I just turned 30 and one of my goals was to finally get rid of all debt this year ($10k in credit card debt; $9k in student loans).
I used my entire savings to accomplish this and can say I’m debt free. I did this as I’m looking to buy a house within the next 12 months due to my current income and believe my chances would go up substantially with no debt as I’m in California.
Have very little in 401k and Roth IRA ($7k combined) as I would always want the most I can in my paycheck to enjoy little luxuries which I don’t regret.
What is your advice to now accelerate the savings/invesement process to finally own a home (put a down payment and have some extra cash for emergency fund, etc.)?
Thanks in advance.
Advice. Used Up Savings to Wipe All Debt
byu/BigHead_760 inpersonalfinance
Posted by BigHead_760
9 Comments
Buy less, save more. There isn’t really a trick to it.
You should have probably saved some money for an emergency fund before paying off all your student loans but what’s done is done. What is your income and how much do houses cost where you want to live?
Your income has to exceed your spending to grow your savings. It is that simple. The amount you earn that you don’t spend is the amount you have available to save. Unless you can increase how much you earn, the only way to increase the amount you save is to spend less. Additionally, you are at a very vulnerable time at the moment, having exhausted your savings.
My advice would be to put buying a home out of your mind for the time being. Rebuild your emergency fund from where you are now, don’t go back into debt, and put money aside for a substantial down payment for a few years. Then you can come back to purchasing a home. Right now, you just got yourself out of (a relatively small amount of) debt and are rushing to get into the most debt you will ever be in in your life.
Slow down and get your feet back under you first.
Cool.
Now remember how you saved up the cash to pay off all that debt? Do that again. This time it will be way easier because you won’t be chasing interest.
I would focus on my career and increasing my earnings if you want to stay in SoCal. If you buy a 600k place, you’ll want to put down 60 – 120k down and your payment will ~3400, at current rates.
Taxes and insurance are very high here, and if you’re in an HOA that can be high too.
I can see that you’re not worried about your retirement savings, but 10 years goes fast and if you were 40, I would be worried at how little savings you have.
Do not understand any circumstances but a house without a 6 month emergency fund.
Decrease your expenses, increase your income.
You have to reframe your attitude
“ I would always want the most I can in my paycheck to enjoy little luxuries which I don’t regret”
Nothing wrong with making mistakes, lord knows I have. But you have to recognize them and recognize the damage it’s done.
But being impatient got you in the mess you dig yourself out of, don’t be impatient digging yourself back in. Start contributing to your retirement accounts, build up an emergency fund, then revisit where you’re at.
Your timetable is not realistic, your years, not months away
debt free is great! congrats!
now save up an emergency fund, max out your retirement contributions, and then save for a down payment.