Yes, congrats. That must feel amazing.
I’m hoping to follow in your footsteps soon.
Don’t give my husband any ideas.
I may have missed it, but can you summarize the retirement benefits you will get through your college? Do they offer a 401k plan? If so, do they make any contributions to your account? Sometimes employers will contribute a few percent to the account, sometimes they don’t. Do they have a pension or other retirement benefits?
One great benefit to parents who work at colleges is that often their kids can go to the school for free or very inexpensively. That can easily be $50k-100k that you don’t have to save. Try to strongly encourage your kids to go to your college rather than go somewhere else.
I’m not denying it’s happening, but if you go this way prepare to get screwed.
@amarinth that is exactly accurate. I’m from California and I own a $100 apple.
I don’t know what your payments were, but if you can spare $460-ish per month, you will have that $21.5k back in four years. Maybe by then the housing market won’t be so coo-coo crazy, and the issues with your credit that caused you to have to take out a car loan at 14.5% will have cleared up.
Also, you can negotiate with companies to make partial payments on delinquent accounts in exchange for “removing the negative tradeline.” Some companies get all posh posh about this and claim it is unethical, but others are happy to do that in exchange for money.
That’s been my experience using the purchase price of my house as the basis. It isn’t true for the current inflated value. Maintenance costs aren’t going up as fast as prices are.
And congratulations! Have you thought of renting in a better area?
Good for you! And, it can feel like you just now spent $21,500, but in reality, you spent that money long ago. The spending happens when you acquire a debt or obligation to pay, not when you pay it off. (Not directed at you specifically, but some people don’t seem to get this.)
In some markets, if you don’t go this way prepare not to get a house.
It’s got to be an amazingly liberating feeling to be rid of those payments - the big trick now will be to discipline yourself to continue making those payments, to your house fund.
I might have advised clobbering the credit card, and refinancing the car loan a month or two later, as the rates are likely lower than when you got it - mainly to strike a balance between cash flow and a cushion - but I cannot argue with your approach either.
Now is a wonderful and terrible time to buy a house. In some parts of the country prices are going insane, with bidding wars (much like 2001-2003), while interest rates are insanely low. If you do purchase, be prepared to be upside down on the loan if the bubble crashes hard enough at some point. As long as you can afford the payments, and don’t need to sell, that’s really not that big a deal (hell, your property taxes will drop - ours did) but it’s something to consider. We were lucky when we moved in 2002 halfway through the bubble: far enough that our townhouse sold for a fortune, but not so far that we could not afford to buy a detached house.
Having a big down payment will help a lot when it does come time to take the plunge. 20% down gets rid of a lot of hassles like PMI. 1% of the value is not too off the wall - most years we do not spend that much, on the other hand, last year we got a new roof and about 4,000 in other repairs, so we spent more than that, last year.
Keep the credit card - and use it, but pay it off each month. When it comes time to purchase, the lenders will want to see that you have a history of using credit carefully. From what you said, that’s not ideal right now but every month you keep paying it on time will help your rating creep up.
Re that car rate that people grumbled about: Sometimes you just need reliable transportation and if you’re not in a top credit tier, you pay what you gotta pay. Someone might say buy an older used car - but that has a lot of cost involved too, not the least of which is reliability concerns. Having once been gifted with a used car, the maintenance was more than a payment would have been. Have you mismanaged things? HELL no. You have a lot more cash saved up than we ever have and we’re a lot further along in life than you are. All our funds are in our retirement accounts.
As several people have noted, that may be a feature these days, not a bug.
I will echo the recommendation to wait to buy. You earned yourself some money by paying off the credit card and car loan. While waiting for the housing market to cool off a bit, you can do more for your retirement and keep building up your down payment and credit rating.
Haven’t had a car payment in 15 years as we paid cash for our last two, and our mortgage is much cheaper than rent around here. But it takes time to get to that point.
I’m assuming the car situation is stable and that you won’t need another car soon.
As someone who has two reliable vehicles, one 19 years old and one 22, sometimes keeping up with the maintenance and repairs of the vehicle you have is cheaper over time than buying even a new-to-you one.
Sure, once every few years I might have to put $1,000-1,500 into a significant repair, but you can’t buy a working car for that price anymore, so doing that every 3-4 years is more cost-effective than acquiring a car payment. The difference is that you pay it all up front instead of fractions of it every month. People can be deceived by the “low, low monthly payment!”.
Buy quality items and maintain them can pay off long term.
I do this too. The bank still collects the merchant fees, less the amount that Visa/MC keeps. It’s enough to make a profit off you as long as you don’t default and if you’re paying it off each month, you won’t.
Assumable mortgages these days are about as rare as hundred dollar bills on the sidewalk.
The seller doesn’t want to sell to anyone they don’t have faith in and a buyer with an inspection contingency in today’s market is putting up a billboard saying “I may back out of this deal in three days!”
I read an article saying that many single-family home buyers are institutional investors. They started getting into the market in a big way in 2009 and they may be dominating it right now. .
Congratulations! You spent that money when you bought the car/dishwasher/whatever was on the card. Now you have invested your cash at the interest rate you were paying. This is probably the safest, highest-yielding investment you will ever make in your life. Don’t regret if for an instant.
Part of me does – the emotional part, to be sure. We waited a very long time to have that much money in the bank and then – poof! – it was gone. I realize that money was spoken for the moment I signed the loan paperwork, but seeing the savings account depleted to this extent hits a very visceral nerve.
During the year 2020, between having a baby, starting a new business and dealing with the pandemic, we lost about $30,000 in savings. I wish it had gone toward debt, but most of it went to emergency childcare. And yes, it hurts.
But this is why we put the money aside in the first place. This is the second major financial catastrophe we’ve survived due to planning ahead (and, if you’ll permit me a plug, the You Need a Budget software changed our lives forever.)
I’m happy to report as of 2021 we’ve recovered about $20,000 of that. We’ve gone from “Omg drowning drowning” to “Should we go for six months expenses or max out the Roth?”
You hear a lot about the great success stories, I Paid off All My Student Loans in Two Years yadda yadda but you rarely hear about people who just scraped through disaster because of wise financial decisions. I think a lot of people don’t realize how vulnerable they are.
You are tracking the wrong number. Don’t worry, my sister does it too. I don’t know if this will help but I have never tracked my savings as the bottom line. I have always tracked my net worth: assets - liabilities.
Start a little balance sheet spreadsheet, starting with last month. List your financial assets: Savings account, checking account, IRA, pension plan. List your debts. At the bottom calculate your net worth by subtracting liabilities from assets.
Then, update it for this month. Your net assets didn’t change.
Now, do a cash flow spreadsheet looking at your spending last month and what it will look like next month. See how much better it got? You’re on your way to much better financial condition. Recognize you did a good thing.
For what it’s worth, I prepare an annual balance sheet a/o 12/31 each year and see how I did, and I track the change year over year and against my targets, which I set 2-5 years out.
In today’s sellers market, if the buyer was stupid enough to back out for no good reason, the seller could probably get a better offer in under a week.
When we put our house on the market in NJ 25 years ago in a weaker market we got an offer during the open house. A bit later the buyer was being antsy, and our realtor basically said “make my day” since he knew he could get a better offer almost immediately.
BTW, my daughter was thinking of buying. She put down an offer on a house and got the inspection done. It was about 85 pages. The house had water damage all over the place. She said no, thanks. (And is now waiting out the market.) If she had bought that house without an inspection, she’d be facing disruptive and expensive repairs. No thanks.
The only argument against this is that new cars have significantly improved safety features. I don’t know about you, but I’m getting older and it was worth buying a new car instead of putting money into my old one to get them.
Nice paying off the car loan. That $16,400 you were paying at $387/mo @ 14.9% would have taken you another 5 years to pay off and almost $7,000 in interest. Gone!
It does. The number in the bank account was a safety cushion. If something happened and there was an emergency, you were prepared. And it also symbolized all the hard work that you’d done. And now, it’s gone. But you were paying >$150/month for that cushion and that symbol - which makes them very expensive. Especially, when you still have a healthy amount still in the bank.
It still absolutely sucks to see the balance shift, though.
(You will need to make a similar decision when you buy the house - more money upfront v. a stronger safety net and higher overall costs; the consequences of different terms. I chose somewhere in the middle, it was the best fit for my personality, but it helps to be deliberate about the choice and consequences of having made it. I know that from a purely financial standpoint, I’m wasting money. I also know how much money I’m wasting based on my mortgage terms. Psychologically, that amount is worth it for peace of mind.)