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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 311074  
Subject: Re: Debt vs emergency fund Date: 10/24/2013 4:11 PM
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My monthly expenses are easily 4k.

I would strongly suggest that you begin tracking expenses immediately, as in writing down everything you/DH spend money on. If you are making $90k and only have $4k/month in expenses, where is the other $3.5k/month going? I'm sure some of it goes to taxes, etc. but there is probably another $1k - $2k that you may be spending, but don't realize how much it is, especially since you say that your monthly expenses are 'easily' $4k. And, since you have accumulated $20k in credit card debt, your monthly spending may be even higher than $5k - $6k.

It's important to understand what your real monthly expenses are, because at $4k/month, the new income of $44k should just about be able to cover your expenses almost indefinitely, with maybe a little tightening/adjustment. If you have to start drawing $2k - $3k per month from your e-fund, then you are likely to run out of money pretty quickly.

I read that I should pay off the debt. But my question is...taking such
a large paycut and being the only bread winner, is it wise to cut my emergency fund in half?

I would second the suggestions on waiting until you have stabilized your work situation. On the other hand, I would suggest that you start looking for a job now, rather than waiting until after you've retired.

I realize I could also refinance and pull equity or not. Need a lawyer to answer this one...I wish to not become a joint tenant on the deed with my husband. It is a pre-marital asset and he has contributed nothing toward the place in the entire marriage. I am afraid that just the act of refinancing will make it a marital asset. I would rather keep the insanely high interest rate. the payment is still only 490.

Refinancing to pull cash out of your home to pay past/current living expenses is using your home as a credit card. Not a good idea, especially if you want to continue living there.

I will say - if your interest rate is insanely high, and you could get a lower rate by refinancing, then it might be worth looking into the legalities of refinancing the property as a your sole and separate property. The mere act of refinancing should not add DH to either the deed or the mortgage, if it's handled correctly.

That said, if you are retiring from your job in 3 months, and don't have another job lined up - you've probably missed that boat for now, and will need to wait until you have a job again before you attempt to refi. Lenders don't usually like to give new loans out to people whose income is going to decrease significantly in a few months, and they do contact your employer to confirm that you are going to continue to be employed.

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