Should we take out HELOC for emergency expenses?

[Anonymous]

We're currently in a financial predicament and would appreciate feedback. We built a new house a couple years ago. It was a bit of a stretch financially but we were willing to make sacrifices to live here (our PITI is 35% of our income). We were one of the first buyers in our community so got quite a good deal (the house has since been appraised at $100k more than what we paid). During the past year DH's overall pay has decreased. So while we have a good amount of equity in the home we do not have a lot of cash flow at the moment. Once we pay our large property tax bill at the end of the year, our savings will almost all be wiped out. We're working very hard to build up our savings again but wondering what the best thing thing is to do in the meantime. Should we get a HELOC to serve only in case of emergencies? In a couple years both our cars will be paid off which will really help with the cash flow issue. We've already made some changes- moved the kids from private to public school as well as reduced 529s for awhile. Any other suggestions? Moving is a very last resort.

[Anonymous]

I would

[Anonymous]

I would too assuming the you can get one for not much $

[Anonymous]

Not a bad idea if you can control yourself in terms of spending... Personally, I would not. Sounds like you have good measures in place. If I were you, I would try to fight thru. But I understand most may recommend you do.

[Anonymous]

How much are your cars worth, what do you owe, and what's your income? I would seriously consider downgrading at least one car to get rid of that payment.

Mathematically, it's not a bad idea to take out the HELOC. Realistically, I worry about it, because you're putting your most important asset at risk if your finances get tighter.

Do you have Roth IRAs you could pull the contributions from?

Any side gigs either of you could pick up to make some extra money and build a buffer? Something in your industry, or if that's not possible - cleaning some houses, watching neighborhood kids for date nights or on weekend days, pet sitting, small landscaping jobs, meal prep, selling something on etsy? Think about skills you have.

Any stuff you have at home you could sell? I've been amazed when I go through my stuff and sell things I'm not using anymore - made 1200 at a garage sale once. Craigslist or FB are good options too. Any unused small appliances in the kitchen, etc?

I'm not against helocs, but I really think you're setting yourself up for more financial heartache unless you make a little more breathing room. The school change is a good one. What else could you do? Double check your cell phone plans, most major providers have gone down in the last several months, no contracts. $50 a month helps. Cable? Kids lessons? Home cleaning or lawn service? What's your grocery spending like? That's our biggest expense after housing.

[Anonymous]

I would do it. But the risk is that you use it for things other than an emergency which makes your situation worse. Another suggestion is to escrow your property taxes so that you are forced to save it.

[Anonymous]

Isn't your tax payment included in your PITI? You usually don't pay it yourself.

In any event, yes, I'd apply for a HELOC if you can get one.

[Anonymous]

I wouldn't, if you have trouble paying you'll lose your house.

Rein in your spending and put away a little each month.

[Anonymous]

Do you have a monthly budget, written down (either in Excel, on a white pad, etc) before the month begins? And then how do you track if you stick to it?

Actually budgeting and then tracking that you stick to it - either through Excel or a program like Mint or YNAB - is a really fast way to reign in expenses before you do anything more significant.

[Anonymous]

Anonymous wrote:Isn't your tax payment included in your PITI? You usually don't pay it yourself.

In any event, yes, I'd apply for a HELOC if you can get one.

I second the question about the taxes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Isn't your tax payment included in your PITI? You usually don't pay it yourself.

In any event, yes, I'd apply for a HELOC if you can get one.

I second the question about the taxes.

OP here. Instead of escrowing the tax payment, we pay it all at the end of the year. I know PITI refers to monthly expense so perhaps I conveyed it wrong. Was just trying to make the point that if you were to look at our overall situation, our PITI is 35% of income. We are stretched but it's not an outrageous percentage.

[Anonymous]

Anonymous wrote:How much are your cars worth, what do you owe, and what's your income? I would seriously consider downgrading at least one car to get rid of that payment.

Mathematically, it's not a bad idea to take out the HELOC. Realistically, I worry about it, because you're putting your most important asset at risk if your finances get tighter.

Do you have Roth IRAs you could pull the contributions from?

Any side gigs either of you could pick up to make some extra money and build a buffer? Something in your industry, or if that's not possible - cleaning some houses, watching neighborhood kids for date nights or on weekend days, pet sitting, small landscaping jobs, meal prep, selling something on etsy? Think about skills you have.

Any stuff you have at home you could sell? I've been amazed when I go through my stuff and sell things I'm not using anymore - made 1200 at a garage sale once. Craigslist or FB are good options too. Any unused small appliances in the kitchen, etc?

I'm not against helocs, but I really think you're setting yourself up for more financial heartache unless you make a little more breathing room. The school change is a good one. What else could you do? Double check your cell phone plans, most major providers have gone down in the last several months, no contracts. $50 a month helps. Cable? Kids lessons? Home cleaning or lawn service? What's your grocery spending like? That's our biggest expense after housing.

Very good suggestions. In addition to putting our kids in public school & reducing 529s, we've lowered our credit card interest rate by calling and asking for a better rate, we've lowered energy rate the same way, we had an insurance agent find a much better rate on our home insurance, we met with a financial planner, started shopping more at cheaper grocery stores (this is our biggest expense other than housing too), and are selling stuff on online garage sales.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How much are your cars worth, what do you owe, and what's your income? I would seriously consider downgrading at least one car to get rid of that payment.

Mathematically, it's not a bad idea to take out the HELOC. Realistically, I worry about it, because you're putting your most important asset at risk if your finances get tighter.

Do you have Roth IRAs you could pull the contributions from?

Any side gigs either of you could pick up to make some extra money and build a buffer? Something in your industry, or if that's not possible - cleaning some houses, watching neighborhood kids for date nights or on weekend days, pet sitting, small landscaping jobs, meal prep, selling something on etsy? Think about skills you have.

Any stuff you have at home you could sell? I've been amazed when I go through my stuff and sell things I'm not using anymore - made 1200 at a garage sale once. Craigslist or FB are good options too. Any unused small appliances in the kitchen, etc?

I'm not against helocs, but I really think you're setting yourself up for more financial heartache unless you make a little more breathing room. The school change is a good one. What else could you do? Double check your cell phone plans, most major providers have gone down in the last several months, no contracts. $50 a month helps. Cable? Kids lessons? Home cleaning or lawn service? What's your grocery spending like? That's our biggest expense after housing.

Very good suggestions. In addition to putting our kids in public school & reducing 529s, we've lowered our credit card interest rate by calling and asking for a better rate, we've lowered energy rate the same way, we had an insurance agent find a much better rate on our home insurance, we met with a financial planner, started shopping more at cheaper grocery stores (this is our biggest expense other than housing too), and are selling stuff on online garage sales.

How much CC debt do you have and what's the interest rate?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Isn't your tax payment included in your PITI? You usually don't pay it yourself.

In any event, yes, I'd apply for a HELOC if you can get one.

I second the question about the taxes.

OP here. Instead of escrowing the tax payment, we pay it all at the end of the year. I know PITI refers to monthly expense so perhaps I conveyed it wrong. Was just trying to make the point that if you were to look at our overall situation, our PITI is 35% of income. We are stretched but it's not an outrageous percentage.

But PITI is not 35 percent of your income. PII is 35 percent, plus whatever your taxes are. PITI is probably closer to 40 percent of gross, isn't it?

You are living beyond your means.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How much are your cars worth, what do you owe, and what's your income? I would seriously consider downgrading at least one car to get rid of that payment.

Mathematically, it's not a bad idea to take out the HELOC. Realistically, I worry about it, because you're putting your most important asset at risk if your finances get tighter.

Do you have Roth IRAs you could pull the contributions from?

Any side gigs either of you could pick up to make some extra money and build a buffer? Something in your industry, or if that's not possible - cleaning some houses, watching neighborhood kids for date nights or on weekend days, pet sitting, small landscaping jobs, meal prep, selling something on etsy? Think about skills you have.

Any stuff you have at home you could sell? I've been amazed when I go through my stuff and sell things I'm not using anymore - made 1200 at a garage sale once. Craigslist or FB are good options too. Any unused small appliances in the kitchen, etc?

I'm not against helocs, but I really think you're setting yourself up for more financial heartache unless you make a little more breathing room. The school change is a good one. What else could you do? Double check your cell phone plans, most major providers have gone down in the last several months, no contracts. $50 a month helps. Cable? Kids lessons? Home cleaning or lawn service? What's your grocery spending like? That's our biggest expense after housing.

Very good suggestions. In addition to putting our kids in public school & reducing 529s, we've lowered our credit card interest rate by calling and asking for a better rate, we've lowered energy rate the same way, we had an insurance agent find a much better rate on our home insurance, we met with a financial planner, started shopping more at cheaper grocery stores (this is our biggest expense other than housing too), and are selling stuff on online garage sales.

How much CC debt do you have and what's the interest rate?

$11,000 at 0% until Spring 2018