Hello!
After reading a lot of MMM posts, forum threads, bogleheads wiki and various other sources I was hoping to get some help with prioritizing financial goals! Everyone seems so nice and helpful on this forum that I was hoping some people would have some advice about our situation and what to do. For a little background my wife and I are both 26 and recently got married last fall. We want kids down the line in a few years but not right away.
She has more debt than me because she went back to school for her teacher's license and is 6 credits shy of getting her Master's Degree in teaching. She is waiting until she gets tenure to finish the degree because school districts do not like to hire a teacher they have to pay more (go figure). My workplace does have a 401k match dollar for dollar up to 6% but I won't qualify until I've been working there a year. They also have discretionary profit sharing of 0-4% after 1 year as well. My wife will have a pension that she is required to contribute. I am currently maxing the HSA but otherwise am not currently contributing to any "retirement accounts". I will probably want to contribute $2,000 if we qualify for the saver's credit for a free $200 from uncle sam.
My question/conundrum is as follows:
We have three different goals we would like to work towards:
-Buy a house
-Pay off our student loans
-Save for retirement
Our current hope is that if she gets a fulltime teaching position at roughly $40,000 a year gross that we could get a house near her work and take advantage of these ridiculous interest rates on mortgages before they go up significantly in the next 6-12 months. Full time teaching jobs are typically available between mid March through mid September. There are down payment assistance options that could probably help us bridge the difference in affording a mortgage and also a tax credit where we would get the first 35% of interest back as a credit if we buy this year. The money for that tax credit is limited and goes through December 2014 or when it runs out. The CFP I spoke with today said it would be a good idea to save up as if for purchasing a loan and then if we can get it, great! If not, we can just put that money into our student loans or invest for retirement. So here is what my question boils down to:
Is it financially better to save to Buy a house and redirect the money to either student loans or saving for retirement if that falls through or just focus on the student loans or investments and get a house after we've paid back more/most/all loans or invested to a certain point. If you want, you can order the three options based on what we should do from first to last. Please explain the financial reasoning or numbers for your recommendation.
Thank you so much for reading and any advice you have!!!
Income:
My full time job:
~$850 every two weeks after taxes, health, dental, and vision insurance plus maxing HSA contribution.
$0 to $3,000 gross, maxes out at roughly 2400 after tax for a monthly bonus based on performance, no idea how/if this is taxed
My wife's two jobs:
~450 a month tutoring part time after school
~650 a month from substitute teaching
Total income: ~2800 + any bonus
Expenses:
769 a month for rent through September 2014
~380 a month student loan minimum payment (this will go up by ~$295 a month in 6 months when grace period is over)
~200 a month groceries
~175 a month on gas for two cars
~150 a month eating out
~150 a month misc expenses (this covers everything from toiletries and clothes to birthday gifts for family and other random expenses)
88.67 a month for wife's cell phone (I can't wait until her contract expires!)
54.37 a month on cable/internet combo
48.49 a month car insurance for two cars
~40 a month energy bill
Total monthly expenses = 2055.53 feel free to round up to 2100 in case I missed something and go to 2400 when other loans go into repayment
Assets:
6,750 in check/savings after substracting for April rent
3,000 in a Roth IRA I helped my wife open
Total Assets: 9,750
Liabilities:
My debts:
$1,000 5.35% student loan
$9,500 6.55% in four student loans
Wife's debts:
$5,544 5.35% student loan
$5,547 5.75% student loan
$7,200 6.55% student loan
Still in grace:
$12,500 6.8% in two subsidized student loans
$13,500 6.8% unsubsidized student loan
The student loan debt is tax deductible up to 2,500, we are in the 15% tax bracket so you can adjust interest rates accordingly after tax. The 6.8% loans will go down to 6.55% like most of the rest while in repayment due to 0.25% reduction from autodebit.
Total liabilities: $54,791