Would you draw out of Heloc with this budget

[mawmawandlovingit]

for a remodel?

I have been "wanting" to remodel for years now in my kitchen and living area. DH and I have worked really hard to put three children through private school and college paying cash along the way. We love to travel, fish, and have lots of hobbies. That is why we purchased the Boat, Trailer, and Truck.

I just don't know if it is worth it to do a remodel at this time or wait another year to try to save up as much as I can. I should be able to sock a good bit into savings fast.......OR pay off some of the existing loans.

So here goes:

Monthly Gross $12,033 (DH $8833, Me $3200) DH and I are both 45

Retirement - $1237 (DH 14% with employer 7%) balance $485K he will also get a pension around $500K
Medical - $335
Taxes - $2774
Truck Loan - $551 (balance $20386)
Boat Loan - $550 (balance $20341)
Trailer Loan - $422 (balance $4639)
Heloc - $932 (balance 110000)
Escrow - $350 (save monthly for taxes and insurance)
Car Inc - $336 (includes boat, trailer, and 3 vehicles)
Fuel - $450
Utilities - $375
Groceries - $500
Cell - $160
Gift/Christmas Savings - $200

So this leaves $2861 monthly for miscellaneous expenses, dining out, savings, etc....

Total in savings $11,800

I am estimating $30k for the remodel, which includes knocking out walls and gutting kitchen, and replacing all floors in front of house. IF I decide to take a draw on Heloc for this it will be at 3.25% or if I lock in for a fixed monthly payment 4.25%. I know that the 3 consumer loans are a total of $1523 and once these are paid off our budget will really look good, so just not sure what I should do!!

[swamp]

I wouldn't, I'd wait until the boat or trailer or truck were paid down more.

[Tiny]

With a boat - when will you have time to spend in your kitchen? Won't you be out doing boating things every chance you get (and presumably NOT thinking about your kitchen back at home)? Why not put off the kitchen remodel - it doesn't seem like you'll be around much to enjoy your remodelled kitchen.

FWIW: I'm the kind of person who, it they don't see something, it doesn't bother them... I need a kitchen remodel too but I'm rarely at home and the kitchen works just fine when I am there - so I don't really think about my vintage 40's kitchen and how it would look so much nicer if it got updated. Just so you know where I'm coming from with my comment.

[mawmawandlovingit]

May 20, 2011 11:28:49 GMT -5 @tbird said:

You've got great income - but what happens if DH gets fired? injured in an accident? Without his income, you'd sink fast. You could tighten up if you lost yours.

you could save the 30 k in 1 year......although drawing out of heloc, paying it back isn't a big deal as long as you both keep your jobs......

11k in savings if pretty stinky given your income, so I'm guess there is a spending problem that you need to address before it gets out of control....

how long to pay off the truck boat and trailer?

The low amount of savings is pretty much because we had 3 college age kids at one time, paying cash for that, and also paying cash for DD's wedding. I also had a business that I had to close that I had bills that I was socking alot of cash to get paid off. We are just now getting comfortable with having extra to put into savings/paying off debt.

The trailer will be paid off by December this year. The truck and boat each have 3 more years at the current monthly payment plan. I know it would be smart to try to put money into paying those off to give a little more wiggle room.

I did not put into the budget that I am paid bi-weekly so I do get two paychecks that I can put towards savings or debt. I also get a bonus at the end of the year around $3- $4k that I can also use.

[❤ mollymouser ❤]

I thought that the general rule was, if you think the remodel will be $30K, make sure you have $40K?

[Gardening Grandma]

I don't see a mortgage payment. Is your home paid for?
You owe a balance on the heloc of 11000? Or that is the amount available to borrow?
What are the iinterest dates and durations of the loans?

[Deleted]

I would try to save it up. It shouldn't take that long with your incomes. This is because you are carrying debt on depreciating assets already and your EF is pretty slim.

[mawmawandlovingit]

May 20, 2011 12:33:15 GMT -5 Gardening Grandma said:

I don't see a mortgage payment. Is your home paid for?
You owe a balance on the heloc of 11000? Or that is the amount available to borrow?
What are the iinterest dates and durations of the loans?

The Heloc was a refi of our original mortgage, the balance is $110,000. We were able to do the Heloc for 15 years with a 4.25% rate down from 6.25% and there were no fees involved whatsoever. The Trailer rate is 5.75% the Boat is 5.9% and the Truck is 3.75% The trailer I plan to pay off by December and the Truck and Boat will be paid off in 3 years if I stick to the original payment plans.

[Gardening Grandma]

1) You have listed about $5000/mo in expenses. An EF of $11000 will last about two months. I would be very worried about that and would try to get my EF up to at least twice that.

2) You already have over $45,000 in debt that is depreciating. Have you figured out how much you will pay in interest on those three loans if you don't pay them off early?

3) I would revamp the budget and divide my priorities between building up the EF and paying off the loans.

4) No, I would not add to the heloc for a remodel. With your income, there is no discernable reason why you shouldn't be able to pay off the existing loans, beef up the EF AND save up the cash to pay for the remodel....

[Anne_in_VA]

I wouldn't add any more debt until some of the other debt is paid off. If I were you I'd be paying down the trailer and boat while saving money for the kitchen update.

If you or your DH lost a job, you'd have a lot less disposable income and I'd be very uncomfortable with that little in savings and with so much debt, but that's just me.

[endofera]

I would wait 6 months. You can enjoy your summer and not have your kitchen all tore up, enjoy the boat. In 6 months, you could have more saved by then. Your trailer will only be one payment away from paid off. It will be November and you can have a great kitchen in time for Thanksgiving and Christmas.

[alabamagal]

May 20, 2011 12:08:16 GMT -5 ❤ mollymouser ❤ said:

I thought that the general rule was, if you think the remodel will be $30K, make sure you have $40K?

I think my general rule will be if you think $30k, expect $60k

[mawmawandlovingit]

May 20, 2011 14:31:15 GMT -5 @tbird said:

The low amount of savings is pretty much because we had 3 college age kids at one time, paying cash for that, and also paying cash for DD's wedding. I also had a business that I had to close that I had bills that I was socking alot of cash to get paid off. We are just now getting comfortable with having extra to put into savings/paying off debt.

yeah......but.....you ran out and took on 50K of debt/1500 monthly payment before beefing up the savings account.....

NOT a prudent move....

Yep, not the smartest move......I guess since we for so long COULD NOT afford to buy the things we wanted, when we did have all of the important things (the kids needs) paid for we just splurged on ourselves. I don't think I would do it any differently but after actually putting it on paper, and seeing the responses, I do know what I need to do before moving on with any future purchases.

[mawmawandlovingit]

May 20, 2011 14:37:39 GMT -5 alabamagal said:

May 20, 2011 12:08:16 GMT -5 ❤ mollymouser ❤ said:

I thought that the general rule was, if you think the remodel will be $30K, make sure you have $40K?

I think my general rule will be if you think $30k, expect $60k

Oh Lord, I hope not!!

[debtheaven]

I'd pay at least two of those things off (probably all three) and then think about doing the kitchen remodel. You could pay the trailer off in two months, then concentrate on the truck or boat. If you put the trailer payment and the extra money towards that, either the boat or the truck could be paid off in about six months (this said I'd be saving too, I agree that 11K is not enough in savings.)

Unlike many other people here, I don't have a problem with borrowing for a project and then paying it off. But, you've already done that ... three times (trailer, boat, truck). We do that too, but only for one "project" at a time.

Without the college and wedding expenses you could pay things off pretty quickly, but I certainly wouldn't be saving for a kitchen redo, let alone borrowing for one, with all that debt on depreciating assets.

ETA: You've got great income. Kudos to you for putting all your kids through college, I think that's a fantastic gift! But I'd really encourage you to wait another six or 12 months and consolidate your "empty nest" position before you take on more debt.

[Gardening Grandma]

May 20, 2011 14:42:54 GMT -5 @mawmawandlovingit said:

May 20, 2011 14:37:39 GMT -5 alabamagal said:

I think my general rule will be if you think $30k, expect $60k

Oh Lord, I hope not!!

I can tell you from our experience building a house - it's going to cost more and take longer than you plan.... Add 10% (20% is more realistic) to whatever bid you look at. And add 50% to whatever time you are told....

[schildi]

I would pay everything off, including the HELOC, then build up a decent EF (one year of expenses?), and then save up for the remodel. Yes, that will take a while. But can you imagine what kind of money you'd have with no payments on anything? You'll be able to keep on putting money away for retirement while saving for almost any project and/or want at the same time. All it takes is a little bit of patience.
We are in a similar situation, make similar money, and are 38 & 40 years old. We have comparable retirement savings to you, a 1.5 year + EF and no debt except $30K left on the mortgage. We started from absolute zero 12 years ago. We do still have to get two kids through college, but that may not be very expensive in our case. We would also like to remodel our kitchen, same as you. We will wait a few more years though. Oh, we also have a camping trailer, but sold the boat 5 years ago when we got the trailer, lol. You have time for the boat and a camping trailer?

[mawmawandlovingit]

May 20, 2011 15:32:57 GMT -5 schildi said:

You have time for the boat and a camping trailer?

We take the boat with us when we go camping. We LOVE fishing and camping so we normally incorporate the two together.

[schildi]

May 20, 2011 16:14:34 GMT -5 @mawmawandlovingit said:

May 20, 2011 15:32:57 GMT -5 schildi said:

You have time for the boat and a camping trailer?

We take the boat with us when we go camping. We LOVE fishing and camping so we normally incorporate the two together.

I was thinking about that before. The problem is you got to take two cars then, darn! Unless, I guess you use one of those slide in campers (and have a really big truck). What kind of camper do you have? And what kind of boat? We are looking into possibly getting a new camper for next season ....

[mawmawandlovingit]

Unfortunately, we do have to have two tow vehicles.....that is why we bought the Truck. I'm not one for staying in hotels or cabins and I feel like the trailer is a home away from home. We have a Jayco Eagle with two slide outs, and a 20 foot aluminum boat. I would definitely shop around for a trailer that will suit your needs and one that you will keep for awhile.

[Plain Old Petunia]

I think it is fine that you have bought some toys, but you need to pay them off before indulging in something else. It won't take too long, as you have a big "shovel".

As has been pointed out, you don't have much in reserves to float you in the event your income is disrupted for some reason. Protect what you have now before you worry about improving your kitchen.

[schildi]

May 20, 2011 17:06:12 GMT -5 @mawmawandlovingit said:

Unfortunately, we do have to have two tow vehicles.....that is why we bought the Truck. I'm not one for staying in hotels or cabins and I feel like the trailer is a home away from home. We have a Jayco Eagle with two slide outs, and a 20 foot aluminum boat. I would definitely shop around for a trailer that will suit your needs and one that you will keep for awhile.

Nice .... Those Eagles are huge, they start at 32ft if I remember correctly, right? Our friends have one of the 32 footers. Very nice, but too big for us, we are looking at a Jayco Sport X20E right now. Currently, we have a popup, and we may actually buy another popup. We prefer smaller because we don't like the hookup sites in most State Parks, they are like parking lots . Not even talking about private campgrounds. And the large(r) campers won't fit on many (the nicest) campsites.
I wish I could tow a trailer, and then an 18ft runabout behind it, lol ....

[jkapp]

With that budget I would probably take a year to plan out what I wanted for the kitchen (get the estimates, line up the contractors, etc) and keep pushing money into savings to pay for it all during that time.

[debtheaven]

With that budget I would probably take a year to plan out what I wanted for the kitchen (get the estimates, line up the contractors, etc) and keep pushing money into savings to pay for it all during that time.

This, sort of. Personally I'd use that year to pay off two toys and save more while I plan the new kitchen.

[azphx1972]

I think that since you paid for your kids' college, it's only fair they pay for the kitchen remodel.

[april47]

The "experts" recommend 8 months emergency fund which for you is about $80,000. An advantage to having lower incomes is that unemployment helps and with a part time job its possible to at least eat. Those with incomes and bills like yours would be up a creek. Even a medical emergency where you couldn't work would be disastrous. I would pay off your toys and save first a good emergency fund and then save for the remodeling. Spend more time in your boat and enjoy yourself so you will forget your remodeling craving.

[Deleted]

$1237 (DH 14% with employer 7%) balance $485K he will also get a pension around $500K

I don't really understand what you mean here. Will your DH get a pension that's worth $500k or will he just get that in lump? You might want to run some calculations on how much money you will need for retirement - replacing 11k a month in retirement takes a lot of money. I would think around 3 or 4 million dollars if you retired at 65. Maybe less because you won't be saving for retirement or paying as much in taxes.

[midjd]

Looks like you have almost $3K of discretionary income... I'd start socking that at your loans, first the trailer, then the boat, then the truck. You should be paid off and in good shape in less than 2 years.

After that, I'd increase your retirement contributions a bit. Are you contributing anything? I see your DH is doing about 21%, I'd try to match that if I were you. It will be difficult to duplicate that income in retirement without upwards of $2M in assets.

[Deleted]

Welcome to 2011 where everyone is risk adverse. The economy needs people to spend that can afford it - and you can afford it. Take the low fixed rate and don't forget my dinner invite when the kitchen is done.. ;D

[debtheaven]

MMC, I agree, they can probably afford it, if all continues to go well.

But would you really be comfortable with that level of debt on three depreciating assets, and borrowing more for the kitchen? And having that little in the bank in savings? I certainly wouldn't.

And I'm one of the few people here that find it easier to pay off debt than to save LOL.