Disaster Planning and Debt...

[snapping turtle]

A small trick we used a few decades ago, if your CC, auto loans, or other’s interest rates are higher than your mortgage interest rates, a Heloc to combine them and pay them off at a lower monthly total out of pocket cost. Then if that money was already in your budget, add that amount to your mortgage payment to pay down your mortgage principal. By law any extra you pay over minimum mortgage payment must be applied to the principal loan amount. This assumes you have the equity available to do this.

We refinanced the house at a much better interest rate right before Covid.we had like 300 dollars rolled out on a tire purchase on the credit cards but that was it. I think the house interest rate was 2.25 to 2.5 depending on which way you read the loan. So kinda free money

Was going to do house rework and such. Did a bathroom.installed all new flooring. Painted the whole inside. New lighting and outlets. Some flooring work around an old leaky bathroom. New furnace. Basement French drain because the water table has risen. Bought 2 the field behind the house.new stove refrigerator and dish washer in the kitchen. Check check check. I believe so far with the land purchase we have doubled the home valve.

Second bathroom was delayed due to in-laws having health issues which required more time and energy than the home remodel. We hit a brick wall because the better half decides what the finished items look like because everything I do is sterile and stark. Finish the main bathroom and kitchen remodel and we for sure have doubled the value of the house in two years.

Now we have 1/2 of the refinance in the bank minus a generator a second refrigerator and a coming soon refrigerator.
But the remodel is halted for the time being because of inflation and supply chain issues.

I will now be doing most of the labor myself to offset the material cost. Not what we planned but what has to be done. So it will be a slower remodel.

We figured that getting the money pre inflation and paying it off post inflation was ok. Just wish the family illness and deaths did not delay the material purchases. I work an average of 6 days a week some of those days are 12-16 hour shifts also. So taking on some of the larger projects I would need to take vacation days.

Now we are stockpiling the items when a good deal comes. Kitchen counters I think are next and I am just going to bite the bullet and have them measure and install. Not something I do enough to warrant the time and tools to DIY.

Wife has a car payment we throw an extra 100 a month at and the dealership tries to buy that RAV4 back monthly. I have 3 cars and that are paid for and run well (minus the old pickup which needs some love thrown to it) I also bought a Toyota FJ Cruiser as more my mid life crisis retirement vehicle that will be paid off in 2 years. So I have transport more than covered and will most likely be down to the daily driver the ranger pick and the FJ soon. (The FJ has eaten into the gun purchases and a few of those purchases might go to FJ payments in the future as who needs 14 marlin 39a’s)

So two car payments and a house loan. We shall soon crack back down and finish the remodel. Needs are kitchen counters bathroom remodel and a garage.

 

[firecadet613]

That's what I used and think the OP is using. I think the last couple years has pointed me in different big picture directions. That's the point I wanted to try and describe to the OP. From a grounded non-crisis basis and outlook, anything of real livlihood value to you and a family in the future, particularly this decade, would be best to own. No one knows how things will adjust moving forward and there's plenty of threads on that.

IMO It'd be very wise to allocate any debt to non viable items for one's livlihood. Examples would be toys like boats, extra cars, UTVs, even credit cards at a last resort. I'd rather own a home and some freezers full of your local butchers whole hog and beef, frozen fruits and vegetables, and big pantry of dry foods. The survival and disaster forum on the board is the real deal now.

Obviously no debt would be best but a monetary change and hopefully temporary fallout could happen quite quickly. It's not something I would have ever thought before. My approach was the question "what do I most need now for the next decade?" No one knows what will happen to your Roth IRAs or tax deferred accounts. Might be worth using "SOME" of those monies for the livlihood items discussed. Things like a generator you'd never would have thought of before.

While on vacation or just driving around, I see many "alternative" living arrangements. Homes and cars are budget killers! People are fixing up old and small, but nice quaint homes, living in "barndeminiums", and even travel trailers on a small plot of land. I'd want to do anything before dealing with the loss of a home. Great time to think outside the box. The HGTV big home and mortage is no longer the American dream we've been sold. Why? Because the fiat currency system is debt based instrument dependant on the stability of the Fed Gov and Central Banks (cartels) manipulating the currency. This isn't the first nor the last time they've screwed it up.

Yep...we modify it though.

We still use credit cards (paid in full every month). No envelope system but we track every penny with Every Dollar.

We didn't really pay off in order of highest interest payment but which would get to zero first and give us the momentum to that we can do this.

No car payment in 2+ years has been amazing. We eat out on occasion, but nothing like we used to and we don't miss it one bit.

We have been giving quite a bit and it's an amazing feeling....

 

[jake blue]

The trouble with this whole 'which to pay off first' debate is it doesn't consider the debt load of different debts. Credit cards have higher interest rates than mortgages but you're not going to pay off a mortgage in a month or two. If you can make an additional half payment per month on a mortgage it can shave an extra hundred or so dollars off the debt load and the earlier in the loan this occurs the greater the impact. The problem for most people is that's 15-30 years down the road whereas paying off a credit card balance now has an immediate sense of accomplishment even if it only saves a few bucks in interest charges.

Paying off revolving debt is also tricky because so many people don't know how to stop using it for their daily life expenses so then end up paying finance charges on top of their daily living costs. So if you can pay off an entire credit card balance in one month and avoid paying any finance charges then go ahead and use the credit card but if you ever can't pay it off at the end of the month then put it away, pay it off as soon as possible, and only keep it for real emergencies.

If you have good enough credit to obtain new credit, look for zero interest intro rates and transfer as much as you will be able to pay off before the intro rate runs out. Don't use the credit line for anything else and prioritize paying it off before the interest charges kick in. It's like a free parking spot for your debt while you work on paying it down so long as you actually pay it off. Also, avoid predatory lending like payday loans and anything with the term deferred interest. These are usually last resort lenders who know when people fall on hard times they'll grasp at any lifeline even if it's tied to an anvil that'll end up drowning them.

I'm also not opposed to using lower interest HELOC to consolidate and pay down mountains of higher interest debt but there's two important things to consider. First, if you're consolidating debt because it's unmanageable in it's native form then you have to also cut off that source of debt or you'll just keep spending and accruing even more debt, compounding the problem. Second, home equity is best used to improve the value of your home and you can't do that if all that equity is tied up in servicing your other debt. If you don't have a roadmap to no-debt- lifestyle then just milking your home equity isn't the one-step solution to all your debt problems.

 

[Leadeye]

I can't imagine how bad it would have to get or the difficulties involved for lending institutions to implement mass foreclosures or repossessions. Would those institutions still even exist and function.

 

[dudley0]

During good times it takes foreclosures maybe a year to get all settled. During mass foreclosures it could only take longer, in my opinion.

Owe nothing on my house but getting ready to build a detached garage. I pulled the money from elsewhere to cover it, but it will remove a lot of cash on hand.

I guess the only repo would be if the county wanted more in taxes than I could pay.

 

[Leadeye]

I don't see mass foreclosures or repossessions, at least not on a personal scale, maybe commercial property. County sheriffs are going to be way too busy to serve papers, and I don't think you could pay repo men enough after the first few groups are shot at.

 

[cburnworth]

Single income, wife & 2 kids(1 in college with grants & scholarships). House paid for, 3 cars paid for ( i do little repairs on the vehicles & the oil changes). No credit cards until a couple of years ago & i use the large limit to get client equipment & pay off monthly( I use the rewards to get my hunting gear). I have a lowes card that get's me 5% off on purchases( home repair & remodel stuff & paid off in a few days). My latest credit card gives me 3% on purchases(including gas) I pay off all cards within a few days to a week of using it. I have about 1k in cash on hand. We pay cash(get's us a discount) for all doctor & dental visits. I will need to look into insurance for catastrophic & long term care as I am in my 50's now. Time has flown by. I raise chickens and have just processed 50 lbs of chicken(8 birds). I have also started raising rabbits. Bulk hog & beef have been purchased also.
The problem of using credit cards is that one time you can't pay it off. Also some places are charging an additional fee to use credit cards.

 

[Ingomike]

I believe every family has a few of these in its group.
We were talking about those beautiful kids just yesterday. It makes us very sad that a parent can weaponize a child for their personal gain.

QFT!!!

 

[tim87tr]

I can't imagine how bad it would have to get or the difficulties involved for lending institutions to implement mass foreclosures or repossessions. Would those institutions still even exist and function.

I don't see mass foreclosures or repossessions, at least not on a personal scale, maybe commercial property. County sheriffs are going to be way too busy to serve papers, and I don't think you could pay repo men enough after the first few groups are shot at.

The case study for this would be the 08/09 meltdown. I can't say I understand how it all works but I do believe the monetary policies implemented at the time only delayed the inevitable point we are at now. During the last recession mentioned, there had to be a lot of people losing homes and banks that went out of business.

Since then so many banks have popped up everywhere due to the low prime rate and large amount of lending. The interest rates have been kept artifically low ever since 08 and with recent mortage rate increases plus inflationary impacts to families, it knocks many people out of the market. Looks like a huge bubble to me that will have a disastrous burst affecting home owners and banks, both of which claim the real estate market is on fire and homes are worth the inflated prices.

 

[dudley0]

I firmly believe that the 08 real estate bubble pop would have been avoided if people would have done their due diligence.

Doesn't matter if a banker says it's a good idea to buy a 100k house when you make seven bucks an hour. Use your brain. I had some of the best deals right before everything melted down. Banks would work with me on all kinds of odd arrangements. Best was when I bought five duplexes at one time. Ran them all separate to avoid a commercial loan. At closing I did an instant HELOC which helped cover the money down I would have needed. I had less money out of pocket than I would have on a normal single family home purchase.

Instead I added ten more doors to the fold. I knew the HELOC payment was interest only. I just dumped all the extra money into one, paid it off then moved to the second one. By the time I was almost done with the third one I gained enough cashflow it was a breeze to finish the rest.

Around the same time I had people tell me they either did a cash out refi or got a HELOC on their house so they could buy a motorcycle or a new home theater.

Use your brain and use it wisely.

 

[Mij]

It’s just my opinion but as I see it, most Americans are financially illiterate. The other side they are tied to keeping up with the Jones’s or appearances. You can educate yourself out of the first part. You’ll have to look a little deeper to fix the later. As I said it’s just my opinion and I don’t mean to disparage anyone.

 

[dudley0]

I agree that most Americans are stupid with money.

What I don't like is that I get penalized for other people's stupidity.

Never liked the Jones' enough to care.

 

[jake blue]

I remember saying to someone prior to the 2008-9 mortgage crisis that it was coming and was laughed at. "Home ownership is at a historic high!" They replied. Well yeah, but anyone with enough sense to know sub-prime mortgages with seven years interest-only then a massive balloon payment was a formula for a financial disaster could see it coming a mile away. And the response if we recall was federal interference, in the form of requiring lenders to modify the mortgages to more favorable terms, writing off millions and perhaps billions in debt, then when banks invariably started folding then bailing them out and setting more rigid standards for lending practices as well as debt-to-asset risk analysis. The federal government now routinely stress tests financial institutions and if they are shaky they must shore up their lending policies or divest themselves of toxic assets. So perhaps some good came from it but only until the next financial crisis when they'll find a reason to gut those measures in favor of more lending flexibility - or the government will just bypass financial institutions altogether and start sending citizens free money every month! Oh wait, we already tried that in 2020-21 when they banned evictions and suspended foreclosures for like 18 months. Sheesh, it's like the fiscal ignorance starts at the very top!

 

[spencer rifle]

Sheesh, it's like the fiscal ignorance starts at the very top!

If we followed our government's example, we would just borrow and borrow and never worry about repayment. There are people who function like that. Pay for your own stuff? You're a sucker when the bailout comes.
No health insurance? Taxpayers will pay.
Bank screwed up and went under? Taxpayers got you covered.
Took out a loan for that worthless degree? Squeeze the local taxpayer.

If you borrow $50,000, the bank has you by the throat. Borrow $5,000,000 and you have the bank by the throat.

 

[Mij]

Jake B, I’ll agree the ignorance starts at the top. But also feel that is not the root of the problem. The problem is the current system of our currency, ie: Fed. Res. system, that only gives the .gov to much leeway in creating money where there is no room for any more in the current financial climate. But of coarse there is plenty of incentive for those at the top to maintain the status quo.

The real solution is to abolish the FR and put us back on some kind of intrinsically backed currency system. Just my opinion of course.

 

[jake blue]

Jake B, I’ll agree the ignorance starts at the top. But also feel that is not the root of the problem. The problem is the current system of our currency, ie: Fed. Res. system, that only gives the .gov to much leeway in creating money where there is no room for any more in the current financial climate. But of coarse there is plenty of incentive for those at the top to maintain the status quo.

The real solution is to abolish the FR and put us back on some kind of intrinsically backed currency system. Just my opinion of course.

Agreed and the fiat monetary system is really the biggest looming threat of disaster in this country. Think a baby formula shortage sucks? Wait until it's all the food! China doesn't have to start a war, they can just stop shipping almost everything we use daily. I think it was then Chairman of the Joint Chiefs of Staff Michael Mullen who warned that federal debt was the greatest threat to national security facing the country but the warnings have apparently fallen on deaf ears.

 

[churchmouse]

I remember saying to someone prior to the 2008-9 mortgage crisis that it was coming and was laughed at. "Home ownership is at a historic high!" They replied. Well yeah, but anyone with enough sense to know sub-prime mortgages with seven years interest-only then a massive balloon payment was a formula for a financial disaster could see it coming a mile away. And the response if we recall was federal interference, in the form of requiring lenders to modify the mortgages to more favorable terms, writing off millions and perhaps billions in debt, then when banks invariably started folding then bailing them out and setting more rigid standards for lending practices as well as debt-to-asset risk analysis. The federal government now routinely stress tests financial institutions and if they are shaky they must shore up their lending policies or divest themselves of toxic assets. So perhaps some good came from it but only until the next financial crisis when they'll find a reason to gut those measures in favor of more lending flexibility - or the government will just bypass financial institutions altogether and start sending citizens free money every month! Oh wait, we already tried that in 2020-21 when they banned evictions and suspended foreclosures for like 18 months. Sheesh, it's like the fiscal ignorance starts at the very top!

Pandering. Shoring up the base. With our money.

 

[churchmouse]

Agreed and the fiat monetary system is really the biggest looming threat of disaster in this country. Think a baby formula shortage sucks? Wait until it's all the food! China doesn't have to start a war, they can just stop shipping almost everything we use daily. I think it was then Chairman of the Joint Chiefs of Staff Michael Mullen who warned that federal debt was the greatest threat to national security facing the country but the warnings have apparently fallen on deaf ears.

As scary as it is I sometimes believe they know exactly what they are doing and what the end results will be.

 

[Mij]

^^^^^^^^^^^

In the words of those that came before me……Nailed It!!!

 

[2in1evtime]

I myself think it wont be long before we see a massive home repo going on, the housing market has gone bananas this last couple of years, i am seeing 70.000 dollar homes selling for 180,000 plus and now the counties feel that they need to readjust everyones property taxes because of this, i don't think they should be able to raise your homes value til it sells to the next buyer, then go off that purchase price, but with all the taxation without true representation it is all a scam, and indiana is one of the most taxed states too.!!!!!! Its going to go bust mark my words!!!!!!!!