A little more background would be helpful. I'm fairly young (33) and prior to this year was making <$100k/year supporting a family of seven. Much of the debt multiplied (1 to 2 houses, etc.) due to moving to this new job in 2010 (which also met the goal of moving close to family).
My income just three years ago was only about $80k/year, then went to $100k, then down as I moved to this job and took a paycut to about $80k last year again. So to make it sound like I have been living high on the hog is incorrect.
To walkthrough BF's comments:
1. The rental is breakeven for us currently (or slightly positive). I understand the desire to get rid of it (and take the tax benefit), but I'd prefer to hold my cash for now. If I could have sold it this year, I probably would have for the tax benefit (would make up some of the cash loss), but at this point I'd wait until 2014 when I am again in the high tax brackets.
2. We expect to pay off the CC by March. I'm not planning on accelerating the student loan payments.
3. Future savings goal - as I said, walk away at the end of 2014 with >$300k+ in savings and the CC/HELOC paid off. That $300k is primarily retirement savings so by 35 years old I'll have $300k+ stashed away, which considering I had very little prior to this year, seems pretty good.
4. Something I forgot - we are planning for year 1 to rent out the finished basement and already have renters ($1200/month). This will pay off more than half of the HELOC.
The options exercise was not optional. The $120k in savings was what was left over after options exercise, taxes and charitable contributions. Prior to that, we had almost no savings.
As for our budget, we have the aforementioned debts, but otherwise our spending habits have not changed substantially with the increasing income.
Ok, I have a better picture of your finances now. But I think I'd stick by most of my previous comments. But I'll make a few more which are meant to be constructive:
Having $300000 in savings by age 35 is good, but not great. We had quite a bit more than that even before my stock option jackpot (which wasn't as big as yours) and we also had paid our house off so had no mortgage. And we have no kids to put through college. So, congratulations, but don't pat yourself on the back too long.
If you were happy on $80k, I suggest living on that level of income as long as you can, at least after taxes. With a wife and 6 kids wanting everything that you can now afford, it will be very easy to inflate your lifestyle substantially.
You are a prime candidate to open a donor-advised fund before December 31. This will allow you to make a huge tax deductible donation this year into your fund to shelter much of the hit from the stock options then distribute that donation to charities over the next several years. You mention that you make big charity deductions already so this is no change to your budget - simply a tax maneuver. You can do this through Vanguard or T. Rowe Price. You need to do it this year for two reasons - first because you have unusually high income from the options in 2012 to protect and there is a good chance the charity deduction will be limited after this year. The first is a certainty. The second is speculation. But this move will save you thousands in taxes, possibly enough to pay off your credit cards!
I still can't figure out why you would borrow money to renovate your basement. You don't need to borrow. You can fund it out of your monthly income. There is also clearly more to this story since you first said you need it for the kids then suddenly you're not even going to use it for the kids but will instead rent it out.
Honestly, I really do congratulate you on your success. But you are not thinking clearly about your new situation. You've got some good ideas you want to pursue but you are also making some very costly mistakes that you don't even seem to realize. I also think you have a somewhat "immature" view on what constitutes being in good financial shape.
I personally don't have as big an issue with debt as many here do if it is producing a measurable benefit. Not paying off a rental that is breaking even, probably producing a tax benefit (depreciation and passive losses) and also building equity is a reasonable decision. Taking out a new HELOC to finish a basement you don't need to produce rent income you don't need is dumb.
You are in better shape than many people your age. But if you want to stay ahead of the curve you need to make good decisions with your money. Some of your plan is good but you should think through it more. You didn't like BF's comment but his advice was good.