financial WWYD

[ktgrok]

We have 401Ks and a college fund, and then another set of investments that were begun with an inheritance my husband got before we married. It's currently doing well but we are hearing talk of a possible "correction" in the stock market. At the same time, we really really need to make some improvements on our house. We want to sell the house and move closer to my sister and parents (move about 30 minutes away, to the other side of the metro area). We need to do the improvements before we can sell. (and living without them done is stressing my husband out)

 

We need to:

 

Finish bathroom remodel (already tore out the tub and drywall down to the studs and the flooring has been torn out and is bare concrete slab...the tile was leaking, ad then the toilet leaked sewage into the flooring. Toilet is fixed, but obviously this all needs to be finished.)

 

Replace fencing. It's barely standing on two sides of the yard. 

 

Replace flooring and some drywall in my son's room where the roof leaked (roof was repaired but there was water damage). wE have the flooring to do it, and my husband can do this himself, but need to buy the drywall. 

 

Do something about the yard in the back....probably put down some sod in a small area. 

 

Dig a trench around the back screened patio to keep dirt from washing back onto patio every time it rains, and then power wash the patio. 

 

We are considering taking some money out of those investments and paying someone to do the fencing, and buying the rest of the materials needed for everything else. Possibly paying for someone to do parts of it. Husband works a full time job, teaches part time at a university, and is getting his masters so time is a huge issue...some of these jobs are taking forever because of this.

 

We would still have about 9K in savings, and wouldn't wipe out the investments by any means. Is it crazy to do this? Or, given the state of politics/finances/etc (not trying to get political...but there is definitely more volatility right now) would it possibly make sense to move some money from stocks to basically invest it in real estate (aka our home). 

 

Edited to add: 

I should clarify these are all repairs (other than the toilet) from before we bought the house. We bought it as a foreclosure that needed a ton of work. We have financed with money and time and a lot of other repairs. So it's not that we can't afford to do the regular maintenance. We've done all that plus these things. We've already completely remodeled the kitchen, replaced appliances, made roof repairs, replace the pool pump and filter etc. We just should not have bought a fixer-upper with my husband so busy. 

 

 

 

Edited June 13, 2017 by ktgrok

[zoobie]

If there's equity in the house, I would tap that first. No tax implications on a HELOC or similar. Find out what you'll get dinged in taxes and penalties from withdrawing from investment accounts.

[JustEm]

We are in the process of fixing thing up to sell, about $10,000. We decided to put the money on a credit card that has 0% interest for 18 months. That way, we aren't taking from our investments and we'll be able to pay it off with money from the sale of the house. If for some reason we don't sell in time we can pay the card off with savings. But houses in our neighborhood have been selling in a few days of being on the market so that likely won't happen

[Carol in Cal.]

Aside from the financial question, I would like to say--it's worthwhile to live in a decent house.  The last time we moved, we fixed up our house so nicely to sell that I was kicking myself for not doing it sooner so we could enjoy it more.  If you can afford it, and it sounds like you can, having someone come in to finish the bathroom and your son's bedroom would be my first priorities.  It's not just a question of the relative value of investments, but rather of liking your life.

[SKL]

Money is there to be used.  Sounds like you already have more savings than most Americans.  And you have work that needs to be done.  I wouldn't wait any longer.

 

Nothing is guaranteed, no matter how much money you have or don't have.  If you wait until you have enough savings to handle every possibility, you'll never get to enjoy life.  And then, even if you never enjoy life, all those bad things can still happen to you, and they'll affect you more.

[StephanieZ]

Well, some of those things are super cheap, but labor intensive. For instance, drywall is like dirt cheap, surely under $200 for a bed room. So, that one bedroom project could be done with nearly no expense.

 

So, first of all, I'd prioritize getting the cheap-but-labor-intensive stuff DONE since you don't want stacks of materials around anyway. Get that stuff good and done before putting more cash into more materials. 

 

Second of all, if you are in the stock market, as you are, you've GOT to ignore the chatter about market timing. Google up "market timing" and you will see that every single smart personal investment advisor in the universe tells you not to do it. Ever. You will absolutely lose money over the long term if you do that. You are NOT gonna' be better at market timing than the guys who run the big funds who do it for 10,000,000/yr. And even THOSE guys suck at it. Really. Stock market investing has got to be a set-it-and-forget-it thing for us little people if you don't want to lose long term. Believe me, I was freaking out about the markets on Nov 9. I was sooooo worried that we'd lose a lot . . .  and good grief, the market is up like 13-15% in the last 6 mos. WTF? That's nuts, I have no idea how all these investors aren't as freaked out as I am about worldwide economic catastrophe, but, well, whatever. I stuck to my plan -- set it and forget it -- and I keep sending in my contributions . . . and our accounts are higher than ever. I *know* that over the years, they come down and then go up. Seen it before, will see it again. It's cool, because that money is in there for decades, not months . . . SO, anyway, that's my 2c on your market timing thoughts. DON'T. 

 

On the other hand, if you want/need to spend those investment accounts, go for it. Just be sure to factor in any taxes. You've probably got some long-term capital gains (and possibly some short term) in those accounts that you'll capture upon sale. 

 

If you are gonna sell investments to pay for the home improvements, I'd do it methodically . . . First do your free/cheap improvements w/o selling anything. Then sell, say, $1-5k increments, enough to get supplies for 1-2 projects . . . Don't sell more until you're done with the last batch of projects. I'd do it this way because otherwise, it's too easy to either buy a bunch of supplies that sit and make me crazy not getting used . . . or spend the $$ on other things and not get the projects done! Besides, this does a bit of "dollar cost averaging" for your sales, which reduces the risk of market timing inherent in a larger one time sale. 

[prairiewindmomma]

The investment accounts aren't retirement accounts, so there aren't penalties for withdrawals.  Paying taxes on the gains on the base, however,  may significantly cut into your funds.

 

Markets are cyclical.  They just are.  The problem with selling at any point is that once that investment is gone, it's gone. I have a little $500 account that I made and have just left to illustrate to my kids what markets do.  I made an original investment of $500 during the tech boom (late 1990s). When the market corrected during the tech boom, the value fell to $350ish.  The investment recovered and went to $600-700, and then the 2008 recession hit. The value fell to $250.  My little investment right now is worth about $750.  Over a 20 year period, it has seen a lot of movement, but it's still the same amount of stock that I purchased.

 

By contrast, with the exception of a few pocket areas, housing over the last 20 years has had a -.05% return. One could argue (and I do believe this, fwiw), that housing is also due for a correction in a number of areas.  It's very rare that we see a correction in just one sector of the economy.

 

The materials that you list aren't expensive.  It's just time consuming.  Unless your house payment is likely to go down with the move, I vote that you keep saving and setting aside weekends to DIY.

[Χά�ων]

Agree with a PP that some of what you listed are material cheap and labor heavy. My question is do you all have the skill set to do the work? If so I would buy materials and make the work a priority, ie after work and weekends are dedicated to working on the house. If possible use vacation time to work. On this line, if you have friends who have the basic skill set I would tap into that and have work days with dinner and/beer provided.

[mommyoffive]

Great advice here.  

 

Is your 9k your only e-fund?   How long does that last you? 

 

 

Will you make money on your house when you sell? 

If so I would do the cc 0% thing. 

 

 

I would not pull money out of investments.  

[ktgrok]

Part of the problem is yes, they are labor intensive more than material expensive...which means my DH feels he should do it all himself. However, he realistically can't keep working two jobs, and going to Grad school, and get it all done, and have time with the kids, etc. So he gets overhwhelmed, and it just gets partially done or not done. 

 

I think we should at least pay for someone to do the fencing for us. And he also doesn't want to spend the money in savings on materials, as that is our emergency fund. 

 

hmm.things to think about

[Χά�ων]

Part of the problem is yes, they are labor intensive more than material expensive...which means my DH feels he should do it all himself. However, he realistically can't keep working two jobs, and going to Grad school, and get it all done, and have time with the kids, etc. So he gets overhwhelmed, and it just gets partially done or not done.

 

I think we should at least pay for someone to do the fencing for us. And he also doesn't want to spend the money in savings on materials, as that is our emergency fund.

 

hmm.things to think about

Why can't you do it? Depending on the ages of the kids, they can help out.

[prairiewindmomma]

Our new cedar fence (two sides only) ran almost $4k this spring.  Our repair from the leaking roof--to replace drywall and paint a closet--ran $1500. Will withdrawing the funds go as far as you'd like?

 

I think my challenge that I have with you withdrawing the funds are these:

1. The money is gone once it's gone.

2. I'm guessing your new house will be bigger with a larger house payment, so this is funding a move that will increase expenses.

3. House expenses, as a part of life, just happen: the leaking roof, the leaking toilet, etc.  Each was seen as a crisis in its own right.  You are having a hard time funding through emergencies the life you are currently living in a smaller house.

 

A 9k cushion isn't much.  (I say this as a woman who has had to do the following repairs in the last six months: replace air conditioner, replace roof, replace fence (it blew over), plumbing repair, replace microwave) and still needs to replace her deck and sprinkler system. (No irrigation = no grass here.)  Both of our vehicles are pushing 200k, and we're just hoping they will keep going another year; dh doesn't have ac in his (in Texas). 

When I say that I get the frustration and sacrifice, I do....

Edited June 13, 2017 by kbeal

[ktgrok]

Why can't you do it? Depending on the ages of the kids, they can help out.

Youngest is 2 months old. Not very helpful :)

 

And I'm incredibly not good at this type of stuff. Demolishing, yes. Anything that requires precision measurements? No. Not at all. Terrible. I get sidetracked and screw it up and have to start over and waste materials. And no one to watch the 2 month old while I do drywall or whatever. She's not even old enough to go on my back in the carrier yet, only front carry. 

[Χά�ων]

In that case I would look at the skills that friends and family have and tap into that.

[ktgrok]

I should clarify these are all repairs (other than the toilet) from before we bought the house. We bought it as a foreclosure that needed a ton of work. We have financed with money and time and a lot of other repairs. So it's not that we can't afford to do the regular maintenance. We've done all that plus these things. We've already completely remodeled the kitchen, replaced appliances, made roof repairs, replace the pool pump and filter etc. We just should not have bought a fixer-upper with my husband so busy.

[prairiewindmomma]

Ok, that makes more sense. Thanks for clarifying!

[SKL]

Honestly, I'd bite the bullet and pay someone to get it done.  At least the stuff that isn't practical to quickly do yourself.

[MommyLiberty5013]

We have 401Ks and a college fund, and then another set of investments that were begun with an inheritance my husband got before we married. It's currently doing well but we are hearing talk of a possible "correction" in the stock market. At the same time, we really really need to make some improvements on our house. We want to sell the house and move closer to my sister and parents (move about 30 minutes away, to the other side of the metro area). We need to do the improvements before we can sell. (and living without them done is stressing my husband out)

 

We need to:

 

Finish bathroom remodel (already tore out the tub and drywall down to the studs and the flooring has been torn out and is bare concrete slab...the tile was leaking, ad then the toilet leaked sewage into the flooring. Toilet is fixed, but obviously this all needs to be finished.)

 

Replace fencing. It's barely standing on two sides of the yard. 

 

Replace flooring and some drywall in my son's room where the roof leaked (roof was repaired but there was water damage). wE have the flooring to do it, and my husband can do this himself, but need to buy the drywall. 

 

Do something about the yard in the back....probably put down some sod in a small area. 

 

Dig a trench around the back screened patio to keep dirt from washing back onto patio every time it rains, and then power wash the patio. 

 

We are considering taking some money out of those investments and paying someone to do the fencing, and buying the rest of the materials needed for everything else. Possibly paying for someone to do parts of it. Husband works a full time job, teaches part time at a university, and is getting his masters so time is a huge issue...some of these jobs are taking forever because of this.

 

We would still have about 9K in savings, and wouldn't wipe out the investments by any means. Is it crazy to do this? Or, given the state of politics/finances/etc (not trying to get political...but there is definitely more volatility right now) would it possibly make sense to move some money from stocks to basically invest it in real estate (aka our home). 

You will likely get heavily penalized and taxed on any withdrawals on the 401(k) prior to your retirement age. IF you must pull money out, then do so out of the non-retirement assets.

 

Regarding the market and volatility, yes a large correction is HIGHLY likely. It's not so much politically related as it is just the unsustainability of so much in the American economy that has been building over the past decade/years AKA bubbles. If you want to try and protect some of your assets for a troubled economy, you can look into precious metals investing such as gold and/or silver as both rise when stocks plummet. But they are also highly volatile so some people do not like that. That said, gold has risen 400+% in the past decade. You also may wish to rethink stocks that involve consumer goods and go more into utilities. Consumer spending tanks when the economy tanks.

 

Depending on how desirable your neighborhood is, if you want to move, I would advise doing the bare minimum on home improvements if you want to sell. Look at and read about easy ways to update and clean your home before spending a load of money on updates. Returns on investments are best for kitchen and bath projects. But you will still likely only recoup only 90% or less on those updates when you sell.

 

Look at homes online that have sold in  your 5 mile radius in the past 6 months. What did they have that you don't? How long were they listed? Make your project list based off those facts rather than nebulous ideas of home renos.

Edited June 13, 2017 by MommyLiberty5013

[ktgrok]

 

 

Depending on how desirable your neighborhood is, if you want to move, I would advise doing the bare minimum on home improvements if you want to sell. Look at and read about easy ways to update and clean your home before spending a load of money on updates. Returns on investments are best for kitchen and bath projects. But you will still likely only recoup only 90% or less on those updates when you sell.

 

Look at homes online that have sold in  your 5 mile radius in the past 6 months. What did they have that you don't? How long were they listed? Make your project list based off those facts rather than nebulous ideas of home renos.

 

I would call these more repairs than improvements. Things like replacing the bathroom tile because the shower was unusable due to water getting behind the tile. Or replacing the fence because it's going to fall down. There are already some boards that are falling. Or replacing water damaged flooring. Stuff that just isn't real nice we will keep. Same for the other repairs we have done, it has all been things that have to be redone. Not just for cosmetics.

[JustEm]

Why are you replacing the fence instead of simply tearing it down entirely? I can't imagine you would get back you investment on replacing it. Or did I misread and you are only making repairs to it and not replacing entirely

[ktgrok]

Why are you replacing the fence instead of simply tearing it down entirely? I can't imagine you would get back you investment on replacing it. Or did I misread and you are only making repairs to it and not replacing entirely

We have two large dogs so we need to have a fenced yard. Also, there are rules about fencing in the yard with childproof gates if you have a pool.

[JustEm]

We have two large dogs so we need to have a fenced yard. Also, there are rules about fencing in the yard with childproof gates if you have a pool.

Oh I missed that you have a pool. That would certainly mean new fence in most cases.

[solascriptura]

I wouldn't take any money out of investments that charge a penalty. I believe 401ks will but I'm not as sure about college accounts.

[ktgrok]

I wouldn't take any money out of investments that charge a penalty. I believe 401ks will but I'm not as sure about college accounts.

We wouldn't touch the 401K, IRA or college accounts. Just the other investments. Our Edward Jones guy is pretty good about making sure we don't pay much when we have taken money out before.

[Χά�ων]

What about going to Home Depot and looking at their project financing? We are looking at it for a roof and debating doing that rather than take the money from savings.

 

Lowe's is not as generous in our area.

[Scarlett]

What about going to Home Depot and looking at their project financing? We are looking at it for a roof and debating doing that rather than take the money from savings.

 

Lowe's is not as generous in our area.

 

 

We have done several projects this way. Using Lowe's interest free offer.  The last one was for 24 months if the amount was over $2K.  We remodeled an entire bedroom (floor, window, closet, paint, trim, everything) Before that we did a bathroom gut job. 

 

Doesn't solve the labor cost problem though.

 

We are getting a HELOC to finish ours up.  But we are mortgage free and have sooooo much left to do.  I just couldn't take it anymore.

[Χά�ων]

We have done several projects this way. Using Lowe's interest free offer. The last one was for 24 months if the amount was over $2K. We remodeled an entire bedroom (floor, window, closet, paint, trim, everything) Before that we did a bathroom gut job.

 

Doesn't solve the labor cost problem though.

 

We are getting a HELOC to finish ours up. But we are mortgage free and have sooooo much left to do. I just couldn't take it anymore.

We are looking at a roof so labor will be included.

[HTRMom]

Do not go into this expecting to get your money back when you sell. You won't. You need a timeline of paying these things back.

 

I would not hesitate to use the investment money, assuming it's not for retirement. What's the point of having it if you won't use it when you need money? But a HELOC could be another good option, depending on your equity. Still, you might end up tapping into those investments to buy the next house, since you will pay that back with the proceeds.

 

 

Sent from my iPhone using Tapatalk

[Ravin]

I would want to know what the tax hit would be. And whether it might be an option to take a loan from the 401K rather than withdraw the funds.

[ktgrok]

Do not go into this expecting to get your money back when you sell. You won't.

 

 

The issue isn't getting our money back, or selling for more money. It's being able to sell at all, really. I mean, I suppose some sucker might be dumb like us and take it as is, but I doubt it. 

Edited June 13, 2017 by ktgrok

[HTRMom]

The issue isn't getting our money back, or selling for more money. It's being able to sell at all, really. I mean, I suppose some sucker might be dumb like us and take it as is, but I doubt it.

Right. You have to do it, but you also have to plan to pay back the money, unless it's ok to just lose the investment money.

[KatieJ]

If you are planning to sell when the projects are done, I would look at zero percent credit cards, equity bank loan, or whatever costs you the least amount in charges/interest etc with the game plan that you get it done quickly, sell and pay off the debt immediately. Life doesn't tend to get calmer.

[Scarlett]

The issue isn't getting our money back, or selling for more money. It's being able to sell at all, really. I mean, I suppose some sucker might be dumb like us and take it as is, but I doubt it. 

 

 

This is EXACTLY right.  Sometimes you have to spend some money just to get out.  But I doubt you lose money if you bought a fixer.  We did and we expect to make a lot of money when we sell, even now with taking out a 40K HELOC.

[ErinE]

Never do anything trying to "time" the market. I'm in finance. I only invest our money in target date retirement exchange traded funds. I ignore our investments except when I'm reconciling accounts. There's tens of thousands people trading on massive floors, managing billions, and talking to other seasoned investors all day long. As Stephanie noted, they're terrible at it. Study after study has shown buying and holding index-based funds outperforms active trading.

 

This isn't financial advice, but I wouldn't touch any tax-sheltered retirement or college funds. There's a large tax penalty in addition to the income taxes on the withdrawn funds.

 

As far as the renovations, I would look into 0% financing whether through credit card or home improvement stores. Make a list of what needs to be done and estimate the cost, knowing it likely will be 10-20% more. Our last home renovation exceeded our budget by 100%, but that was a whole house renovation.

 

Drywall is relatively easy to do, but hanging it is a two person job. Given what you described, if you have someone to watch the children, you and your husband could replace the dry wall and tape and mud in a weekend. Painting could done the next weekend.

 

Tile is more tricky. If neither of you have placed tile before, I would recommend you hire it out. With just a bathroom, they can be done in a day, assuming the space is already prepped.

 

Fencing is another weekend job since it seems you won't replace the entire fence. Easy to do yourself or help your husband assuming you have childcare assistance.

 

For flooring, I'd hire someone to install it if it's carpet, tile, or wood. Professionals can do the job quickly.

 

Given that everyone is busy, consider hiring a handyman service with general contractor capabilities. The GCs we've worked with charge 10% over cost and labor, but their experience and advice smoothed the renovation process.

[Katy]

I'd call 3 well respected contractors and get estimates.  DH was determined to redo a deck at our last house, but when we got estimates we realized there was NO POINT in doing the work ourselves.  The contractor just wanted some work to give his guys hours between two bigger projects, and we were very flexible with timing.  The contractor was charging very little (I'm not sure he made more than his laborers), and because of his materials discounts the contractor could literally do the whole deck cheaper (and it turned out, better), than we could have ourselves.  It was so worth it we also called him in for other little projects when we sold.  10 of them cost $1300, which was MUCH better than DH doing it, given his work hours at the time.

 

The guy did such good work we became close friends, at least until we moved away.

 

 

ETA:  I'd be more inclined to pay with emergency fund than pull out of market, and IME market corrections always take longer than they say they will.  Especially because a great deal of it has to do with international currency.

Edited June 14, 2017 by Katy

[OneStepAtATime]

1.  I would really hesitate to take out the money that way.  I agree with others, is it possible to use 0% financing through a credit card then just pay it back before the interest hits?  The ONLY way I would seriously consider going that route is if doing so gave you the possibility of hiring out for the bigger jobs instead of them hanging over your DH's head.  It sounds like he is way overloaded and will be for a very long time to come.  That causes a lot of mental stress.

 

2.  If you took out money, do you even know pretty accurately how much money you would actually need to finish all of these jobs if your DH did them vs. hiring out?

 

3.  Have you and your DH realistically estimated the time it will take to finish each job and laid that out against what time your husband actually has?

 

4.  Have you actually called and gotten people to come out, inspect and give estimates from well respected contractors for any of these jobs (but especially the bathroom)?  I would do that first, if you haven't.  I would want hard numbers to work with before yanking money out of investments.  Especially for the bathroom, since that is a very time consuming, labor intense job, I would see what a contractor would charge and how long it would take.  Has your DH done a lot of tile work?  Your DH could probably do the fencing himself over a couple of weekends or so, especially if he had someone to help with the posts, but the bathroom will take a lot of time with just one person doing it, especially one exhausted, overworked person.  Mucking it up will be more costly than mucking up a couple of fence boards, too.  Plus, in reselling the house a lot of people are going to care more about how the bathroom looks than the fence.  If your DH is exhausted and rushed it may not come out looking as professional as you would like for selling. Get an estimate for the bathroom at least and by more than one contractor.  Make certain you specify the materials/style you want so the estimates are comparing apples to apples.  It may be more affordable than you think, and if they could get in and out in 2-3 days tops that might help with mental stress as well as taking a very labor intensive job off the list.  

 

5.  Also, if you could do the bathroom right away, that would also give you another working bathroom.  It benefits you immediately.  

 

I hope you find a workable solution.  Best wishes.

[kroe1]

It seems like a no brained to me. 1. You must move. 2. The only way to move is to do the improvements. 3. You have a source of cash for the improvements.