will get better, allowing you to focus on the primary mortgage (should you decide to keep it and should you decide you want to rather than investing).

regambale

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Re: Liquidate assets to pay off debt??
« Reply #2 on: February 19, 2012, 07:14:33 AM »
Thanks for responding. Ok, to answer some of your questions:
After going over our budget recently, we have made changes that brought us from spending more than we bring in, to about breaking even...I am doing all that I can do (quit buying clothes, highlighting hair, buying makeup, etc.), but the only thing I have convinced my husband to do, is to not eat out so much.  So trying to do anything extreme, such as selling our home (or even cutting cable for that matter) would send my hubby through the roof.

I have recently checked mortgage interest rates to see about refinancing, but have found that 4.25% is about what we would get still. Def. couldn't get it low enough to offset cost of refi. This is for a 30-yr fixed. No money down.  We do not pay mortgage insurance because we have government backed (VA) loan.  We have no emergency fund.

The rentals seem great...but out of the  $2475 that they bring in, $700 a month goes towards basic expenses, and that does not include what maintenence, repairs, etc. will cost.  The primary is not costing $20k.  I added the $10k+ in interest that we pay each year by having the mortgage, plus the expenses on the rentals homes (the other $10k).

I could be wrong in my thinking here, but if we sold the rentals we would not have the $2475 in rent income (assuming both are rented at all times, and renters are paying), BUT we would also not have $700 dollars in interest and insurance plus the cost of maintenence. We would also not have the $1520/mo. mortgage payment (because we would pay off primary), and we would not have $265/mo. payment for the next several years (we would pay off student loan). So we would gain (700+1520+265)= $2485 NOT including other expenses for the rentals (replacing carpet, painting, times when vacant, etc.).  Which already exceeds what they are bringing in...

Again, since I can not make all the decisions alone, it makes it more difficult to make major changes.  Also, I have three small kids, which makes everything more tricky/difficult.  We have to live in our primary at least for a year (deal with the foreclosure).  We do own two cars, but both are paid off.

arebelspy

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Re: Liquidate assets to pay off debt??
« Reply #3 on: February 19, 2012, 09:59:11 AM »
I think you're overcomplicating.  Let's try to simplify.

You say: "both homes should bring in about $360k, not including closing and other costs"

Okay, so let's say you'll net 330k.

Right now they bring in about 1250/mo after the 50% rule.  That's a 4.5% cash on cash return on your 330 invested, plus potential for appreciation.

Right now in the low housing environment, with it generating you an okay return, I wouldn't sell.

IMO, cash out refi or HELOC is the best way to go. With the current low interest rate environment, tap that equity to pay off some of the other deb.
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smedleyb

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Re: Liquidate assets to pay off debt??
« Reply #4 on: February 19, 2012, 07:33:39 PM »
regambale, time to sit down with your hubby and get serious about the finances.  Having no cash on hand is no way to go through life.  Sounds like you know the only path to cash is through the 'Stachian principle of extreme economization without deprivation.  Try different strategies to get there.  For example, don't tell the husband we need to get rid of cable; show him a life where it's no longer desired.  Cutting out clothes is a good start; if you cook, cut out the meat.  Let him know you can't afford it.  Refuse to dine out.  tell him to go alone if he must. 

Stick to your guns.  It might get ugly at times.  Stay resolute.  Communicate.  Your future -- your family's future -- depends on it.

Good luck!   

Joementum

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Re: Liquidate assets to pay off debt??
« Reply #5 on: February 19, 2012, 10:59:57 PM »
Your monthly gross from both rental incomes is $1775. Your monthly mortgage payment is $1,520. Your student loan I'm going to assume is $200, or so? The rentals alone cover all expenses (not factoring in taxes). I think it's time you sit down with your husband and really get him to realize the kind of position you guys are in. You guys are in a great position with both of those rentals, but are obviously spending too much money somewhere. If you don't have jobs, then not making ends meet makes sense. If you do have jobs, I'm trying to wrap my head around how you aren't making ends meet.
« Last Edit: February 19, 2012, 11:02:58 PM by Joementum »

arebelspy

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Re: Liquidate assets to pay off debt??
« Reply #6 on: February 20, 2012, 05:12:07 AM »
Your monthly gross from both rental incomes is $1775. Your monthly mortgage payment is $1,520. Your student loan I'm going to assume is $200, or so? The rentals alone cover all expenses (not factoring in taxes). I think it's time you sit down with your husband and really get him to realize the kind of position you guys are in. You guys are in a great position with both of those rentals, but are obviously spending too much money somewhere. If you don't have jobs, then not making ends meet makes sense. If you do have jobs, I'm trying to wrap my head around how you aren't making ends meet.

And if the above is in fact the case, then selling the rentals is a horrible idea.  It solves your immediate problem of debt / spending all your money (by trading current income generating assets for that relief), but with the anti-Mustachian habits of spending all you have, you'll just get into that hole again, and then have nothing to help take care of it.  Selling them moves you backwards from financial freedom.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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MEJG

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Re: Liquidate assets to pay off debt??
« Reply #7 on: February 20, 2012, 07:52:20 AM »
Hi Regambale,
   
I can only second what the other posters have said. If you have only just "made changes that brought us from spending more than we bring in, to about breaking even" you have a huge problem on your hands.  Spending more than you are taking in, or even just spending exactly what you bring in (living paycheck to paycheck) is dangerous for your family's future.  I know you know that, I can only assume that is why you've come to this particular forum to ask for help.

Your rental income should cover your mortgage and your student loans (after the 700 expenses) with the numbers you gave.  You need to be living within your means. If you just trade those assets (the rentals) for zero debt it will be very easy to find yourself in the hole overspending again, because that is where you are right now. changing your balance sheet around will not change the patterns you have in place.

I completely understand that you cannot make all of the financial decisions.  I have a husband too, and one that likes to spend money and easily feels deprived.  We don't always see eye to eye on the big picture.  It takes a lot of open and honest non-judgmental communication and constant reevaluation for us to make it work.  I wish you the best of luck moving forward with a partner that is not exactly on the same page as you.

I have one small child.  I know our lives changed so much when our miniMEJG was born (almost 2 years ago) and it changed our finances a lot too.  I understand the costs in money and time one child takes and I can extrapolate to three, though I know I don't truly understand nor will I till I get there.

I have a lot of sympathy for your position.  It's a tough spot - but none the less something MUST change if you want your family to be financially stable.

There are two main things to start with.  One simplify and cut costs on everything you have control of.  Second get your husband on board.

Cutting costs:
you've made a great start! keep it up.  If you do not need (food sheather safety are needs) do not buy it. Period.  Sell, or donate things that you do not use.  Clothing, accessories, children's toys etc. Simplify your life down.  Focus on doing more rather than spending more.  Read the articles on MMM, the simple dollar and brave new life for budget tips and tricks.

Also, track your spending.  Do this with excel, or a homemade budget, or Mint.  I just started using Mint and it is GREAT- it will even categorize your spending via your credit cards well.  Once you know exactly where every dollar is going you can see where to save.

Get your husband on board:
Here are some blog posts that helped us (plus a new one!!)
http://www.thesimpledollar.com/2007/01/31/31-days-to-fix-your-finances-a-wrapup/
http://www.bravenewlife.com/02/how-to-get-your-significant-to-embrace-a-brave-new-life/
http://www.mrmoneymustache.com/2011/04/25/having-the-talk-with-a-current-or-potential-mate/

You know your mate best.  I can get my hubby to try things for a set period of time.  So saying to him, let's not watch TV for a week or month and see how it feels, or let's not buy anything processed for a month, or lets try to see to eat through the pantry etc works for us.  A set period of trial time and then reevaluate. 

The other thing that was HUGE for us, in fact instrumental in even getting Mr. MEJG to try things for a week or month was understanding our goals.  What does our ideal life look like? how can we get there?  Our ideal life does not = 60 hour work weeks and someone else raising our child, so FI is something we are working on working towards.  The 31 days to fix your finances series REALLY helped my hubby a lot.

I think more frugality and a sustainable lifestyle are really what you need.  Not trading two assets giving you a very reasonable rate of return to supply your current unsustainable lifestyle. 

Best of Luck!!!

regambale

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Re: Liquidate assets to pay off debt??
« Reply #8 on: February 21, 2012, 10:05:26 AM »
Thank you everyone for your answers; this has helped me so much!! And I agree with everyone, that selling the rentals would only help short term.  We have been debt free more than once, but always find ourselves back in debt.  But I have only recently begun to take control of spending so that it won't happen to us again, and so we can get back on track...Thanks again for your help!!

Guitarist

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Re: Liquidate assets to pay off debt??
« Reply #9 on: February 21, 2012, 11:01:37 AM »
I wouldn't know what to do with myself if I had passive income paying for the roof over my head.
You should be saving at least 80% of your work income off that piece of information alone, whether you put it away or pay off debt.

regambale

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Re: Liquidate assets to pay off debt??
« Reply #10 on: February 21, 2012, 11:12:36 AM »
Also, to address Joementum's question of how is it that we are not making ends meet. Let me explain:

Regular, definite monthly expenses are as follows: mortgage, utilites, groceries, phone, interenet, tv, student loan, gas, kids savings ($25 for each) = $3470/month

Things that will come in the future to be accounted for: taxes, insurance, HOA dues, doctor/dentist visits, home repair/maintenence, gifts/birthdays/christmas/misc., clothes/shoes, vehicle maintenence=$1530/month MINIMUM. that's if nothing goes wrong with rentals/no vacancies, etc...
Total = $5000

My husband brings home $2600 per month from his job (some goes into 401k and to pay back 401k $ that we borrowed). I stay home with my kids (ages 5, 2, and 1). As you can see, with just the basics (no eating out, vacations, etc.) there is NOTHING left over to save or have if something unexpected comes up...every dollar is accounted for already.  That's why the rentals scare me because if tenants trash it, don't pay rent, or it stays vacant we will be in the hole and have to take out loan/ use credit card to cover expenses. Where being debt-free will avoid these unexpected costs/fluctuations in income.

regambale

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Re: Liquidate assets to pay off debt??
« Reply #11 on: February 21, 2012, 11:27:57 AM »
Hi Guitarist,

Thank you for your reply....I WISH we could save 80% of my husband's income.  Living on 20% would leave me with $520 plus the $1775 from the rentals = $2295/mo.   I'm really not trying to be a pessimist, but realistic.  Just trying to get help figuring this out...

Mortgage = $1520
Utilities = $300 (gas, water, electric, garbage)
Student Loan = $265
Groceries = ....there's only $210 left...that would get me through about a week and half for a family of 5.
Gas (vehicles) = ?
Phone = ?
internet = ?
misc. = ?


Physics

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Re: Liquidate assets to pay off debt??
« Reply #12 on: February 21, 2012, 11:36:42 AM »
I just saw your post in the other thread, which I'll quote here for reference:

Quote
OMG!! This is soooooo bad, but we have a TV in every room of the house. 5 total. All with cable.  We had a 50" flat screen in living room, but my husband thought it was too small, so now we have a 60" (the 50" is now in kids play room)...purchased before I started reading MMM  =(  And I HATE TV!! My kids want to watch Spongebob all day, and my husband falls alseep on the couch each night watching reruns of The Office.  IT SUX.  We were spending $150/mo. for Direct TV with NFL Sunday ticket. I just got it down to $65/mo. But my husband about crapped his pants when I told him we need to get rid of cable altogether...plus, it cost us almost $400 right now to break contract...we have no Netflix though; I just cancelled because the movies would come and sit around the house for months and not get watched. Now I just go to Redbox and rent one for $1 if we want one.  Living frugally is sooooo difficult when your spouse and you don't see eye to eye.

You are considering liquidating somewhat profitable rental units, when you are living on the edge of a net minus every month, and yet you are paying for cable, and your husband just bought a new 60" flatscreen as your 6th TV?  There is a big disconnect here.  I know you see it, you should take action.  I suppose that is why you are here, which I commend, but boy oh boy.... crazy town!

I'm a big NFL fan, and I watched tons of games every Sunday in full HD.  Total cost?  ZERO.  I have a $20 HD antenna from Amazon hooked up to my "older" LCD TV that I bought pre-MMM days.  Works perfectly and I get to watch any game I want, other than Monday night football, which if I deem it an interesting game, I can head to a sports bar or something.

TV is not a fixed cost, it is the ultimate in variable costs.
« Last Edit: February 21, 2012, 12:39:00 PM by Physics »

Guitarist

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Re: Liquidate assets to pay off debt??
« Reply #13 on: February 21, 2012, 11:55:31 AM »
Ok, so I think we've all agreed that your passive income is paying off your mortgage and student loan payments.

So we've got $2,600 to play with. I take home about $100 more then that and I am paying all my bills with it. Plus, at the current time, I am paying nearly $1,300/month to get rid of credit card debt (it's not nearly as I high as that number seems, just trying to beat a 12 month no interest period ending and wanting to be done with it all sooner then later). I also take care of rent from that pot of $895 (not Mustachian, I am hoping to find something cheaper when the lease is up) and the cell phone bill.
So you've got $2,600 every month assuming mortgage and student loans are taken care of with other income.

$2,300 after utilities (consider ways to save here, low flow shower heads, adjust water heater setting, turn down thermostat, keep lights off when not using them, etc.)

Groceries: To a certain extent, feeding a family of five should not be that much more then feeding any other "average" sized household. I don't know how much you spend here on average, but take a long hard look at your next receipt and consider what you're buying. A lot of sodas and snacks? Maybe start cutting them out. Let's say this number is roughly $400 with room to cut. $1,900

Gas: Tell your husband to invest in a bike. Until then, get him to look into hypermiling. Get rid of the SUVs for a decent sized car that can fit your kids in the back comfortably. $150/month in gas at this point? $1,750.

Phone: Buy a no contract phone. There is a MMM article about it as well as a few threads in the forum. I figure this will put you at $50 for the two of you. $1,700

Internet: What are you spending on it now? Maybe $30/month? $1,670.

TV: Get rid of cable.

Misc: I don't know what you mean by this but it sounds like stuff you could possibly live without. Sure the kids need to new shoes as they grow, but toys and video games? Maybe encourage them to play in the neighborhood, meet new friends, explore the world close to home.

So you've got $1,670 every month. I know there will be other expenses that come up. Dentist and hospital visits. Car maintenance (though you should talk your husband into DIY'ing some of it). Fixing up the rentals/them sitting vacant every now and then.

So it may not be the 80% I mentioned, but it is already over 50% without serious cutting yet (at least in my opinion). As you get rid of the car usage you should have a little more saved there. Reducing groceries and thinking of ways to lower utility costs adds a little more to be saved as well.

I think the point stands that we are all having a hard time understanding where your money is going.

regambale

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Re: Liquidate assets to pay off debt??
« Reply #14 on: February 21, 2012, 12:06:11 PM »
Yes. Thank you....can you talk to my husband!! LOL! The TV bought was the fifth one but still so uneccessary.  And purchased before I started getting a grip on the spending and reading MMM, otherwise, I would have said NO WAY!  As soon as we are closer to the end of our direct tv contract, cable will be a thing of the past for us too (already preparing myself for the fight this will cause).  As a stay at home mom, I completely stayed out of our finances (bad idea). Before a few weeks ago (when I finally asked myself "why do we not have any money or anything to show for it?") I couldn't tell you what our mortgage payment was, how much my husband made, what our credit card debt was, or anything else having to do with our money/finances.  I just let my smart, sweet, down-to-earth with perfect credit husband take care of everything...so, our bills were always paid, but that's it.  We've made lots of mistakes, but I am doing what I can to try to do better moving forward.

p.s I am a finance major/MBA. shame, shame.

Guitarist

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Re: Liquidate assets to pay off debt??
« Reply #15 on: February 21, 2012, 12:14:34 PM »
Well it looks like you are getting a handle on it, which is good, and explains why some of the details are missing. I think you will be fine as long as you work with your husband to get back into comfortable living by building a full stache.

5 TVs... I would sell at least 3 of them now. I understand the contract with DTV. The way I look at it, those payments will be a reminder of the past and how much you hate that wasteful spending. Once it's gone, you will have that much more money freed up. I have a CC I have been paying $1,100/month on since December. I am excited about the money I will have pouring in once it's paid off next month. It will be so much easier paying off the other two (less on the balance then the first one, and their 12 month period ends in August). Once those are done, I will open up an IRA. Once that's maxed, I will up my 401k contributions. Once that's at its max, I will open up a taxable account.

I think your husband will be open to an idea you create together. Just make sure both sides are willing to make concessions.

MEJG

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Re: Liquidate assets to pay off debt??
« Reply #16 on: February 21, 2012, 12:38:13 PM »
I am so happy to hear we didn't drive you off.  Good for you for getting involved.  The more knowledgeable you become about your family's current status the more effectively you can change things (and the better we can suggest changes)

 I would serious think about doing the 31 days to fix your finances in parallel.  It might help bring a reason for change into focus for your Hubby :-)

Your groceries might be a good place to really start.  Shop the perimeter buy fresh produce, diary and meats.  Don't go hungry and don't tempt yourself by going into the middle of the store. 

regambale

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Re: Liquidate assets to pay off debt??
« Reply #17 on: February 21, 2012, 12:43:20 PM »
Hmmm, thank you for the input:

Utilities: Have been freezing our a$$es off to keep heat bill down, but could try to do more here.

Groceries: Being that this includes all household products too (toilet paper, toothpaste, soap, etc.) I absolutely can't do it on $100/wk. Maybe try for $125?? I stopped buying snacks, soda, juice, etc. But lots of milk and produce.  Not allowed to eat out at all, so all meals are cooked at home.

Cars: We have a RAM and Pilot (i know, i know...) but both are paid off.  Had the convo. about downsizing...not gonna get hubby on board with that one.  Just hope these vehicles last us a long, long time. He works 7.5 miles from our home.  I try not to drive anywhere these days. But he works 7 days a week.  Did just switch insurance companies though so saving a little there (for homes too)

Phone: Verizon gets ya.  We pay $150 for cell service.  Again, we are in a contract situation here. But I will look more into this for sure.

Internet: $70/mo. with Charter.

Cable: I agree. What a waste all around.  Pay penalty now to have shut off or try to wait it out a little longer? Again, having a hard time having my husband agree on this one...seems to think survival is impossible without TV.

Misc.: Yes, had son's 1-yr birthday party last week, spent $ only on food for guests (family), requested no gifts (still got them)...but anyway, stuff like that. certain maintenence on the house/cars (a/c tune up, adding insulation, truck needs new tires...both vehicles need 90k mile service. Just stuff that comes up. Christmas though?? Tips, ideas?

I know. It boggles my mind as well.  We just bought our house this past Sept. But before that we lived in, what is now one of our rentals. So we had no car payments, no mortgage, no credit card debt, only the student loan. So we had my husband's paycheck ($2600/mo.) and one rental ($1200/mo.). BUT we are still in the mess we are in now.  Just a lesson learned...it is so easy to $5 and $10 yourself to death and not even realize it (I agree with Mrs. MM: stay away from Wal-Mart and Target) And buying a bigger house??? Why didn't I find MMM a few months earlier!!!!

regambale

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Re: Liquidate assets to pay off debt??
« Reply #18 on: February 21, 2012, 12:46:35 PM »
I am sorry...what's this?  31 days to fix your finances

If I could get my husband to see the big picture, the prize at the end of the tunnel..he might open up a little more. He always accuses me of being "cheap". He hates it.

MEJG

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Guitarist

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Re: Liquidate assets to pay off debt??
« Reply #20 on: February 21, 2012, 12:57:17 PM »
No need to freeze the house out. If it's as low as you can get comfortably (65-68 range is about where people reach the edge of comfort depending on the region you live in) don't hate living your life to save another buck or two. Be comfortable. But investing in low flow shower heads can help.

You are doing well with eating out and groceries. Prehaps look into buying items when they are onsale and adjusting your menu to fit those products.

7.5 miles... he can bike it. Maybe encourage him to do it once or twice a week. Maybe do it as a way to make him look fitter for you. In exchange, tell him you will have a bike or walk day with the kids (to the playground or to a store near by if possible). Sell one of the cars.

Yes, Verizon does get you. Weigh the early termination fee with how much you would save by switching plans.

Internet: Holy crap, that seems like a lot. Do you have the highest plan? Usually, those aren't necessary.

Cable: May as well wait. Like I mentioned, it is a reminder of the interest/bill paying life you are leaving behind for the interest/income earning life you are reaching.

Misc: Got to celebrate birthday's and I think you did a good job keeping expenses low. For Christmas: Encourage homemade gifts. Perhaps everyone gets everyone else one gift and then focus more on the family aspect then the gifts. Go for a walk around the neighborhood and enjoy the peace you'll have walking in a winter wonderland as everyone else is probably staying in their house all day. Cars will need work and taxes will need paid, but even giving you leeway with the rough numbers I drew up, all that is setting you back another $1,500/month EVERY month?

MMM

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Re: Liquidate assets to pay off debt??
« Reply #21 on: February 28, 2012, 10:49:18 PM »
Wow, I love this thread!

You hardcore readers are really throwing our new guest around in this Moshpit of Mustachianism, but it looks like she is a great sport about it.

The biggest problem I see by far is THE TRUCKS!!!

I mean Holy shit, how often do you have one family member pull an 8,000 pound trailer full of horses on an interstate journey, while the second person simultaneously carries SEVEN PASSENGERS UP OVER AN UNPAVED ROCKY MOUNTAIN PASS??

Because if that doesn't happen at least twice a week, those vehicles are RIDICULOUS choices!!!

The good news is, you can sell them both immediately, get a couple of 2002 Hyundais or Kias, and use the remaining cash to pay off debt.

This is an emergency, not an option for the husband to consider at his leisure ;-)



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Re: Liquidate assets to pay off debt??
« Reply #22 on: February 29, 2012, 06:53:18 AM »
The others have some amazing cost-cutting suggestions and I think they've pretty much covered it.

A suggestion re: the hubby. I think it would help if you two sat down and went over your financial goals. Where do you want to be in 5 years? 10 years? Do you want to help with your kids' college someday? How comfortably do you want to retire? What are you going to do in an emergency given you have zero savings?

Figure out the math for your goals. Then sit down, and look at your expenses. It helps to have everything written down on paper. It wasn't until I calculated everything out that I thought "I need x dollars to make my financial goals and right now with my current spending I don't even have half that". And that's when the whole mustachianism/frugality thing really clicked with me. Without the cold hard numbers staring me in the face, I could kind of pretend I was doing alright since all the bills were paid. Getting him on board might mean making him realize that your current spending on frivolous things is taking away from the things that are important down the road.

Set up a system to track your expenses monthly- I personally really like mint.com because it puts all your accounts in one place so you can't "hide" overspending by putting it on another account. Set budget goals and make serious changes to achieve those goals (shop sales, shop at bulk stores for groceries, drive less), then track to see where you are. Again, it helps to really connect those numbers to the goals you have. All the good intentions in the world won't help unless you have some sort of tracking and accountability system.

Also, random psychological tip: People feed off of the valence (positive/negative) with which you approach things, and react accordingly. So if you approach this as a terrible negative thing ("oh we have to cut expenses and it sucks and we're barely making ends meet") then other people- like hubby and the kids- will also react negatively. Find a way to put a positive spin on things. See it as a challenge, not a punishment. It's a chance to try on a new way of life.

This isn't deprivation- it's prioritizing. The way you spend your money (and your time) says something about your priorities in life. Is TV more important than having financial stability for your family? Is having a big ass car more important than having retirement money? Those're the kinds of choices you're making, and when you frame it that way, you realize that cutting back doesn't leave you deprived- it leaves you free to channel your money to the things that are more important.

MMM

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Re: Liquidate assets to pay off debt??
« Reply #23 on: February 29, 2012, 09:26:09 AM »
You are very wise, Happy Panda, and your explanation is very well done.

I must point out to new readers that I know my harsh rants against big trucks are not actually good psychology for people who are struggling with financial decisions - they're just good fun (and I have heard that they can sometimes provide a good shock to those who were previously fooling themselves by rationalizing awful decisions like Dodge Ram and Honda Pilot ownership).

So while I still don't mind starting the conversation with a punch in the face, I really appreciate having people like Panda waiting in the wings to swoop in and treat the wound attentively, then use positive psychology to help bring in new healthier life habits.

so, thanks!

regambale

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Re: Liquidate assets to pay off debt??
« Reply #24 on: March 08, 2012, 02:55:27 PM »
I just came back to this thread to read any new content, and was happy to see a response from MMM himself, as well as some other great responses.  MMM's response brings me to my next big question that I was going to start a new thread about, but will just ask here:"What to do when your spouse does not agree with you on how to manage finances?"  This has been my biggest obstacle.  My husband and I have sat down (nicely and in a positive manner) and gone over budget, and ways to save, and our future goals; however, we still can not agree on big issues and how to go about reaching these goals.  When I first starting reading the blog, I was instantly hooked, convinced, and on board one-hundred percent.  Of course, the first plan/idea I threw to my husband was selling the cars...to put it lightly, the idea did not go over well with him (Ok, he got downright angry!)  To be fair, my husband is a great guy.  He is smart, kind, and a great husband/father.  But he thinks my new frugal way of living is just plain crazy.  I could not even win the "no cable TV" argument, although I did get the bill down to $50 from $150.  I can do what I can do, but I can not change him.  Our finances are/have always been combined.  I am trying to take small steps with him to keep from rocking the boat too much, but I am really frustrated!  What to do when you are dealing with someone who just doesn't get it (and has no desire to, really)??

Anyway, back to the "two trucks" debate, his arguments:
- buying cheaper, older vehicles would require more maintenence and would have to be replaced much sooner, possibly costing more in the long run.
- our vehicles are paid for, what's the big deal
- i absolutely do not want to be without a truck. period.

Do I continue to press the issue since it is, as MMM put it, an emergency?  Even though it will cause some issues between my husband and I.  Or do I just let it go, and continue to save where I can; where I have some control (groceries, clothing, etc.)?

P.S. The profit from selling our two trucks after buying two cheaper vehicles could probably completely or almost completely pay off his student loan ($14k @6.8%).  Leaving our mortgage as our only debt (not including paying back borrowed 401k money).

Mr Mark

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Re: Liquidate assets to pay off debt??
« Reply #25 on: March 08, 2012, 04:04:34 PM »
R,

Another stranger's two-cents worth.

I agree with all the sage financial advice. Selling those rentals would be a backward step. You can obviously spend less. And all things considered, in potentially really great shape.


But to get there you need to engage with hubby on the end goal, your vision. Once he buys in to that 'end point', and the path(s) towards it, you can make progress. And start with the quick wins. Sell some useless stuff on Craigs list or EBay. Use a budget that all agree to. You can then stick to it, using cash only if necessary.

Fortunately you have a great asset base to start from.