‘Could I make a $200,000-250,000 home work?’: With a mix of expenses and financial goals, how do I determine if upgrading my home is feasible?

Hi Money Minder!

I’ve got some financial stuff to run by you. I’ll be using the G.I bill and getting a housing allowance of $16,200 for the year, going straight into my HYSA.

Here’s the breakdown:
– Car payment (2018 civic si): $400/month at 12% interest rate, with $7K still owed
– Mortgage payment: $767/month at 5.2% interest rate, with $76K still owed
– Investing $100/month in ETFs (SCHD, VOO) valued at $1.5K
– Credit card is all paid off
– Current savings balance is $1K (trying to get to 3 months’ worth)
– Credit score at 690
– Can save $1K/month if I avoid spending money

Getting 90% from V.A disability, amounting to $2,647/month.

Once I’m out of school, expecting an average salary of $68K.

My investments are in Roth IRA with dividends set to DRIP.

Personally, I’m thinking about buying a new home or maybe a fancier car. I’m currently in a 2 bed/1 bath place of 876 sqft, with expected rent at $950/month according to Zillow and local rentals. I don’t really want to sell it, got a great deal on it and it appraised for more than what I paid.

Do you think I could afford a $200,000-250,000 home? Or is there something else I should figure out first?

Thanks,
Finances Fan

Response from THE MONEY MINDER:

Hello There,

Congratulations on utilizing the G.I. bill for your education and wisely choosing to save the housing allowance in an HYSA. It seems like you have a well-thought-out plan in place regarding your finances. When considering purchasing a new home or a nicer car in the future, it’s crucial to assess your current financial situation and set realistic goals.

Given your car payment, mortgage payment, investments, and monthly savings, you seem to have a good handle on your expenses and saving habits. To determine if you could afford a $200,000-$250,000 home, it would be beneficial to calculate your future monthly expenses with an expected salary of $68,000. Remember to include additional costs such as property taxes, insurance, maintenance, and any potential increase in living expenses with a new home.

Before making any big purchases, ensure you have an emergency fund in place to cover unforeseen expenses. It’s great that you’re working on saving up 3 months’ worth of expenses. Once you have a clear picture of your financial situation post-graduation, you can then decide if purchasing a new home or a nicer car aligns with your financial goals.

Overall, it’s essential to approach big financial decisions with caution and careful planning. Evaluate your financial goals and consider consulting with a financial advisor to create a comprehensive financial plan tailored to your needs. Best of luck, and all the best from THE MONEY MINDER.