Stretched Thin With Multiple Jobs

Lori is working three jobs, and she has a $20,000 second mortgage. Should she refinance her home to get a better rate on her mortgage?

QUESTION: Lori in Springfield is working three jobs, and she has a $20,000 second mortgage. Should she refinance her home to get a better rate on her mortgage? Dave discusses Lori’s situation and tries to figure out where her $40,000 income is going.

ANSWER: You have a $20,000 second mortgage. My rule on the second mortgage is that it needs to be in Baby Step 2 unless it is half your annual income or more. In your case, I would roll it out to Baby Step 6 and delay paying it. But with rates down, it would be a good idea, and it would probably help your monthly cash flow, to roll them together.

If you have $15,000 in other debt, that’s not going to take a long time. It sounds like you’re trying to do too many things with this budget right now, and you probably need to simplify it. You’re a detail person, and I think you’ve nerded yourself out in this budget. You need to go to bare bones living to try and get the debt snowball rolling and begin to knock out a couple of these cards as quickly as you can.

It’s not unusual at all for someone to pay off $15,000 on a $40,000 income in a year or two. It’s not easy, but it’s doable. It’s beans and rice, not going on vacations or out to eat, and Christmas is a craft. I’m not saying you have gaping holes in this budget, but there ought to be more wiggle room than you’re describing.