HELP!I'm pouring my heart out here, need advice!*Updated 6/12/07*

[dvcgirl]

I feel the same way -- there's an intangible feeling that comes with knowing that every square inch of your home is YOURS. In theory, I might be able to earn more if I were paying the mortgage at, perhaps, five percent while investing at 12%. The reality is that when the stock market takes a down turn, my retirement account and stocks lose money -- but no bricks ever fall off my house! Also, watching investments takes constant work; you can either pay someone to do it (which eats into your profits) or you can do it yourself (a subject which doesn't interest me much). But once the house is paid for, it's DONE. It's a forever investment that -- if you've chosen well -- will continue to both serve you in a physical way and increase in value.

We paid off our house about two years ago, and I just cannot tell you how liberating it feels. We never had a big mortgage in the first place, but knowing that this place is MINE is very, very nice.[/QUOTE

That's how we feel too Mrs. Pete. We just figured that we had a whole lot to invest at once...why not invest some and pay cash for a house. Ultimately, this was one of the best/luckiest decisions we ever made.

We're not afraid to take some risks with our investments. We're fairly aggressive in our portolio because we're in our late 30s, but we don't have "the stuff" to play the leverage game that many play, some quite successfully. I have a BIL who has leveraged their home to the hilt in order to buy investment properties. I wouldn't be able to sleep at night....and I like my sleep.

We've thought about getting into the real estate game, but again, it's not for us. That can be a very profitable game, but there's also some risk there...and that risk is increasing...and lately it's increasing rapidly. I like montioring our accounts, and filing the quarterly reports in the filing cabinet. And I love-love-love not having a mortgage payment or a car payment.

But we do look into other schools of though regarding finances. There's always something to learn...and that's why I enjoy the conversations on this baord....different perspectives help me to learn and think differently. Not that I'll change...lol! But I like to hear different points of views on financial matters.

 

[disneymom3]

Have you read this whole thread?! This is the first time I have spoken out against a post. I am sorry but you don't seem to get what I have been giong through/doing for the past three weeks. I did get it, and I am getting it under control. Sorry, just had to retaliate at this one.

Of course you did. That post was rude and uncalled for and obviously from someone who has not been reading along with you. You are learning a lot and allowing many of us to learn along with you. Keep working hard. you are going to get there.

 

[dvcgirl]

I would be one of those people. We have more than enough in savings to pay off our mortgage if we wanted to, but why would we want to? We would lose out on the growth of our investments over the years. Plus, a home is not a liquid investment. Yes, you can get money out if needed, but it takes some time and incurs some cost to do so. The market may have the occasional down year but over the long run we'll make far, far more money by keeping our assets invested in stocks than if we used the money to pay off our mortgage.

Now what I don't understand is all the people who have substantial savings and still carry credit card debt. There was a segment on one of the evening news shows about this a while back. People were trying to explain why they kept their money in the bank earning 3 or 4% interest while carrying a credit card balance at 18%. The reporter just couldn't seem to get these folks to understand how ridiculous that was.

Well, it depends Steve. We invest our "mortgage payment" on a monthly basis...reducing our market risk. We're buying high...and we're buying low...helping to even it all out. A lump sum invested at the wrong time (say...like spring of 2000) can be very tough to recover from.

Having said that, we also had a large amount to invest at the same time that we paid cash for that first house in NJ. We decided to split the difference...not take on a big mortgage and invest it all. Rather, pay for the house and invest the rest. Our decision was wise/lucky based on the date that we purchased our home. March 2000....our portfolio took quite a hit. But we owned our home. The portfolio has since recovered nicely, our home in NJ doubled...we moved to Orlando and bought a house for less than the profit we made on the NJ house...and invested the rest. So we're not the average American...and neither are you. We just have different approaches.

As for people carrying credit card debt with money in savings....yeah, I'm not clear on that either. They are the same people with the money in the mattress....

 

[crisi]

Totally untrue, you would have to pay tax on the 8,500 interest about $3000 using your % resulting in loss of cash flow of about $2000.

Doh, your right....you also need to pay closing costs on the mortgage (which is where I get hung up on the scheme.) There are riskier ways to keep the tax bite down - long term capital gains for instance is a mere 15%. But the point I'm trying to make is that you are not spending $1000 to save $360 on your taxes. In the "it doesn't pay to pay down your mortgage" scenarios, you are using the money you would have used to pay down your mortgage to get a better rate of return somewhere else - because a mortgage with a tax break is about the lowest interest you can get.

My own mortgage, that I'm paying off to get the cash flow benefit, is at 6%. My bond fund has been paying 10% for the past few years....silly to cash that in to pay down the mortgage. When the bond fund pays 3% (looks like it might this year), then I'll think about turning it into house.

 

[LauraR]

That Sallie Mae debt consolidation loan sounds like a great opportunity for you! If your lowest credit card rate is over 10% and you can get 6.99%, that's wonderful. I'd be all over this if it were me. I'd also include the two credit cards with the lowest balances. From what you've said, you probably wouldn't pay them off in less than 36 months, and the simplicity of writing one check a month that covers all of your former credit card debt is worth a lot in itself. Now that you have brought your dad in to help put the brakes on the credit card spending, I definitely don't think it will be as easy for you to run up more credit card debt. So, I say go for it!

 

[arminnie]

A lump sum invested at the wrong time (say...like spring of 2000) can be very tough to recover from.

Very true. Timing is everything. I sold my home in the San Francisco Bay area three weeks after 9/11. Housing prices didn't go down, but I definitely got to invest the proceeds in a very down stock market.

I'd also cashed out the stock in my 401K at the end of '99 just because I thought the market was so ridiculous.

My past housing experience in Texas though was always to buy high and sell low.

I just bought a home in New Orleans (days before Katrina). Financing worked out better for me than paying cash.

I have an MBA in finance from Stanford, and I seem to do better in the financial markets than the housing markets.

 

[MAGICX2]

ps-how's your DD doing?

DD is doing wonderful! Thank you for asking. She seems (maybe just my imagination) to be hearing things she didn't notice before. And she has started speaking more clearly since the surgery. Alot of worry, but well worth it. Thanks for all the prayer and pixie dust!

 

[Cindi0511]

Good for you for talking with your dad! I'm sure that took a while to work up to. Although I obviously don't know him, I can only imagine the look on his face if you ever ask for those cards. That idea was even way better than the bank vault! My dad was very frugal too, for the most part, and I can only imagine the conversation had it been with me and him. Enjoy and cherish the time you have with him -- I would give almost anything to be able to get my dad's opinions again. Family is priceless!

Question: you said some of the docs forgave or wrote off your bills to them. Were any of these on the credit cards so that you could get a refund to your card or were they all in addition to? And, I know that your debt came over a period of time, but is there anything at all that you could take back and get refunded onto your card for?

Hugs, and keep up the great work! We can't wait for the online party in three years when you are all caught up!

Cindi

 

[MAGICX2]

Well we did the Sallie Mae loan and here is what we got:
$25,000 7.99% fixed APR for 48 months= $652 per month
The loan administrator said in order to approve the loan she would need my cc account #'s and they would pay them off directly. Then it would be up to us to cancel the accounts. She must have been my guardian angel.
We paid off ALL cc accounts and two medical bills. Now the only payments we have are the mortgage=$1401 per month, car=$327.33 per month, sig loan=$230 per month (taken out directly from pay check $115 twice a month) and now this. I feel really good about this. I have set it up for automatic payment from checking account for $200 every week. So, we will be paying an extra $148 to principal every month. I finally feel like things are getting under control. After paying all the cc bills we had $616 left and it has been put away (and I mean out of sight, out of mind) for Christmas. This will be the budget for our entire family. We don't make our first payment on the consolidation loan until Dec. 20 so that gives us plenty of time to get a good emergency fund going. I feel so good!

 

[PlaneJoy1]

Is this an unsecured loan? I'm just curious. I would like to do something like this, especially since I have recently gotten our spending under control.... for good.

Congratulations! You've really stuck it out and hopefully made a difference in your money management. Keep it going and get things paid off. Imagine what it will be like when you have that extra $$ each month. Yeah!!!

 

[TNKBELL]

I'm sorry you are in such a sad situation. Have you ever thought of debt consolidation? My friend (years ago) decided to take this route and it really helped her to get her credit card debt paid off. If I can ask a question here(not trying to be harsh), why do you have two trips to Disney if you are so in debt? I know you said that you paid cash for one. Why not have put that cash on some of your credit card balance? Once again, I'm not judging you just trying to help you see from a different perspective. Another thing, I know you don't want to here this, but you really need to get rid of your credit cards! I would keep one for an emergency and cut the rest up! You said yourself that you have an addiction to shopping, so get rid of the temptation. Take baby steps. Try cutting back on your budget. Can you get rid of extra things: starbuck for coffee, steaks for dinner weekly, extra cable stations, etc. Just make the decision that you are going to get your financial state back in order and do it. Gosh, I hope this helps! I'll be sending some pixie dust your way!

I had just had to pop in to say HI to a fellow Wichitan!!!

 

[LauraR]

Hey, I'm really happy for you! Sounds like a huge weight is off your shoulders. It must feel really good to have much more money going to principal than interest now. I think you've made some smart money moves. Now just stay strong with the spending, and you'll be out of debt in no time!

Glad to hear your DD is doing well, also!

 

[minnie1928]

I'm guessing that you probably can't contain yourself right now! This is great news, just keep the momentum going. Build the emergency fund and then throw whatever you can on to the debt (you'll get plenty of opinions here as far as which to payoff first!). My opinion is that as long as your "extra" money is being used to paydown debt, that's good enough! Pick whichever one you want and get rid of it. One thing that works for me is to reconcile my checking account the night before I get paid. Whatever is left (after budget items and expenses) I write a check out to the company holding the note on my car for the balance in my account. Then I start all over for the next pay period. Sometimes the check is for $12, other times it's for $120. Either way I figure it's money I would have otherwise blown on something I didn't REALLY need anyway.

Congrats and Good Luck!!

 

[Cindi0511]

I'm guessing that you probably can't contain yourself right now! This is great news, just keep the momentum going. Build the emergency fund and then throw whatever you can on to the debt (you'll get plenty of opinions here as far as which to payoff first!). My opinion is that as long as your "extra" money is being used to paydown debt, that's good enough! Pick whichever one you want and get rid of it. One thing that works for me is to reconcile my checking account the night before I get paid. Whatever is left (after budget items and expenses) I write a check out to the company holding the note on my car for the balance in my account. Then I start all over for the next pay period. Sometimes the check is for $12, other times it's for $120. Either way I figure it's money I would have otherwise blown on something I didn't REALLY need anyway.

Congrats and Good Luck!!

Well said, Minnie1928!

 

[stemikger]

For those of you who are interested, Ric Edelman has an interesting theory on why you should not pay off or pay down your mortgage.
In his book "Ordinary People, Extraordinary Wealth" it is the number one secret and he makes a pretty convincing argument.

I personally have changed my mind on this about a hundread times, but I think I like David Bach's advice the best. He basically says make one extra payment a year and you don't have to neglect your other investments while you are doing this.

 

[disney junky]

Not having read all of the above threads, but skimming most, I found this an extremely interesting take on building wealth.
http://finance.yahoo.com/columnist/archives/headlines/millionaire/2005/1

 

[Deesknee]

been there done that. We now have one cc.
IMHO addiction is addiction. If you're shopping to "get away" from stress, depression. Perhaps conseling could help. Believe it or not, I'm sure there is a 12step somewhere. They have it for gambling, smoking, eating, alcohol, drugs, perhaps shopping.
I understand, it's easy to bury oneself in bills.
good luck

 

[disneysteve]

Not having read all of the above threads, but skimming most, I found this an extremely interesting take on building wealth.
http://finance.yahoo.com/columnist/archives/headlines/millionaire/2005/1

Just so you know, that David Bach article is an excerpt from his book, "The Automatic Millionaire." Definitely worth borrowing that one from the library.

 

[LuckyD]

Great articles!

I may have to buy that book.

 

[robsmom]

Well we did the Sallie Mae loan and here is what we got:
... After paying all the cc bills we had $616 left and it has been put away (and I mean out of sight, out of mind) for Christmas. This will be the budget for our entire family. We don't make our first payment on the consolidation loan until Dec. 20 so that gives us plenty of time to get a good emergency fund going. I feel so good!

I have been following this thread for weeks and applaud that you have moved quickly to make changes. The Sallie Mae loan should help you to get back on track. That said, I feel like i want to rain on your parade a bit. I don't question your desire to get debt free - I know you want it. I do question your full understanding of what you are doing. If i read this correctly, you just borrowed $616 for Christmas! In this one transaction you lowered your interest rates but you increased your debts even further by borrowing more than you paid off. The extra amount that you took out is enough to get you out of debt one month earlier. I know that it is only adding a month. But the disney trips are "only adding a month or two" and who knows what real need will come down the line that adds a month or two. You are looking at "only adding a month" 4/5/6 times in just a few months. If every year you only add another 6 months to your debt payoff schedule...it will take you twice as long to get out of debt as you think.