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Thursday, October 1

My Financial Situation

I was not planning to lose my job in August, and when I did, reality hit me:
I have amassed serious debt:
  • $28,798 in outstanding credit card bills (not counting balances on cards I pay off each month).
  • $96,832 owed on my house.
  • $33,883 owed on a HELOC used to purchase a rental property.
  • $39,185 owed on my car (the bane of my existence).
  • $17,725 owed on student loans.
  • $181,274 owed on 2 other rental properties.
  • $40,000 in other obligations related to rental properties.
  • I am purchasing another rental property in October which will add to this debt.
My balance sheet is okay:
  • I own a total of 6 rental properties (about to be 7), conservatively valued at $450,000.
  • My primary residence is worth at least $125,000.
  • The interest rate on my student loans is a paltry 1.6%.
  • The HELOC, though variable, is currently at 4.5% and is tax-deductible.
  • The credit card debt consists of the following: $5,150 at 0% through June 2010; $23,648 at just under 4% for the life of the balance.
The bane of my existence:
  • The Good: It's a sexy car.
  • The Bad: The interest rate is 3.9%.
  • The Ugly: I owe $39,185. I have 54 payments remaining at $785 per month.

I will focus on long-term debt. If I have a short-term obligation (something which will be paid off in less than a year), I won't spend much time talking about it. It is still a debt and something that needs to be paid off, but it is a more manageable one. Long-term debt - mortgages, student loans, car loans, large credit card balances - these are the debts that get consumers (you and me) in trouble.

My dad would roll over in his grave if he knew how much debt I have. His philosophy was that the only debt you should acquire should be a mortgage on your primary residence. My #1 financial goal will be to pay off my debt as fast as I can. That'll make Dad happy!

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