Please Critique - Personal Finance Situation

[feenan2014]

Hello everyone. I first want to say thank you for taking the time to read this and offering your advice and opinions. Finances are something I always fret over even though I think I'm in a good position. I look forward to the day of being able to jump into my car and drive without first calculating how much this trip is going to cost me!!!

Anyways, I am 24 with a 22 y/o fiancée who just graduated. She begins full-time work at the end of May. We are both cut from the same cloth and have similar/identical financial goals. I just bought a house 7 months ago and have been doubling payments each month. The house will be our only debt - currently 80% LTV. No car/student loans.

Monthly Take Home Income - $6,800

Expenses:
Mortgage - $2500 (double payments)
Food - $500 (very exaggerated - rarely eat out. Mostly prepared ahead meals)
Gas - $500
Utilities - $250
Misc - $250
Total - $4,000

Since I was the only one supporting us while she was in school, I have tapped into my savings so when my significant other comes aboard, we will be essentially starting fresh and from $0.00. Here are our goals:

10% + Employer Match into 401k
Max out IRA each year
Emergency Fund - $10,000 (ideally 15k)
Savings: $5,000
Cash Reserves - $1,000

I know it is very risky owning a house, paying double payments, while not having an emergency fund, so this will be our highest priority. Once we have our e.fund and saving accounts padded, we are going to throw almost everything into the house. This should enable us to pay off the house in under 7 years unless we rent it out and move prior. The exception will be for personal investing accounts - I dont see this being more than $5k-$10k annually. I don't know where else to put our money if we are maxing out our IRA, 401k, have 6-12 months expenses saved, and double mortgage payments.

Hopefully everyone has made it to this point. Thanks for reading and I would love to hear your thoughts and input.

Regards,

[bjl584]

How did you finance your house? If 30 years, then refinance to a 15 year or less as opposed to doubling the payments.

There is also a case to be made for paying the minimum on the mortgage, as you can most likely get a better return if you invested the money.

I'd at least back the payments off until you have an adequate emergency fund.

[Weird Tolkienish Figure]

Hello everyone. I first want to say thank you for taking the time to read this and offering your advice and opinions. Finances are something I always fret over even though I think I'm in a good position. I look forward to the day of being able to jump into my car and drive without first calculating how much this trip is going to cost me!!!

Anyways, I am 24 with a 22 y/o fiancée who just graduated. She begins full-time work at the end of May. We are both cut from the same cloth and have similar/identical financial goals. I just bought a house 7 months ago and have been doubling payments each month. The house will be our only debt - currently 80% LTV. No car/student loans.

Monthly Take Home Income - $6,800

Expenses:
Mortgage - $2500 (double payments)
Food - $500 (very exaggerated - rarely eat out. Mostly prepared ahead meals)
Gas - $500
Utilities - $250
Misc - $250
Total - $4,000

Since I was the only one supporting us while she was in school, I have tapped into my savings so when my significant other comes aboard, we will be essentially starting fresh and from $0.00. Here are our goals:

10% + Employer Match into 401k
Max out IRA each year
Emergency Fund - $10,000 (ideally 15k)
Savings: $5,000
Cash Reserves - $1,000

I know it is very risky owning a house, paying double payments, while not having an emergency fund, so this will be our highest priority. Once we have our e.fund and saving accounts padded, we are going to throw almost everything into the house. This should enable us to pay off the house in under 7 years unless we rent it out and move prior. The exception will be for personal investing accounts - I dont see this being more than $5k-$10k annually. I don't know where else to put our money if we are maxing out our IRA, 401k, have 6-12 months expenses saved, and double mortgage payments.

Hopefully everyone has made it to this point. Thanks for reading and I would love to hear your thoughts and input.

Regards,

Looks fine to me, what are your specific goals?

[Redraidernurse]

Like the above poster said, look into whether you can get a better return on your money than paying of your home early. We could pay off our home in full right now but we choose to invest the money because we are getting better returns on it.

[Eagle]

Hopefully everyone has made it to this point. Thanks for reading and I would love to hear your thoughts and input.

Welcome to the forums! First congrats on your home purchase and your upcoming wedding!

Second, it looks like in your early to mid 20's you guys have made some very good financial choices. You also spend significantly less than you make.

A few of questions for clarification....

So as of today you have $0 in your checking or savings account?

Who's paying for the wedding and honeymoon?

What is your mortgage balance and interest rate?

[feenan2014]

I will just answer the questions as they were asked.

bjl584 - 30 year conventional loan at 4.25%. I have the same internal debate. Pay off mortgage with 4.25% interest or invest and make 5%+. However, the feeling of having a house paid off and being 100% debt free, makes me all giggly inside.

Weird Tolkienish Figure - specific goals you ask? First and foremost is the goal of being debt free. We look forward to the day. We would like to be in a position to help our family and friends. We've made it to where we are with their help and support and we would love to give back. When we have a family, our child's education is very important so a college fund is a must. We both would like to travel while we work towards retirement at a relatively young age (50's-ish)

Redraidernurse - This is something I think about daily! The majority of my down payment for the house came from personal investing so I really want to focus on this a lot more down the road. Ideally, we invest at least $1k per month on top of IRA and 401k.

Eagle - Thank you for your kind and welcoming words! Yes, I live basically paycheck to paycheck at this point. This is not what I want and will be changing VERY soon. The wedding and honeymoon will be paid by us, but our parents have told us what our gift will be and their gifts combined will pay for almost all (if not more than) the wedding and honeymoon. Mortgage balance is 203k on a 254k purchase price @ 4.25%.

Up until now, I've been paying this by myself and this is why I am hurting financially. Once my financee and I combine forces, things will be much better and we will be able to actually have a savings and put money towards higher earning investments while still paying extra on the mortgage.

[LivingAlmostLarge]

Will you divert extra mortgage to pay cash for wedding and honeymoon?

[Goldy]

Do you know what your wife will be making once she graduates?

We are in a very similar situation to you, aggressively paying down our mortgage (262k now 217) and also plan to pay it off in 7 years by double payments. We chose to use a 5/1 arm to reduce the interest we are paying while we have the mortgage. If yo switched to a 5/1 am at 2.5% you would save 13k in interest over the 7 years you intend to pay it off. With that said I'm not sure I would recommend that for you because the EF is too low to justify the additional risk of a ARM in my opinion.

When your wife gets a job I would look at maxing the 401k and both roths. That's what we do and I think of it as a way to diversify against putting all of that cash towards your house.

[snafu]

Welcome to SA. Your enthusiasm and a fresh perspective is terrific. I think it's important to get detailed information about your [& fiancee's employer's] retirement plan. You both need to know fees, choices & MERs. We don't want you to leave free money on the table. I realize retirement is off the radar at 24 y/o but small sums set aside need time to compound significantly and there is free money being ignored.

You seem focussed and knowledgeable which is a dynamic combination. I wish you'd opted for an adjusted interest rate mortgage as I'm guessing your lower level of credit experience impacted your FICO score in a negative way and resulted in a 4.25 % mortgage.

There was no category for transportation, operation or maintenance which was puzzling. What is your plan going forward for furnishings, home and yard maintenance and repairs? The rule of thumb for home owners is to work up a 1% of value fund over time. The research suggests developing an Emergency Fund initially $ 1K, working up to a sum that reflects 3 months of very basic expenses [mortgage, utilities, medical, transportation and food if your employment is stable.

I admire your determination to clear your mortgage as it offers a low risk project. You will need to balance that desire with potential to increase net worth. Have you read The Automatic Millionaire [Bach] or The Millionaire Next Door? they are available at the library or on most re-sale books on line.