Kill (Pay off) last student loan with savings?

[james.hendrickson]

LPM - GREAT JOB on getting those student loans paid off!

It looks like you're not maxing out your 401(k), I'd consider doing that. While you may not get the matching, any contributions you make are deductible and you'll get the long term benefits of having the cash in the market.

[amastewa93]

Woah! Goals!!! That is such an awesome feat... I still have about $24K left to pay on mine, but am planning a more aggressive pay-off plan starting in June so that I can focus on buying a home

I agree with James though - you should definitely look into maxing out your retirement contributions, then consider other investments like real estate. Remember, one of the best investments you can make is in yourself.

[bjl584]

Congrats!

Great job on getting rid of the loans'

[lootpacman]

LPM - GREAT JOB on getting those student loans paid off!

It looks like you're not maxing out your 401(k), I'd consider doing that. While you may not get the matching, any contributions you make are deductible and you'll get the long term benefits of having the cash in the market.

Thanks! Great suggestion. One thing I always wondered if I'll be able to afford to buy a home or invest in something big at my salary if I max out my 401k.

If I max out at $18k, I have $64k in income left before taxes. Then $13.2k/yr for rent after taxes.

Off the top of my head, I have the aim to save $60K within the next 4-5 years, for home/investment property which means I need to save over $20K/yr.

I'm open to strategies and resources you al have used to accomplish your saving and investing goals. Also let me know if my thought process needs adjusting.

[james.hendrickson]

Thanks! Great suggestion. One thing I always wondered if I'll be able to afford to buy a home or invest in something big at my salary if I max out my 401k.

If I max out at $18k, I have $64k in income left before taxes. Then $13.2k/yr for rent after taxes.

Off the top of my head, I have the aim to save $60K within the next 4-5 years, for home/investment property which means I need to save over $20K/yr.

I'm open to strategies and resources you al have used to accomplish your saving and investing goals. Also let me know if my thought process needs adjusting.

Oh man - thats a hard one. Usually its harder to pursue two goals at once. I typically fail when I do more than one thing at a time.

I like the idea of owning your own home. Guru's like Robert Kiyosaki and Grant Cardone will tell you that owning a home isn't a good move, but the data don't play that out. Homeowners typically have net worths that are substantially higher than non-homeowners. So, I'd get a place as soon as possible. That way you'll diversify, get tax benefits and have an asset that can appreciate in value.

You could work your investments - looking at the funds you're holding to lower their fees. That might help improve your returns on that end.

One thing I think is true: money accrues to people who take care of it, so just going through the process and having these discussions will likely benefit you in the long run.

[Gailete]

Thanks! Great suggestion. One thing I always wondered if I'll be able to afford to buy a home or invest in something big at my salary if I max out my 401k.

If I max out at $18k, I have $64k in income left before taxes. Then $13.2k/yr for rent after taxes.

Off the top of my head, I have the aim to save $60K within the next 4-5 years, for home/investment property which means I need to save over $20K/yr.

I'm open to strategies and resources you al have used to accomplish your saving and investing goals. Also let me know if my thought process needs adjusting.

I have no clue where you live, but lots of folks, with families, with less income than you have bought homes for themselves. I think part of it depends on what kind of house you think you want to afford. You should be looking for a house $200K assuming you are maxing out your 401K or less which means a downpayment of $40K. I take it you aren't married. If you plan to in the future, you are going to want to pay attention to schools etc. as you take the next few years to save and look for a good area to buy in.

Don't make the mistake of those people during the housing bubble thing and think if you banker tells you that you can afford a $500K house that you can, you can't. Between the extra costs associated with home ownership, yard work, repairs, replacing appliances, furnaces, redecorating, etc. Moving into a new home always costs more than you have ever budgeted. You especially don't want to end up with a house that is next to a lot of McMansions with pool guys and lawn guys, and the like that will cost a pretty penny every year. We live where if we want our front yard to grow to a foot tall we can, but most housing developements have strict rules about that sort of thing. It isn't optional. If you yard is unkempt, etc. your neighbors will hate you because you are bringing down everyones property values.

A house is a good way to increase your wealth, but it does cost money as well. I would rather own than rent. I always paid my rent on time, was pretty much the perfect tenant, but I dtill din't like being heald to a contract whhere I couldn't hang pictures on the wall or paint what color I wanted. I wasn't even allowed to have a window air conditioner anywhere but on the back wall! so only one room would have had the benfit of it. I want my own place, but others would never want their own place.

[snafu]

Thank you for the update and Congratulations on paying off your final student loan. I'm so impressed with your awareness of the need to manage your money rather than allowing your money to control your activities. I don't know your future plans but you seem to desire home ownership which has potential as a good investment and more potential to drag you down. As long as you understand the risks, I feel confident you'll succeed.

1st home ownership ties you to your location for a minimum of 5 years. You can't just give notice and move. If offered desirable employment, significant upgrade in position, in another location your ownership status can become an albatross in a flash... There is a giant process involved in readying a home for sale, finding a good agent, 'staging,' having strangers traipsing through your home at the most inconvenient times plus looky-loos, unconventional offers, lawyers, paperwork galore and more.

2nd Money: Rule of thumb suggest purchase price around 2 - 2.5 x Annual Income. Monthly expenses not to exceed 30% of monthly income which includes Mortgage, interest, taxes, [homeowner] insurance, +PMI [if required], HOA [if required],utilities, landscaping, repairs and maintenance. [We learned the hard way to maintain a 1% of value sinking fund because life throws challenges]

Buying is all about location, location, location. Consider commute to work and traffic patterns. How would location affect your social activities? What are safety issues? Who are your neighbours and how do their activities impact you? Will you be paying municipal taxes for amenities that benefit you?

Get references and [U]check them out[U] for a qualified, credential/certified Home Inspector as he is the only person between you and a money pit. Some realtor's recommendations have potential to be a conflict of interest.

You need a minimum of 20% down payment, to avoid high cost, no benefit to you, Private Mortgage Insurance. Read documents carefully because some mortgages demand you continue to pay PMI until the mortgage is totally paid off.

Every point on a mortgage is critical to negotiate because interest is front loaded and most loans are for 30 years. Watch current mortgage loans online, you can negotiate with your preferred lender. There can be extra benefits offered by Credit Unions, possibly in your interest to check it out. For the 1st decade or so, nearly all the mortgage portion of allocation, goes to interest.

BTW, don't get dragged down by incidentals like paint color or old appliances. Paint is cheap and an easy DIY, you don't want appliances on your mortgage for 30 years, they have a shelf life of around a decade. Likewise, don't pay extra for beautiful 'staging' that furniture and decor, leaves on closing, you get no benefit.

Best wishes for future success . [sorry so long]

[lootpacman]

Thank you for the update and Congratulations on paying off your final student loan. I'm so impressed with your awareness of the need to manage your money rather than allowing your money to control your activities. I don't know your future plans but you seem to desire home ownership which has potential as a good investment and more potential to drag you down. As long as you understand the risks, I feel confident you'll succeed.

1st home ownership ties you to your location for a minimum of 5 years. You can't just give notice and move. If offered desirable employment, significant upgrade in position, in another location your ownership status can become an albatross in a flash... There is a giant process involved in readying a home for sale, finding a good agent, 'staging,' having strangers traipsing through your home at the most inconvenient times plus looky-loos, unconventional offers, lawyers, paperwork galore and more.

2nd Money: Rule of thumb suggest purchase price around 2 - 2.5 x Annual Income. Monthly expenses not to exceed 30% of monthly income which includes Mortgage, interest, taxes, [homeowner] insurance, +PMI [if required], HOA [if required],utilities, landscaping, repairs and maintenance. [We learned the hard way to maintain a 1% of value sinking fund because life throws challenges]

Buying is all about location, location, location. Consider commute to work and traffic patterns. How would location affect your social activities? What are safety issues? Who are your neighbours and how do their activities impact you? Will you be paying municipal taxes for amenities that benefit you?

Get references and [U]check them out[U] for a qualified, credential/certified Home Inspector as he is the only person between you and a money pit. Some realtor's recommendations have potential to be a conflict of interest.

You need a minimum of 20% down payment, to avoid high cost, no benefit to you, Private Mortgage Insurance. Read documents carefully because some mortgages demand you continue to pay PMI until the mortgage is totally paid off.

Every point on a mortgage is critical to negotiate because interest is front loaded and most loans are for 30 years. Watch current mortgage loans online, you can negotiate with your preferred lender. There can be extra benefits offered by Credit Unions, possibly in your interest to check it out. For the 1st decade or so, nearly all the mortgage portion of allocation, goes to interest.

BTW, don't get dragged down by incidentals like paint color or old appliances. Paint is cheap and an easy DIY, you don't want appliances on your mortgage for 30 years, they have a shelf life of around a decade. Likewise, don't pay extra for beautiful 'staging' that furniture and decor, leaves on closing, you get no benefit.

Best wishes for future success . [sorry so long]

@snafu, great response and I didn't find it long at all. So based on all the information you wrote above, home ownership doesn't sound desirable for me in the next 4 years but would love to have the money ready in case I change my mind though. I also live in a HCOL city and won't find anything around $200K without moving pretty far out of the city, so I could see myself moving in 4-5 years depending on where my career is going.

LPM - GREAT JOB on getting those student loans paid off!

It looks like you're not maxing out your 401(k), I'd consider doing that. While you may not get the matching, any contributions you make are deductible and you'll get the long term benefits of having the cash in the market.

I will aim to max out my 401K and save aggressively to have a down payment ready in the next 4-5 years.

@james.hendrickson Btw are you recommending I max out 401K every year? (I can create a follow up post in the investing section detailing the index funds I'm invested in so far)

[lootpacman]

Investments

Here are my investments:

401K: $6,722
Vanguard Total International Stock Index Admiral 10% (VGTSX)
expense ratio: 0.17%

https://personal.vanguard.com/us/funds/snapshot?FundId=0113&FundIntExt=INT&funds_disable_redirect=true

Vanguard 500 Index Fund - Admiral 90% (VFIAX)
expense ratio: 0.04%

https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT&funds_disable_redirect=true

Roth IRA: $6,533
Vanguard Target Retirement 2055 Fund Investor Shares (VFFVX)
expense ratio: 0.15%

https://personal.vanguard.com/us/funds/snapshot?FundId=1487&FundIntExt=INT&ps_disable_redirect=true&funds_disable_redirect=true

Traditional IRA: $28,332
FIDELITY TOTAL MKT INDEX PREMIUM CL (FSTVX)
expense ratio: 0.035%

https://fundresearch.fidelity.com/mutual-funds/summary/315911800

[snafu]

I don't wish to discourage your desire for home ownership. An HCOL adds difficulty but your income will increase and I wonder if you'd consider Condo ownership in spite of the higher risk should resale be necessary in a market in a decline. I don't know your skill set but buying a 'fixer upper' has potential to get you into ownership and like many of us, rely on You Tube demonstrations to teach us the basics like spackle walls, paint and the trick to making doors 'hang' correctly. Guess what, under normal circumstances replacing a commode is not difficult. You also learn new skills that are needed as a home owner The issue in my view is the ratio of owner residents to rental residents.

I wonder what other SA's think about making large contributions to ROTH, because you control asset allocation and using your contribution portion to make up part of the downpayment since there is no tax or penalty. You give up some tax benefit but your income is lower now than in the future. At least, I suggest you continue to track the housing market seeking the 'gem' you can afford.

[lootpacman]

I don't wish to discourage your desire for home ownership. An HCOL adds difficulty but your income will increase and I wonder if you'd consider Condo ownership in spite of the higher risk should resale be necessary in a market in a decline. I don't know your skill set but buying a 'fixer upper' has potential to get you into ownership and like many of us, rely on You Tube demonstrations to teach us the basics like spackle walls, paint and the trick to making doors 'hang' correctly. Guess what, under normal circumstances replacing a commode is not difficult. You also learn new skills that are needed as a home owner The issue in my view is the ratio of owner residents to rental residents.

I wonder what other SA's think about making large contributions to ROTH, because you control asset allocation and using your contribution portion to make up part of the downpayment since there is no tax or penalty. You give up some tax benefit but your income is lower now than in the future. At least, I suggest you continue to track the housing market seeking the 'gem' you can afford.

I like the sound of this approach as well, I will consider a Condo. I will be saving the amount to reach $60K+ in 4-5 years so I could still have that auto withdraw from my 1.5% Savings account.

Will look for books, forums and YouTube videos about Real Estate since I don't know much about that subject.

For now, I've increased my 401K contributions that will total around $16K by end of year (leaving myself some room to cover other hiccups)...hopefully I can max out that would be a good experience for me.

[Jluke]

First, payoff the $1500 credit card bill. doesn't matter that it is 0%.

good job on the student loans; now avoid any further loans/debts.

401k max for 2018 is $18,500.

I would suggest opening a Roth IRA and contributing $150/month or more. (Max is $5500/year). I would also make it a goal to not use this towards the house, but that might not be realistic.


Get into a saver's mindset and your future self will thank you. If you feel like every last dollar is going somewhere, and there isn't much left - you are doing it right

Don't rush into home buying - the first many years are tilted towards interest, which nowadays might not even give you a tax benefit.

If you haven't already, check out a loan amortization schedule and see what your anticipated mortgage payments and payoff schedule look like.

[lootpacman]

First, payoff the $1500 credit card bill. doesn't matter that it is 0%.

good job on the student loans; now avoid any further loans/debts.

401k max for 2018 is $18,500.

I would suggest opening a Roth IRA and contributing $150/month or more. (Max is $5500/year). I would also make it a goal to not use this towards the house, but that might not be realistic.


Get into a saver's mindset and your future self will thank you. If you feel like every last dollar is going somewhere, and there isn't much left - you are doing it right

Don't rush into home buying - the first many years are tilted towards interest, which nowadays might not even give you a tax benefit.

If you haven't already, check out a loan amortization schedule and see what your anticipated mortgage payments and payoff schedule look like.

I just updated my contribution amounts for 401K and Savings and it does feel like I won't have any money to use.

I think these will be my finance goals of the year:
1. Max out 401K (or come close)
2. Save over $11K in Emergency Fund ($11K + current balance)
3. Reduce Dining out expenses (which is quite high according to Mint)

I'm curious where you got $150/month from for adding to Roth IRA? (I do have one)

[Jluke]

I'm curious where you got $150/month from for adding to Roth IRA? (I do have one)

Random amount (and was my experience) but over 12 months it adds up to 1800 which is a decent amount. Every little bit counts though.

[lootpacman]

Random amount (and was my experience) but over 12 months it adds up to 1800 which is a decent amount. Every little bit counts though.

Ok gotcha.

For future readers I was also to find this article that was in sync with the advice most people on here was giving: https://www.financialsamurai.com/inv...e-downpayment/