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They already have well paying jobs, pension plans, IRA accounts, and other ways of setting themselves up need cash till payday online for the future, but how can they streamline their debt payoffs and maximize their cash? Then they go on to tailor a plan of action for Erik and his wife, giving some great examples of leveraging low-interest debt in order to pay off higher interest debt and fill emergency funds. Mindy:Welcome to the BiggerPockets money podcast loans for bad credit no fees no guarantor no brokers show number 170, finance Friday edition, where we interview Erik and talk about new payday loans direct lenders capital allocation, how he manages his cash, debts and assets. Erik:We started listening to BiggerPockets money and we love the idea of the monthly money meeting. Thank you guys too for mentioning that over and over again. Mindy:Hello, hello, hello, my name is Mindy Jensen and with me as always is my punny co-host Scott Trench.
We really have too much for you, you doing most things pretty well here. What an interesting set of different challenges, wildly different personal finance challenges, all from people who get it and are thinking about their financial positions, but are still struggling with mapping out a strategy and plan and those types of things. I hope that people who are listening are finding just as much value as I am. Mindy:We should, before we do though, we should note that the contents of this podcast are informational nature and are not legal or tax advice, and neither Scott cash advance online direct lenders nor I, nor BiggerPockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal, tax and financial implications of any financial decision you contemplate. Mindy:Erik, welcome to the BiggerPockets money podcast. Mindy:Erik and his wife are both teachers in New Jersey where the cost of living is higher, but so are the salaries. My wife and I are both teachers in New Jersey and it is like you said, a pretty high cost of living area. Currently we net around a little over 9,000 a month from our two teaching jobs. And there are also a few stipend positions payday loans no credit check no faxing that my wife and I do at school that are included in that net.
My wife and I both have 403(b)s through our jobs and we also pay into the pension every month as well. What do you have leftover after expenses and can you walk us through some of those big expenses?
Currently the college fund for our older daughter, we put it about 200 a month in. Pet care, we have pet insurance and we also have to buy our cat food.
She also has a pretty bad catnip habit, so we like to take care of her.
Anyways, start with the smallest thing first, but love that. Scott:You got 800 bucks left over, of which really most of that is going to college funds and IRAs, your Roth IRA. My first reaction to this situation is that you guys are apply for online loans doing a lot of really good things. We do have a safety net fund that is not totally liquid, but also pretty easy to get to if we were to need that in a particular situation. Mindy, do you have any comments or thoughts on this so far before we start going into some of the strategy and tactics? I think you did a great job in tracking all of them. How do you condense them and think about them as line item opportunities loan bad credit instant approval or bigger categories?
I think you can do the same thing for a lot of these other things.
You can have a miscellaneous category and you can sub categorize them too if you like that level of detail. Like that, I would separate your rental business from your personal stuff. That rental business should not be requiring cash out of your personal position.
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It should be capitalized on its own and spitting out cash to you on a regular basis, rather than forcing you to put money from your same bucket into that business. If it was not in an LLC, if you just own it in your own name as a sole proprietorship, I just opened up the bank account separately and have all the expenses for that rental business flow through that separate bank account and pull money out of it.
I think that will again, simplify your financial position to help you kick some clarity around it. We have one for the rental that we have and one for our personal expenses, but that HELOC is that weird mix in that personal and business.
Would you recommend continuing to prepay that he HELOC with our own cash as well to get it down and move on in the future? One is the debt snowball and the other is the avalanche. When I zoom out and look at your financial position, I say, all of your debts are at low interest rates. But for me, prepaying low interest debt if your goal is to aggressively move towards five, might not be the most optimal capital approach. Mindy:I think that Erik is killing it on the interest rates and I missed the 2. I would not, but again, I am comfortable with moderate debt and this kind of debt, mortgage debt. One thing that my husband and I came to an agreement on is, I used to be, I want to be completely debt free. He said, I would rather take the money and invest it.
So you are crushing it on the interest rate, but again, paying off your debt and being completely debt free is a mindset that some people are way more comfortable with. That is something that you and your wife should discuss. I guess it really is a mindset more than really looking at it from afar. And then continuing to focus on the accumulation of assets from the context of a strong liquidity position. Scott:And then having that capitalized rental business, you have some debt, but your income and your cash positions in that case will be pretty conservative to me and allow you to continue to be aggressive on the investing front rather than prepaying all of the debt. Mindy:I agree with Scott, with taking the rental out of your personal expenses.
You had a question about the HELOC since it is related solely to the rental property, is that correct? But you took the money out of your primary residence and put it into the rental. So the rental owes you money, not you owe that money back. Is that a general going into a slush fund thing or is that a specific bill? This was something that my wife and I sat down, because we had time during the pandemic to start to think about other ways of having some income.
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We wanted to try to find something that was apply for online loans a little on the safer side, because we were both working full time. I think for us having that cash flow of 400 or so a month was something we could feel good about while we learned the ropes. I like that this is the roof and the exterior maintenance is already covered for you. The best way to learn how to screen tenants is to actually screen tenants and then realize I made a mistake or you could read the BiggerPockets tenants screening guide.
Scott:Given that context, I would not be prepaying your home mortgage or your rental mortgage or your car payment. I really do paying off the HELOC faster than the rent mortgage or the primary mortgage. And so the focus I think should really be on how do I accumulate cash at a faster and faster rate, which brings us back to your income and expenses. That tells me that the leverage point for you here is really going to be on the expense side.
There may be other, you said you have stipend things and stuff. Your 15 year refinance is going to, again, compound this problem in the short run. And regardless of which methodology you like, the avalanche or the snowball, that just makes more sense to go to the HELOC.
Mindy:I would really consider prepaying the HELOC apply for online loans over prepaying the primary. Because, well, at that interest rate, if you could pull that money out and put it towards the HELOC and payoff the HELOC at this 1.
You call up your lender and you say, I want to back out of this mortgage and I want to take more money out at a higher interest rate. The single biggest part of all of your spending is going towards this mortgage payment right now. How much is your house worth and how much is the mortgage amount?
Mindy:I would reach out to them and ask them what it takes to pull some money out. Try to compare them with no points are the same amount of points prepaid with that stuff. More debt is never emergency loans from the government better than less debt, but the terms of that debt really matter a lot. Mindy:Another thing to think about, you can repay your 30 year loan in 15 years.
Once you have saved up a ton of money, you can start cranking it out and still end up paying your mortgage off in 15 years or 20 years.
I would definitely not refinance at a 15 year and then begin prepaying that additionally, before prepaying the HELOC. I would either continue with your 15 year mortgage, but attempt to pull some money out.