Dear Mary: We live in Nevada and we own a second home in Arizona. My husband wants to sell the Arizona property and then use the proceeds to pay off our credit debt, car loan, and home equity loan on the Nevada property, about $ 165,000 in total.
I do not agree. I think we should rent the Arizona property to generate income and benefit from its future appreciation.
My husband is concerned that if we can’t rent it, we won’t be able to handle two mortgage payments plus our other debts.
Dear Lorna: Let’s say you sell the Arizona property and pay off your debts, and then it turns out that you were right that you could have easily rented the property and gained a lot from its appreciation.
Even though he would have given up on the return on investment, he is debt free and a homeowner in Nevada.
But let’s say he doesn’t sell, and it turns out he was right: He can’t rent the house and he can’t keep up with both mortgages plus the large amount of unsecured debt. In that case, you could lose everything. You have to see that as a real possibility.
My advice is to view this as an opportunity to show your husband a lot of respect by trusting his decision.
There is also something for you in this. This gives you the opportunity to meet your need for care and feel financially secure.
This seems like a win-win. However, before you do anything, be sure to check with a tax professional to find out what taxable event, if any, could trigger the sale of your Arizona property.
Dear Mary, I am a pilot for a major airline with a credit card debt of $ 70,000 plus a mortgage. I am not proud to say that we do not have savings or emergency funds.
Soon, I will get a windfall of around $ 40,000. Should you use that to pay off unsecured debt? – Stan
Stan: If you did that, you would still have an unsecured debt of $ 30,000 plus a mortgage. Sounds a lot better, 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 have no choice but to rush to the credit cards for a ransom, and before you know it, you’ll be back at $ 70,000, or probably more.
My advice is to use that windfall to fund your contingency fund, which is a pool of money equal to three months’ living expenses (six is better), known to many as an emergency fund.
Keep it in a savings account, where it can earn a certain amount of interest. Now live as frugally as you can and attack that $ 70,000 madman with all the enthusiasm you can.
Get on a strict spending diet. Just knowing that you are not sitting on the brink of financial ruin will give you the courage to endure the short-term sacrifice.
All you need now is perseverance and determination.
Mary invites questions, comments and advice at EverydayCheapskate.com, “Ask Mary a Question”, or c / o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740.