Drowning in debt

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Carefreeap
Posts: 2074
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Drowning in debt

Post by Carefreeap » Thu Jun 01, 2017 7:17 pm

unclescrooge wrote:
miamivice wrote:
Replacing my vehicle (the one with 210,000 miles) is my biggest worry.
Can't you lease a car for $200/month?

I live in SoCal, and it seems every young kid fresh out of college and a job drives a new BMW. So I might be biased.
Lol, it's the first step of the slippery slope of debt and KUWJ! :twisted:

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willthrill81
Posts: 2310
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Drowning in debt

Post by willthrill81 » Thu Jun 01, 2017 8:10 pm

HomerJ wrote:
miamivice wrote:
Carefreeap wrote:What did you purchase with the $140k HELOC?
For privacy, I don't wish to disclose it here. I can say it is an asset that I expect to appreciate at 5% per year and costs next to nothing to keep.
I would have paid cash for this from taxable. Do that now. Cash out 140k, and pay off the HELOC.

Take an extra 60k from taxable, replenish your emergency fund (can be used to buy a new vehicle).

That still leaves you with most of your money in taxable. Guaranteed 4% return on the retired debt, and most of your money is still in stocks. This is a good compromise.

This is what I would do. I would not gamble that the stock market will continue to out-pace my debt. The stock market could crash tomorrow. You could lose your job tomorrow. And you will still owe that money.

But you are not me. You don't have to follow my advice. The odds are good you will have more money doing it your way in the long run.. But there is a non-zero chance that you could have less. I'd rather sleep at night.

The fact that you call it "drowning in debt" is a sign you are not sleeping at night. The next 5% drop of the stock market is going to give you a LOT of stress, as you wonder if it's the start of a 30% drop.
+1

This is definitely a situation that smacks of over-leverage. Stocks are at highs, and assuming she won't take a bath in taxes by selling, paying off the HELOC (and getting a solid used car) sounds wise. I think the OP would be happier without the HELOC and $140k less in taxable than now. I know I would be. If the housing market were to take another tumble, a property leveraged to the hilt could be a disaster. And selling stocks then might not be nearly as 'comfortable' as it would be now.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

BigJohn
Posts: 1398
Joined: Wed Apr 02, 2014 11:27 pm

Re: Drowning in debt

Post by BigJohn » Fri Jun 02, 2017 10:16 am

Chan_va wrote:Sell the asset and pay off the HELOC. You are arbitraging a potential gain of 5% vs. a certain loss of 4%. Sure you get a tax deduction now on the 4%, but you will also pay taxes on the other end on the gain.
This is what I would do in your shoes.

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