Day to day money decisions - what would you do?

[dd564]

Some background.

I work full time. My wife picks up shifts here and there and recently took a part time job.
We also own some real estate. Last year I wrapped up a project and in doing so, ended up borrowing from our HELOC a fair amount at a variable interest rate (currently about 5.5%).
I also have a contractor who worked on the project, whom I've owed a few thousand dollars and he was fine with taking payments over the next few months.

Networth wise, we are strong, but while rehabbing this property we were cash short (making mortgage payments and repairs with no rental income on this property).
We have a low mortgage to value on this house and rather than refinances, I figured we'd just work our way through it.

Now we have been collecting rent payments, and my work has been good, so at the end of the month we have more spare money.

My goal has been to pay off contractor and HELOC as soon as possible. My wife however has not seen any benefit of this rental property with this change.
Last year when wrapping up that house we skipped our usual summer vacation so we could wrap up this house project (sooner vs later) and without refinancing a mortgage.

At this point, with the extra money at the end of the month, I've been aggressively paying the contractor and the HELOC. Problem is, wife hasn't seen any positive effects other than me just being happier that the big ball is turning positively.

Each month I measure our networth, and after doing so today it was again a positive growth, but my wife said "I don't care about our net worth".
She's not really into money like many people are on here. Moreso interested in the experiences and goods that money can buy.

Question is, how would you handle this? Stay firm and pay down debt to then enjoy money later, or to try and do some 50-50% split so we see more enjoyment now knowing it will take longer to pay off these debts which in turn would unleash more positive cashflow.

Appreciate your opinions.

 

[joylesshusband]

Get rid of the wife.

 

[cathy63]

It depends on your agreement with the contractor. If he's being a nice guy and letting you stretch out payments past the time that you had initially agreed to, then you should pay him off as quickly as you can. There's just something unseemly about spending on luxury items when someone else is stretching their own finances to accommodate you. However, if you had this delay written into the payment schedule at the start of the contract, then I think it's fine to stick to that schedule.

For the HELOC, you can be a little less aggressive if it makes your marriage happier. Find a balance that lets you enjoy life now while still saving for the future.

 

[Aerides]

What are you giving up by staying firm exactly - what is the particular downside that your wife is experiencing?

Are you proposing skipping vacation for a 2nd year? What else is the 50/50 split going to restore?

While I'm a big fan of reducing debt, I wouldn't be thrilled to forgo vacations for 2 years, so some balance might be better here. It's not clear though what you are sacrificing by paying sooner than later.

 

[dd564]

It depends on your agreement with the contractor. If he's being a nice guy and letting you stretch out payments past the time that you had initially agreed to, then you should pay him off as quickly as you can. There's just something unseemly about spending on luxury items when someone else is stretching their own finances to accommodate you. However, if you had this delay written into the payment schedule at the start of the contract, then I think it's fine to stick to that schedule.

For the HELOC, you can be a little less aggressive if it makes your marriage happier. Find a balance that lets you enjoy life now while still saving for the future.

Contractor is a nice guy and he's been easy about the payments. I'm at the point now where I can send him one more check and he's paid off.

To me I feel worse about owing him than the interest bearing ones just because I don't like to owe people money. So despite no interest, he's been my #1 to pay off. (also, he handles minimal repairs for me on a moments notice).

I was thinking to aggressively battle the HELOC, but the differences in interest really aren't that significant if I pay it off sooner. Still real money, but the price of happiness is hard to predict.

 

[dd564]

Get rid of the wife.

Are you married?

 

[brucethebroker]

30 year landlord/real estate investor here.
Rehab and rental properties are tricky (and stressful) and both of you need to be on the same page-my DW is and we still have had our issues here and there. She may not like the leverage angle, or the always scraping by until the next thing.

You two need to have a long talk about your future plans involving the rentals. If you cannot reach a compromise, my advice is to find another way to build wealth that you can agree on.

 

[samclem]

Question is, how would you handle this? Stay firm and pay down debt to then enjoy money later, or to try and do some 50-50% split so we see more enjoyment now knowing it will take longer to pay off these debts which in turn would unleash more positive cashflow.

I wouldn't handle it at all. DW and I would handle it. It would probably start with a sit-down discussion of the current situation and then back out to discuss common goals and ways to achieve them. I'd be prepared to accept that we may have different priorities, but that our overall happiness for years to come (the strategic goal) was more important than how we get there (the short term tactics). This conversation might take several sessions (best to take breaks to let everyone chew on what has been discussed). When we are done and the agreements re-stated so we are all clear on the road ahead, then all the little day-to-day decisions get a lot easier.

 

[dd564]

What are you giving up by staying firm exactly - what is the particular downside that your wife is experiencing?

Are you proposing skipping vacation for a 2nd year? What else is the 50/50 split going to restore?

While I'm a big fan of reducing debt, I wouldn't be thrilled to forgo vacations for 2 years, so some balance might be better here. It's not clear though what you are sacrificing by paying sooner than later.

We've been fortunate to so a spring break vacation and a summer vacation most years. Last year we skipped both. This year we are traveling for spring break, and we are agreeing we'll do a summer trip around August. We both agree on this, but my wife will hold the missed vacation over my head for a while I'm afraid.

Part of our agreement in the past was that she would fund vacation (tickets hotels) (we have separate accounts) and on vacation I pay for restaurants, events, transportation, car rental etc. Issue is she didn't work a lot last year spending more time doing stay at home mom and providing value to the family that way so her portion of the budget didn't exist to go (and I didn't have spare money to say "Hey, I'll be a nice guy and flip the bill".

The sacrificing by going harder on HELOC payments is that if we scale back on HELOC, she'll have more cash in her hand (be able to work less). From there, I'm not sure what she would do with it, but it wouldn't likely be investments.

Again, she's not a real money person. She's not a "spender" but she's not a saver / investor either. So it's unlikely money going to her will speed up retirement, car payments, or a wiser investment.

 

[dd564]

30 year landlord/real estate investor here.
Rehab and rental properties are tricky (and stressful) and both of you need to be on the same page-my DW is and we still have had our issues here and there. She may not like the leverage angle, or the always scraping by until the next thing.

You two need to have a long talk about your future plans involving the rentals. If you cannot reach a compromise, my advice is to find another way to build wealth that you can agree on.

We've "agreed" to stop where we are at. The goal was to get to this many because in theory these will be enough to support us per my plan as we roll closer to retirement. So we finished the "acquisition and rehab" step of my plan and the next steps are paydown of debt / increase market investments, so the most stressful part should be over, but she seems more traumatized than stressed from it at this point.

 

[COcheesehead]

Sounds like you're driving the money boat and your wife doesn't like where you are headed. Throw her a bone, maybe surprise her with a weekend get-a-way. Happy wife, happy life. You two also need to work on common money goals or it will only get worse.
Why did you buy a rental when it seems you are under tight finances? That is something else I am concerned about.

 

[SumDay]

The first thing I thought of was marriage counseling. Finances are high on the list of arguments and worse. If you can't discuss it rationally with her, maybe a mediator would help. There are two sides to every story, and problem. Good luck.

 

[Chuckanut]

A 'lack of money problems' is important to enjoying life. It's #2.

#1 is good health. I got that lesson this year when my wonky knee finally said "Enough Chuck, I won't let you do the things you want anymore until you get me fixed."

I am very glad I spent the first six years of retirement traveling about, climbing to the top of towers and castles, hiking in mountains, and playing outside with the grand-kids. I hope to start up again later this year.

I vote for 50/50. Make sure to spend the money on things and experiences that truly bring long term joy to your lives.

 

[JustCurious]

Happy wife, happy life.

Happy husband, happy life.

 

[COcheesehead]

Happy husband, happy life.

But that doesn't rhyme.

 

[dd564]

Sounds like you're driving the money boat and your wife doesn't like where you are headed. Throw her a bone, maybe surprise her with a weekend get-a-way. Happy wife, happy life. You two also need to work on common money goals or it will only get worse.
Why did you buy a rental when it seems you are under tight finances? That is something else I am concerned about.

Finances weren't tight at the point of buying, but as with the best laid out plans, sometimes they fail.

Instead of spending and estimated $40k on rehabbing the house, it ended up being about $150k. So it ate up all of our cash reserves to do it. Fortunately it's in a desirable areas so we're still "okay" on it. Since we didn't refinance, we currently have a strong equity position (except for the HELOC and contractor paymenet) on the house because we bootstrapped it the last 2 years.

 

[dd564]

But that doesn't rhyme.

Happy man, happy clan?

 

[COcheesehead]

Finances weren't tight at the point of buying, but as with the best laid out plans, sometimes they fail.

Instead of spending and estimated $40k on rehabbing the house, it ended up being about $150k. So it ate up all of our cash reserves to do it. Fortunately it's in a desirable areas so we're still "okay" on it. Since we didn't refinance, we currently have a strong equity position (except for the HELOC and contractor paymenet) on the house because we bootstrapped it the last 2 years.

I gotta ask...
How does a project go from $40k to $150K?

 

[Aerides]

I think you're not seeing the forest for the trees here, OP.

You and you wife have some pretty fundamental financial differences. Your use of hers/mine vs. ours, seems...odd. I know people have separate accounts, DH and I have some of each and some combined, but we don't ever think in terms of his money or my money. It's all just ours.

Same for any significant financial decisions. They are jointly made. Now, it's one thing if your wife is saying "i don't care, you handle it", but still, you know her better than anyone else here, and if you are making decisions that you know are going to be unwelcome surprises, then that's a disconnect.

Your issue isn't handling the day-to-day and the current decision. You just aren't on the same page. It doesn't matter who currently brings in the bigger paycheck, or who has the bigger account. If a marriage isn't a partnership first and foremost, it's going to be rocky.

 

[Qs Laptop]

Get rid of the wife.

LOL! Can't imagine how you got your screen name.

 

[Qs Laptop]

Did you both decide to make improvements to the rental property? Did you both decide to access your HELOC to finance the improvements to the rental property? If so, it seems that your wife is out one summer vacation as a result of the decision. If she wasn't on board with accessing the HELOC her side of the story is stronger. If she was OK with that, you've got to decide if stringing out the repayments longer is worth her being happier.

You say your net worth is strong, so it sounds like you could take a bit longer to pay back your HELOC, and not be affected too much by it. However, an unhappy wife is going to affect you every day.

I completely understand your desire to get that line of credit repaid ASAP, but I'd compromise. Find out what you can do to make it better and try to accommodate her. Make sure she understands that you don't like paying interest but you are willing to do it if it makes her happy. At the same time, set some sort of a limit. Your compromise isn't a blank check, after all.

 

[dd564]

I gotta ask...
How does a project go from $40k to $150K?

Hard to break down since one thing led to another and I try to "fix things the right way".

Started of as a kitchen redo. Leave the rest the same. Tore down paneling, and drywall and studs came with it. "Look, there is our stucco holding up this corner of the house.

Decided need to fix the water issue and in doing so, hey, let's add a half bath to main floor. Get bid to fix water issue and bid to add bathroom on upstair bedroom, and the difference isn't that much different, so we decide instead of adding one bath, let's add two!

Continue rebuilding house from inside out and discover you want to move some windows around to make the kitchen better. Stucco repairs. House needs to be redashed so let's do the whole thing while we are at it ($15k).

But first, let's fix this sagging drywall. Oh, it's not just sagging drywall, it's sagging floors and ceilings. Let's fix that while we're at it.

Travel for work and trust contractor. Next thing you know, you paid a large amount of money for goods he hasn't purchased and services that he didn't quite complete. (25-30k) gone. I'm an idiot.

Oh, contractor went AWOL. I need to pull new permits with the city and pay for them again to continue work. ($2k)

While have all these walls open, let's rewire the whole house since we're running wire to the new bathrooms. ($18-23k)

Oh, city doesn't like the way we are fixing the sagging floors and roofs. (let's do it right and lift half the house so the floors can be somewhat level and we can keep the original hardwood floors. ($15k)

Oh, hey, the boiler quit working. Let's replace it ($8k). Oh, and now we have some frozen pipes that burst. Let's re-plumb most of the house.
Since we have a new boilers, let's put floor heat in the bathroom ($5-8k).

Hey, this 3-6 month project is taking two full years!!! (Holding costs with no rent) $30k

You know, even though the existing bathroom is fine, now that this drywall is down, the city says bathroom isn't compliant. Let's move the toilet. New tile, new drywall, some demo work, ... (basically redo a third bathroom. (10k)

I'm sure these figured don't add up, but each one of these issues seemed to have 10 mini issues along the way. These are all of the items we dealt with that are separate from the $40k we planned to spend on the kitchen (which also became more expensive).

The good news is:
1. We are done
2. It's a very desirable area
3. In the end, the current value of the house is "close" to what we put into it. We bought it with the plan of keeping it longterm so we wanted everything done right (and we might move into it someday, so we'll be okay). But it wasn't worth the emotional toll we had on it.
4. It was a real learning experience. (I've rehabbed a couple houses before it but this one uncovered a lot.

 

[dd564]

Did you both decide to make improvements to the rental property? Did you both decide to access your HELOC to finance the improvements to the rental property? If so, it seems that your wife is out one summer vacation as a result of the decision. If she wasn't on board with accessing the HELOC her side of the story is stronger. If she was OK with that, you've got to decide if stringing out the repayments longer is worth her being happier.

You say your net worth is strong, so it sounds like you could take a bit longer to pay back your HELOC, and not be affected too much by it. However, an unhappy wife is going to affect you every day.

I completely understand your desire to get that line of credit repaid ASAP, but I'd compromise. Find out what you can do to make it better and try to accommodate her. Make sure she understands that you don't like paying interest but you are willing to do it if it makes her happy. At the same time, set some sort of a limit. Your compromise isn't a blank check, after all.

So during the rehab, she went from being "on-board and involved", to "I'm good with your judgement." to "Whatever it takes" to "I don't want to hear about it". (Generally). So yes, it caused stress and the answer now is "Why did we decide to do it". Which isn't a great question at this point after the project went the direction it did. It was my mistake.

Just a bit ago we sat down to chat about this.
The point of contention is we spend $$ on making these other houses nicer than our own. We've level set on finances and she has a couple priorities that she feels we should be saving towards on our own house. This is the bigger priority in her view than racing to pay off all debt. I gave her an idea of the "extra" money we should see and how best to use it.

So what we will probably do is start "saving" by paying down the HELOC and then in spring we'll borrow back out to pay for the project, possibly with me doing a fair amount of the labor to lower that projected cost.

 

[RobbieB]

I'd go on a vacation as soon as possible.

 

[Mr. Tightwad]

Once you got married, you lost the ability to make decisions independently.