I’m 23 years old and started a job in June after graduating. I make about $73,000 per year. I currently rent an apartment and pay $1,200 in rent each month plus utilities. I’d like to purchase a home with a smaller monthly payment. I have a car debt of $23,000 and I pay $400 per month with 0% APR. I also have $22,000 of student loans and I try to pay at least $500 per month. My required payment is $250 per month. Right now I have a savings of $3,000 and am trying to increase that.
Here’s a basic game plan:
- You need more than $3,000 in savings, and while it’s commendable to be paying off your debt aggressively, I would urge you to return close to the minimum monthly payment on both your car and student loans. Some, or all, of your student loan interest is deductible at your income level. Thus, it’s not quite as damaging to hold off on paying extra.
- If the above move allows you to save an additional $250/mo then this has the potential to add another $3,000 to your savings over the next year.
- You need to start looking into your home budget, your available loan options, etc. In most cases you’ll need 3% down, so start looking at your savings in this context.
- Lastly, if your company offers a 401(k) with an employer match you need to be sure you’re taking full advantage of this match instead of solely focusing on short term goals.
Adam C. Harding, CFP
Disclosure: For informational purposes only. Not to be considered investment, tax, or legal advice. My responses on Nerdwallet are for educational purposes only and action should not be taken until a thorough analysis has been done by me or your financial advisor. Investing involves risk of loss and diversification does not ensure protection against risk of loss.
You make huge coin for a 23yo…start banking it! Stop paying extra towards student loans and instead direct it towards savings. There are 1% down conventional mortgages you can get so practically qualify now. Even without a 2 year work history, if you are employed in your field of graduation then you should qualify. To build wealth faster, buy a house and take in a paying roommate to help cover mortgage and utilities. - The Savings Coach
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