Random Financial Question

TXDirt
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Plano, TX US
We owe about $140,000 left on our mortgage. The company I work for is going through bankruptcy and I expect the company to dissolve in the next few months. As one of the key employees I have been offered about $50,000 to stick around and help wind the company down.

I have no new job lined up yet and expect it could take several months to find employment.

Option A: take that money and put it all towards the mortgage in one lump sum. Thus getting closer to paying off the house which is a goal we have. That would get our mortgage down to $90,000.

Option B: put the money in the bank and “live” off it while I find a new job.

My wife has a small job, I have a little bit of savings, and with unemployment benefits I feel we could get by for a period of time if I go with option A.

If I go with option B, I feel like I would just slowly bleed through that money and at the end of the day not have much to show for it.

Little bit more risk with option A as I don’t have a new job lined up yet. More security with option B but could burn through the money with nothing to show for it.

What does the Vital brain trust think?
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plowboy
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3/25/2022 10:55am
Brother, I don't know what your occupation/skill is so it's hard to say how long you'd be out of work. I assume you'd be paying your mortgage out of the $50k and unemployment. Depending on your other bills...that buys you quite a bit of time. Throwing it all on the mortgage doesn't pay it off and the payment will still be due every month with nothing but unemployment to cover it.

If you can get another job pronto...then throw what's left of the $50k at the mortgage. That wad of money is your lifeline...don't give it to the bank.
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3/25/2022 10:58am
Money in your bank and a higher balance on your mortgage gives you a lot more flexibility.

And if you’re not already, I’d be investing before paying extra on a mortgage.
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3/25/2022 10:58am
New job lined up doesn’t mean anything. Until your working there and your 1st check clears , then you know you hv a legit job. 2 months ago the economy took a big crash 7,800 trucks in Chicago the biggest freight hub in the country and 78 loads available in a 200 mi radius. That’s iL., Wi. mi. And Indiana. Who knows if the 50k at your co checks will clear. A lot of trucking co.s in the last few months went bankrupt.
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plowboy
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3/25/2022 11:04am
New job lined up doesn’t mean anything. Until your working there and your 1st check clears , then you know you hv a legit job. 2...
New job lined up doesn’t mean anything. Until your working there and your 1st check clears , then you know you hv a legit job. 2 months ago the economy took a big crash 7,800 trucks in Chicago the biggest freight hub in the country and 78 loads available in a 200 mi radius. That’s iL., Wi. mi. And Indiana. Who knows if the 50k at your co checks will clear. A lot of trucking co.s in the last few months went bankrupt.
Lol...pro may be doom and gloom but he isn't wrong. I've worked for more than one company that went bust and their promises and paychecks were worthless.
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The Shop

LungButter
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Yellow Pine, ID US
3/25/2022 11:08am
If it were me I'd hold onto the $50k until I had a new gig lined up.

You can always throw it at your mortgage at that point but if it takes longer than expected to get the new gig then that $50k is gonna do you more good in your bank account (or maybe cash on hand given the state of the world) than it will by saving you a little interest on your mortgage.

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motosmith
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Washougal, WA US
3/25/2022 11:16am
I would try to refinance at the lower principal (90k). Then your payment will go down. If you make a standard payment without refinancing, you gain equity but your payment doesn't change.

I don't like the idea of living off the money because it will go to zero with nothing to show for it.

You might consider option C. Buy a new dirt bike.

I think you can find a job pretty easy. Its an employees market. Good luck.
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G-man
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Mesa, AZ US
3/25/2022 11:25am Edited Date/Time 3/25/2022 11:34am
LungButter wrote:
If it were me I'd hold onto the $50k until I had a new gig lined up. You can always throw it at your mortgage at...
If it were me I'd hold onto the $50k until I had a new gig lined up.

You can always throw it at your mortgage at that point but if it takes longer than expected to get the new gig then that $50k is gonna do you more good in your bank account (or maybe cash on hand given the state of the world) than it will by saving you a little interest on your mortgage.

Yep what Lungbutter says is the smart thing to do.
And I would add wait 2-3 months at the new job before throwing any extra $$ at the mortgage just to be safe.

Once you feel comfortable ask the mortgage company what's your true PRINCIPLE payment is each month.
Don't know if you have a 30 year mortgage or what (I had a 15 yr originally) but see if you can condense to a 10 year (low interest) mortgage and by paying the WHOLE principal payment I paid it off in 8 years and saved about $78K!

Like I said in the other thread. "Interest is $$ down the toilet".

I'm not rich enough to be able to light cigars with C notes... Smile

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Falcon
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3/25/2022 11:25am
I would take the money and bank it. Live like you do not have that extra cash, and then when you get your next job, apply that money to your mortgage at that time.
It's nice to have a safety net, just in case. You shouldn't have too much trouble finding work these days, but you never know how that will change.

You didn't mention whether you will still be earning wages from the company or if the $50,000 is your pay for "X" number of weeks while the company goes out. That changes the equation quite dramatically. If you'll still be earning wages, then by all means, put a large sum on your mortgage. You'll basically be moving your retirement date a little closer to today.
plowboy
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3/25/2022 11:40am
What is your skill set bud? Textron is hiring. (Cessna, Beech, ATAC, Bell). ATAC is in Ft Worth. It's not all aircraft maintenance...IT and other stuff.
TXDirt
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3/25/2022 11:54am
Good insights everyone. Thank you!

@Falcon, I will be paid my normal wages for the next few months. There is also a chance I may collect severance on top of this “retention” bonus. But that’s not quite clear yet.

@plowboy, I’ve been with current company for 12 years. First as Director of IT and for the last five years as CIO/CISO.

It’s been a good paying job. Tons and tons of stress though.

I think it will be quite difficult to replace my current income. Good paying jobs are filled by people who don’t want to leave them. I’ll be over qualified for a lot of mid-level jobs.
whyZ
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3/25/2022 12:10pm
Curious as to why you wouldn't consider starting you own company. At least doing some side work while you're phasing out your current gig. Do some consulting, private contracting with 1099's, under the table work. I know a lot of people like being employed rather than being an employer, but give it a shot you may like it.
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colintrax
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3/25/2022 12:13pm
Keep the money. You don't know when you'll have income again and money on hand is more useful than less debt. No telling if we get dragged into this war, if the economy takes a dump, you get in a car accident. Shit happens, be prepared for it.

There's a reason big business have cash on hand AND running debt.
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plowboy
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3/25/2022 12:16pm
TXDirt wrote:
Good insights everyone. Thank you! @Falcon, I will be paid my normal wages for the next few months. There is also a chance I may collect...
Good insights everyone. Thank you!

@Falcon, I will be paid my normal wages for the next few months. There is also a chance I may collect severance on top of this “retention” bonus. But that’s not quite clear yet.

@plowboy, I’ve been with current company for 12 years. First as Director of IT and for the last five years as CIO/CISO.

It’s been a good paying job. Tons and tons of stress though.

I think it will be quite difficult to replace my current income. Good paying jobs are filled by people who don’t want to leave them. I’ll be over qualified for a lot of mid-level jobs.
Yep, that's a pickle. It's either eat crow and start low somewhere else or wait for god knows how long for a commensurate position somewhere else. (Which probably won't be local). Good luck buddy.
skeef
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3/25/2022 12:27pm
It's not hard to find good work right now. I have been offered multiple postions in a matter of two months of searching while with my current employer. Not saying it's easy either but if you are skilled and the current company values that. Those are great interview points. Also people want senior upper level management. Something I struggle with but it would play in your favor.
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TeamGreen
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Thru-out, CA US
3/25/2022 12:31pm
If that $50K comes with add’l stress that you don’t need?
(I saw your comment about this job already being stressful)
I’d maybe consider a nice week-to-week fee for helping “wind things down” & start job surfing immediately.

I won’t be surprised when you nail down something that’s better than you’d expected.

Good luck!
GrapeApe
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3/25/2022 12:31pm
Take the $50k, drive to Choctaw Casino, come home with $100k. Or $0. YOLO
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1
plowboy
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3/25/2022 12:38pm Edited Date/Time 3/25/2022 12:41pm
GrapeApe wrote:
Take the $50k, drive to Choctaw Casino, come home with $100k. Or $0. YOLO
Lmao...I was just about to post that I was surprised no one had mentioned going to the
casino.Woohoo

Grape...you ever heard, "Choctaw Bingo" by Ray Wylie Hubbard? Give it a listen... it'll make ya smile. (All the places he mentions are real...very familiar to us Okies, Arkies, Kansas people).
TXDirt
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3/25/2022 12:48pm
Dump it all into dogecoin?
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GrapeApe
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3/25/2022 1:04pm
GrapeApe wrote:
Take the $50k, drive to Choctaw Casino, come home with $100k. Or $0. YOLO
plowboy wrote:
Lmao...I was just about to post that I was surprised no one had mentioned going to the casino.:woohoo: Grape...you ever heard, "Choctaw Bingo" by Ray Wylie...
Lmao...I was just about to post that I was surprised no one had mentioned going to the
casino.Woohoo

Grape...you ever heard, "Choctaw Bingo" by Ray Wylie Hubbard? Give it a listen... it'll make ya smile. (All the places he mentions are real...very familiar to us Okies, Arkies, Kansas people).
I've only heard the James McMurtry version, but yes very relatable to those who have spent time in the North Texas/South Oklahoma methamphetamine region Laughing
plowboy
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3/25/2022 1:08pm
TXDirt wrote:
Dump it all into dogecoin?
No...that takes time and effort. Instant results at the casino.
plowboy
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3/25/2022 1:10pm
GrapeApe wrote:
Take the $50k, drive to Choctaw Casino, come home with $100k. Or $0. YOLO
plowboy wrote:
Lmao...I was just about to post that I was surprised no one had mentioned going to the casino.:woohoo: Grape...you ever heard, "Choctaw Bingo" by Ray Wylie...
Lmao...I was just about to post that I was surprised no one had mentioned going to the
casino.Woohoo

Grape...you ever heard, "Choctaw Bingo" by Ray Wylie Hubbard? Give it a listen... it'll make ya smile. (All the places he mentions are real...very familiar to us Okies, Arkies, Kansas people).
GrapeApe wrote:
I've only heard the James McMurtry version, but yes very relatable to those who have spent time in the North Texas/South Oklahoma methamphetamine region Laughing
The "Pop knot and gun shop".Wink
Brad460
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3/25/2022 2:26pm Edited Date/Time 3/25/2022 2:27pm
Wait- Wouldn’t that $50k lump sum really only be about $32k ish after taxes? Lump sum payments are taxed very high..Why would you get $50k tax free?

In this situation the last thing I would do is put it towards a low interest rate house loan..

Keep it as a cushion..maybe you’ll get a new job right away and can then put it towards your house later on.

With this current job market, no reason you wouldn’t have a new job before your current one ends..
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LoudLove
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US
3/25/2022 2:29pm
TXDirt wrote:
Good insights everyone. Thank you! @Falcon, I will be paid my normal wages for the next few months. There is also a chance I may collect...
Good insights everyone. Thank you!

@Falcon, I will be paid my normal wages for the next few months. There is also a chance I may collect severance on top of this “retention” bonus. But that’s not quite clear yet.

@plowboy, I’ve been with current company for 12 years. First as Director of IT and for the last five years as CIO/CISO.

It’s been a good paying job. Tons and tons of stress though.

I think it will be quite difficult to replace my current income. Good paying jobs are filled by people who don’t want to leave them. I’ll be over qualified for a lot of mid-level jobs.
Are you in N TX/DFW? There are more IT jobs than people in this area! Keep the $50K and start your job search while closing up your current shop. The interview-to-hire process can take 3+ months, but you shouldn’t have trouble tracking down opportunities. Even jobs you’re not particularly interested can be used to hone your interviewing skills.
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Tracktor
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3/25/2022 2:54pm
motosmith wrote:
I would try to refinance at the lower principal (90k). Then your payment will go down. If you make a standard payment without refinancing, you gain...
I would try to refinance at the lower principal (90k). Then your payment will go down. If you make a standard payment without refinancing, you gain equity but your payment doesn't change.

I don't like the idea of living off the money because it will go to zero with nothing to show for it.

You might consider option C. Buy a new dirt bike.

I think you can find a job pretty easy. Its an employees market. Good luck.
You shouldn't need to refinance to benefit from a lower payment after a principle reduction. "Most" lenders allow you to recast the loan with a principle reduction of $10k or more. Recast = re-amortizing the remaining balance of the remaining term of the loan. Usually for a fee of around $250.

As a mortgage lender my advice is to not put money on mortgage unless you really don't need it. Mortgage debt interest is(usually) tax deductible. It's easier to put money into the mortgage than it is to get it back out. Of course this all depends on your personal goals & financial situation.........
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TXDirt
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3/25/2022 4:16pm
Brad460 wrote:
Wait- Wouldn’t that $50k lump sum really only be about $32k ish after taxes? Lump sum payments are taxed very high..Why would you get $50k tax...
Wait- Wouldn’t that $50k lump sum really only be about $32k ish after taxes? Lump sum payments are taxed very high..Why would you get $50k tax free?

In this situation the last thing I would do is put it towards a low interest rate house loan..

Keep it as a cushion..maybe you’ll get a new job right away and can then put it towards your house later on.

With this current job market, no reason you wouldn’t have a new job before your current one ends..
They gross it up to pay for the tax hit I’ll have.
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TXDirt
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3/25/2022 4:17pm
Thanks everyone for the prudent advice. It is true it will be easy to put that money into the mortgage but will be a lot more difficult to pull out should I need to.

Good points!
mxtech1
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Galesburg, IL US
3/25/2022 6:36pm
You should have an easy time finding another job in that field/industry. Have you been keeping an eye on LinkedIn to see what your job market opportunities are?

Stick it out and get that lump sum money. If worse comes to worse, you could bridge your income with a part time or min wage job for a few/weeks or months just to cover the bills. Go work at Lowe's garden center or something stress free like that until you get your ideal job.

I wouldn't use the lump sum on your mortgage. You would be better off paying off credit cards, auto loans, etc. first. If you have none of those, take the lump sum and invest it into something relatively conservative & let it grow. Whatever you do, don't just park it in the bank and let it sit there.
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TXDirt
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Plano, TX US
3/25/2022 6:57pm
Would it be stupid to liquidate my 401k and pay off my mortgage completely? I’d take a big tax hot obviously accessing it early.

Not having a house payment to worry about feels like it would lift a big weight off my shoulders should I not be able to find employment for awhile.

Maybe I’m too fixated on paying off my house.
tuggy450
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Massapequa, NY US
3/25/2022 7:30pm Edited Date/Time 3/25/2022 7:32pm
No definitely don't liquidate your 401k, you'll get a 10% penalty right off he bat and then have to pay income taxes on what's left. Now consider your income already was higher because of the 50k actually more before taxes, + your usual income, and your IRA withdrawal and you will get absolutely slaughtered in taxes.

take the 50 k, put it into an account and use it to fund more retirement , Roth IRA, etc. Some you can use, if you need it to make mortgage payments. , keep it in reserve. You can always do the pay off your mortgage thing if everything goes south. be essentially bankrupt with no debt.

Ideally, you want to have your savings make you money tax free or deferred, and interest on your debt as a write off on your income if possible.
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TXDirt
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3/25/2022 7:53pm
Good stuff guys! Appreciate the feedback!

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