Dear Money Minder,
I’ve got a bit of a pickle. My job isn’t bringing in enough cash to cover my bills, which aren’t even that high. My bills are about $3690, including a pesky $500 chase credit card bill that has a $10k balance.
Every month, I’m about $1,000 short to cover everything like bills, food, and my mortgage. Job hunting is tough right now, so I’m considering tapping into my equity.
Right now, I have a 30-year note for my home worth $540k, with $208k left. I also have a $40k home equity loan at 10.25% over a 20-year term, which means $400 a month.
On one hand, having the cash would be nice for peace of mind. But my gut isn’t thrilled about the crazy interest over 20 years, using my house as security, and the uncertainty of when I’ll get a new job.
Am I right to think this might not be the best long-term move for a short-term fix, or could there be a way to make this work?
Cheers,
Worried and Unsure
Response from THE MONEY MINDER:
Hello There,
Sorry to hear about the financial challenges you’re facing. It’s never easy when your income doesn’t cover your expenses, especially with bills piling up. It sounds like you’ve thought through your options, but let’s break it down further.
Dipping into your home equity can provide short-term relief, but it’s important to consider the long-term implications. A home equity loan may seem like a convenient solution, but the interest rates over 20 years can add up significantly. Additionally, using your house as collateral means there’s a risk involved if you’re unable to make payments in the future.
Instead of taking on more debt, have you explored other options to increase your income or reduce expenses? Perhaps finding freelance work, part-time gigs, or even negotiating with creditors for lower monthly payments could help bridge the gap. It’s also worth taking a closer look at your budget to see if there are any areas where you can cut back, at least temporarily.
While the idea of having cash on hand for peace of mind may be tempting, it’s crucial to weigh the risks and benefits carefully. It might be beneficial to consult with a financial advisor or counselor who can provide objective advice tailored to your specific situation.
Remember, finding a new job may take time, but having a solid financial plan in place can help you navigate this challenging period with more confidence. Stay proactive and focused on finding sustainable solutions that won’t put you in a more challenging position down the road.
Take care and best of luck on your financial journey.
Farewell from THE MONEY MINDER.
