“I’m paycheck to paycheck.” I make $350,000 a year, but I have $88,000 in student loans, $170,000 in car loans, and a mortgage that I pay $4,500 a month. Do I need professional help?

I’m the first of my generation to own a house and the first to earn that much per year and I don’t want to spoil that. How, concretely, can a financial adviser help me?

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Question: By the end of 2022, I will have earned $350,000 before taxes as sole breadwinner and head of household. It’s a great starting point and I’m very aware of how lucky we are to be in this position, but I’m always looking to improve. I currently have $88,000 left in student loans (originally close to $150,000) and very little credit card debt (less than $2,000 with over $25,000 available). I have two car loans totaling $170,000 for two electric vehicles at 5% interest.

I was recently offered a $200,000 HELOC at 9% which would help me lower some of my monthly payments and do some minor home repairs and upgrades, but I want to make the right choices. And I was also introduced to a few long-term real estate investment opportunities that are out-of-state rental properties that are currently giving him a 10-12% return on investment. But my biggest concern is that after taxes, 401(k) contributions, bills, savings, and the mortgage ($4,500), on paper, I’m from paycheck to paycheck. other. I would like to use this HELOC to consolidate debt while participating in some of these investment opportunities. I’m the first of my generation to own a house and the first to earn that much per year and I don’t want to spoil that. How, concretely, can a financial adviser help me? (Are you also looking for a new financial advisor? This tool can help match you with an advisor who might meet your needs.)

Answer: You have a few questions to address here, so let’s go through them one by one. The first being the HELOC. Yes, HELOCs can be a good way to consolidate debt, but the rate you’re offered isn’t advantageous, as average HELOC rates are just over 6%. “I would ask if 9% is the best rate you can get because it seems a bit high,” says Chris Chen, certified financial planner at Insight Financial Strategists. Additionally, “I would like you to consider the potential impact that our Fed policy and inflation have on interest rates, as HELOCs generally have variable interest rates and we are in a rate hike. You can start at 9% and end up being much higher,” says Chen.

Plus, your student loans, car loans, and mortgage are all likely below 9%, so consolidating through a HELOC is unlikely to save you money. “You might want to start somewhere different, like the snowball method, where you focus on one loan, usually the smallest one, and direct all of your resources to repaying that loan while maintaining payments on the others,” explains Chen. This method might work to finish your student loans, and maybe one of your car loans, to start with.

Having a problem with your financial advisor or have questions about hiring a new advisor? Email [email protected]

As for these real estate investments, what do you really know about these returns? “When it comes to real estate investments, I assume the 10% to 12% ROI that you are talking about is the income you would get from the investment. If so, that’s very high, and often when you get a return that’s significantly above the norm, there’s something else that makes the investment less desirable. Be careful,” Chen said. (Are you also looking for a new financial advisor? This tool can help match you with an advisor who might meet your needs.)

Certified Financial Planner Kaleb Paddock says you might want to work with a financial coach before working with a financial advisor. While a financial advisor helps develop investment strategies and long-term financial plans, a financial coach provides a more educational experience and focuses on short-term goals for money management. “A financial coach will help you pay off all your debt, maximize your cash flow, and create systems and processes to proactively direct your money,” says Paddock.

While it’s good to have a high income, there’s a concept called Parkinson’s Law, which basically states that your expenses will always rise to reach your income, no matter how high that income is, Paddock explains. “Working with a financial coach will help you beat Parkinson’s Law, eliminate your debt, and then allow you to supercharge your investments and life planning with a financial advisor,” says Paddock.

A financial advisor might also be able to help, and Danielle Harrison, Certified Financial Planner at Harrison Financial Planning, advises looking for someone who does comprehensive financial planning and can help you create a more comprehensive plan for your money. “They can help you create short-term and long-term goals and then help you with advice on the financial decisions and opportunities presented to you,” says Harrison.

A financial advisor would also help you take a long-term approach to your money and create a spending plan where you don’t feel like you’re living paycheck to paycheck on a $350,000 salary. . “Everyone has blind spots when it comes to their finances, so finding a knowledgeable finance partner can be invaluable,” says Harrison. (Are you also looking for a new financial advisor? This tool can help match you with an advisor who might meet your needs.)

Having a problem with your financial advisor or have questions about hiring a new advisor? Email [email protected]

*Questions edited for brevity and clarity.

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