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, auto loan and Nevada property mortgage – about $ 165,000 in total.
I disagree. I think we should rent Arizona property to generate income and benefit from its future appreciation.
My husband is concerned that if we are unable to rent it, we will not be able to afford two mortgage payments and also our other debts.
Dear Lorna: Say you sell Arizona property and save your debts, and then we found out that you were right in saying that you could easily have rented the property and made money from its valuation.
Even if you have waived a return on investment, you are debt-free and own a home in Nevada.
But let’s say you don’t sell, and he was right: you can’t rent the house and you can’t pay the two mortgages plus the large amount of unsecured debt. In that case, you can lose everything. You have to see this as a real possibility.
My advice is to see this as an opportunity to show your husband a lot of respect for trusting your decision.
There is something about that for you too. This gives you the opportunity to meet your need to be taken care of and feel financially secure.
This looks like a win-win. However, before doing anything, be sure to check with a tax professional to find out which taxable event, if any, might trigger the sale of the property in Arizona.
Dear Mary: I’m a pilot for a major airline and I have a $ 70,000 credit card debt, plus a mortgage. I am not proud to say that we have no savings or emergency fund.
Soon, I will make an unexpected profit of about $ 40,000. Should I use this to pay off unsecured debt? – Stan
Stan: If you did that, you would still have a $ 30,000 unsecured debt plus a mortgage. It looks much better, for sure.
But what will happen next month, when you have an unexpected emergency, or next year, when you lose your job? You will feel that you have no choice but to run to credit cards for a ransom, and before you know it, you will be back with $ 70,000, or probably more.
My advice is to use this unexpected profit to finance your contingency fund, which is a pool of money equal to three months (six is better) maintenance expenses, known to many as an emergency fund.
Keep it in a savings account, where you can earn some interest. Now live as sparingly as possible and attack that $ 70,000 nut with as much enthusiasm as you can.
Put yourself on a strict diet. The mere fact of knowing that you are not on the verge of financial ruin will give you the courage to endure the short-term sacrifice.
All you need now is persistence and determination.
Mary invites for questions, comments and tips at EverydayCheapskate.com, “Ask Mary a Question,” or with Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740.