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Message
A Question About Priorities
Posted on 4/23/16 at 7:29 pm
Posted on 4/23/16 at 7:29 pm
I'm 26, make ~$3.5k take home per month, and have decided I want to buy a home in the next few years or so. Unfortunately, my savings pretty much don't exist (~$2,600 in my checking right now, ~$5k in 401k). The good news is that I have a solid credit score (786), 0 credit card debt, and just a $5,500 car note and ~$10k in student loans remaining. I haven't built much savings primarily because I've been so focused on knocking out my car and student loans. Should I go back to minimum payments on the car ($250 per month) and student loans ($160) and focus on saving for a down payment? Or should I keep driving down debt and accept the fact that I will need to rent until my mid-30s before I can afford a home? I could always move back to Texas and afford a cheaper house, but I really do love it out here on the west coast and would rather not leave. I'm just becoming more and more uncomfortable about throwing out ~$1k a month in rent, and would rather see that money do something for me ASAP.
4
Posted on 4/23/16 at 7:44 pm to agalloch
I think you should probably stick to paying of the car and student loans. After those are done, then I would rigorously save up atleast 20% down on a home. In the meantime, if you are any way handy and have some extra time on your hands: maybe look into buying a small fixer upper Type house that you can work on and live in until those debts are paid. I completely understand not want to throw $1k in rent and not see any return
Posted on 4/23/16 at 8:26 pm to agalloch
I would not buy a home in your situation. No down payment, little savings.
Worst case is you buy home and it drops in value substantially. You will be stuck.
Another almost as bad situation is you buy a home and it needs a 5-15k repair soon after..you will be in debt.
Save money. Home ownership is nice but not if you don't have savings.
Worst case is you buy home and it drops in value substantially. You will be stuck.
Another almost as bad situation is you buy a home and it needs a 5-15k repair soon after..you will be in debt.
Save money. Home ownership is nice but not if you don't have savings.
Posted on 4/23/16 at 8:57 pm to agalloch
Keep knocking out the debt. Renting while you're young has many positives. You should be primarily focused on increasing your income...this will solve most of your money problems.
Posted on 4/23/16 at 9:44 pm to Sigma
His gross is probably 57K a year or so..pretty good for a young person in today's economy.
Yes, increasing it will help a lot. But I don't think his situation is as bad as some are making it out to be.
OP, look into some of Dave Ramsey's strategies for saving a lot of money in a quick amount of time.
Track your spending. Should be able to put away a good chunk each month toward a downpayment. Put it in an online account (Capital One 360, for example) or you could invest it (but I'm too nervous to do this, personally, and tbh you don't really have the savings to risk it either, in my opinion, although you could probably find some relatively safe mutual funds) and don't touch it.
If student loan interest is high, look at Sofi regarding refinancing. They're offering some people 2% rates.
Yes, increasing it will help a lot. But I don't think his situation is as bad as some are making it out to be.
OP, look into some of Dave Ramsey's strategies for saving a lot of money in a quick amount of time.
Track your spending. Should be able to put away a good chunk each month toward a downpayment. Put it in an online account (Capital One 360, for example) or you could invest it (but I'm too nervous to do this, personally, and tbh you don't really have the savings to risk it either, in my opinion, although you could probably find some relatively safe mutual funds) and don't touch it.
If student loan interest is high, look at Sofi regarding refinancing. They're offering some people 2% rates.
Posted on 4/23/16 at 9:59 pm to cfa626
You bring home $3,500/month...and you've got less than 6 weeks worth of income in the bank with no real substantive monthly debt?
Can we start with what you're blowing you're money on every month?
Can we start with what you're blowing you're money on every month?
Posted on 4/23/16 at 10:24 pm to agalloch
I wouldn't buy just because you are young and the ability to easily move across the country for a job upgrade is immeasurable.
Posted on 4/23/16 at 10:53 pm to GFunk
quote:
Can we start with what you're blowing you're money on every month?
I throw $500 extra per month at my car note and student loans...should probably have mentioned that. I live in a modest place, spend $300 a month or so on food, and support my girlfriend while she's in grad school. I could save more, but I don't have any vices. Portland is also getting up there in terms of cost-of-living. I definitely pay a high tax to live here, but I love it. $3.5k a month doesn't go terribly far if you're driving down debt.
This post was edited on 4/23/16 at 11:03 pm
Posted on 4/23/16 at 10:54 pm to cfa626
quote:
If student loan interest is high, look at Sofi regarding refinancing. They're offering some people 2% rates.
Yep, my student loan interest is pretty high, 6.5%. I never considered refinancing them, I'll definitely look in to it.
Looks like I should just deal with renting and get over it. And build some emergency savings as well. I've been fine for a while, but I really should have more in the bank than I do, debt be damned. Thanks y'all.
This post was edited on 4/24/16 at 2:53 am
Posted on 4/24/16 at 9:02 am to agalloch
My advice is different than everyone else's. First, I would max out what you are allowed to put toward retirement. Hopefully you are able to take advantage of a savings plan that allows you to contribute pre-tax dollars. After that I would then lay out a budget to see what you can afford. I congratulate you on paying off so much of your debt. I'm sure that has come with some sacrifice. As far as buying a house, it really depends on what the market is where you live. If prices are on the high end of a cycle, I might wait and put more money towards debt retirement. With that said, I always encourage young people that I work with to buy an inexpensive house if possible. When you are ready to have a family or move into something nicer, the down payment you have from selling your starter home comes in handy. You will also learn a lot about home repair while living in your starter home. Your repairs might not be pretty, but on a cheap house it isn't the end of the world. My first house was 30 years old and in a rural area. When I sold it five years later, it had increased about 10% in value and I ended up with about $25K in cash to use as a down payment on my second home.
Posted on 4/24/16 at 9:56 am to Ramblin Wreck
Don't follow that advice. Home ownership is very overrated and unnecessary for young people today. Only do it once you know for a fact you are staying in an area for an extended length of time (5+ yesrs).
Posted on 4/24/16 at 10:51 am to agalloch
quote:This is the least smart thing that your're doing. I'm trying to be nice.
support my girlfriend while she's in grad school.
Posted on 4/24/16 at 10:59 am to lynxcat
quote:
Don't follow that advice. Home ownership is very overrated and unnecessary for young people today. Only do it once you know for a fact you are staying in an area for an extended length of time (5+ yesrs).
Agreed, It depends on your situation. My company has a generous relocation package. The closing and real estate fees can be a lot of money you are losing if a company isn't paying them.
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