Hi Money Minder,
So, here’s the deal. We’re at a crossroads and not sure if buying a house or sticking with renting is the smartest choice for us. Our income has been on the rise lately (yay!), especially since I started making good money a couple of years ago. But now, our family is expanding and our one-bedroom apartment is feeling a bit cramped. Houses around here can go for about $400K, but they often need a ton of repairs (good thing my FIL is a contractor). Our rent is affordable, but the space is tight. We’ll definitely need more room in 6 months. The thought of renting a bigger place for $2.5K a month is also in the air. Oh, and let’s not forget about our massive student loan debt and not-so-great retirement savings. How should we navigate through all this?
Here’s our financial snapshot:
- Me (30s) making $150K a year
- $25K in student loans with 3.5% interest
- $20K in retirement
- No other debts
- Spouse (30s) making $100K a year
- $60K in student loans with 5.5% interest
- $20K in retirement
- We have $90K in savings/emergency fund
Our budget breakdown looks like this:
– 12% for housing
– 10% for my MIL’s rent
– 12% for debts
– 25% for savings
– 14% for wants
– 27% for other needs
Any tips or advice on how to tackle this?
Take care,
Financially Confused Family
Response from THE MONEY MINDER:
Hello There,
Congratulations on the significant increase in income you have experienced over the past few years! It’s great to hear about your financial progress. Given your current situation and the impending growth of your family, it’s essential to carefully evaluate whether buying a house or continuing to rent is the best financial decision for you.
Considering that housing in your area can be around $400K and your family is about to expand, it’s understandable that you may need more space soon. While buying a house may seem appealing, especially since your father-in-law is a contractor who can assist with renovations, it’s crucial to assess your overall financial picture before making a decision.
With substantial student loan debt and limited retirement savings, it might be more prudent to continue renting for now. Renting a larger space for $2.5K a month could provide the additional room you need without committing to a significant mortgage and potential repair costs associated with buying a house.
Given your income levels and current financial allocations, it’s advisable to prioritize paying off the student loans with the higher interest rates to minimize the long-term interest costs. Increasing contributions to retirement accounts, building an emergency fund, and addressing any other outstanding debts should also be considered within your budget.
While homeownership can be a goal for the future, focusing on reducing debt, boosting retirement savings, and maintaining a stable financial foundation should take precedence at this point. By aligning your financial decisions with your current priorities and long-term goals, you can set yourself up for a more secure financial future.
Best of luck navigating this important decision, and feel free to reach out if you need further guidance or support. Farewell from THE MONEY MINDER.
