This week on Life or Debt: The McCray & Gucatan Family

Wela Financial Advisors on what we saw, what we learned, and what we should do on this week’s episode of Life or Debt on Spike.

The McCray/Gucatan family has found themselves in serious cash flow issues due to financial decisions made throughout the years, both independent of one another and together as a couple. Bottom line, they need to clean up their financial baggage before trying to pack in the same suitcase!

Filing for Chapter 7 bankruptcy may be the best possible solution for Pat as she has personally guaranteed business debt and this will allow for a complete liquidation and financial re-set. Scot needs to look at Chapter 13 which is a reorganization of debts and would allow him to potentially keep his home and avoid foreclosure. In order to qualify for Chapter 13, however, Scot will have to move back into his main residence to avoid it being classified as an investment property which you can’t maintain in this type of bankruptcy proceeding. This is a serious lifestyle consideration as he won’t be living in the same residence as Pat and the kids. Tough decisions, both financially and emotionally, must be made!

Both Scot and Pat have been making great income so this isn’t a story of low wages but rather too much SPENDING. Pat and Scot need to develop a realistic budget they can stick to. With household income as high as theirs is, there’s no reason to rack up the amount of credit card debt and other personal loans. Yes, they do have a lot of mouths to feed but this comes down to prioritization. Mink coats and $1,000 car payments can’t come before the necessities of basic living. So while living within a budget is paramount to their success, the question we must ask is how do we decide whether or not to rent or buy a house?

At the end of the day, cash flow and flexibility are KING! How much can you afford to pay for the place you live? In today’s low-interest rate environment buying has never been so affordable but that still doesn’t mean it is right for you. How much can you realistically put towards a down payment? 5%? Or the recommended 20%? What kind of commitment do you want? When you buy, you’re on the hook for the life of the mortgage. When you rent, you’re typically only locked in for a year before you can make a change. These and many other decisions play into the answer of whether to rent or buy.

If you're currently facing the question of whether to buy or rent your next residence, here are a few articles that may help you decide.

Renting Versus Buying A Home

Podcast: The Hidden Costs When Budgeting For Your New Home

Buying A New Home - How Much House Can I Afford?

A Starter Home That Ignites A Future Flame

When Good Debt Goes Bad