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Coming into some money and NEED advise!

Posted by on Feb. 24, 2012 at 11:32 AM
  • 11 Replies

DH bought a business about a year ago. He is now in a position to sell it and make about $60k in equity. We also have about $20k coming back to us for taxes (the entire year was a wright off). Not only that we have about $20k in his business savings account that he was going to use as a conversion fund (he owns a partial franchise that requried him to save money to convert to a full franchise within two years). That money is ours because we will sell before we convert.

So... here is the deal. We aquired about $20k in credit card debt in the process of him quiting his old job and starting up the business. He has a new job offer that will double what he is paying himself now. We also have another $10 in credit card debt that we aquired before buying the business. We completely depleated our savings in buying the business (about $10k) and have not yet built that back up.

We have about $60k in student loans between the two of us.

We have two car payments with a pay off of about $40k.

We do not own our home but are under a lease/purchase agreement to buy the house after a two year period. We have been in our home for 6 months. We would like to buy it sooner while the market is still bad and interest rates are still low.

Our plan with the money is this...

1)pay off ALL credit cards (about $30k total)

2)pay off the smallest car loan (about $16k)

3)put some money into savings

4)make a down payment on the house once DH has been in his job for at least 6 months.

I am just confused as to how much we should put in savings, or if we should even pay off ALL of our credit cards. I also don't know if its a smart idea to pay off the car loan, and I wonder if we SHOULD pay off one of our student loans!

I just don't know how to go about deciding how to allocate these funds. I KNOW we want to put money into savings. I also know we will NEED at least 5% down on our house (about $10k)... we won't put down any more than the min. down payment because we know with DH's income (and even if he lost his job and had to work at mcdonalds) we can afford the payment after we get all of our credit cards paid off.

Please help me financial mommas. This is a wonderful opportunity for my family and I DON'T want to screw it up!

by on Feb. 24, 2012 at 11:32 AM
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Replies (1-10):
suziejax
by Suzie on Feb. 24, 2012 at 11:39 AM

I say pay off as much as you possiably can in debt and first make sure you have at least for now  1000.00 set aside for emergencys Plus your plan looks good also!

Congrads

I_Do_It_All
by on Feb. 24, 2012 at 11:44 AM


Quoting suziejax:

I say pay off as much as you possiably can in debt and first make sure you have at least for now  1000.00 set aside for emergencys Plus your plan looks good also!

Congrads

Thank you. this is really overwhelming and it would be easy to make mistakes in this situation.

QueenPebz
by Member on Feb. 24, 2012 at 11:45 AM
calculate what item you will be paying the most for overall, what has the highest interest? if you pay the credit cards off will you just use them into debt again? on the flip side to all that, if you pay off the house early you could get a loan from it and pay off the rest of the items. it would be difficult to say without running all the final numbers.
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mommyprice09
by Ashley on Feb. 24, 2012 at 11:51 AM

i agree

Quoting suziejax:

I say pay off as much as you possiably can in debt and first make sure you have at least for now  1000.00 set aside for emergencys Plus your plan looks good also!

Congrads


http://raysofsunshineanp.blogspot.com/
MamaBear2cubs
by Nikki on Feb. 24, 2012 at 12:56 PM

I agree.

Quoting suziejax:

I say pay off as much as you possiably can in debt and first make sure you have at least for now  1000.00 set aside for emergencys Plus your plan looks good also!

Congrads



QuiltLover
by Jocelynn on Feb. 24, 2012 at 2:12 PM

No debt means freedom all the way around...eliminate all you can ....you most likely, at some point, will need to use the emergency fund...like Dave says..."it's not If I will have an emergency, it's When"..and he is right...so happy for you and the windfall...it could be life changing if you make the right choices now.

Stevensmomma
by on Feb. 24, 2012 at 2:16 PM

I would pay off credit cards first and work you way through paying off the rest 

ReesesPieces
by on Feb. 24, 2012 at 5:42 PM

I agree with Suzie.  Definitely put $1000 aside in savings for a mini emergency fund.  The rest of the money would go to paying off as much debt as humanly possible (and cutting up those credit cards!).  Sallie Mae isn't a family member - no need to keep her around any longer than is necessary.  You probably wouldn't be able to pay her off with this money, but the money you'd be saving in not having credit card and car payments can go toward paying those student loans off quickly!  Then once you are debt free, start saving up a 6 month emergency fund and save up for a house.  It is SO much easier to be a homeowner when you don't have debt and a fully funded 6 month emergency fund, as opposed to when you don't do those things.

Kristen1010
by on Feb. 24, 2012 at 6:08 PM
Like some previous posters mentioned - Look up Dave Ramsey! :)
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I_Do_It_All
by on Feb. 24, 2012 at 8:16 PM


Quoting ReesesPieces:

I agree with Suzie.  Definitely put $1000 aside in savings for a mini emergency fund.  The rest of the money would go to paying off as much debt as humanly possible (and cutting up those credit cards!).  Sallie Mae isn't a family member - no need to keep her around any longer than is necessary.  You probably wouldn't be able to pay her off with this money, but the money you'd be saving in not having credit card and car payments can go toward paying those student loans off quickly!  Then once you are debt free, start saving up a 6 month emergency fund and save up for a house.  It is SO much easier to be a homeowner when you don't have debt and a fully funded 6 month emergency fund, as opposed to when you don't do those things.


Thx! I hadn't thought about it like this yet. But makes total sense to pay off as much debt as possible and since we will have extra income (at least for the first year) we can take all of that $500 or more in payments we've been paying toward credit cards and apply it to our student loans! We could have mine (the smallest with the highest interest rate) paid off within two years if we add that $500 to the $137 I am already paying a month! Better yet, we could take that $500 extra a month and pay down the 2nd car payment! Then in two years we would have an extra $1000 to pay toward student loans every month!

So much to think about! I have a friend that is a financial advisor and I'm gonna give her a call tomorrow. I want to have a plan in place before we have the money in hand.

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