Okay so pay off family debt then onto the mortgage? Our mortgage is 5.66% so as this is less than the expected 7% long term from shares, is this still reccomended? I do like the idea of having the house paid off and that is a safe bet but i already feel like we have lost time in the market if we want long term results
At this point I'd want more liquid cash available. What happens if you lose your job, or are in an accident and can't work, or are hit by a bus and don't yet have life insurance? Or even need a car repair that you can't swap for? When you are fighting so hard just to get your spending below your income, you want to have some extra cash in your account to cover the months when you lose discipline, or some unanticipated emergency hits.
Personally, I'd want the family loans paid back. At the same time, your family likely won't foreclose on your house and kick you to the street, or repossess your vehicle. Businesses who lend money, OTOH, will do so without batting an eye.
Generally speaking, it may be helpful to look at things from the perspective of "what is most likely to fuck up our lives?" To me, that seems like:
1. Get the insurance you need, because you really do not have the assets to cover what you'd lose.
2. Keep some cash on-hand so you're not worried about bouncing checks or a major bill of some sort. This is particularly true where your budget is based on assumptions that haven't been proven yet (P2 can bring in more $$! We can cut groceries! Etc.). Honestly, I wouldn't put a single penny toward debt
or investments until you have several months of experience demonstrating that you guys are actually achieving what you hope to on the budget.
3. I can't advise on debt vs. investments, because I don't know your system at all. But if you want to prioritize debt, start with the highest-interest one. If it is just down to mortgage or family, focus on the mortgage unless/until your family signals they'd very much like to get some of their money back, thank you very much.
There was one other thing that struck me from the original post. I know you are very concerned (legitimately!) about P2's difficulties engaging in money talks and seemingly unrealistic expectations about how much you can afford. But I'd also challenge you to look at your own expectations as well. From the OP, you want to retire in 10-15 years, you want to leave generational wealth for your kids, and yet you're seriously struggling to balance the budget (and even talking to P2 about balancing the budget). Even without P2, though, those first two things are completely inconsistent with each other. You make around $100K/yr. Even if you could invest every single penny of that for the next decade, that gets you maybe $1M and a paid-off house. That's nothing to sneeze at -- but it's also nowhere close to covering even your revised budget for the rest of your lives, much less create generational wealth for your kids.
My guess -- and I could be totally wrong about this -- is that you guys have really focused on all the opportunities for P2 to make a shit-ton of money through his business. So you've taken on a bunch of debt to start the business on the assumption that you'd make so much from the business that repayment would be a breeze; you haven't really worried much about the budget at all; you've bought a house (which is $$$ any way you look at it); and P2 has taken up some pretty expensive hobbies (again, presumably, on the belief that the business would provide enough income to support them). But
you don't actually have that business yet. Your brain and behavior have leaped ahead to "we're wealthy businesspeople," but you haven't yet put in the work to get there. And meanwhile, you've also added a couple of kids -- along with a desire to both have some daycare
and homeschool, by the same person who is supposed to be investing time into that business -- which makes it even more difficult to put in the time and effort to turn that business into the great moneymaker you two have based all of your plans and expectations around.
IMO, until your business is covering its debt and turning a profit, you don't have a business. You have a hobby. So you need to treat it as such unless and until you can do the things you need to do to turn it into a business. What are those things? Well, first, you develop a business plan. You track expenses and profits and keep updated P&L figures.
You throw all your available time and energy into that business to get up to critical mass. You spend extra time on networking and advertising to get word out there about your business. You reinvest profits back into the business so it can grow into something bigger and better. You hire the necessary people with the necessary skills to manage things like taxes and benefits and registrations and licensing and all that legal/compliance stuff. Basically, if you want to build a business from scratch, it's not like having another baby -- it's like having triplets.
Unfortunately, you guys have gotten yourselves into a situation where you can't do all of that right now. You have two young kids, and you are unwilling to send them to daycare. That means P2 -- whose time seems to be the lynchpin to this whole thing -- cannot dedicate the time the business needs. Meanwhile, you are working a regular job because someone has to pay the bills -- but that means you can't provide as much support on either the business or the kid front. And when P2 does have free time, he seems more interested in spending it on hobbies than on his part of the business -- and he's resistant about even discussing stuff like that, to the point that are intimidated even to raise the subject.*
The reason I'm mentioning all of this isn't to make you feel bad. It's to make sure you understand that
what you have now is your life for the foreseeable future. You are not in a holding pattern for a couple of years until the business takes off. You are a single-income family, making around $100K, with a stay-at-home dad taking care of the kids, and once in a while maybe bringing in a little money on the side from his hobby business. So you need to recalibrate your plans and expectations to that reality.
IOW, your current lifestyle is based on assumptions of what you could afford with this massively successful business. But those assumptions are not valid now, and will not be for years, if ever. So you need to recalibrate that lifestyle to what people making $100K/yr can afford -- it's not about trimming a bit here and there around the edges, it is about fundamentally resetting your expectations about the kind of lifestyle you can afford on that income. And unfortunately, that's not a $500K house at 5.66%,
and three cars,
and lots of expensive hobbies,
and a SAH spouse. No matter how much you make, life is always an "or," not an "and" -- but that is particularly true the less you bring in.
*On this front, would it help to tie some of his desired "extras" to the business income? E.g., you need him to bring in $250/week now. If he brings in say $350/week, then $75 of that goes to household needs/debts/savings, and $25 of that goes toward a round of golf, or some online shopping, etc. Would that work given his personality? FWIW, if it would work, I'd suggest looking at it maybe on a monthly basis -- you needed $1000 last month, he brought in $1400, so now he gets $100 extra this month for golf of whatever. (This is what I did when I was working hourly, with unpredictable hours -- I set the budget based on the expected minimum hours, and then things like going out to dinner got budgeted out of whatever extra I got from working more than that)
