I’m 29 and just bought a house a few months ago in a MCOL city. This house is about 28% of my take home pay, and also needed some updates and various electrical/plumbing to get up to code. It has been quite a lot of money leaving my pocket recently and I’m getting a little overwhelmed.
I know when everything is complete that this is going to be an awesome place to live, and I’m doing a lot of the work myself. However, I’ve had to scale back my investments to just 6% to my 401k and feel like I’m behind now. For the last few years I was able to max out my 401k, Roth IRA, and HSA and throw in a couple hundred bucks to my brokerage accounts.
I was also dealt a fairly large tax bill and owe the IRS about 7.5k and have been throwing $300 a month to that. I make about 6k a month after taxes, my mortgage is 2000, and my car payment is 375. No other debts besides this. Part of me wishes that I would’ve kept renting and maxing out my accounts. My rent previously was around $500 a month and now obviously is about 4x that. Has anyone been in a familiar spot? Does it get better? Feeling quite stressed atm.
Thanks for any advice/insight!
Increased Expenses / Regret
byu/countryclubkilla infinancialindependence
Posted by countryclubkilla
9 Comments
It gets better but it sounds you like you did two things wrong:
1. Entered into a mortgage with no emergency fund.
2. Poorly planned your tax bill
All fixable but it may take you time to recover. Not fully maxing your retirement is ok. From the looks of it you’d be back on track end of this year/next year. Don’t fret too much. Just work on fixing the above two. The mortgage/income ratio will scale down over time as you earn more. Having the security of owning over renting is nice too.
>This house is about 28% of my take home pay, and also needed some updates and various electrical/plumbing to get up to code. It has been quite a lot of money leaving my pocket recently…
I’ve had to scale back my investments to just 6% to my 401k and feel like I’m behind now.
Part of me wishes that I would’ve kept renting and maxing out my accounts.
You don’t seem to be taking into account that your house is an investment. Renting is an expense; when you pay rent each month, you don’t see any return on that. When you’re paying a mortgage, a portion goes towards your principal, which is effectively going back into your pocket. When you pay for an update, a portion of that cost is increasing the value of your home. And those investments also naturally, typically grow over time. And, of course, many of those investments are tax friendly. *And*, above all else, owning a home (at least one that you like) provides a pretty significant improvement to one’s quality of life. It’s hard to put a number on that, but I’m fairly certain it’ll probably offer more direct happiness than a 401k could.
I’m not saying buying a home will necessarily net you the same kinds of returns as a 401k or something, nor am I saying that buying a home is always better than renting. But you should sit down with a spreadsheet and run some of these numbers in detail, cause you don’t seem to appreciate just how well situated you appear to be.
Yes, I overbought house and it took me five years to get a job where things felt easy. You will be okay! You just have to grind it out.
How much do you have invested? If you at least have $100k-$150k+ that’s great for your age. In a year or two you’ll probably be glad you bought once your back on track investing-wise
Gets better almost immediately. It’s 28% of your income this year. Watch it be 26% next year then 25% then before you know it under 20%. You’ll be on here in 15 years or so asking if you should pay it off early is my bet.
Also, when you are in your 20’s the average person would say that the definition of maxing your 401k means getting the full emplyer match. The idea of putting in the full $23k is just mind blowing to most. Throttling back to only matching level while starting your home ownership is very reasonable and is still building up to a Financially Independent future
We bought a 1.8M condo in 2022. My wife got fired before the first mortgage payment and I got kicked out of my own company 6 months later. We made it through and the purchase has thus far been one of the best financial decisions we’ve ever made.
Sometimes you gotta recognize life isn’t going to go according to plan. You already made the purchase, don’t regret it. Keep grinding, you’ll be fine.
Lots of good advice here. I’d encourage you to get a roommate in the short term!
Typical and you’ll feel better once you get a few raises. Good luck!
I bought my house at 29 too. Don’t lose sight of the fact that all the money you put towards your mortgage you’re getting back in equity. When you pay your rent, it’s gone. Also you no longer have to deal with apartment neighbors above or below you and their noises, unexpectedly high rent hikes (though it seems you somehow had a sweet deal), and having to move because the place is sold or whatever. And don’t forget that all the money you put towards mortgage interest is tax deductible.
Mortgage being 28% of take home is fine, and that’ll go down as you make more money as you grow in your career.
Triage the house updates that are needed and only do what’s dire now. You do it one thing at a time, over time, and it won’t end up being that bad.
Congrats on buying the house!