Congratulations! You just sold your house, now what?
We’re going to Disneyland!
Okay, not quite, but the prospect of facing the next month without a house payment, insurance premium, property tax, gas bill, water bill, heating bill, softwater rental bill and other miscellaneous maintenance costs sounds like a trip to paradise – or at least a couple of days off.
Last week, we closed on the home that we have not lived in for sixteen months. The closing documents were overnighted to us earlier in the week and Mrs. Stew and I signed the papers, had them notarized and then sent them back across the country with our fingers crossed and our hearts in prayer.
I am looking forward to completely revamping our family budget and finding some positive numbers at the end of the month. I actually have fallen behind in keeping track of our budget, the news was just too grim. Next week I will know the final numbers on the damage that this episode has done to our finances. We are definitely in the red, but things are not nearly as bad as they could have been after sixteen months of owning a home in one state while renting in another. Some reasons for thankfulness:
- We were never late on a payment of any kind.
- We never bounced a check.
- We are only about $6,000 in the red on our overall annual budget.
- Our credit score is still quite healthy.
- No foreclosure, no default, no bankruptcy, no short sale.
I have started to reorganize our system for keeping track of our finances and setting priorities for the next couple of years. Here are our financial priorities beginning next month – this is assuming that my wife takes the job opportunity that has developed.
First Priority: 0% APR Balance Transfer
One of the ways that we have made ends meet since we ran out of money in March is by virtue of a 0% balance transfer onto one of our credit cards. This money is interest free until March of 2010. We want to completely pay off that debt before interest starts to accrue. The total debt is around $15,000, we currently have approximately $10,000 on hand. This is a risky strategy that I do not recommend to anyone even thought it seems to be working out for us. If our house had not sold . . . if my wife does not work . . . if I lose my job . . . we could be “up a crick” as they say.
Priority #2: Emergency Fund
We have exhausted all of our emergency fund, savings, cash, etc. The only liquid money we have left is the balance transfer money. This needs to change – quickly! My goal is to have a three month emergency fund saved up before we start to attack our other outstanding debt in earnest.
Priority #3: Retirement
Some of you may remember that we cashed out about two thirds of our small retirement savings back in March. This fall, both my wife and I plan to max out our employee matching opportunities at work. My employer will match up to 5% and my wife’s job will match up to 3%. Lord willing, we will catch up on our retirement savings in a hurry.
Priority #4: Debt Reduction
Beyond the balance transfer we have a number of debts that I consider “bad” debt. I hope to pay off what remains of our home equity loan first, then we will go after our car loan, then my wife’s student debt.
We do not plan to enter into another mortgage for a long time. What is your #1 financial priority?