Dear Mary: We live in Nevada and have a second home in Arizona. My husband wanted to sell the Arizona property and then use the proceeds to pay off our credit debt, car loan and home equity loan on a Nevada property – a total of about $ 165,000.
I do not agree. I think we should lease Arizona property to generate income and profit from future appreciation.
My husband worries that if we can’t rent it out, we won’t be able to handle the two mortgage payments plus our other debt as well.
Dear Lorna: Let’s say you sell your Arizona property and pay off your debt, and then you are right that you can easily lease the property and commit a murder of its appreciation.
Even though you will lose your return on investment, you are debt free, and you own a home in Nevada.
But let’s say you don’t sell, and he turns out to be right: you can’t rent the house, and you can’t cover both mortgages plus a huge load of unsecured debt. In this case, you can lose everything. You have to see it as a real possibility.
My advice is to see this as an opportunity to show great respect for your husband by trusting his decisions.
There’s something for you too. This gives him the opportunity to meet your need for attention and to feel financially secure.
This looks like a win-win. Before you do anything, however, be sure to check with a tax professional to learn what, if any, taxable events may have been triggered by the sale of an Arizona property.
Dear Mary: I am a pilot for a major airline and have credit card debt of $ 70,000 plus a mortgage. I’m not proud to say we don’t have a savings or an emergency fund.
Soon, I’ll have a windfall of around $ 40,000. Should I use it to pay unsecured debt? – Stan
Stan: If you do, you still have $ 30,000 in unsecured debt plus a mortgage. Sounds a lot better, for sure.
But what happens next month, when you have an unexpected emergency, or next year, when you lose your job? You’ll feel like you’ve got no choice but to run to your credit card for a bailout, and before you know it, you’ll have $ 70,000 back, or maybe more.
My advice is to use that windfall to fund your emergency fund, which is a pool of money equivalent to three months of living expenses (six is better), known to many as an emergency fund.
Put it in a savings account, where he can earn some interest. Now live as short as you can, and hit those $ 70,000 nuts with all the zeal you can muster.
Put yourself on a strict spending diet. Just knowing that you are not sitting on the edge of financial ruin will give you the courage to endure the short-term tradeoffs.
What you need now is persistence and determination.
Mary invites questions, comments, and tips on EverydayCheapskate.com, “Ask Mary a Question,” or c / o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740.