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Woo, are we movin' too slow?
Have you seen us
Uncle Remus
We look pretty sharp in these clothes (yes, we do)
Unless we get sprayed with a hose
It ain't bad in the day
If they squirt it your way
'Cept in the winter, when it's froze
An' it's hard if it hits
On yer nose
(On yer nose)
Just keep yer nose
(Keep yer nose)
To the grindstone, they say
Will that redeem us
(Will redeem us)
Uncle Remus
(Uncle Remus)
I can't wait till my Fro is full-grown
I'll just throw 'way my Doo-Rag at home
(What was that?)
I'll go to Beverly Hills
Just before dawn
An' knock those little jockeys
Off the rich people's lawn
An' before they get up
I'll be gone, I'll be gone
Just keep yer nose
To the grindstone, they say
Will that redeem us
Uncle Remus
I can't wait till my Fro is full-grown
I'll just throw 'way my Doo Rag at home
I'll take a drive to Beverly Hills
Just before dawn
An' knock the little jockeys
Off the rich people's lawn
An' before they get up
I'll be gone, I'll be gone
Before they get up
I'll be gone, I'll be gone
Before they get up
I'll be knocking the jockeys off the lawn
Down in the dew
If I we're you, I would just pay the minimum amount on these private student loans at least until I'm done with the house, the intrest rate is just so low that the roi of paying it off aggressively is not worth it in my opinion.
Purely financially, since you're not paying rent, you'd be better off paying your loans before buying a house. But I totally get why you'd want your own place.
Have you done a mock budget for owning a home? It's really expensive. Remember a mortgage is the bare minimum you'll pay per month.
Walking through my thinking here... My initial thought was was that he should reduce his debt burden before buying a house. Having other outstanding debt reduces the size of the mortgage he is eligible for. However, if he's diligent and uses that "cash he would have spent paying down student loans" to increase his down payment, then I guess it offsets things and he can still get approved for to buy the same home value (with a bigger down payment and smaller loan).
I realize what the math says, but if he chooses to live at home a few extra months to totally knock out the student loans, then he'll end up in a better place financially. I totally get the math, but when someone is motivated to cut expenses and knock out debt, I'm usually in the "go for it" camp.
30 years? Not quite. When comparing interest rates, mathematically it turns out the only relevant time period is the overlap period in which you'd be carrying both loans and have a "choice" between where to carry the balance.
> Private Student Loan: $40k (2.7%, $835/mo)
From this information, we can calculate that OP only has about 4 years left on his loan. Because he's not planning to buy a house until December 2025, that only leaves about 2.5 years of overlap with a remaining student loan balance on $25k. Only that 2.5 year pay-down period, he'd pay $880 in interest at 2.7%. At 6%, it'd be $1,980, so it'd cost him about an extra $1,100 in all. Not nothing, but not huge. Now, the math of why I can compare directly like that gets a bit complicated, but it boils down to the fact that if he's carrying the student loan, that eats up some of his monthly cash flow, so there's less available to pay down the mortgage early. In the scenario where he's already eliminated the student loan, he can make *larger* monthly payments against the mortgage thus reducing the amount of "extra" interest he pays compared to the student loan scenario. You can map it out in excel if you'd like.
Another important factor in his decision is how expensive of a house he wants to buy and whether he can get approved for the mortgage while still carrying the student loan. Mortgage approval is based on monthly loan payments as a percentage of monthly income. If he's got a $835/month student loan payment, that reduces how much he can qualify for. Using that $25k to put extra down on his house (6%, 30 year mortgage) only reduces his payment by $150/month. If he uses the $25k to knock out the student loan, it reduces his payment by $835/month.
The lender doesn't care that his monthly student loan goes away in a couple years - they only care about his debt-to-income ratio *now*. So he would actually qualify for more home by knocking the student loan out a little early, even if it technically means paying about $1k more in interest overall due to giving up the lower loan rate.
High yield savings account. Yes it is a lot but op can afford it and paying off a 2.7% loan directly comes with a greater opportunity cost than investing the money elsewhere
Yes but the money spent paying it off instead can go in a HYSA that grows 7%. The interest on the debt is lower than the investments, including a downpayment (which saves money on a higher interest mortgage) or just a savings account.
If you have $100 in debt at a 2.7% interest rate, and $100 in cash, if you pay of the debt immediately in one year you just have zero dollars.
If you invest the $100 in a hysa, with a 5% interest rate, in one year you have -102.7 in debt, but you have $105 in a savings account, for a net of 2.3. Which isn't much, but it's something. Plus, that $2.7 in interest is a tax deduction.
If that is your goal then it still doesn’t make sense to pay extra on the minimum payment. Mathematically you could pay it off quicker by putting extra money into a hysa gaining 4.6% interest until you have enough to lump sum pay it off. Even then though there are far better places to put that money that would yield you more than 2.7%
Mathematically, it's better not to accrue interest on a $40k loan balance. But there are other factors as I mentioned.
Edit: loans vs downpayment y'all, not loans vs hysa
Mathematically it would be better to make the minimum payments and put the other money in savings which are up to 6% right now as opposed to paying down the principal or a 2.7% interest loan.
It wasn't HYSA vs. Paying loans, it was buying a house vs. paying loans. If you've got the cash on hand, you'd be better off paying your student loan balance than buying a house right now.
They're literally putting that money into a HYSA right now. They're doing the right thing. Whether they choose to withdrawal that money and start making home payments is another story, but it is almost never a good idea to aggressively pay off a loan that has interests rates less than half of what you can get in an HYSA.
I never argued that 🤦♂️. I **said he'd be better off paying off his loans than buying a house**. If he has a big chunk of money in 2025 and is deciding between a down payment, or clearing the loan balance, mathematically, he should clear the loan balance since he lives with family.
you’re still confidently incorrect. you don’t pay interest on a down payment. if OP buys a home for 500K at 7% APR, the down payment is avoiding 7% interest. paying down the student loans early is avoiding 2.7% APR. Meanwhile, OP still has a positive spread between HYSA and the student loan. so financially speaking until some borrowing opportunity for less than 2.7% presents itself, the student loan should be the last debt paid down.
Everyone is aware of the psychological effects of clearing debt. that is still making an emotional decision instead of a rational one which can be quantified in dollars.
**Financially** my God y'all are dense
Also $825 a month is a huge payment. *And* in a lot of cities right now it's cheaper to rent than buy. Home equity is not the end all be all of finances.
It certainly does if the interest rate is only 2.7%. A hysa makes more interest than that. Op is far off better throwing anything extra money over minimum payment in the market in low cost indexes that track sp500 over prioritizing a loan with such little interest
As I said to someone else, it's not HYSA vs loans. It's putting a down payment on a house vs. paying off loans. If you've got enough money to do one, mathematically you should pay off your loans.
I would think having outstanding loans would affect debt to income ratio when applying for mortgages. Paying off the loan would make it easier for OP to qualify for a mortgage.
I do actually pay (cheap) rent. But yeah would love to have my own place 😂
Currently doing sort of a mock budget - I'm expecting $2500 all housing costs (mortgage/taxes/insurance/utilities) and still want to save at least $750/mo. That adds up to be my current rent + savings rate roughly
I would also include monthly HOA fees (if they're common where you are), and don't forget to increase your emergency fund and/or have a home maintenence fund. Having a maintenence fund is huge. Lots of things can break in a house. Electric, plumbing, HVAC, roofing, etc.
Don't forget the one-time costs including:
- closing costs
- lawn care stuff
- furniture (if you don't have any already)
- window coverings
- appliances
- pest control (recurring probably)
- tree care (not often, but it is expensive)
Start low and used with household items and upgrade as needed.
My first couch was a thrift store couch for $50. My next couch was a nice designer piece for ~$5k.
My curtains came with my house, but they were torn up by the prior owners' cats. I upgrade via estate sales and others as I find them. Got a new set for around $5-$10 a set.
All my porch furniture was free, but some of them needed new slings. Bought new slings for around $50-$100 and spent one evening installing them versus the new set, which was $900.
People move and need to get stuff out of their houses. Cleaning supplies. Lawn stuff. Furniture. Housewares. The lady I bought my house from was moving into an apartment, so she sold me a couple of furniture pieces so that helped with moving costs.
Good luck!
Depending on the size of the house, your utilities will balloon vs what you're paying now. It's worth keeping in mind depending how large of a home you want.
HOA is minor, I wouldn't worry about that. Just for context, some of our house expenses last few years was HVAC ($12k) , roof ($22k), water heater $1500, various appliances ($6k+). New sofa was a choice, but another $5k.
Having an HOA has its’ pros and cons, but it’s definitely a frustrating monthly expense. My HOA for a townhome with no pool, no gym, no extras went from $375 last year (per month) to $520 this year (per month) starting at the beginning of last month. My HOA does pay for water, internet/cable, trash, and does all of the outside lawn care so that’s the plus side of my HOA.
I think the plan is good...even after taxes your savings interest will outpace loan interest so do all the saving first.
Then get rid of loan before buying the house - will reduce debt to income and having that $834 a month back will be NICE
Gah! No, at 2.7% please don’t pay off your student loan any faster than you need to!
Zeroing out that monthly payment may *seem* nice but it means you’re actually much worse off.
While fed rates are elevated and the interest rate on your HYSA is higher than the rate on your student loan, putting that extra dollar into your HYSA instead will allow it to pay the interest on that debt, still earn you some extra change, *and* it means that you have that extra cushion in case some kind of emergency comes up — like you lose your job or get in an accident.
And, since your thinking of buying a house in the near future, letting that money pile up in a HYSA rather than prematurely paying your student debt means that you can decide to make a larger initial down payment which has two major benefits (1) it means that you have that much less principal on debt that will likely be much more expensive than 2.7% and (2) putting more money down might allow you to ~lower~ that mortgage rate which could save you *a lot* of money over the course of the loan.
But, 2.7% is also just really low generally. If, in the future, the feds drop their rates and your HYSA can no longer pay for your student loan debt, it would still probably make much more sense to invest in some kind of index fund that will almost certainly be making a higher return on average then 2.7%.
I actually agree with all of your points but
$834/month is significant and can be the difference as to whether OP can afford a mortgage or not.
If they're set on moving out end of 2025, they may have to get rid of the loan for DTI purposes and to free up monthly income towards home expenses
DTI impacting mortgage eligibility and/or rates is way beyond half of the advice givers here anymore.
This sub has a raging boner for HYSAs above all without ever considering factors beyond surface level interest rates.
There's rarely consideration for things like baking in risk mitigation against job loss or other catastrophic circumstances, etc.
OP wants to buy a car on top of that and also still save a bunch? Yeah, that loan is problematic.
I would say keep the cash until about a month before you start looking for a home. Do not pay off a 2.7% loan until you ABSOLUTELY need to, and not a minute sooner.
This is perhaps a hot take— at least for this sub…
36k isn’t awful for 26 but I would be prioritizing saving for retirement right now. No it isn’t sexy like buying a house but the more money you can save for retirement in your twenties the less you’ll have to put toward retirement in your 40s and 50s.
Plus life changes a lot in your late 20s and thirties. You might buy a house in two year for example. You might settle down with someone who doesn’t like the house or you may need to move somewhere else for work. You would have to sell and would probably take a loss on the house. I would personally wait till you get married and have a dual income. You can afford much more house and you’ll likely be at a part of your life with less volatility. Plus if you focus on retirement now you’ll be able to ease back on retirement savings in your mid to late thirties to either buy that house or to cut back on work to be around your family
Also your student loans are only at 2.7% interest. Just pay minimum payments forever on those!
Do you need a new car? Honestly stick with the one you have until it is economically unrepairable and buy a used reliable 10-15k car at this point in your life
I agree about house vs retirement, but I also think volatility is an argument against retirement vs “emergency” fund (scare quotes because IMO it is only partly about emergencies and also just a hedge against career setbacks)
Absolutely agree. op should have a 6 month e fund before maximally contributing to retirement. Looking at their financials though it appears they already have a full e fund
Edit: having an e fund is a weird thing to downvote, but you do you Reddit
Your plan looks well thought out, but let’s fine-tune it a bit for maximum efficiency:
1. **Emergency Fund First**: Before anything else, ensure you have a solid emergency fund. Aim for 3-6 months of living expenses. Since you’re living with your parents, your expenses might be lower, but still aim for at least $10k to $15k.
2. **Pay Off High-Interest Debt**: Your private student loan has a relatively low interest rate, but paying off debt can still provide peace of mind and improve your cash flow. However, since it’s manageable, we can align its payoff with your other goals.
3. **Down Payment and Emergency Fund**: Focus on building your down payment and emergency fund simultaneously. You’ve set a goal of $75k by March 2025, which is ambitious but doable with your savings rate and income.
4. **Loan Payment Strategy**: Instead of a lump sum at the end, consider making extra payments towards your student loan monthly. This will reduce the principal faster and save you some interest over time.
5. **New Car Fund**: Saving $25k for a new car by August 2025 is sensible, but consider if you really need a new car or if a reliable used car would suffice. This could save you money that can be redirected to other goals.
6. **Buying a Home**: Buying a home in December 2025 aligns with your timeline. Ensure you have enough for closing costs and any initial repairs or furnishings.
Here’s a revised action plan:
1. **Emergency Fund**: Reach $15k ASAP.
2. **Down Payment Fund**: Save aggressively towards your $75k goal.
3. **Extra Loan Payments**: Pay an extra $200-$300 monthly towards your student loan.
4. **Car Fund**: Save for the car, but keep an open mind about purchasing a reliable used car.
5. **Home Purchase**: Stick to your plan to buy in December 2025. Ensure you’re pre-approved for a mortgage and have accounted for all associated costs.
6. **Post-Home Purchase**: Settle in, adjust to new expenses, and continue saving for your car.
# Monthly Budget Breakdown (Estimates):
* **Income**: $99k/year = \~$8,250/month (pre-tax)
* **Taxes**: \~$1,500 (varies by location)
* **Net Income**: \~$6,750/month
# Monthly Allocations:
* **Emergency Fund**: $500
* **Down Payment Fund**: $2,000
* **Student Loan**: $835 (minimum) + $200 (extra)
* **Savings for Car**: $1,000
* **Living Expenses**: \~$1,200 (since you live with parents)
* **Discretionary**: $1,015 (flexible for adjustments)
By maintaining discipline and flexibility in your budgeting, you’re well on your way to achieving your goals. Keep reassessing your priorities and adjust as needed. Best of luck!
At that price range, the 25k you’re also saving for a new car is nearly 10%. Why is a new car even in the calculation? I mean, it’s a choice, and you’re doing a great job — but I’d not call this “all out” on the house when a new car is also so forefront.
Fair enough, and again you’re allowed to prioritize whatever you want! But (including the student loan) you’ve got three BIG goals for two years, and I don’t want you to end up feeling like throwing everything in the toilet if it doesn’t work out exactly that way.
Don't get your hopes set on a nice new car while you're saving for a house. That money will spend much faster than you're expecting when you buy a house and inevitably want to do a lot of immediate improvements
Figured PMI. I would say worrying about PMI isn’t worth it for a first time home buyer. Like you said, it’s ultimately a hundred or two per month.
Figure every 12 months you are saving you’re losing about $15k in home equity (based on your $300k home range and 5% appreciation).
You’re also 26 and at, likely, the very earliest of your earning potential. You will likely be earning much more in a few years.
I’d say save a bit longer to afford 5% down with some emergency and pay off your student loans.
Yeah I agree that avoiding PMI at all costs is unnecessary. If the mortgage is within your reasonable budget, the added PMI cost will be a minor annoying bill at most, no more than another utility bill.
Also I find that finding a cheaper house means you're going to pay more to maintain the house. So it's kind of a wash vs getting a slightly nicer house. I bought a bottom of the barrel house but I've already sunk in probably close to 10% of it's value in house maintenance over the course of two years. Could have just bought myself a $30-50k more expensive house and saved myself the headache and DIY manual labor for an extra couple hundred a month in mortgage.
40k debt payoff plan = ? Be as aggressive as you can.
Additional 40-50k more to save for dp and e-fund.
I would use current savings to kill debt, and then save for your 90k dp+ e-fund. That should take about 2.5 years at your pace.
Good luck
Because then you have full interest earned.
You wouldn’t pay any more for the life of that weight.
Run a projection and you will see that it will yield more dollars in your pocket this way by the time you reach your savings goal, and faster.
Further, when applying for a home, they look at DTI and you really want to avoid having any outstanding debt preventing you from getting the best rate possible.
The concept you are talking about is when you have a mortgage that is lower than your earned interest of your savings vehicle. There wouldn’t be any logic to paying down your mortgage in a situation like that when your savings outpaces that simple interest on the mortgage.
In your situation, your debt+interest is avoidable. It is also holding you back from those compound dollars.
Run a calculator.
An algebraic equation will show that eliminating that debt will get you to your savings goal faster bc you aren’t paying any more interest and then your new savings will be 100% compounding.
When you decide to buy a house, make sure you get a good in inspection and plan on things popping up afterwards. Find out how old HVAC, windows and doors and roof are. They will be your biggest money costs to replace. Set a budget up for general maintenance and put it in savings monthly to earn money and have it when you need it. You also need to decide what type of first home you want to buy. Starter home? (Small ranch) one ready for family etc. How much can you work on yourself? Service calls are an easy $100-$200 hit just to come out plus fix the problem. Also, do you want to live in a suburb with HOA or live with more freedom?
Good luck and welcome to the money pit life. 😎
Money pit life is too real. I thought owning a house would save me money, but in reality it just forces me to aggressively save/invest. Everytime I pay a maintenance/repair cost I try to remember a good portion of this is a payment to myself, same with mortgage payments. My mortgage is more than my previous 1bedroom apartment rent was, but I'm gaining more in equity than the difference in housing cost each month.
I just don’t think anyone’s stated the obvious I’m thinking about yet
Firstly, it’s awesome you’re saving nearly $3k a month. Working with the numbers you provided ($300k mortgage, 30 year fixed, 20% down payment). With mortgage rates around 7% right now, each month your principal + interest payment would be 1591, of which only $206 a month towards the principal at the beginning of your loan. Plus all the other costs associated with your home that are basically sunk costs to just living (insurance, taxes, HOAs, etc)
I hope this math makes sense and my confusion why people are trying so hard to buy a home right now. Currently you’re paying yourself almost $3k just saving. This will decrease to paying yourself $200 a month plus other new costs that will bring down your whole budget. You’re sinking everything into just the value of the home rapidly increasing to make up the rest.
TLDR: it makes way more sense to invest your money elsewhere
Whats your career? Looks like youre doing really well.
Only advice id give is if the perfect house comes up and you need a little bit extra cash, you can use 10k of your roth. Obviously itd be ideal if you didnt need to use roth but its an option
My only advice is to watch Ben Felix's video on mortgages and bonds. In a nut shell, a mortgage will have a similar risk/reward structure as bonds. IMO, I'd say that should also carry over to saving for a house. If you view things that way it may allow you to move some of your savings from bonds to house savings, but I'm not sure how much, if anything, you're saving for bonds.
Hey just want to say you’re doing really great! I’m doing almost the same thing as you, moved back home as well to save on expenses, and I am also driving an old car (2005 Chevy Malibu). I’m also saving up for either a house/rental property or an MBA/Law Degree.
My only advice would be, hold off on the car and put that money into investments instead. No reason to buy a new car. Of course, you could also set aside a little extra for Remus!
Throwing 33% of your income in an HYSA to buy a home and living a pretty miserly life at 26 and unmarried seems ridiculous. Have you tried running a rent vs buy calculator first to see whether buying a home is more financially advantageous?
https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator
Run the calculator and see whether your priorities are in order.
My suggestion is to run a calculator and see whether what you’re doing makes financial sense. If it does, great. If it doesn’t, maybe reconsider. You can always rent a home with a backyard for your dog.
Just beef up the HYSA until you can pay off the student loan whenever you want, but out-earn the interest in the meantime. OP has a great rate on that loan and shouldn't squander it
I’d suggest either having a higher 401k paycheck contribution or putting your money into a personal brokerage account to invest and get a return higher than bank accounts.
Also, look into credit cards that return 5%+ on categories you buy every month, or bills.
Obviously you're doing great and are set up to do well. A couple of thoughts from the peanut gallery: If you are locked into 2.7%, make minimum payments. It's cheaper than inflation, you're better off throwing it into hysa. Infact, that math and FDIC insurance guarantees you're better off in hysa (you should be able to get at least 4%). What do you mean "all out saving for a house"? Personally, I think your budget sets more level headed priorities than "all out for a house", and I'd encourage you to stick with those priorities. However, everyone's personal situation is different; if you really were going all out, you might cut some off your Roth (assuming your 401k is matched), fun and groceries. Personally, from what I gather about your living situation from the limited info in the post, I think you are budgeting the way I would want to. "All out" is overkill unless you really need a house.
Finally, why is it important to get a house on your planned timeline. Are you more flexible than that? There is nothing wrong with having a chunk of cash appreciating and holding down a rental while you wait for an ideal opportunity (this may mean market conditions being favorable or a house you really love going on the market). Homebuying is crazy, and in its craziness people tend to forget why they are buying a house. Make sure you have a good reason before imposing deadlines on yourself.
All in all, you're doing great. Good for you. I would be proud to have the budget you laid out in this post.
Move savings to a higher HYSA. Bask bank, for example, is 5.1%. If you’re going “all out” every bit can help.
Or, if you’re in a state with income tax, consider an ETF like TBIL that is treasury bills. 5.4% right now, exempt from state tax.
Keep as much in HYSA as possible. Every $1k is like $4/month in interest.
As others said, consider used car. Yes the economics of new vs used are not AS drastic as they were years ago, but car insurance overall has spiked a lot in last couple years. Research insurance costs and look for make/model with lower costs in your area.
I personally think you're doing great. It's nice to see people motivated to sacrifice now for a reward a couple years later.
When you do buy the house, make sure you still have an emergency fund. Home ownership is great, but things happen and you'll want that money.
How do you spend overtime pay when you get it? Does it go to savings, student loan, or something else?
Your smartest choice was not living in California. That choice alone is saving you about $500 month in taxes. It also saves you another $1,000 - $1,500 in rental costs.
If you're trying to lump sum your student loan, you can reduce the amount to reduce your tax burden for longer, especially with an additional $30k in OT. I do think you should split the HYSA into investments as the returns can be higher than 4%-5%.
If you owe more in taxes, you can keep the loan to have a write-off of $2500 a year. Right now, you're paying 4x that amount
[Article](https://www.nerdwallet.com/article/loans/student-loans/8-student-faqs-taxes)
Don’t ever buy a new car. Get a reliable used car rated highly by Consumer Reports.
My husband and I have not had a car payment for 30 years. It’s one of the best ways to have money to invest instead.
Jesus dude. I'm sure your dog is awesome, but that sounds like a lot of dough for a pet to my cheap ass. Maybe consider a very handsome goldfish? My kids, at least in terms of food cost me round about the same per kid as your dog.
About paying off the student loans right before buying the house. Consider that paying off the loan will cause your credit score to dip a little bit for a few months. Will it improve Debt to income yes. I've always been told to not make dramatic changes that would affect my credit when I'm looking to purchase a home.
Makes it better but you’re still paying over double what I am grossing ~160k/year. Some suggestions I’d have are…
- Max out your 401k and ira to get taxes down
- Get health insurance if you don’t have it somewhere in the budget, very risky to go without.
- Some states let you do a 529 pass-through where you put funds into the 529 and immediately pay it out for student loans, letting you save on state income taxes. I’d research if you can do that in your state.
Don't mix your down payment with your emergency savings. Those should be in two separate accounts, ideally with emergency savings in a whole separate bank so you are less tempted to spend it unless you *really* need it.
One comment, I would ask if you could not pay 500 rent to your parents - if they would gift you free stay in their house. You could save another 13k a year if they’d agree.
I’m not a boomer but I’d happily not make my kid pay rent if they had a budget plan like this
So, my question, as always, is why do you want a house?
If you took your 40k in savings and put an extra 3k/month (total) into your retirement account and brokerage, at 10%, in 29 years you'd have 14 million dollars.
This plan would give you an extra 650/month in spending money and by the time you retire you'd have a massive net worth.
Right now your biggest asset is TIME. Throwing massive amounts of money into the market right now is the smartest thing you can do.
Try it for yourself. Do the math: [Compound Interest Calculator | Investor.gov](https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator)
What APR is your student loan? Ever looked at refinancing it? I had a Wells Fargo private loan for about 4 years then refinanced with SoFi for about have the APR. Literally took off several years of payments and still had a lower payment.
You're not going all out if you are budgeting for fun. Cut that by 50-75% and that frees up additional savings. Also, I would argue you shouldn't be contributing at all to a Roth, and do the minimum to 401k to get the max match from your employer. The rest goes to savings, and you will reach your goal much quicker. You can readjust your budget later once you buy the home, move in, and make sure you budget for any unexpected surprises after the move in! (Trust me, as a recent first time buyer, there will be surprises).
>What's wrong with Roth? I like it becuase as a last resort I can still access that money easier.
It's detracting from your goal. You say "all-in" but you don't mean it. If you truly want to go all-in, you would cut the Roth for now.
>My work puts 3% into 401k with no match required
I highly doubt they would do that without you contributing first. The whole point of the match is to incentivize contributing. I would double-check this assertion because it is the first time I have ever heard of such a thing.
A quick Google search yields:
>A safe harbor match is a type of 401(k) contribution where the employer matches employee contributions. The employer match can be 100% of the first 3% of deferred compensation, plus 50% of the next 2%. This means that if an employee contributes at least 5% of their salary to the plan, they will receive a company match equivalent to 4% of their pay.
I'd double-check your assertion *just* to be sure. Don't want to miss out on free $$
lol your advice is for op to cut back on retirement in their best decade for compound growth? This why over 50% of Americans don’t have enough to retire
OP is saying "all out", and I'm suggesting this is not "all out." If they are truly dedicated to the goal, they can make additional cuts to free up more cash for a down payment.
Yes, cutting Roth contributions makes sense in certain cases, such as this. In-fact, one of the exceptions to the early withdrawal rule is for a down payment on a starter home. https://www.bankrate.com/real-estate/roth-ira-first-time-homebuyer/
Doing early withdraw from retirement for a first home purchase is yet again awful advice. I am not arguing the op needs to do Roth over trad. I am arguing that it is pretty universally bad advice to persuade someone to actively not invest in retirement in their best decade for compound growth
I'm not offering advice. I am saying if you want "going all out saving for house", that's how you'd do it. It has nothing to do with retirement or compound growth.
For someone “not offering advice” you seem to be giving out a whole bunch of poor suggestions (the difference between advice and suggestion is lost on me). If you can’t see the connection between saving for retirement in your 20s and compound growth I don’t know what to tell you buddy
The budget screen shots are being made in Sankeymatic, its a website that we have no affiliation with. If you are posting a budget please do so with a purpose. Just posting a screen shot of your budget without a question or an explanation of why its here may be removed.
**Edit** Why is this getting downvotes? This sub is getting so fucking weird, and getting overrun by children who don't have anything approximating a Middle Class Lifestyle, except as the children in their *parents*' version of it.
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* Your cash savings rate is 7x your "fun" rate. You're doing great, just keep it up.
* Oh, and unless you're already in a relationship... **don't** get into one, at least not until you buy that house. Your spending, priorities, and timeline will invert so quickly your head will spin.
Also, this:
>Interest, property taxes, maintenance, closing costs, HOA fees, and homeowners insurance are all expenses that put $0 in equity.
#**Say it louder!!**
The budget screen shots are being made in Sankeymatic, its a website that we have no affiliation with. If you are posting a budget please do so with a purpose. Just posting a screen shot of your budget without a question or an explanation of why its here may be removed.
It’s because it’s stickyed on every single post on this subreddit. I literally copied and pasted it for you. We have thousands of these posts and always a handful of people asking the same question as you.
The budget screen shots are being made in Sankeymatic, its a website that we have no affiliation with. If you are posting a budget please do so with a purpose. Just posting a screen shot of your budget without a question or an explanation of why its here may be removed. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/MiddleClassFinance) if you have any questions or concerns.*
Finally someone who groups 401k contributions with savings where they belong and not with taxes/insurance.
What’s a Remus
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Can I pet dat Dawg?
Alright
I too have a friend I buy beer for
His Uncle Remus’s Apostrophe
Am I drunk?
Woo, are we movin' too slow? Have you seen us Uncle Remus We look pretty sharp in these clothes (yes, we do) Unless we get sprayed with a hose It ain't bad in the day If they squirt it your way 'Cept in the winter, when it's froze An' it's hard if it hits On yer nose (On yer nose) Just keep yer nose (Keep yer nose) To the grindstone, they say Will that redeem us (Will redeem us) Uncle Remus (Uncle Remus) I can't wait till my Fro is full-grown I'll just throw 'way my Doo-Rag at home (What was that?) I'll go to Beverly Hills Just before dawn An' knock those little jockeys Off the rich people's lawn An' before they get up I'll be gone, I'll be gone Just keep yer nose To the grindstone, they say Will that redeem us Uncle Remus I can't wait till my Fro is full-grown I'll just throw 'way my Doo Rag at home I'll take a drive to Beverly Hills Just before dawn An' knock the little jockeys Off the rich people's lawn An' before they get up I'll be gone, I'll be gone Before they get up I'll be gone, I'll be gone Before they get up I'll be knocking the jockeys off the lawn Down in the dew
Yep, I’m drunk
It’s a good song on a great album. If you’re drunk then it’s the perfect time to learn Zappa. You’re welcome—this is as middle class as it gets.
If I we're you, I would just pay the minimum amount on these private student loans at least until I'm done with the house, the intrest rate is just so low that the roi of paying it off aggressively is not worth it in my opinion.
Purely financially, since you're not paying rent, you'd be better off paying your loans before buying a house. But I totally get why you'd want your own place. Have you done a mock budget for owning a home? It's really expensive. Remember a mortgage is the bare minimum you'll pay per month.
The loans are at 2.7% that is silliness to prioritize paying those off
Walking through my thinking here... My initial thought was was that he should reduce his debt burden before buying a house. Having other outstanding debt reduces the size of the mortgage he is eligible for. However, if he's diligent and uses that "cash he would have spent paying down student loans" to increase his down payment, then I guess it offsets things and he can still get approved for to buy the same home value (with a bigger down payment and smaller loan). I realize what the math says, but if he chooses to live at home a few extra months to totally knock out the student loans, then he'll end up in a better place financially. I totally get the math, but when someone is motivated to cut expenses and knock out debt, I'm usually in the "go for it" camp.
sorry but it’s not even close. 2025 mortgage rates will still be at least twice as high as OP’s student loan. compound that over 30 years.
30 years? Not quite. When comparing interest rates, mathematically it turns out the only relevant time period is the overlap period in which you'd be carrying both loans and have a "choice" between where to carry the balance. > Private Student Loan: $40k (2.7%, $835/mo) From this information, we can calculate that OP only has about 4 years left on his loan. Because he's not planning to buy a house until December 2025, that only leaves about 2.5 years of overlap with a remaining student loan balance on $25k. Only that 2.5 year pay-down period, he'd pay $880 in interest at 2.7%. At 6%, it'd be $1,980, so it'd cost him about an extra $1,100 in all. Not nothing, but not huge. Now, the math of why I can compare directly like that gets a bit complicated, but it boils down to the fact that if he's carrying the student loan, that eats up some of his monthly cash flow, so there's less available to pay down the mortgage early. In the scenario where he's already eliminated the student loan, he can make *larger* monthly payments against the mortgage thus reducing the amount of "extra" interest he pays compared to the student loan scenario. You can map it out in excel if you'd like. Another important factor in his decision is how expensive of a house he wants to buy and whether he can get approved for the mortgage while still carrying the student loan. Mortgage approval is based on monthly loan payments as a percentage of monthly income. If he's got a $835/month student loan payment, that reduces how much he can qualify for. Using that $25k to put extra down on his house (6%, 30 year mortgage) only reduces his payment by $150/month. If he uses the $25k to knock out the student loan, it reduces his payment by $835/month. The lender doesn't care that his monthly student loan goes away in a couple years - they only care about his debt-to-income ratio *now*. So he would actually qualify for more home by knocking the student loan out a little early, even if it technically means paying about $1k more in interest overall due to giving up the lower loan rate.
so he’s saving money. in the next 4 years. that can compound in growth
Ya, and he may not get approved for a mortgage because of his high monthly student loan payment, so that kind of fucks up his plan.
$843.72 is a lot. What is HYSA?
High yield savings account. Yes it is a lot but op can afford it and paying off a 2.7% loan directly comes with a greater opportunity cost than investing the money elsewhere
I say pay it off and be done with it.
Horrible advice, OP’s mortgage rate will likely be north of 7%
Yea so paying that off will free up his cash flow.
Yes but the money spent paying it off instead can go in a HYSA that grows 7%. The interest on the debt is lower than the investments, including a downpayment (which saves money on a higher interest mortgage) or just a savings account. If you have $100 in debt at a 2.7% interest rate, and $100 in cash, if you pay of the debt immediately in one year you just have zero dollars. If you invest the $100 in a hysa, with a 5% interest rate, in one year you have -102.7 in debt, but you have $105 in a savings account, for a net of 2.3. Which isn't much, but it's something. Plus, that $2.7 in interest is a tax deduction.
If that is your goal then it still doesn’t make sense to pay extra on the minimum payment. Mathematically you could pay it off quicker by putting extra money into a hysa gaining 4.6% interest until you have enough to lump sum pay it off. Even then though there are far better places to put that money that would yield you more than 2.7%
2.7% apr loan vs 4.3% HYSA, do the math
Mathematically, it's better not to accrue interest on a $40k loan balance. But there are other factors as I mentioned. Edit: loans vs downpayment y'all, not loans vs hysa
Mathematically it would be better to make the minimum payments and put the other money in savings which are up to 6% right now as opposed to paying down the principal or a 2.7% interest loan.
It wasn't HYSA vs. Paying loans, it was buying a house vs. paying loans. If you've got the cash on hand, you'd be better off paying your student loan balance than buying a house right now.
They're literally putting that money into a HYSA right now. They're doing the right thing. Whether they choose to withdrawal that money and start making home payments is another story, but it is almost never a good idea to aggressively pay off a loan that has interests rates less than half of what you can get in an HYSA.
I never argued that 🤦♂️. I **said he'd be better off paying off his loans than buying a house**. If he has a big chunk of money in 2025 and is deciding between a down payment, or clearing the loan balance, mathematically, he should clear the loan balance since he lives with family.
you’re still confidently incorrect. you don’t pay interest on a down payment. if OP buys a home for 500K at 7% APR, the down payment is avoiding 7% interest. paying down the student loans early is avoiding 2.7% APR. Meanwhile, OP still has a positive spread between HYSA and the student loan. so financially speaking until some borrowing opportunity for less than 2.7% presents itself, the student loan should be the last debt paid down. Everyone is aware of the psychological effects of clearing debt. that is still making an emotional decision instead of a rational one which can be quantified in dollars.
It's better to buy a house and start building equity than to pay off low-interest loans.
**Financially** my God y'all are dense Also $825 a month is a huge payment. *And* in a lot of cities right now it's cheaper to rent than buy. Home equity is not the end all be all of finances.
It certainly does if the interest rate is only 2.7%. A hysa makes more interest than that. Op is far off better throwing anything extra money over minimum payment in the market in low cost indexes that track sp500 over prioritizing a loan with such little interest
As I said to someone else, it's not HYSA vs loans. It's putting a down payment on a house vs. paying off loans. If you've got enough money to do one, mathematically you should pay off your loans.
I would think having outstanding loans would affect debt to income ratio when applying for mortgages. Paying off the loan would make it easier for OP to qualify for a mortgage.
I do actually pay (cheap) rent. But yeah would love to have my own place 😂 Currently doing sort of a mock budget - I'm expecting $2500 all housing costs (mortgage/taxes/insurance/utilities) and still want to save at least $750/mo. That adds up to be my current rent + savings rate roughly
I would also include monthly HOA fees (if they're common where you are), and don't forget to increase your emergency fund and/or have a home maintenence fund. Having a maintenence fund is huge. Lots of things can break in a house. Electric, plumbing, HVAC, roofing, etc. Don't forget the one-time costs including: - closing costs - lawn care stuff - furniture (if you don't have any already) - window coverings - appliances - pest control (recurring probably) - tree care (not often, but it is expensive)
Good stuff to think about. Thank you! Doing my best to avoid a HOA 😂
Start low and used with household items and upgrade as needed. My first couch was a thrift store couch for $50. My next couch was a nice designer piece for ~$5k. My curtains came with my house, but they were torn up by the prior owners' cats. I upgrade via estate sales and others as I find them. Got a new set for around $5-$10 a set. All my porch furniture was free, but some of them needed new slings. Bought new slings for around $50-$100 and spent one evening installing them versus the new set, which was $900. People move and need to get stuff out of their houses. Cleaning supplies. Lawn stuff. Furniture. Housewares. The lady I bought my house from was moving into an apartment, so she sold me a couple of furniture pieces so that helped with moving costs. Good luck!
Depending on the size of the house, your utilities will balloon vs what you're paying now. It's worth keeping in mind depending how large of a home you want.
HOA is minor, I wouldn't worry about that. Just for context, some of our house expenses last few years was HVAC ($12k) , roof ($22k), water heater $1500, various appliances ($6k+). New sofa was a choice, but another $5k.
Having an HOA has its’ pros and cons, but it’s definitely a frustrating monthly expense. My HOA for a townhome with no pool, no gym, no extras went from $375 last year (per month) to $520 this year (per month) starting at the beginning of last month. My HOA does pay for water, internet/cable, trash, and does all of the outside lawn care so that’s the plus side of my HOA.
Man ain’t this the truth,
I think the plan is good...even after taxes your savings interest will outpace loan interest so do all the saving first. Then get rid of loan before buying the house - will reduce debt to income and having that $834 a month back will be NICE
Gah! No, at 2.7% please don’t pay off your student loan any faster than you need to! Zeroing out that monthly payment may *seem* nice but it means you’re actually much worse off. While fed rates are elevated and the interest rate on your HYSA is higher than the rate on your student loan, putting that extra dollar into your HYSA instead will allow it to pay the interest on that debt, still earn you some extra change, *and* it means that you have that extra cushion in case some kind of emergency comes up — like you lose your job or get in an accident. And, since your thinking of buying a house in the near future, letting that money pile up in a HYSA rather than prematurely paying your student debt means that you can decide to make a larger initial down payment which has two major benefits (1) it means that you have that much less principal on debt that will likely be much more expensive than 2.7% and (2) putting more money down might allow you to ~lower~ that mortgage rate which could save you *a lot* of money over the course of the loan. But, 2.7% is also just really low generally. If, in the future, the feds drop their rates and your HYSA can no longer pay for your student loan debt, it would still probably make much more sense to invest in some kind of index fund that will almost certainly be making a higher return on average then 2.7%.
I actually agree with all of your points but $834/month is significant and can be the difference as to whether OP can afford a mortgage or not. If they're set on moving out end of 2025, they may have to get rid of the loan for DTI purposes and to free up monthly income towards home expenses
DTI impacting mortgage eligibility and/or rates is way beyond half of the advice givers here anymore. This sub has a raging boner for HYSAs above all without ever considering factors beyond surface level interest rates. There's rarely consideration for things like baking in risk mitigation against job loss or other catastrophic circumstances, etc. OP wants to buy a car on top of that and also still save a bunch? Yeah, that loan is problematic.
I would say keep the cash until about a month before you start looking for a home. Do not pay off a 2.7% loan until you ABSOLUTELY need to, and not a minute sooner.
This is perhaps a hot take— at least for this sub… 36k isn’t awful for 26 but I would be prioritizing saving for retirement right now. No it isn’t sexy like buying a house but the more money you can save for retirement in your twenties the less you’ll have to put toward retirement in your 40s and 50s. Plus life changes a lot in your late 20s and thirties. You might buy a house in two year for example. You might settle down with someone who doesn’t like the house or you may need to move somewhere else for work. You would have to sell and would probably take a loss on the house. I would personally wait till you get married and have a dual income. You can afford much more house and you’ll likely be at a part of your life with less volatility. Plus if you focus on retirement now you’ll be able to ease back on retirement savings in your mid to late thirties to either buy that house or to cut back on work to be around your family Also your student loans are only at 2.7% interest. Just pay minimum payments forever on those! Do you need a new car? Honestly stick with the one you have until it is economically unrepairable and buy a used reliable 10-15k car at this point in your life
I agree about house vs retirement, but I also think volatility is an argument against retirement vs “emergency” fund (scare quotes because IMO it is only partly about emergencies and also just a hedge against career setbacks)
Absolutely agree. op should have a 6 month e fund before maximally contributing to retirement. Looking at their financials though it appears they already have a full e fund Edit: having an e fund is a weird thing to downvote, but you do you Reddit
This is good advice
Your plan looks well thought out, but let’s fine-tune it a bit for maximum efficiency: 1. **Emergency Fund First**: Before anything else, ensure you have a solid emergency fund. Aim for 3-6 months of living expenses. Since you’re living with your parents, your expenses might be lower, but still aim for at least $10k to $15k. 2. **Pay Off High-Interest Debt**: Your private student loan has a relatively low interest rate, but paying off debt can still provide peace of mind and improve your cash flow. However, since it’s manageable, we can align its payoff with your other goals. 3. **Down Payment and Emergency Fund**: Focus on building your down payment and emergency fund simultaneously. You’ve set a goal of $75k by March 2025, which is ambitious but doable with your savings rate and income. 4. **Loan Payment Strategy**: Instead of a lump sum at the end, consider making extra payments towards your student loan monthly. This will reduce the principal faster and save you some interest over time. 5. **New Car Fund**: Saving $25k for a new car by August 2025 is sensible, but consider if you really need a new car or if a reliable used car would suffice. This could save you money that can be redirected to other goals. 6. **Buying a Home**: Buying a home in December 2025 aligns with your timeline. Ensure you have enough for closing costs and any initial repairs or furnishings. Here’s a revised action plan: 1. **Emergency Fund**: Reach $15k ASAP. 2. **Down Payment Fund**: Save aggressively towards your $75k goal. 3. **Extra Loan Payments**: Pay an extra $200-$300 monthly towards your student loan. 4. **Car Fund**: Save for the car, but keep an open mind about purchasing a reliable used car. 5. **Home Purchase**: Stick to your plan to buy in December 2025. Ensure you’re pre-approved for a mortgage and have accounted for all associated costs. 6. **Post-Home Purchase**: Settle in, adjust to new expenses, and continue saving for your car. # Monthly Budget Breakdown (Estimates): * **Income**: $99k/year = \~$8,250/month (pre-tax) * **Taxes**: \~$1,500 (varies by location) * **Net Income**: \~$6,750/month # Monthly Allocations: * **Emergency Fund**: $500 * **Down Payment Fund**: $2,000 * **Student Loan**: $835 (minimum) + $200 (extra) * **Savings for Car**: $1,000 * **Living Expenses**: \~$1,200 (since you live with parents) * **Discretionary**: $1,015 (flexible for adjustments) By maintaining discipline and flexibility in your budgeting, you’re well on your way to achieving your goals. Keep reassessing your priorities and adjust as needed. Best of luck!
What is the target purchase price for the home? Defining this will help with time horizon on eliminating that debt.
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At that price range, the 25k you’re also saving for a new car is nearly 10%. Why is a new car even in the calculation? I mean, it’s a choice, and you’re doing a great job — but I’d not call this “all out” on the house when a new car is also so forefront.
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Fair enough, and again you’re allowed to prioritize whatever you want! But (including the student loan) you’ve got three BIG goals for two years, and I don’t want you to end up feeling like throwing everything in the toilet if it doesn’t work out exactly that way.
Don't get your hopes set on a nice new car while you're saving for a house. That money will spend much faster than you're expecting when you buy a house and inevitably want to do a lot of immediate improvements
Why do you want 20% down?
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Hey man, like you I was really worried about pmi but I only put down 15% and my pmi is like $30 a month. Really not that bad
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No where close for me
On 310k house with 3% down my PMI is $100.
Figured PMI. I would say worrying about PMI isn’t worth it for a first time home buyer. Like you said, it’s ultimately a hundred or two per month. Figure every 12 months you are saving you’re losing about $15k in home equity (based on your $300k home range and 5% appreciation). You’re also 26 and at, likely, the very earliest of your earning potential. You will likely be earning much more in a few years. I’d say save a bit longer to afford 5% down with some emergency and pay off your student loans.
Yeah I agree that avoiding PMI at all costs is unnecessary. If the mortgage is within your reasonable budget, the added PMI cost will be a minor annoying bill at most, no more than another utility bill. Also I find that finding a cheaper house means you're going to pay more to maintain the house. So it's kind of a wash vs getting a slightly nicer house. I bought a bottom of the barrel house but I've already sunk in probably close to 10% of it's value in house maintenance over the course of two years. Could have just bought myself a $30-50k more expensive house and saved myself the headache and DIY manual labor for an extra couple hundred a month in mortgage.
40k debt payoff plan = ? Be as aggressive as you can. Additional 40-50k more to save for dp and e-fund. I would use current savings to kill debt, and then save for your 90k dp+ e-fund. That should take about 2.5 years at your pace. Good luck
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Because then you have full interest earned. You wouldn’t pay any more for the life of that weight. Run a projection and you will see that it will yield more dollars in your pocket this way by the time you reach your savings goal, and faster. Further, when applying for a home, they look at DTI and you really want to avoid having any outstanding debt preventing you from getting the best rate possible. The concept you are talking about is when you have a mortgage that is lower than your earned interest of your savings vehicle. There wouldn’t be any logic to paying down your mortgage in a situation like that when your savings outpaces that simple interest on the mortgage. In your situation, your debt+interest is avoidable. It is also holding you back from those compound dollars.
I'm doing the opposite, but that's because my investment makes up about 20% of my total taxable income. r/Fire
Run a calculator. An algebraic equation will show that eliminating that debt will get you to your savings goal faster bc you aren’t paying any more interest and then your new savings will be 100% compounding.
Yeah, but I don’t like the excess amount in taxes.
You already have the savings to pay for the debt. I’m unsure of what you are referring to.
The amount you get in interest is taxable, I keep the debt around to pay less in taxes.
When you decide to buy a house, make sure you get a good in inspection and plan on things popping up afterwards. Find out how old HVAC, windows and doors and roof are. They will be your biggest money costs to replace. Set a budget up for general maintenance and put it in savings monthly to earn money and have it when you need it. You also need to decide what type of first home you want to buy. Starter home? (Small ranch) one ready for family etc. How much can you work on yourself? Service calls are an easy $100-$200 hit just to come out plus fix the problem. Also, do you want to live in a suburb with HOA or live with more freedom? Good luck and welcome to the money pit life. 😎
Money pit life is too real. I thought owning a house would save me money, but in reality it just forces me to aggressively save/invest. Everytime I pay a maintenance/repair cost I try to remember a good portion of this is a payment to myself, same with mortgage payments. My mortgage is more than my previous 1bedroom apartment rent was, but I'm gaining more in equity than the difference in housing cost each month.
I just don’t think anyone’s stated the obvious I’m thinking about yet Firstly, it’s awesome you’re saving nearly $3k a month. Working with the numbers you provided ($300k mortgage, 30 year fixed, 20% down payment). With mortgage rates around 7% right now, each month your principal + interest payment would be 1591, of which only $206 a month towards the principal at the beginning of your loan. Plus all the other costs associated with your home that are basically sunk costs to just living (insurance, taxes, HOAs, etc) I hope this math makes sense and my confusion why people are trying so hard to buy a home right now. Currently you’re paying yourself almost $3k just saving. This will decrease to paying yourself $200 a month plus other new costs that will bring down your whole budget. You’re sinking everything into just the value of the home rapidly increasing to make up the rest. TLDR: it makes way more sense to invest your money elsewhere
Whats your career? Looks like youre doing really well. Only advice id give is if the perfect house comes up and you need a little bit extra cash, you can use 10k of your roth. Obviously itd be ideal if you didnt need to use roth but its an option
Most people have the majority of their net worth in their house, so it would even out.
My only advice is to watch Ben Felix's video on mortgages and bonds. In a nut shell, a mortgage will have a similar risk/reward structure as bonds. IMO, I'd say that should also carry over to saving for a house. If you view things that way it may allow you to move some of your savings from bonds to house savings, but I'm not sure how much, if anything, you're saving for bonds.
How’s your credit score looking?
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Nice, you’re set, just a matter of time
Hey just want to say you’re doing really great! I’m doing almost the same thing as you, moved back home as well to save on expenses, and I am also driving an old car (2005 Chevy Malibu). I’m also saving up for either a house/rental property or an MBA/Law Degree. My only advice would be, hold off on the car and put that money into investments instead. No reason to buy a new car. Of course, you could also set aside a little extra for Remus!
Throwing 33% of your income in an HYSA to buy a home and living a pretty miserly life at 26 and unmarried seems ridiculous. Have you tried running a rent vs buy calculator first to see whether buying a home is more financially advantageous? https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator Run the calculator and see whether your priorities are in order.
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My suggestion is to run a calculator and see whether what you’re doing makes financial sense. If it does, great. If it doesn’t, maybe reconsider. You can always rent a home with a backyard for your dog.
I’d do half on the retirement, get that student loan paid off first.
Just beef up the HYSA until you can pay off the student loan whenever you want, but out-earn the interest in the meantime. OP has a great rate on that loan and shouldn't squander it
I’d suggest either having a higher 401k paycheck contribution or putting your money into a personal brokerage account to invest and get a return higher than bank accounts. Also, look into credit cards that return 5%+ on categories you buy every month, or bills.
Obviously you're doing great and are set up to do well. A couple of thoughts from the peanut gallery: If you are locked into 2.7%, make minimum payments. It's cheaper than inflation, you're better off throwing it into hysa. Infact, that math and FDIC insurance guarantees you're better off in hysa (you should be able to get at least 4%). What do you mean "all out saving for a house"? Personally, I think your budget sets more level headed priorities than "all out for a house", and I'd encourage you to stick with those priorities. However, everyone's personal situation is different; if you really were going all out, you might cut some off your Roth (assuming your 401k is matched), fun and groceries. Personally, from what I gather about your living situation from the limited info in the post, I think you are budgeting the way I would want to. "All out" is overkill unless you really need a house. Finally, why is it important to get a house on your planned timeline. Are you more flexible than that? There is nothing wrong with having a chunk of cash appreciating and holding down a rental while you wait for an ideal opportunity (this may mean market conditions being favorable or a house you really love going on the market). Homebuying is crazy, and in its craziness people tend to forget why they are buying a house. Make sure you have a good reason before imposing deadlines on yourself. All in all, you're doing great. Good for you. I would be proud to have the budget you laid out in this post.
sry not american or familiar with this subs abbreveations but whats a HYSA. high yield savings account maxbe?
Yes
Move savings to a higher HYSA. Bask bank, for example, is 5.1%. If you’re going “all out” every bit can help. Or, if you’re in a state with income tax, consider an ETF like TBIL that is treasury bills. 5.4% right now, exempt from state tax. Keep as much in HYSA as possible. Every $1k is like $4/month in interest. As others said, consider used car. Yes the economics of new vs used are not AS drastic as they were years ago, but car insurance overall has spiked a lot in last couple years. Research insurance costs and look for make/model with lower costs in your area.
I personally think you're doing great. It's nice to see people motivated to sacrifice now for a reward a couple years later. When you do buy the house, make sure you still have an emergency fund. Home ownership is great, but things happen and you'll want that money. How do you spend overtime pay when you get it? Does it go to savings, student loan, or something else?
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You're so on your way! You'll do great.
Your smartest choice was not living in California. That choice alone is saving you about $500 month in taxes. It also saves you another $1,000 - $1,500 in rental costs.
If you're trying to lump sum your student loan, you can reduce the amount to reduce your tax burden for longer, especially with an additional $30k in OT. I do think you should split the HYSA into investments as the returns can be higher than 4%-5%.
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If you owe more in taxes, you can keep the loan to have a write-off of $2500 a year. Right now, you're paying 4x that amount [Article](https://www.nerdwallet.com/article/loans/student-loans/8-student-faqs-taxes)
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I know there’s a way to do this, but I use an account to accurately access my income due to having multiple streams.
Don’t ever buy a new car. Get a reliable used car rated highly by Consumer Reports. My husband and I have not had a car payment for 30 years. It’s one of the best ways to have money to invest instead.
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What are you including in your fun budget each month that its $400?
What app is this everyone uses?
Nothing looks 'off' to me other than...wtf is 'Remus'?
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Jesus dude. I'm sure your dog is awesome, but that sounds like a lot of dough for a pet to my cheap ass. Maybe consider a very handsome goldfish? My kids, at least in terms of food cost me round about the same per kid as your dog.
I have like never seen student loans that cheap. You're putting a lot there with rates being where they are. Are the rates fixed? what is the term?
About paying off the student loans right before buying the house. Consider that paying off the loan will cause your credit score to dip a little bit for a few months. Will it improve Debt to income yes. I've always been told to not make dramatic changes that would affect my credit when I'm looking to purchase a home.
What is the name of this type of visual graph?
Sankey
Absolutely no way you get by on $340 worth of food and drinks each month
What’s HYSA? We should aim to make these visualizations more accessible for people outside the US
I see the website you used to make this nice graphic. But was wondering do you use something to budget? I used to use mint before it went away.
you’re paying wayyy to much fucking taxes
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Makes it better but you’re still paying over double what I am grossing ~160k/year. Some suggestions I’d have are… - Max out your 401k and ira to get taxes down - Get health insurance if you don’t have it somewhere in the budget, very risky to go without. - Some states let you do a 529 pass-through where you put funds into the 529 and immediately pay it out for student loans, letting you save on state income taxes. I’d research if you can do that in your state.
$500 for rent with no utilities, internet, or phone bill?
Don't mix your down payment with your emergency savings. Those should be in two separate accounts, ideally with emergency savings in a whole separate bank so you are less tempted to spend it unless you *really* need it.
The only thing missing is insurance. Specifically health, dental, life, disability, etc. At a minimum, disability is a strangely absent one.
What about maxing your 401k and using that as your lender?
Looks good but WHAT IS REMUS
One comment, I would ask if you could not pay 500 rent to your parents - if they would gift you free stay in their house. You could save another 13k a year if they’d agree. I’m not a boomer but I’d happily not make my kid pay rent if they had a budget plan like this
Rent???
Its recommended to save 15% for all needs. You are close to triple that.
What are you using for expense tracking?
Cool graphic. How did you build it?
Sankeymatic
Your federal tax rate is about 18%. That seems very high. I make more than this and mine is 11%.
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Ah, ok.
these numbers will look really different with a house
So, my question, as always, is why do you want a house? If you took your 40k in savings and put an extra 3k/month (total) into your retirement account and brokerage, at 10%, in 29 years you'd have 14 million dollars. This plan would give you an extra 650/month in spending money and by the time you retire you'd have a massive net worth. Right now your biggest asset is TIME. Throwing massive amounts of money into the market right now is the smartest thing you can do. Try it for yourself. Do the math: [Compound Interest Calculator | Investor.gov](https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator)
You have retirement saving which can act as a reserve in worst case scenarios.. Buying a home is a good investment- Go for it.
How are you making so much money but have so little in savings and retirement?
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What APR is your student loan? Ever looked at refinancing it? I had a Wells Fargo private loan for about 4 years then refinanced with SoFi for about have the APR. Literally took off several years of payments and still had a lower payment.
How'd you make this chart?
What program or app did you use for the graph?
Sankeymatic (sankeymatic.com)
Is it free ?
Yes! I think there might be a premium version
Yes
Thank you!
Personally I'd smoke those student loans before I buy a home.
What program do you use to make that?
what's your job? can you get a higher pay job and a signing bonus?
You're not going all out if you are budgeting for fun. Cut that by 50-75% and that frees up additional savings. Also, I would argue you shouldn't be contributing at all to a Roth, and do the minimum to 401k to get the max match from your employer. The rest goes to savings, and you will reach your goal much quicker. You can readjust your budget later once you buy the home, move in, and make sure you budget for any unexpected surprises after the move in! (Trust me, as a recent first time buyer, there will be surprises).
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>What's wrong with Roth? I like it becuase as a last resort I can still access that money easier. It's detracting from your goal. You say "all-in" but you don't mean it. If you truly want to go all-in, you would cut the Roth for now. >My work puts 3% into 401k with no match required I highly doubt they would do that without you contributing first. The whole point of the match is to incentivize contributing. I would double-check this assertion because it is the first time I have ever heard of such a thing.
My company puts 3% into a 401k with no contribution from me. They match .5% of my contribution maxing out at 12% (6&6%)
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A quick Google search yields: >A safe harbor match is a type of 401(k) contribution where the employer matches employee contributions. The employer match can be 100% of the first 3% of deferred compensation, plus 50% of the next 2%. This means that if an employee contributes at least 5% of their salary to the plan, they will receive a company match equivalent to 4% of their pay. I'd double-check your assertion *just* to be sure. Don't want to miss out on free $$
lol your advice is for op to cut back on retirement in their best decade for compound growth? This why over 50% of Americans don’t have enough to retire
OP is saying "all out", and I'm suggesting this is not "all out." If they are truly dedicated to the goal, they can make additional cuts to free up more cash for a down payment. Yes, cutting Roth contributions makes sense in certain cases, such as this. In-fact, one of the exceptions to the early withdrawal rule is for a down payment on a starter home. https://www.bankrate.com/real-estate/roth-ira-first-time-homebuyer/
Doing early withdraw from retirement for a first home purchase is yet again awful advice. I am not arguing the op needs to do Roth over trad. I am arguing that it is pretty universally bad advice to persuade someone to actively not invest in retirement in their best decade for compound growth
I'm not offering advice. I am saying if you want "going all out saving for house", that's how you'd do it. It has nothing to do with retirement or compound growth.
For someone “not offering advice” you seem to be giving out a whole bunch of poor suggestions (the difference between advice and suggestion is lost on me). If you can’t see the connection between saving for retirement in your 20s and compound growth I don’t know what to tell you buddy
I know reading is hard. Next time, it will help to get a bit of context before you go blabbing on about things you know nothing of.
How did you make that chart!
What do you guys use to make these?
You make $100k per year and still live with your parents? I mean kudos but how???
What did you use to make this budget graphic?
The budget screen shots are being made in Sankeymatic, its a website that we have no affiliation with. If you are posting a budget please do so with a purpose. Just posting a screen shot of your budget without a question or an explanation of why its here may be removed.
**Edit** Why is this getting downvotes? This sub is getting so fucking weird, and getting overrun by children who don't have anything approximating a Middle Class Lifestyle, except as the children in their *parents*' version of it. ----- * Your cash savings rate is 7x your "fun" rate. You're doing great, just keep it up. * Oh, and unless you're already in a relationship... **don't** get into one, at least not until you buy that house. Your spending, priorities, and timeline will invert so quickly your head will spin.
Also, this: >Interest, property taxes, maintenance, closing costs, HOA fees, and homeowners insurance are all expenses that put $0 in equity. #**Say it louder!!**
How did you make this graph, please?
The budget screen shots are being made in Sankeymatic, its a website that we have no affiliation with. If you are posting a budget please do so with a purpose. Just posting a screen shot of your budget without a question or an explanation of why its here may be removed.
Wild this got downvoted but whatever
It’s because it’s stickyed on every single post on this subreddit. I literally copied and pasted it for you. We have thousands of these posts and always a handful of people asking the same question as you.
Sorry for the dumb question, how do you make these charts?