Sorry for being so blunt but I have quite a few questions / statements.
No dramas with being blunt, it gets you the answers you’re looking for. Also I’m a blunt person myself, so I appreciate it.
Also note my location, some things will be different from the majority of what you see here on GRS due to me being located in Australia. That’s why our interest rates are higher and I will refer to things a little bit differently, but I will try and compensate as best I can.
First the house: you said you owned one previously and were ahead on the payments and sold for a profit so why did you still end up taking on a mortgage for 535k out of the 575k value at the time for the house, thats a very high ratio mortgage considering your income of 11.5k monthly?
House 1: Purchased for $349,000 in 2006, mortgage after deposit, first home buyers grant, stamp duty and related costs was $346,475. When we sold the house in 2008 for $417,000, the outstanding mortgage was $317, 934.45. So we’d paid down quite a lot of it in the first two years.
House 2: Purchased for $575,000 in 2008, we extended our mortgage by an extra $210,808.50 to pay for it. There were a couple of rebates in there for us that were due to us using the same agent to buy House 2 that we used to sell House 1. Also we paid off whatever outstanding debts we had at the time with some of the profit from House 1.
Secondly you carry a very high ratio of debt on all of your credit cards, which I should mention must be killing your credit score. Although I assume you already have most of the major loans already in place so you don't have any more in the foreseeable future.
In my experience, the credit score is not as big a deal in Australia as it appears to be in the US, from what I’ve read. And yes the CUA Personal loan is there to prevent us loading up our Gold Credit Card. We see the Once Credit card as an interest free loan, same as the GE Finance. Both of them will be paid off before their 24 months interest free period is due to finish, and before the interest rate that would be applied to the amount borrowed comes into effect.
Third, what other expenses do you have monthly besides the mortgage? How did you manage to rake up so much revoling debt on the credit cards with the large income?
The usual; groceries, fuel, insurances, medical, phone/s, power, rates, pets, water, internet. Was planning on breaking down our budget into specifics in a future post. I did a quick check online and Brisbane, where I live, has the equivalent cost of living as Los Angeles, if that helps put it into perspective.
We racked up the debt on the Gold Credit Card due to medical issues, my wife just went through some unexpected surgery and after health insurance and Medicare coverage, it still sucked us dry. Every other debt was explained in the first post, some not awesome reasons i.e. GE Finance for the couch, but with the 24 months interest free we see it as lay by with the goods in our house. It’s an attitude we’re working on changing. As for the large income, it’s been growing, as they do. When we bought House 1, we were on a combined income of ~$110,000. My wife has since graduated with an MBA, changed jobs and is now bringing in a lot more, so our combined income now is ~ $210,000, but that get’s slaughtered by our Pay As You Go (PAYG) tax rate.
Fourth, What is "Super" under your assets is this a savings / investment account because I highly doubt its making more interest that your gold visa or the personal line of credit. You should look at eliminating those for a very quick and high interest return on your money.
Super is our Superannuation, I believe the equivalent would be the 401k in the US. It is government mandated 9% of our wage that the employer has to pay to ensure that I don’t become a burden on future generations. I.e. if I earned $50K a year, I’d get to take home the $50k, minus PAYG tax, and the employer would have to stick $4500 (9% of the $50K I earn) into my Super account ever year. We generally can’t draw on our Super until we hit retirement age, and I believe that’s changed recently from 65 to 67 years, so a long way off.
Fifth, you should be setting so much aside monthly for your housing repair fund, this would have helped with the amount of that personal line of credit. Also please set up and emergency fund of 3-6months expenses. It seems that things are already super tight as they are and that losing one of the incomes would destroy you financially.
Since starting this revision of our finances on the 10th of August, I have instigated the start of an Emergency Fund, taking the cash left over from filling the car up, and our groceries and sticking it into an ING account every Monday. It’s currently sitting on $130.98. That’ll eventually cap out at $2,000, base on most of our excesses for insurances are in the $400-500 range, so if a couple pop up at once, we’re covered. Then I will be working on the 3 month out of work fund.
Hope that helps clarify things for you.