Opinions on my saving and current debt

**jIM_Ohio** · 02-02-2010, 08:04 AM

Originally posted by Aehs01 View Post

Hello,

I'm new to this forum so I hope i'm posting in the right place. I thought i'd get some opinions about my goals and where I currently stand.

I recently turned 25, live at home, take home about $2200/month and these are currently my expenses-
Rent to parents $200/month
Car Loan $285/month Owe $11,500 and have around a 5% interest rate (I forget exactly what it is)
Car Insurance $125/month
I went to school at a place called computertraining.com and started with a $26,500 loan that grew to almost 30k before I started to pay it off about 2 years ago now. I currently have this loan down to $12,000 as i've been paying it off very diligently over the past couple years, I don't owe a payment until September 2010. It has a variable interest rate of about 7.25% last I checked.

My essential goal is to save for a house, I don't believe in renting as I think it's honestly a waste of money. I recently aquired an ExxonMobil credit card to save me 15 cents a gallon when going to the pump, the credit limit is only $500 so it's very unlikely i'll get burned using it. My bank actually reccomended I get a credit card to help improve my credit, i'm currently at about a 745 credit score.

My question for everyone is would it be smarter to pay off my student loan debt then start saving for a house? I could probably have it completely paid off within the next year to year 1/2. I'm told i'd reap alot of tax benefits being a home owner and could use this to pay off my debt. A colleague suggested I just saved all my money then continued to pay $100 on the student loan to keep the interest from building over time then by the end of the year i'd have a good amount of money to use as a down payment for my own place. I'm told the housing market is not going anywhere and I also hear all the time that I should stay home as long as possible to save money.. what are your thoughts?

Welcome...

first thing is do not think about rent as a "wasted" financial resource. It is good for short term housing. You pay rent now to parents, how is that different than paying a landlord?

One thing about houses is they are tough to get rid of, especially if you expect to make money on it... so if you make a mistake, and you might, make the mistake renting... it is easier to get rid of a lease on an apartment than a house.

I would do the following:

1) get 1 normal credit card (not a gas card, but a bank card)
2) use the card occasionally, paying off balance every month
3) Save 20% of gross income for retirement, or do a 15-5 split between a retirement account and savings account
4) after saving 20%, focus on debt reduction. When debts are eliminated, increase savings for rent or mortgage

Expect to need 30% of house value to purchase. 20% for down payment and 10% for closing, moving and other related expenses (furniture).

That is my financial advice... my living advice is to move out of parents house ASAP and live on your own, renting, for around 1-2 years. Make sure you can deal with the cards life plays you without Mom and Dad around bailing you out with money. Learn to make the money you earn go further ($2200/mo is a salary of about 40-45k per year,right?). If you need to live with M&D to make 40k work, imagine how tough life will be when your mortgage payment is 10X what you pay in rent now.

**Aehs01** · 02-02-2010, 08:11 AM

Thanks for the quick reply, I see your point on renting and some of my thoughts have been also to try renting in an area where i've looked at houses and see if I enjoy the living area before making a large commitment. I will look into a normal bank cc and see what I can find. I did live out of my house in college for a semester in college and also have lived with roommates for 2-3 months but decided quickly I was not enjoying being out of my parents house for many reasons... (I lived with 2 women and it was basically a nightmare)

**ActYourWage** · 02-02-2010, 08:26 AM

Originally posted by Aehs01 View Post

My bank actually reccomended I get a credit card to help improve my credit, i'm currently at about a 745 credit score.

I'm told i'd reap alot of tax benefits being a home owner and could use this to pay off my debt.

Of course a bank will tell you that and I bet that same bank told you would reap a lot of tax benefits too. That way you will be paying them all that interest. Make sure you understand all that is involved.

Owning a house is great, but be sure that you do your research and do not get house fever, thinking you have to buy one, unless it is a very good deal, of course

.

I would rent and save the money for as much of a down payment as possible on a house.

And no, you should not stay home for as long as possible. You are paying your parents already, why not just rent on your own.

**CraigThor** · 02-02-2010, 09:42 AM

My take is this. I owned for several years before moving into out apartment.

This I like about apartment living:

No Maintence on my shoulders, something break I call and they fix
No Scooping/ shoveling snow in the winter
No Mowing the yard in the spring, summer, and fall
Access to a pool and club house that we can use for free when we entertain larger groups.
Playground for our young son
Great court yard view with a balcony on the second floor
Sidewalks around the court yard and complex area so we don't have to walk on the streets
Tennis courts and half basketball courts
Discount at the local Gym a few blocks away if we choose to join

We do live in a nicer apartment and have 2 garages here. Total floor space is 1050 sq ft with a large master bedroom with walk in closet and bathroom. Discount on electric heat in the winter and water is paid along wiht garbage and sewer.

Now owning a home:

Personal yard that is yours to do as you want (mostly watch the covenants on the newer development that have a huge say what you can and can't do wiht your yards/ property.

Maintence - there will almost always be something to fix or fix up or replace. If you can't do these items yourself do soem research well in advance so you know what kind of money your looking at.

Yard upkeep mowing the yard requires a minium of a lawn mower maybe a weed eater - these almost always will require to buy gas and oil as well along with there general upkeep and maintence on the equipment.

Snow Removal- Either a good ol shovel and lots of time or a snow blower - then you will still have to have gas, oil, and maintence on the machine.

Now you can get a company to do the removal of snow and mow the yard but tha costs money as well somtimes considerably more than doing it yourself.

Also consider what you want out of the house. Will you be traveling alot? If so you wil need someone to look after the place and care for the yard, etc if your gone for long periods.

Research garbage and sewer costs. Around here if you own a house they regulate how much you can throw away and if you excede that amount you must go purchase special tags for additional waste.

Utilities - Older homes will typically cost more to heat/ cool as they may not be as efficient as newer homes with better insulation. You can contact the utility companies and they should be able to give you average costs for electric and gas.

I was always one that wanted to own till I bought. Loved the house but hated all the extra time I spent on everything like getting up early to shovel snow if it snowed over night, mowing hte yard when its super hot out. Being able to take trips if we wanted to. Time I wasn't able to go out and do things like cmaping and fishing as the house needed this that or the other.

In the end it is all personal preference but I really love renting my apartment over owning a home. We do live in one of hte nicer units in town and have a long track history of good management so that make it better. Poor management of an apartment will show in the long run and you will probably be very un happy.

Just my 4 cents

Craig

**jIM_Ohio** · 02-02-2010, 10:02 AM

Originally posted by Aehs01 View Post

Thanks for the quick reply, I see your point on renting and some of my thoughts have been also to try renting in an area where i've looked at houses and see if I enjoy the living area before making a large commitment. I will look into a normal bank cc and see what I can find. I did live out of my house in college for a semester in college and also have lived with roommates for 2-3 months but decided quickly I was not enjoying being out of my parents house for many reasons... (I lived with 2 women and it was basically a nightmare)

I am not sure if you are male or female... if you are male and was living with 2 women, you missed a great opportunity to "test" what living with the opposite sex is like. If you are female, and could not live with other females, that makes sense as to why I do not understand women (you do not even understand each other).

ROFL!!!!

have lived with roommates for 2-3 months but decided quickly I was not enjoying being out of my parents house

Here is the issue- typical 18-25 year olds make quick decisions and might not have the mindset to wait things out and work thru your problems.

The keyword is QUICKLY. You cannot quickly get rid of a house. No such thing... focus on some short-mid-long term goals. Start organizing your wants and needs.

Examples- long term goal #1- retirement
mid term goal #1- buy a house
mid term goal #2 move out of parents house
short term goal #1- get out of debt
short term goal #2- have $X in savings
short term goal #3
short term goal #4
short term goal #5
short term goal #6

the point of that is exercise is to see that you have more short term goals than long term goals. However what life has taught me are the short term goals I used to have and did not reach mean little compared to a long term goal everyone needs (retirement).

Being young, you might lean more to short term goals, and most of us here will probably tell you to look at long term goals and mid term goals, knowing that some of your short term goals might get skipped, delayed, or morph into another goal somewhere down the line.

I wil say that I moved out of parents house "for good" my Junior year of college, and that was when I started growing up and maturing faster. At age of 24 I was wiser beyond my years (IMO) than many co-workers my same age (my company hired lots of people about time they hired me).

You may have a good head on your shoulders, but make it a goal to stop living without a parents financial net under you and see what happens. Best if you fall, to fall without a house payment, spouse, or kids which need you. You will be a better person for it IMO.

**Aehs01** · 02-02-2010, 02:40 PM

I am a male, it was technically a good opportunity or so I thought. There was bad communication between us and I was finding that I didn't like it for many reasons.. there was nothing to do there so I had less company over, it was costing me more money, I got into arguments with the girls over stupid things like food and sharing, none of it was really all that positive so I moved back home.

Originally posted by jIM_Ohio View Post

I am not sure if you are male or female... if you are male and was living with 2 women, you missed a great opportunity to "test" what living with the opposite sex is like. If you are female, and could not live with other females, that makes sense as to why I do not understand women (you do not even understand each other).

ROFL!!!!

Here is the issue- typical 18-25 year olds make quick decisions and might not have the mindset to wait things out and work thru your problems.

The keyword is QUICKLY. You cannot quickly get rid of a house. No such thing... focus on some short-mid-long term goals. Start organizing your wants and needs.

Examples- long term goal #1- retirement
mid term goal #1- buy a house
mid term goal #2 move out of parents house
short term goal #1- get out of debt
short term goal #2- have $X in savings
short term goal #3
short term goal #4
short term goal #5
short term goal #6

the point of that is exercise is to see that you have more short term goals than long term goals. However what life has taught me are the short term goals I used to have and did not reach mean little compared to a long term goal everyone needs (retirement).

Being young, you might lean more to short term goals, and most of us here will probably tell you to look at long term goals and mid term goals, knowing that some of your short term goals might get skipped, delayed, or morph into another goal somewhere down the line.

I wil say that I moved out of parents house "for good" my Junior year of college, and that was when I started growing up and maturing faster. At age of 24 I was wiser beyond my years (IMO) than many co-workers my same age (my company hired lots of people about time they hired me).

You may have a good head on your shoulders, but make it a goal to stop living without a parents financial net under you and see what happens. Best if you fall, to fall without a house payment, spouse, or kids which need you. You will be a better person for it IMO.

Opinions on my saving and current debt