Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
My husband and I recently moved for work. We own our old house outright and have no desire to sell. We have student loan and credit card debt (which we’re paying down as fast as we can!), but good credit. Rent is expensive here, and we would like to buy a house in our new area, but have no down payment or savings. We plan to be here for five years before moving on.
Would it be crazy to re-mortgage our house to finance a down payment on a second home? And if it’s not crazy, should we at least wait to do so until after we’ve paid off our credit card debt? The payments on both mortgages would work out to be about the same as what we’re paying now in rent, which is a third of our monthly income. One the one hand, our rent money brings us no equity. But on the other, it feels irresponsible to take on more debt.
—What’s The Right Thing, Here?
Dear What’s The Right Thing,
I hate the idea of taking out debt to buy debt, in this case taking out a mortgage on a home you already own to buy another home. I know you said you had no intention to sell the first home, but I’m wondering, why? If you plan on moving back in five years, or if it has significant sentimental value, I’d keep it, but if not, I’d probably sell it, pay everything off and get a home in the new neighborhood you’ve been eyeing.
If you do not want to go that route, which does seem to be the case, then I would take out a big enough mortgage to pay off all your credit cards, student loan debt, and the down payment on the new home, and start fresh. This way, your finances will be a bit more organized. You’ll also be paying less in interest with your student loans and credit cards being paid off.
If you do not already, I would also have renters in the home you no longer live in. Being a landlord can be a headache, but having someone pay rent on the property could help pay down the re-mortgage faster, and give you a bit more wiggle room.
Dear Pay Dirt,
I’m 31 and have been burned out from my office job of seven and a half years for quite some time now. I’m hoping to land a job elsewhere, preferably down south. (Texas, perhaps?) I want to finally move out of my parents’ house (for the record, I do pay rent and help around the house where I can) and have a place all to myself.
Here’s the good news: I’m currently debt-free. No student loans since I was 25. Four-year car loan was fully paid off just before the pandemic. If I ever have a credit card bill to pay off, it gets paid off immediately. I’ve maxed my Roth IRA contributions the past 4 years. I also “invest” in collecting rookie/prospect refractor cards. I currently have about $90k saved in my savings account.
Here’s the problem: I have Asperger’s. I am an extremely anxious and introverted person. I’m an “indoors” guy and places like the bar or clubs have always made me extremely uncomfortable (to the point of occasional panic attacks). I don’t have a “network” to speak of, especially amongst my peers, as I was frequently bullied for being a special-needs student and having a personal aide. My physical motor skills, outside of typing, are… shall we say… not great.
Where can someone such as myself move to, and how should I even go about moving? Or am I doomed to stick with my current job and live with my parents until they pass away?
—Uncertain About Leaving the Nest
You are in a great place right now, financially speaking, to explore your options and future. If bars and clubs make you extremely uncomfortable, I think it makes sense for you to move somewhere else where there is more of an outdoor scene for you to explore—a place where people spend time outside, in a less crowded and loud environment, pursuing low-stakes, leisure-oriented hobbies together.
Texas would be a great option; so would anywhere where the weather is nice, and there are activities that you could partake in, in the open air. For moving outdoors, I’m thinking places like Arizona, Utah, Colorado, and Nevada would be the most budget-friendly. California, Oregon, and Washington are also plentiful in parks and outdoor activities, if budget is less of a concern.
After you’ve decided on a place, look at the real estate market to find an area you think you’d love to live in, and book a trip to go check it out. Schedule apartment tours, check out neighborhoods for flexibility, and if you’re interested, see what employment is like. With so many jobs now moving remote, it’s harder to decide to move somewhere for “work,” but you may find a local job that suits you, anyway.
After you’ve figured out where you’re going, sit down and talk to your parents about your new plans. I want you to talk to them last because this decision isn’t about them, it’s about you and your happiness. They may be shocked and of course, miss you ,but they also need to know that you’ll be fine on your own. That’s why doing your research beforehand and checking the place out is so crucial. Good luck with your new adventure.
Dear Pay Dirt,
I consider myself financially prudent—I grew up in a blue-collar household where money was tight. I am proud that I have paid off my massive student loans, have steady income, contribute to a retirement fund, and along the way, saved up enough to put a sizable down payment on a house.
However, as I settle into life as a new homeowner, I’m struggling to budget. I find monthly budget plans aren’t realistic because there are odd costs that come up like insurance payments, or a big house project that set me back a few hundred or thousand dollars, but these costs are not monthly. I have found that it’s best for me to set up a little savings account for these accumulating costs, but now I am realizing this is not practical. I can’t have an account for unexpected car expenses, a separate one for house expenses, one for vacations, etc. Any guidance or tools out there that you would recommend?
—I Can’t See The Future
Dear I Can’t See The Future,
Your system is the same one I currently use with my Capital One 360 Performance Savings accounts. Every area of my life gets its own little savings bucket, which really helps me track my goals. It’s fun to watch money grow, not dissipate. But that’s for goals, like vacation funds, and not a bunch of emergency expenses, and I can see why you’re seeing it hard to plan ahead for those.
My advice to you is to save just one giant emergency fund for these costs. Find a bank that has a great high-yield interest rate and save a large amount of money you feel comfortable with. Most people save either $10,000 (which I think would work for you), or they save 3-6 months of their living expenses. This way, you have a large pot of money that can be used for anything that comes your way. But as a new homeowner, you should aim for at least $10,000.
Dear Pay Dirt,
I’m an American who has been living abroad a bit over six years. I have about $5,000 left to pay off on a $35,000 student loan, so the end is in sight. I could afford to pay off the last of this loan in the next few months, probably before payments restart in May. But I’m wondering if I should? I froze my credit with the three credit bureaus in the US in 2017 as my information was part of the Equifax breach and I have been keeping an eye on it without any trouble so far. What will happen to my credit score if I pay off the only money I owe in the US, and with the freeze? What’s the best option should I want to move back in a few years and not be left with a very bad score?
—No Credit, Lots of Problems
Dear No Credit,
Wow, you do have some things to consider. On April 6th, 2022, after you wrote this letter to Pay Dirt, the Biden-Harris Administration announced that they have now postponed the student loan repayment pause until August 31st, 2022, which means you don’t have to repay your loans for a few more months. Paying off your student loans won’t hurt your credit score; if anything, it will make it go up. (A credit freeze, you probably know, does not mean that your credit score cannot change while you are on one. It simply means no one can access your information if you or someone else were to apply for a new credit line with your information.)
But you seem worried that if you pay the student loan back “too fast,” you won’t have a credit history. I suggest that if you know you are coming back to the US eventually, you should see if you can open a credit card, even if it’s a secured one, a year before coming back home. Charge items such as groceries or transportation costs, and then pay the card off monthly. Then, when it’s time to come back, people will see that you have established credit and are a regular user, which are two things that make up your credit score.
More Advice from Slate
I am a parent to a severely allergic child. His allergies include common ingredients like dairy, peanuts, tree nuts, and sesame. I am anxious all the time because he is still a toddler and puts things in his mouth regularly. Unfortunately, my family is very old-school and dismisses my concerns. I go so far as to email allergy action plans from the doctor so they can take it seriously but they don’t, partly because my parents don’t read English and partly because my sister is dismissive and is convinced I am exaggerating. I now feel that whenever I try to explain things to my parents, they tell my sister, who in turn sends me nasty emails saying how horrible I am not trusting our parents with my child. I feel like my family is turning against me, but I refuse to put my son’s safety at risk because they refuse to take me seriously. Can you help?