BiggerPockets Money12 Feb 2021

170: Finance Friday: Trading Debt for Cash Flow and Liquidity with Teacher Erik

Erik and his wife have three big debts to tackle: their mortgage on their primary residence, their mortgage on their rental property, and a HELOC (home equity line of credit) taken out as the down payment for their rental property. So, which debt should they tackle first?

As two school teachers in New Jersey, Erik and his Wife made smart moves earlier this year by closing on a rental property, in order to have another stream of income coming in. They already have well paying jobs, pension plans, IRA accounts, and other ways of setting themselves up for the future, but how can they streamline their debt payoffs and maximize their cash?

First, Mindy and Scott walk through budgeting, and put an emphasis on why you should separate out your business expenses and personal expenses, and make sure they don’t intertwine. Then they go on to tailor a plan of action for Erik and his wife, giving some great examples of leveraging low-interest debt in order to pay off higher interest debt and fill emergency funds.

Whether it’s personal or business debt you’d like to tackle, this is a great episode going through the pros and cons of paying off debt quicker!

In This Episode We Cover

Why rental property owners should always have a strong safety reserve of cash
When prepaying loans may be a good or bad idea
How to not over-categorize your budgets and expense tracking
Pros and cons of using a HELOC to finance a down payment
30 year mortgages vs. 15 year mortgages (rental and primary residences!)
Why you should separate your business expense tracking from personal expense tracking
Why a 457(b) plan is great for those who have it available
And So Much More!

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