No. of Recommendations: 4
Hi Afool,

Here's my 2 cents...

You are dramatically over-housed and under-reserved! What I mean by that is, based on the state (or non-state) of security and stability of your income source, and the fact its just barely covering your lifestyle consumption costs as it is... you can't afford to even consider gambling by keeping all your liquidity tied up in your real estate. (And you can't afford to rebalance liquidity *out* of your real estate because you can't afford the interest costs to separate your cashout for safety!)

You're playing financial Russian roulette... and in terms of odds of calamity, there are 4 rounds in your six-shooter not just one.

You need to do at least one (probably several) of the following steps;
1) reduce your lifestyle costs to the point where your cash reserves are at least equal to 1/4 your annual lifestyle costs. (Of course, you currently have zero cash reserves, therefore;)
2) Sell your free & clear home, in order to fund your emergency cash reserves account of 1/4 your annual lifestyle costs,
3) Look at the costs of renting, or mortgaged-owning, of the smallest housing footprint you can comfortably survive in, in the least expensive location you can be safe in... add that housing cost to your lifestyle nut, and re-calculate #1 and #2,
4) Of the remaining cash, (assuming you are 'location-stable' at this point in your life,) compare renting versus buying your next home (perhaps even a condo) with 5% down, in order to conserve as much of your net cash as possible. Yes... real estate *IS* likely to be a *VERY* strong asset class, versus inflation, going forward the future 5-20 years... so sayeth I ;~)

Dave Donhoff
Leverage Planner
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