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Discussion Starter · #1 ·
Hi!
I would like some input on what you think we should do.

We are paying $2400 for rent and our lease ends in July. We have 4 pets (2 dogs and 2 cats) which makes it very difficult for us to find a place to rent. Our landlord is willing to renew the lease and I am not sure if we should or if we should try to find a place. Moving isn't ideal (we have a 2 month old and a 2 year old) and I doubt anyone would want to rent to us with all of our pets.

Here is some background info on us. My husband's was making about $94k a year and it went up to about $110k. We are about $45k in debt. We have about $7200 in our emergency fund.

Should we use the money in our emergency fund minus $1000 to pay towards debt or should we leave it and use it towards moving? Here in mass you usually pay the first , security, and last month's rent ( I doubt we will find anything below $2k to rent). Thanks in advance!
 

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You won't know until you look around whether you'll find a place that's cheaper and will accept your pets. So don't assume that you can't find a place until you've tried. Is it worth it to you to knock a few hundred off the monthly rent?

As for the $7200 EF... how much do you add to that every month? How much credit card interest do you pay every month? What would $1-2000 do to your smallest debt?

Sorry, I don't really have clear answers for you, you need to look more closely at your finances and evaluate the changes you can make.
 

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Your rent costs $28,800/yr.

Your hubs makes $110, 000 gross - after IRS, State Tax, and SS/Med, there is about $87,000 left. You are currently spending over 33% of his $87k net income on house rent. That leaves only $57,000 for everything else - food, clothes, drink, utilities, cars, gasoline, phones, cable, kid's expenses, medicine, doctors, entertainment, travel, vacation. No wonder you have $45k of debt.

How about buying a small house, using a zero down contract. Is he a Veteran, VA loans are zero down. (A $300,000, 30 year loan costs about $1450/month.)
 
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Discussion Starter · #4 ·
I've been looking at places for a while now. We move a lot (hubs was in the USMC) and always run into this issue. On the plus side I guess we've always found places, but it's always cost us a pretty penny.

Right now we have about $3k in CC debt (will be paid off by next month)
11k in a personal loan (this is the scary one 13.9 %)
8k in student loans
17k Car loan (3.5%).

Paying off the personal loan is my top priority since it has the highest interest. I guess if we moved we'd have more money towards paying off our debt.
 
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Discussion Starter · #5 ·
Your rent costs $28,800/yr.

Your hubs makes $110, 000 gross - after IRS, State Tax, and SS/Med, there is about $87,000 left. You are currently spending over 33% of his $87k net income on house rent. That leaves only $57,000 for everything else - food, clothes, drink, utilities, cars, gasoline, phones, cable, kid's expenses, medicine, doctors, entertainment, travel, vacation. No wonder you have $45k of debt.

How about buying a small house, using a zero down contract. Is he a Veteran, VA loans are zero down. (A $300,000, 30 year loan costs about $1450/month.)
My hubs has three sources of income and only one is taxed so our net income is higher than that. We really aren't struggling at all (we usually have a large excess each month which is thrown towards our debt).

We accured most of our debt moving cross country. Our SUV died a month before we had to move and we were forced to buy a car. We definitely didn't need a 20k car but after putting so much money into our SUV for repairs and knowing a 3k mile drive was ahead for us we just didn't want to risk it with an older car. What we should have done was use our EF to pay down most of the car and take out a smaller loan.
We also used my CC to tide us over until my hubs got a job (again the EF could have been used but we really didn't know about Dave at the time).
Lastly that personal loan was a stupid loan I took out for my daughter's preschool....that was extremely silly on my part.

We are thinking of buying a home but I know Dave usually doesn't reccomend purchasing until you are completely debt free.
 

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What we should have done was use our EF to pay down most of the car and take out a smaller loan.
No, the car loan is your best loan, I would keep it for the full term, 3.5% is a good price to pay for the use of money.

As for the $7200 EF, you are using borrowed money (indirectly) to fund the EF. At 13.9%, you are paying $1000/year to borrow $7200. I would use $6200 of the EF to pay down part of the $11,000 loan.
 

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I really don't understand the advice about not buying a house till you're debt free. You have to live somewhere and chances are you have to pay to live there. You will never get anything back from the rent you're paying. If you buy a house, at least you're building some equity, little though it may be in the beginning. It seems to make even more sense to buy if you can get a VA loan without a down payment. Of course IMO it may not make sense to buy if you're expecting to move again before too long, so forget what I just said if you're not feeling like you'll be settled in the area where you are now.

Thank you both for your service.
 
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Discussion Starter · #8 ·
No, the car loan is your best loan, I would keep it for the full term, 3.5% is a good price to pay for the use of money.

As for the $7200 EF, you are using borrowed money (indirectly) to fund the EF. At 13.9%, you are paying $1000/year to borrow $7200. I would use $6200 of the EF to pay down part of the $11,000 loan.
That's what I was thinking of doing if we renewed the lease. The loan rate is just too high...I also don't know if its a good idea to renew the lease, as old guy said our rent is more than 25% of our income and I just can't think of what's the best financial decision. Rent isn't killing us but I don't want to keep paying that much since its not really benefiting us in the long run.
 
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Discussion Starter · #9 ·
I really don't understand the advice about not buying a house till you're debt free. You have to live somewhere and chances are you have to pay to live there. You will never get anything back from the rent you're paying. If you buy a house, at least you're building some equity, little though it may be in the beginning. It seems to make even more sense to buy if you can get a VA loan without a down payment. Of course IMO it may not make sense to buy if you're expecting to move again before too long, so forget what I just said if you're not feeling like you'll be settled in the area where you are now.

Thank you both for your service.
I was never in the military, my husband was. I think the logic behind waiting is that even though in the long run buying a house is better than renting, you can end up in more debt if you don't have the funds to cover issues that can come up with home ownership like repairs and so on. With Dave's plan after you pay off debt, you build your emergency fund which would prevent you from going back in debt should something needs fixing in your house.
 

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You may not have served in uniform, but I think most people understand our military families make sacrifices along with their spouses in uniform. 🙂

I still disagree about buying vs. renting, but that's a decision each family has to make for themselves.
 

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if you don't have the funds to cover issues that can come up with home ownership like repairs and so on.
Currently, you are covering the repairs/maintenance on your rented house PLUS a profit to your landlord. (I was a landlord for 35 years)

A problem with Dave's plan is that the price of houses might increase by $50,000 during the 4 or 5 years that you are paying off your $35,000 debt. Actually, when I was buying rental houses, house prices increased faster than I could save up for down payments.
 
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Discussion Starter · #13 ·
You may not have served in uniform, but I think most people understand our military families make sacrifices along with their spouses in uniform. 🙂

Very true...it was a very tough 6 years, but I wouldn't trade it for the world.

I still disagree about buying vs. renting, but that's a decision each family has to make for themselves.
We were talking to a realtor and I don't think we even have enough to cover closing costs. Plus the houses in the area are expensive...
 
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Discussion Starter · #14 ·
I agree about rent including possible repair costs but I don't have to fork up any kind of money up front if the dishwasher stops working, or if the A/C goes out vs owning a home I'd have to come up with everything upfront.

I agree about the housing price increasing....I just went to view a house yesterday that was not in the best shape, built in 1820, and it is $375k. The realtor was telling us that right now its a sellers market. There are several houses in my neighborhood right now for sale and most of them are going for $480k and up. I'd hate to have to lay even more in 5 years. I am going to look into buying and compare it to the short term costs of renting.
 

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Too bad you can't relocate to a less expensive area, but I know that's not always possible. And wages sometimes aren't as high in places with a lower COL either.

It's a sellers' market right now because mortgage rates are going up. People who might not have been quite ready to buy are buying now because it'll be more expensive if they wait. Higher demand = lower housing inventory = higher prices = spiraling prices. Rent will probably be going up too as property values increase and real estate taxes get higher. Those costs are passed on to the renters.
 
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