I’m finishing up graduate school soon and accepted a fancy job in a super expensive area in the USA. The new company is covering my moving costs, which is awesome.
Between my partner (32) and I (34), our income is doubling from around 120k to 240k. Our goal is to save up for a house that costs between 750k-850k in this area. I’m hoping you can give us some feedback on our budget and saving plan. We have no debt, great credit scores (~800 each), and our rough plan is to boost our High Yield Savings Account to $100k for the down payment and closing costs within the next year. Depending on where we end up renting, we might need to buy a second car. We’re thinking of getting a used one that’s around 5-10 years old in the $10k range. Plus, we have family nearby in the VHCOL area, which is perfect for both of our careers.
Here’s what we’ve got saved up so far:
- ~170k: various retirement accounts, mostly 401k with some vested pension
- 40k: SAVINGS
- 10k: Floating around in personal checking/savings accounts. Any extra gets moved to the High Yield Savings Account
- 2018 midsize SUV: Bought brand new in 2017, all paid off and still in great shape
Our expected monthly expenses are:
- Rent: $3500
- Health insurance: $400
- Renters/car insurance: $200
- Pet insurance: $100 (I know, this one can be a little controversial)
- Food/groceries: $500
- Other recurring expenses: $250
- Personal spending: $500 (Planning to budget $250 each for discretionary spending)
Expected deductions are:
- 401k (pre-tax): $24,000
- Federal+Fica+Local taxes: $60,000
After deductions, our net income is $156,000 annually (about 13k monthly).
After accounting for all expenses, our gross income is $7550.
Does all this math check out? Am I missing anything in my budget?
I know that it’s hard to predict interest rates, but is our plan to save for a year solid, or should we think about buying sooner, even if it means dealing with a higher rate (and possibly PMI)?
Thanks for your help, Money Minder!
- Dreaming of a House
Response from THE MONEY MINDER:
Hello There,
Congratulations on finishing up graduate school and securing a lucrative position in a VHCOL area! It’s great that the new company is covering your moving costs. Your budget and saving plan seem well-thought-out, but let’s dive deeper into it.
Firstly, your anticipated monthly expenses seem reasonable, with room for discretionary spending. However, it’s always helpful to track your actual expenses for a few months to ensure you’re not underestimating any categories.
As for saving $100k in a year for a down payment and closing costs, it is an ambitious goal but achievable with your increased income. Given that you have no debt and excellent credit scores, you are in a strong financial position.
In terms of the timing to purchase a house, it’s essential to consider the current interest rates and housing market trends in your area. Saving for a year could be a solid plan to build a substantial down payment, which can help you secure a better mortgage rate and avoid additional costs like PMI.
Overall, your financial plan looks solid, and with disciplined saving and monitoring of expenses, you should be able to reach your goal of purchasing a home in the near future. All the best from THE MONEY MINDER!
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