Stop Being Normal Americans

Sherry and her husband are considering not paying their mortgage. In the long run, is it better to suffer now than to struggle and be in the same spot in five years?

QUESTION: Sherry in Pasadena and her husband are considering not paying their mortgage. In the long run, is it better to suffer now than to struggle and be in the same spot in five years? They owe $612,000 on their house, and it’s worth between $450,000 and $500,000. Dave doesn’t agree that they should default on their mortgage after hearing the numbers.

ANSWER: How do you we know where we’re going to be in five years? You don’t.

I still don’t hear that these bills can’t be paid. With an $11,000 tax refund, you need to change your W-4 by enough to bring home another $1,000 a month. You don’t need to be giving the IRS $1,000 a month in order to get a refund with no interest. You’re loaning them money.

I don’t think the $4,000 is worth getting foreclosed on when you make $150,000. Do you need to roll up your sleeves and clean up some of these other messes—get this truck paid off and begin to work through this rehab loan? Yes. Are you guys needing to go on beans and rice, rice and beans for a while and straighten up some of your debts? Absolutely. But is this house in a situation where you need to throw up your hands and get foreclosed on? No, not with a $4,000 payment making $150,000 a year. Absolutely not.

I do think your husband needs to sit down with you and the two of you together need to work on this budget. You need to work out a different budget every single month and look at exactly where you are. You need to quit eating out. You’re not going to be able to go on vacation and those kinds of things until you get some of this mess cleaned up. You guys are just ditty-bopping along being normal Americans and buying everything in sight. That’s what you were doing. That’s how you got in this situation. Now you’ve had to pull the thing back and change direction a little bit. I think you can make it. I really do.