please review my 12 month financial plan?

[feh]

A house should be something that you buy when you are personally financially ready to do so. Ignore interest rates, rent, etc. Save up a 20% downpayment, get the rest of your finances in order, and then and only then should you consider a home purchase.

OP - I applaud you for coming to the site for advice. It's great that you're thinking about your budget in detail and planning.

I will also echo what (most) everybody else has said here - you shouldn't be thinking about buying a house. You don't have the down payment. You have outstanding debt. You don't have a suitable emergency fund.

Mortgage rates will still be low in a couple years. Maybe not as low as today, but you shouldn't buy something just because it's on sale.

[Singuy]

OP - I applaud you for coming to the site for advice. It's great that you're thinking about your budget in detail and planning.

I will also echo what (most) everybody else has said here - you shouldn't be thinking about buying a house. You don't have the down payment. You have outstanding debt. You don't have a suitable emergency fund.

Mortgage rates will still be low in a couple years. Maybe not as low as today, but you shouldn't buy something just because it's on sale.

The housing market is already rebounding(depending on which state though), so I still think it's a great idea to buy a 150k or less house considering the rent for the OP is 1300/month. I did the calculation for her and her new house would cost less than 1300/month (about 300 dollars less a month), and you are locked in at a potential lower rate(cost of the house) than say 3 years from now. She can take the 300 dollars savings and apply it to her debt..
@900 dollars/month ($600 she would of used toward her new car + 300 in savings) can be put toward debt, she'll be debt free(minus the house) in 2 years instead of 3.

[bjl584]

The housing market is already rebounding(depending on which state though), so I still think it's a great idea to buy a 150k or less house considering the rent for the OP is 1300/month. I did the calculation for her and her new house would cost less than 1300/month (about 300 dollars less a month), and you are locked in at a potential lower rate(cost of the house) than say 3 years from now. She can take the 300 dollars savings and apply it to her debt..
@900 dollars/month ($600 she would of used toward her new car + 300 in savings) can be put toward debt, she'll be debt free(minus the house) in 2 years instead of 3.

A house should not be purchased based on market conditions or interest rates. A house should only be purchased when you are financially ready.

You can't live your life thinking in terms of cashflow. You have to look at the big picture.

Taking on $150,000 worth of mortgage debt is NOT a good way to save $300 a month.

[disneysteve]

I'm going to be the curmudgeon here - that seems to be the role I've taken on lately. As someone else put it, this may be the slap in the face you need, so take it as intended - advice to save you from yourself.

Your budget is a disaster. You need to fix your spending habits now, before you even begin to think about a major purchase like a house. You are living beyond your means in ways that are very troubling.

For example, you couldn't afford to pay cash for a TV. Really? I bet if you look on craigslist, you can find dozens of TVs for sale in the $50-$100 range. Instead, you took out a loan to buy a TV. Ironically, you can "afford" to pay $55/month to watch TV with your DirecTV subscription.

You have over $40,000 in debt but you can "afford" $60/month for tanning and $55/month for the gym. All of this at the same time that you have ZERO in your emergency fund.

You expect to get a $5,000 to $7,000 tax refund that you intend to use for the wedding and EF. Why aren't you using it to pay off a big chunk of debt? Put $1,000 in the EF and the rest toward the highest interest debt.

I could go on picking this apart but I think you see my point. You guys have created quite a mess and you don't seem to have any plan or intent to clean it up. Instead, you are finding new ways to spend even more money that you don't have (wedding, house, new car).

The regulars here know that I don't often suggest this, but this is a case where I would highly recommend you pick up a copy of Dave Ramsey's book "The Total Money Makeover" and also go to his website and find a Financial Peace University class in your area. You guys need professional help to change your mindset and get you on the right path for a secure future.

Good luck.

[Singuy]

A house should not be purchased based on market conditions or interest rates. A house should only be purchased when you are financially ready.

You can't live your life thinking in terms of cashflow. You have to look at the big picture.

Taking on $150,000 worth of mortgage debt is NOT a good way to save $300 a month.

The most ideal way to get this person out of financial trouble to to cut his spendings (such as tanning memberships or a 1300 dollar rental) but since the person may not be willing to do so, then you have to work with within his needs.

A house not only can increase in value, but also saves you more money on your tax return. In 3 years, the op would of paid 46800 towards rent..or 150k in rent after 9 years. Even if the OP say lose his job, then the house is forclosed..pretty much the same consequence as being kicked out of the apartment...so I don't really see the risk here.

[disneysteve]

A house not only can increase in value, but also saves you more money on your tax return.

My accountant always says, "You should never buy a tax deduction." Yes, you do get to deduct mortgage interest but that DOES NOT save you money. You have to pay $100 in interest in order to "save" $25 on your taxes. So that $25 savings actually costs you $75. How is that a deal?

I strongly disagree that if OP isn't willing to change spending habits that we should just go ahead and tell him how to buy a house that he can't afford. I don't think that is responsible advice on our part.

[Singuy]

I'm going to be the curmudgeon here - that seems to be the role I've taken on lately. As someone else put it, this may be the slap in the face you need, so take it as intended - advice to save you from yourself.

Your budget is a disaster. You need to fix your spending habits now, before you even begin to think about a major purchase like a house. You are living beyond your means in ways that are very troubling.

For example, you couldn't afford to pay cash for a TV. Really? I bet if you look on craigslist, you can find dozens of TVs for sale in the $50-$100 range. Instead, you took out a loan to buy a TV. Ironically, you can "afford" to pay $55/month to watch TV with your DirecTV subscription.

You have over $40,000 in debt but you can "afford" $60/month for tanning and $55/month for the gym. All of this at the same time that you have ZERO in your emergency fund.

You expect to get a $5,000 to $7,000 tax refund that you intend to use for the wedding and EF. Why aren't you using it to pay off a big chunk of debt? Put $1,000 in the EF and the rest toward the highest interest debt.

I could go on picking this apart but I think you see my point. You guys have created quite a mess and you don't seem to have any plan or intent to clean it up. Instead, you are finding new ways to spend even more money that you don't have (wedding, house, new car).

The regulars here know that I don't often suggest this, but this is a case where I would highly recommend you pick up a copy of Dave Ramsey's book "The Total Money Makeover" and also go to his website and find a Financial Peace University class in your area. You guys need professional help to change your mindset and get you on the right path for a secure future.

Good luck.

You can tell that the Fiance may not be willing to make such smart financial compromises considering she was not willing to stay a night in jail which cost them 5k....

[disneysteve]

You can tell that the Fiance may not be willing to make such smart financial compromises considering she was not willing to stay a night in jail which cost them 5k....

For sure. Also the fact that she is spending $60/mo. tanning and I'm sure had something to do with going into debt for a ring and is involved in what is going to be blown on the wedding.

[bjl584]

The most ideal way to get this person out of financial trouble to to cut his spendings (such as tanning memberships or a 1300 dollar rental) but since the person may not be willing to do so, then you have to work with within his needs.

A house not only can increase in value, but also saves you more money on your tax return. In 3 years, the op would of paid 46800 towards rent..or 150k in rent after 9 years. Even if the OP say lose his job, then the house is forclosed..pretty much the same consequence as being kicked out of the apartment...so I don't really see the risk here.

If someone hypothetically speaking is unwilling to cut out such minor expenses as tanning or gym memberships, then please explain how they will be able to responsibly handle a $150,000 mortgage loan.

You can be kicked out of an apartment and not have your credit ruined btw.

OP's finances are a mess. If he had the rest of his finances in order I may be more inclined to see your point of view, but the way that OP is living right here and now, the absolute last thing that he should do is take on mortgage debt.

[Singuy]

My accountant always says, "You should never buy a tax deduction." Yes, you do get to deduct mortgage interest but that DOES NOT save you money. You have to pay $100 in interest in order to "save" $25 on your taxes. So that $25 savings actually costs you $75. How is that a deal?

I strongly disagree that if OP isn't willing to change spending habits that we should just go ahead and tell him how to buy a house that he can't afford. I don't think that is responsible advice on our part.

This is all based on the fact that they spend 1300/month on rent..which gives them nothing but a place to stay..this in itself is interest no one seems to care about..... I wouldn't suggest the OP to even think about a house if they can move into somewhere for half this much. They definitely need to change their spending habits and it's their priority...but some people are not willing to listen so you have to start with baby steps.

Step 1. No car..done
Step 2. Spend that car money on debt, done
Step 3. Lower your monthly spending (including rent)...buying a house was just a suggestion for lowering their rent AND it's something they are willing to do. Not sure if you can get anywhere by telling them to move into something half its current size....

[bjl584]

I would bet a year's salary that if OP bought a house right now it would cost them more over the next 5 years than if they continued renting.

[Singuy]

I would bet a year's salary that if OP bought a house right now it would cost them more over the next 5 years than if they continued renting.

If rent and house(plus all fees) are both equal, and the house does not appreciate..
In 5 years
Rent: 78000
150k, 0 down, 3.25% interest House: 78000+$23,491.51 principle+5000 tax savings = 106853

So the number for you need to beat is 106853..if buying a house cost more than this number in 5 years..then definitely rent.

My initial estimate for Op

The following numbers are based on a 150k house @30 years x 3.25% interest rate, 10k down
1.If you can't put 20% down, you'll be paying mortgage insurance (84/month).
2. HOA fees (0-50/month)
3. Property Tax (about 170/month)
4. House insurance (about 80/month)
5. Increase in ultilities (+50/month)
6. Repairs/misc
7. Mortgage: 609/month

total: 993/month (does not include HOA fees, does include mortgage insurance).

[Singuy]

You can be kicked out of an apartment and not have your credit ruined btw.

Not true, an eviction will be placed on your credit report in the public records section. Unfortunately, it will damage your credit score, impact your ability to rent in the future, and hurt your chances at getting approved for a credit card or loan.

http://credit.about.com/od/df/g/eviction-definition.htm

[bjl584]

150k, 0 down, 3.25% interest House: 78000+$23,491.51 principle+5000 tax savings = 106853

You should never buy a house with 0% down.

[bjl584]

No true, an eviction will be placed on your credit report in the public records section. Unfortunately, it will damage your credit score, impact your ability to rent in the future, and hurt your chances at getting approved for a credit card or loan.

http://credit.about.com/od/df/g/eviction-definition.htm

It could happen, but most likely the landlord will just tell you to leave. The bank won't be so forgiving.