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Started By
Message
MB, I could use some general advice
Posted on 11/12/13 at 10:14 am
Posted on 11/12/13 at 10:14 am
Here's some backstory:
- Wife and I make about $115,000 combined
- CQQ jr on the way (roughly 1 month away
)
- Wife has 8 years left on PT student loans ($1250/month
)
- Small, 3 bed, 1 bath home ($780/month - will do for now)
- $10,000 emergency fund
- Saving $1000 a month after all bills
- Both contribute to 401k to get co. match
- Owe $4000 on her car (0% interest) and $9000 on my truck
- No CC debt
Our goals are to pay off her car to hopefully offset the cost of the baby ($300/month - we won't be using daycare and she will (hopefully) breastfeed). That should be done in the next 3-4 months. Correct me if he'll cost more.
After that, I'm cloudy on how we should proceed. I'm in Lake Charles and the housing market is about to boom. I think prices on homes in our area are going to soar along with interest rates. I would like to start saving money for 1-2 years for a down payment along with PMI payment up front if we don't get to 20%. I know we should probably stay in our little house for the next 5-6 years while we tackle her loan but damnit if I'm not getting antsy. We've both gone through school and have good jobs. I want to reward ourselves with a nice home before we're 35. By nice, I'm talking $250,000. We couldn't do it now because with a $1500 note, that's roughly $700 more than we pay now. That would leave us with $300-$500 left every month - don't think I would be comfortable with that.
Any advice moving forward? Is $10,000 in a savings smart/dumb? Too much/too little? Is paying off a car with no interest smart? Using the snoball method, I'd like to get the smallest one out of the way.
- Wife and I make about $115,000 combined
- CQQ jr on the way (roughly 1 month away
) - Wife has 8 years left on PT student loans ($1250/month
) - Small, 3 bed, 1 bath home ($780/month - will do for now)
- $10,000 emergency fund
- Saving $1000 a month after all bills
- Both contribute to 401k to get co. match
- Owe $4000 on her car (0% interest) and $9000 on my truck
- No CC debt
Our goals are to pay off her car to hopefully offset the cost of the baby ($300/month - we won't be using daycare and she will (hopefully) breastfeed). That should be done in the next 3-4 months. Correct me if he'll cost more.
After that, I'm cloudy on how we should proceed. I'm in Lake Charles and the housing market is about to boom. I think prices on homes in our area are going to soar along with interest rates. I would like to start saving money for 1-2 years for a down payment along with PMI payment up front if we don't get to 20%. I know we should probably stay in our little house for the next 5-6 years while we tackle her loan but damnit if I'm not getting antsy. We've both gone through school and have good jobs. I want to reward ourselves with a nice home before we're 35. By nice, I'm talking $250,000. We couldn't do it now because with a $1500 note, that's roughly $700 more than we pay now. That would leave us with $300-$500 left every month - don't think I would be comfortable with that.
Any advice moving forward? Is $10,000 in a savings smart/dumb? Too much/too little? Is paying off a car with no interest smart? Using the snoball method, I'd like to get the smallest one out of the way.
This post was edited on 11/12/13 at 10:19 am
4
Posted on 11/12/13 at 10:17 am to CQQ
What is the interest rate on the truck?
Posted on 11/12/13 at 10:19 am to Broke
2.9%
Posted on 11/12/13 at 10:25 am to CQQ
I would squirrel away the extra money to bump up your savings. At that point you can do what you want with the money. If it's pay the car or truck off, it's up to you. You have the option to do that if you want. But I think your emergency money is on the low side.
Posted on 11/12/13 at 10:56 am to CQQ
My main question would be how long is your wife going to stay at home with the baby? You say you're not using daycare, so is she not going to work, or are one of y'all's parents going to watch the kid for free?
Posted on 11/12/13 at 10:59 am to Broke
quote:
But I think your emergency money is on the low side.
to me this depends more on the stability of your income(s) and your credit situation. $10k is a lot if you have a real stable job and enough credit to absorb a financial hit.
as for the OP, if you really want a house, i'd start putting money away for that rather than paying down the 0% debt. and i wouldn't wait until you have 20% if it was me. if interest rates are going to go up (which i think they are), and you are right about home prices going up, it pays off to get in ASAP. PMI sucks no doubt. but the lower rate you get now may more than make up for it. and if home value goes up as much as you think, you should be out of it relatively quickly.
also, don't forget to start saving $ for kid's education
Posted on 11/12/13 at 11:03 am to CQQ
I'd say the emergency fund is a little low. But remember, the more monthly notes you have open, the more $$$ you should carry in your emergency fund.
Here is what I'd do:
-Don't touch the $10k in your emergency fund and save up the $1k/mo and put it in your emergency fund until you get to the amount to pay off your truck in addition to the $10k you have.
- I'd not pay off the 0% car note- that is free money in your pocket).
- You can justify the emergency fund temporarily dipping back to $10k when you pay off your truck since that is one less potential bill you need to be protecting yourself from.
- Once the truck is paid off, the $1k per month you are saving plus the cash freed up from not having a truck note will give you a better idea what you can afford in a house. Plus you will have a better idea how much the new child will actually cost instead of just estimates.
-The emergency fund should theoretically be 6-9 months of living expenses and not just a round number. It needs to go up when your monthly expenses go up and vice versa. Work on getting that where it needs to be when you are down to 1 car note. Then, start saving for the house upgrade.
- Having a nice house is great but if that is what you want, keep in mind how much you will be clearing and be prepared to cut back on other fun expenses.
In my opinion, once you have kids, the most important thing to do is to try to increase your net worth each year. They are expensive so any progress you make for retirement and paying down debt is a win, especially when kids get older and more expensive.
Here is what I'd do:
-Don't touch the $10k in your emergency fund and save up the $1k/mo and put it in your emergency fund until you get to the amount to pay off your truck in addition to the $10k you have.
- I'd not pay off the 0% car note- that is free money in your pocket).
- You can justify the emergency fund temporarily dipping back to $10k when you pay off your truck since that is one less potential bill you need to be protecting yourself from.
- Once the truck is paid off, the $1k per month you are saving plus the cash freed up from not having a truck note will give you a better idea what you can afford in a house. Plus you will have a better idea how much the new child will actually cost instead of just estimates.
-The emergency fund should theoretically be 6-9 months of living expenses and not just a round number. It needs to go up when your monthly expenses go up and vice versa. Work on getting that where it needs to be when you are down to 1 car note. Then, start saving for the house upgrade.
- Having a nice house is great but if that is what you want, keep in mind how much you will be clearing and be prepared to cut back on other fun expenses.
In my opinion, once you have kids, the most important thing to do is to try to increase your net worth each year. They are expensive so any progress you make for retirement and paying down debt is a win, especially when kids get older and more expensive.
Posted on 11/12/13 at 1:09 pm to Crbello4Hiceman
quote:
My main question would be how long is your wife going to stay at home with the baby? You say you're not using daycare, so is she not going to work, or are one of y'all's parents going to watch the kid for free?
She will stay home with him for 6 weeks (paid) and then my mother will be babysitting
quote:
Crbello4Hiceman
Solid advice
Posted on 11/12/13 at 2:18 pm to CQQ
Here is how I see it:
No CC debt -- A+
2.9% on essentially $13000 auto loans - B+
Getting full company match - A+
Savings - $12,000 year on $115,000 salary - C
$10,000 ER fund - C
Student loans - $120,000 remaining - hope she is a MD.
Small house - your characterization. For me, I want to be comfortable, and I also look at my home as an investment. Would a $1280 mo. mortgage make you comfortable and be a good investment/neighborhood/ is public school system good? (Here in Jackson, 3 kids in private school is easily $30,000 per year).
No CC debt -- A+
2.9% on essentially $13000 auto loans - B+
Getting full company match - A+
Savings - $12,000 year on $115,000 salary - C
$10,000 ER fund - C
Student loans - $120,000 remaining - hope she is a MD.
Small house - your characterization. For me, I want to be comfortable, and I also look at my home as an investment. Would a $1280 mo. mortgage make you comfortable and be a good investment/neighborhood/ is public school system good? (Here in Jackson, 3 kids in private school is easily $30,000 per year).
Posted on 11/12/13 at 2:33 pm to matthew25
quote:
Student loans - $120,000 remaining - hope she is a MD.
PT - this is the killer
quote:
For me, I want to be comfortable, and I also look at my home as an investment. Would a $1280 mo. mortgage make you comfortable and be a good investment/neighborhood/ is public school system good? (Here in Jackson, 3 kids in private school is easily $30,000 per year).
Understood. This house is 1120 sq/ft home on a dead in road. We are right next to the country club in the best part of town, just not the prettiest street. Also, this house was gutted and completely redone 4 years ago (new roof, electrical, kitchen, tile, bathroom, everything) -only negative is it's 1 bath. What I'm saying is when we do move, it will literally be within a 5 mile radius of where we are now so the schools are not a concern right now.
Posted on 11/12/13 at 2:56 pm to CQQ
Your kid should not cost anywhere near $300/month if she breastfeeds and you do not use daycare
Posted on 11/12/13 at 3:03 pm to Salmon
That's what I want to hear 
I honestly don't think so either but I'm being conservative
I honestly don't think so either but I'm being conservative
Posted on 11/12/13 at 3:08 pm to CQQ
$100/month is more reasonable, unless your wife just goes apeshit with buying new clothes for the baby like mine
Posted on 11/12/13 at 9:47 pm to CQQ
Can't get a better location. I would look at adding a 20x30 master bedroom/bath suite.
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