what would you do?

blackcats13April 10, 2009

We have some cash we saved up for a needed, but not totally critical home improvement. We also have a small amount of savings and add to it monthly. We have 2 credit cards that get paid off monthly (groceries, necessary bills), and 2 that do not get used and we are trying to pay off. 1 of those is on a self-imposed payment plan and it will be paid off the same month that 0% interest expires. What has changed in our planning is the realization that we NEED a new roof.

I'm considering taking most of the cash we have on hand (keeping a little buffer still though) and paying off the non 0% interest credit card (and continue not using it). That would free up money every month that we can use to pay off or mostly pay off the roof (company offers 12 months same as cash). The problem with that is losing most of our buffer, but then, isn't that what it's for? Another option is applying for an FHA home improvement loan. We have good credit, but the economy being what it is... If we could even get one we'd have to weigh the interest charge against whether we could really pay off the roof in 12 months or not. The roof really has to be done in the next couple of months, sooner is better.

I know there are varying opinions about how best to pay off debt and having emergency savings, I'd just like to get some opinions specific to our situation. If I need to add numbers to this I can.

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I would do as you suggest - use most of the savings to pay off the interest bearing credit balance and use the offer from the roofing company to spread the payments out over 12 months.

However, I would also explore other ways to increase income and put ALL of the extra income into savings - a second job, selling things you are not using; or decrease expenses - Starbucks, impulse purchases, etc.

It is not the size of your income that matters as much as what you do with the net (take home) portion. There are so many ways people spend money when it is not a necessity. Cable TV, new clothes (instead of going to the thrift store), new furniture, toys (for kids or adults), car payments, etc. There is a money saving forum here that might give you ideas.

Good Luck!

    Bookmark   April 10, 2009 at 11:08AM
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Thanks colorcrazy! Sometimes I wish we could decrease expenses so easily still, but we've already pared down nearly as much as possible. There are still some things that need to be sold though. I've considered a second job, but I just can't see how to make it work. It's just not possible during the week, and on the weekend is when we take care of the DIY home improvements, cleaning, and meal planning/cooking. If I had another job who would do those things? And can't forget the family time too! Thankfully board games, reading, and movies at home are popular things to do in our house!

    Bookmark   April 10, 2009 at 5:32PM
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Hi, Blackcats
Sorry, if you are single, I agree that it's just about impossible. Otherwise, one of you can work evenings and/or weekends for a while and the other one do the cleaning/cooking. All DIY projects except leaks can wait until you get back on your feet financially, meaning that you have at least three months of expenses in the bank.

If you have kids, sodas, junk foods, dry cereal, fruit juices, etc. cost money. All they need is water, (whole) fruit, vegetables, milk, etc. If you've already cut all that, then the part time job seems the only solution. Think of it as a temporary sacrifice.

Worse case scenario, nail a plastic tarp over the leaky part of the roof and wait a bit to get it fixed. Not pretty, but neither is debt.

    Bookmark   April 10, 2009 at 7:52PM
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How secure is your employment?

Would it be possible to set up a Line of Credit at the moment?

I set one up several years ago that had no set-up fees and charges no inactivity fees ... that lies there unused most of the time.

You may be able to set one up now, where you might not be able to in a year's time when the payment to the lumber company would become due.

Almost certainly you couldn't if you suffered a layoff in the meantime!

It would give you an avenue to access funds in case of emergency in the meantime, as well.

If you have some assets: mutual fund certificates, stock certificates, even insurance policies with cash value, if you were to offer them as collateral, more than likely you could arrange a lower rate of interest payable.

In case of an emergency, you could put the cost on a credit card, then pay off the balance owing before due date, using a loan from the Line ofCredit - whose interest rates might be 1/3 - 1/5th, maybe even up to 1/7th the rate that credit card issuers charge.

Good wishes for making a choice that you consider wise not only now ... but next year, as well.

ole joyful

    Bookmark   April 11, 2009 at 1:34AM
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If it is not too technically challenging, I would look hard at DIY. Roofing is not complicated (most of the time) its just alot of manual labor.

How does your roofing co qoute compare to companies that don't offer financing?

Another option is all the home improvement stores have 0% offers, maybe finance the materials and pay cash for the labor.

    Bookmark   April 11, 2009 at 10:12AM
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Hi joyful, glad to see ya! I *think* our employment is pretty secure, as much as anyone can be sure of these days. Nothing is pointing to problems in either of our companies and we are both very valued. I hadn't thought of a line of credit, I will look into that.

chris, We do enjoy the DIY route, but I'm not sure roofing is within our abilities. We have the barn-type roof (forget what it's called) which is very steep on the sides. Honestly, I think I'd rather go with a very reputable company and not worry about it again. While DIY tile or counters does not scare me, I just don't trust us for a roof. Strangely, we've only managed to get 2 out of 6 companies to quote us so far. I'm going to check Angie's list again and contact at least 2 more, but I have a good feeling about the company we are waiting to hear from. I suppose that could change if they charge twice as much as the others!

colorcrazy, I see where you are coming from and it is good advice. I think we've decided to go ahead with the roof now. We are stable enough and our debt is low enough to not scare me any more then it would at any other time. I think we could probably tighten the belt just 1 more notch as well. We don't live extravagantly at all, but we do still buy little luxuries like pizza and such. We have projects waiting that we already have the supplies for (like painting), but I think in the fall I might try competing with all the other unemployed for a retail job for the holidays ;)

    Bookmark   April 11, 2009 at 5:47PM
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Can you barter for a roofer?

    Bookmark   April 12, 2009 at 5:43PM
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While I love the idea of bartering, I'm not sure what we could barter. Neither of our professions lends itself to it, or any of our hobbies (motorcycle riding and reading mostly).

    Bookmark   April 13, 2009 at 11:05PM
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