Let’s be tacky and talk money, shall we? (Part two)

October 5, 2010

In case you missed it (or don’t want to scroll down), start with this post.

This time around we’re going to talk about debt.

I’m going to tell you about the debt that Mr. Windows and I are responsible for, our opinions on debt, and how we’ll handle debt in the future.

We are of the impression that not all debt is bad.  In our neck of the woods, being in debt because you are a homeowner is not only incredibly common, it’s the norm. 

We have so much debt we don’t even know what to do with it sometimes.

We owe about $74,000 on the Gilbert House.
We owe $54,000 on the New House.
We owe $6,000 on our Toyota Camry.
We owe $9,000 on our Nissan 350Z.
We owe $25,000 in student loan debt.

All of these numbers are approximate..and no, I’m not embarrassed to show them to you.  This is my reality, not yours.

If you do the math (please don’t), that’s quite a bit of dinero for a couple of youngins like us.

Every month that equates to about $2060 in payments.  This is about 41% of our income.  Btw, income=net after taxes and insurance is taken out of our paychecks.

When I was 20-years-old, I was hell-bent on buying a house.  I had this kick ass job and I was going to do the responsible thing and buy myself a house.  Today, that house is worth $10,000 LESS than it was when I bought it.  I’ve been fighting this reality.  The sad part is that I have an FHA loan and I cannot rent it out–in fact, the mortgage company is threatening foreclosure because I don’t live there–even though I make the payment every month, on time AND satisfied the FHA owner occupancy rules because I lived there for more than 1 year.

This, my friends, is a really good example of what NOT to do.  Do not buy a house because everyone around you thinks it’s a good idea.  I had ZERO dollars for a down payment (and couldn’t fathom why I’d need such a thing), I had no idea what real estate purchasing entailed, and what’s even worse is I never really liked that house in the first place.  It met my requirements–3 bedrooms, 2 bathrooms, and affordable on my income.  So I bought it.

Mr. Windows always wanted to own a house and we intended to get rid of mine, but didn’t want to be homeless (ha, how crazy we were to even think about that), so when we found the new house, we bought it. 

Now, more than two years later we still have both houses.  We have my mortgage on the Gilbert house, our mortgage on the new house, and a second mortgage we took out to remodel the new house.

Now the cars.  I came to our marriage with a 2006 Dodge Ram truck.  His name is Roger (uh, yes, I name everything..snicker all you want; my friends and family find it endearing).  Today, Roger is 100% paid for.  Why?  Cause he got beat to hell by a hail storm in 2009.  This was a HUGE win for us.  It eliminated the $225 a month car payment, I bought the truck back from the insurance company, and now we have a bona fide work truck with 26,000 miles on it.  Who cares that it looks like a golf ball?!

So, months later we decided that we should look into getting a 4-door family car in the event that we decided to have a family.  Oh, and we couldn’t travel with Andre and his big self (Ralphie comfortably fits on a lap in the car..he’s 12 pounds).  So, I negotiated us a hell of a deal on a 2003 Toyota Camry.  It’s the car we drive every day.  Btw, this car does not have a name because I refuse to call it “Yoda” and Mr. Windows refuses to call it anything but, so I pretend it doesn’t have a name.

The Nissan was Mr. Windows’ biggest happy mistake.  Nelly (the 350Z), was one of those incredibly rare (thank goodness) impulse buys on Mr. Windows’ part.  Nelly was in the picture just a few days before I was.  Too bad he couldn’t have waited just a couple of days–I would’ve gone with him to negotiate the price of the car.  We both have a lot of love for this car, though, so it’s not a regret.  It’s a learned lesson–one we won’t make again.

Here’s how we’re trying to remedy this: We’re refinancing the new house.  We have so. much. equity. in that house that our financial advisors recommended that we refinance to obtain some of that equity to eliminate some of our bad debt.

Bad debt is our car loans.  The interest on those loans is not tax-deductible, so eliminating them is top priority. 

By refinancing our house, we’ll save $200 a month on our mortgage payments and $400 a month on the Nissan payment because it will be the first to be paid off.  This will allow us to do a few other things (namely, pay off the Toyota and a few other things).

The student loan will remain there, haunting me, until it becomes a priority.  Right now it’s just not a big deal because we have such a mess in other areas of our financial lives.

The Gilbert House is on the market–hopefully someone buys it.  It’s looking like we’ll probably have to drop the price.  I’m also planning on looking into refinancing it, but that would easily cost a few thousand dollars and I’m not sure I’m willing to spend even more on that house.  Decisions, decisions.

Now for our opinions on debt….

I feel like we definitely are novices when it comes to debt.  We’re more experienced than a lot of people we know, but we’re not exactly proud of that.  We’ve done a lot of things the hard way, but luckily we’re on top of it enough that it hasn’t negatively impacted us (and by that I mean we’re not facing bankruptcy..although it’d be nice to be able to go on a vacation sooner!).

When I met Mr. Windows I had some serious credit card debt.  I’d been paying for school with my credit cards–NOT a good idea.  So, we worked diligently to pay that debt off and Mr. Windows taught me how to use my credit card.  We pay them off every month.  We use them for EVERYTHING.  I even get a little peeved if we can’t use them.  This is how I know how much we spend on groceries, fun stuff, etc.

If we could go back and redo the last 4 or so years, I’m pretty sure we’d have 1 house and 3 paid-for-in-cash cars.  We wouldn’t have made those mistakes.  We also wouldn’t know better if we hadn’t made them to begin with.

We do not think that all debt is bad.  Owning a home and having student loan debt AT LEAST allows you to collect some tax benefits.  However, debt is not for everyone.  My brother, for example, has a hard time paying his monthly utility bills much less a car payment or a mortgage payment.  It’s just not for everyone.  I am of the impression that you do what is best for you…and if it’s not best for you, at least you figured that out!

What our future looks like…

I’m pretty positive that we’ll have a mortgage well into our old age.  That’s something that neither of us has a problem with.  If we can help it, we’ll never have another loan for any other thing–not a car, not a piece of furniture, nothing. 

We are a little different in our financial planning as we’ve met with a financial advisor and have a permanent life insurance policy  that we’ll be making monthly contributions to for the rest of our natural lives, but this policy allows us to do a lot of other things (another story for another day) including not having to take out any other loans if we don’t want to.

So that’s what we owe in dollar amounts and what we’re doing about it.  It’s a work in progress-like most things.

Next up: Our “budget”.

If you’re looking for a financial advisor, or just curious to know how it works, contact Ryan by clicking here.

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