Throw away so I can share some details.
I started my financial planning and FI journey late. I graduated in the mid 2000's with about $120K in student loan debt (fixed gov loans, but mostly private loans with variable % that flexed between 3.75%-7%0. Given my ignorance when I was younger, high student payments, and general financial recklessness, I never saved any money. I got married about 7 years ago and we had some debt from our wedding, honeymoon, and some credit cards. We also had to buy cars since both of ours crapped out. We made OK money but have been living in a HCOL area (SoCal). Had a kid - day care is super expensive but that should end in a couple of years. For the last 4 years we've been able to increase our income through promotions and job changes. We paid off our big credit card debt a while ago, but still had student loans and car payments. Today we're bringing in about $300k/year combined. Because of the burden I always felt about my student loans, I focused the last year paying those off and did so last month. This was mostly for peace of mind. I've also paid of my car and any balance on credit cards. At this point, the only debt we have is a low interest car payment. We have about $150K in 401(k), which at this point we max out + get employer match.
My wife and I both want to buy a house. It's always been a goal of ours, but costs are high (average single family home price is about $770k). Our rent is relatively low, so my plan was to keep our spending budget low which would allow us to save about $5k/month. The plan was to save up for a 20% down payment + cushion and buy in about 2-3 years. However, we unexpectedly got gifted $100K to put toward a home (the stipulation is that we use it for a home). Our credit is killer (both have scores above 800) and I'm thinking we can get a great mortgage rate. I want to continue to save toward my goal of hitting $1M in assets (cash + investments (but not 401(k)) + real estate minus whatever we own on a home) by the time I'm 50, which would be in about 13 years. My plan was to have a mortgage (P&I + T&I) that was around $4500/month, which would leave us about $4500/month to save/invest after all of our expenses. That wouldn't include the 401(k)+employer match (again maxed out). Doing all the math, we'd be able to save about $700k in 13 years, so gains on investments should hopefully bring us to our goal (math is done based on what we make now and doesn't account for additional promotions or increases in salary).
Ok, so here is what I'm hoping to get some thoughts on. I want to be prepared to jump on a home if/when the opportunity presents itself. With rates as low as the are, it seems like I can buy a slightly more expensive home that I initially thought. I've also been thinking that I can stretch slightly above my $4500/month mortgage also. The downside is that we don't have much cash (call it $20K). Market aside (I'm not planning on doing anything until congress decides to pass/not pass the next stimulus) and economy aside (both of our employers seem pretty stable), is this plan too much of a risk? Should I focus on saving more cash to give myself more cushion? What am I not thinking about?
Thanks in advance for sharing your opinions.
Submitted July 29, 2020 at 12:09AM by BSnamejustBS https://ift.tt/3f9OQ6c
