Author Topic: Case study: Saving for down payment vs. retirement  (Read 1835 times)

fluffmuffin

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Case study: Saving for down payment vs. retirement
« on: August 07, 2017, 12:02:26 PM »
Hi all! I was going to post this in Ask a Mustachian, but figured I might as well go ahead and put together a case study. I was just playing around with my jobís retirement calculator and am questioning my decision to focus on saving for a down payment on a future house, vs. directing extra money towards my Roth IRA. Buying a house is at least two years away for a variety of reasons so Iíve got some time to work with, but housing prices are crazy in the city where we want to live long-term. There is nothing on the market under $200k and realistically, we would be looking at a minimum of $250k for a starter home or townhouse. The rental market is equally tough: weíd be paying a $1,400/month for something similar to what we have in our current location, so Iím not seeing how renting makes sense if we have the option to buy.

Edited to add: I would be trying to save enough to get as to a 20% down payment as possible. BF would probably be adding around $5,000 and family would likely be giving us $5,000-7,000.

My boyfriend and I arenít married yet, but live together and are in it for the long haul. He makes about the same amount of money I do, but has $20k in student loans and is also the comparative spendypants of the relationshipóalthough he has no consumer debt and drives a hand-me-down car so heís doing well in comparison with the average American. He is not interested in tracking expenses and Iím not interested in combining finances unless he will, so we keep things separate. Iíve told him that the student loans are his problem until we get married, and then they become our problem.

Numbers are averages from YNAB. I transitioned to new-YNAB in April so some big-ticket expenses are excluded; I've included estimates below.

Category   Monthly   Annual   
Salary/Wages for earner #1   $3,695    $44,342    
Pretax Health Ins.   $0    $0    (Employer covers full freight.)
FICA base salary/wages   $3,695.16    $44,342    
         
401(k) / 403(b) / TSP / etc.   $404    $4,842    
Employer Match   $483.96    $5,808    
Subtotal 1   $3,292    $39,500    
          
Federal tax   $308.24    $3,699    
State/City tax   $143    $1,711    
Soc. Sec. tax   $222.32    $2,668    
Medicare tax   $53.58    $643    
Total income taxes   $727    $8,720.88    
          
Income before other expenses     $2,564.92    $30,779    
         
Monthly Expenses         
Rent   $525   (Total is $1,050.)
Electricity   $60   (I pay all of this in exchange for paying $0 for cable/internet.)   
Groceries (incl. alcohol)   $312   (My BF usually covers a few more six packs and maybe one grocery run. Total household expenses for 2 adults is probably more like $375.)
Cell Phone   $0   (A relative has a hookup for her business and generously covers my cell phone costs.)   
Fuel   $95   (My car sucks on gas and we've been driving a lot (grandma in hospital, etc.).)
Restaurants/Coffee/Going Out   $107   (Ugh. We live within walking distance of an amazing brewery.)   
Entertainment   $35      
Cable/Internet   $0   (BF covers this one.)
Workout/Running   $60   (Have been paying $130/mo for fancy boutique studio. Contract just expired so this is a generous estimate moving forward.)   
Pet upkeep (food, daycare, vet)   $89   (BF contributes same amount. We recently adopted a new dog who's a basket case unless she goes to daycare 2x/week. I can't cut this and stay sane.)
Household Goods   $50      
Clothing/Makeup/Personal Upkeep   $120   (Not reflective of what I spend every month. I've been super-frugal for the last three years and a lot of my staple clothing/shoe items had worn out. I did one big shop for the year in June that was around $1,000. I could have done it more cheaply but I love everything I bought, and am already using it all a ton.)   
Misc   $5      
         
Recurring Expenses         
Car: Insurance   $50      
Car: Registration/Taxes   $7   (Still trying to nail down registration/taxes in my current city, so might have to bump up average.)   
Charitable Giving   $38      
Travel/Weddings/Gifts Slush Fund   $95   (Estimate since I don't have old YNAB numbers handy; no international travel planned for upcoming year.)
         
Monthly Income before other expenses   $2,565      
Monthly Expenses   $1,648      
Monthly Available to Save   $917      
         
Savings Goals         
Emergency Fund   $5,000      
Down Payment   $2,771      
         
Investment Accounts         
Retirement: Personal IRA   $8,095      
Retirement: Employee Contributions    $5,333   (Contributing to max employer contributions.)    
Retirement: Employer Contributions    $8,556      
Stocks   $2,404   (I consider this part of my retirement fund.)   
Vanguard Mutual Fund   $12,004   (One-time windfall. Earmarked for down payment.)   
         
Other Assets         
2006 Jeep Liberty with 120k miles. I'll drive it until it falls apart.         
         
Liabilities         
None. No student loans, all credit cards paid in full each month to get points.         
         
Where All the Extra Money Went (estimates without access to old YNAB numbers are starred)         
Furniture   $1,100   (Single investment piece. Plan to use until I die. Most of cost covered by one-time bonus.)
Dogs   $1,055*   (Handling old dog's end-of-life care, plus one-off costs for adopting moneypit dog.)   
Domestic Travel   $1,000*   (One biggish trip and two smaller ones to visit friends.)   
International Travel   $650   (Paid for flight with points, very affordable all-inclusive.)   
Maximizing Work Trip to Schmancy International Destination   $650   (#YOnLygetaworktriptoeuropeOnce. Also where I spent $1,000 on clothes and shoes.)
Weddings and Gift-Giving Occasions   $500*   (We had All the Weddings. I was also in a bridal party: hello hideous dress and shoes.)   
Dentist's Porsche Cayenne and 3-carat Diamond Earrings   $450   (Needed two fillings.)   


Just from running through the exercise of putting this together, I think itís obvious that my problem areas are traveling and one-time larger expenses, like the piece of furniture and the shopping in Europe. Iím going to be more mindful of that going forward. 2016 was a very rough year financially, so a lot of my energy in 2017 has gone towards rebuilding my emergency fund.

So what should I be doing: keep throwing money in the down payment fund, or start contributing to my IRA again? Some combination of the two? I do anticipate traveling some in the next year (probably only domestically, sobs) and we have two weddings (might be a bridesmaid for one? Friends are waffling about whether theyíre doing wedding parties), so Iíll need to save some money for those costs. Is there anything Iím missing?
« Last Edit: August 08, 2017, 07:12:22 AM by fluffmuffin »

czr

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Re: Case study: Saving for down payment vs. retirement
« Reply #1 on: August 07, 2017, 01:54:20 PM »
Is this goal right or a desired monthly amount?:

Emergency Fund   $5,000   (does not look like 6 months E-Fund)
Down Payment   $2,771  (does not compute)

Anyway, you are going to have to put actual numbers to your goals and your plan on how to get there. So if you have $1,000 to save every month then you should have $12k by the end of the year. Any raises, merit increases you get just pile that to your downpayment/retirement goals via your paycheck.  I would keep contributing to a 401k/Retirement monthly since you will continue to do that even when you get the house and want to keep that good 'pay yourself first' habit.

fluffmuffin

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Re: Case study: Saving for down payment vs. retirement
« Reply #2 on: August 07, 2017, 06:40:39 PM »
Is this goal right or a desired monthly amount?:

Emergency Fund   $5,000   (does not look like 6 months E-Fund)
Down Payment   $2,771  (does not compute)

Anyway, you are going to have to put actual numbers to your goals and your plan on how to get there. So if you have $1,000 to save every month then you should have $12k by the end of the year. Any raises, merit increases you get just pile that to your downpayment/retirement goals via your paycheck.  I would keep contributing to a 401k/Retirement monthly since you will continue to do that even when you get the house and want to keep that good 'pay yourself first' habit.

Edited to add more detail above: I would be trying to save enough to get as close to a 20% down payment on a $250k house as possible. BF would probably be adding around $5,000 and family would likely be giving us $5,000-7,000. So from all sources a total of $50,000.

I am actually okay with $5,000 as an e-fund right now, since I have no kids, don't own a house, have a stable job, and a partner. If my relationship went up in flames I could commute to my job from my mom's house until I got back on my feet. I currently have ~$14,700 sitting there for the house ($2,771 in savings account and $12,000 in bonds) and this number should only go up. Plus I have $2,400 in stocks and $8,000 in a Roth, which I could always tap into if I absolutely had to; I also have a 457 plan through work which I believe I can access with minimal penalties, which has $3,500. And I also have about $17,000 in credit available. I'm not stressed about my ability to handle emergencies with my current life situation. I would make sure to have six months saved by the time we actually bought the house, or if we had an oops baby etc.

I'm just feeling like I'm behind on retirement right now. I don't tend to do super-well with non-automated savings towards multiple incremental goals--I need to have one thing to focus on throwing all of my money at, and my job won't let me set up multiple direct deposits.

Feivel2000

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Re: Case study: Saving for down payment vs. retirement
« Reply #3 on: August 08, 2017, 01:09:59 AM »
Unless you are married and your partner makes significantly less or is a stay at home dad, I wouldn't accept that he only adds 5k to the down-payment.

I also think that your monthly stats look good. Sure, groceries could get down, someone might say that you you could save the 100$ going out money and $50 for household goods seems high. And definitely find a cheaper gym or quit the gym completely.

But unfortunately I think your budget is incomplete. Most of your 1-time expenses are recurring. There will be more presents to give and especially more holidays to take and you should budget for them. And they are no emergencies.


fluffmuffin

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Re: Case study: Saving for down payment vs. retirement
« Reply #4 on: August 08, 2017, 07:05:08 AM »
Unless you are married and your partner makes significantly less or is a stay at home dad, I wouldn't accept that he only adds 5k to the down-payment.

I also think that your monthly stats look good. Sure, groceries could get down, someone might say that you you could save the 100$ going out money and $50 for household goods seems high. And definitely find a cheaper gym or quit the gym completely.

But unfortunately I think your budget is incomplete. Most of your 1-time expenses are recurring. There will be more presents to give and especially more holidays to take and you should budget for them. And they are no emergencies.

True...I do budget for them, actually, but in the interests of simplification (and not having the numbers in front of me with nYNAB, since all of the gifting stuff happened before the April switch) I omitted them. Will edit original post. And I do think $50 on household goods is a little wacky right now; we've been doing some projects around the house this summer (started container gardens, got some flowers, picked up paint to breathe some new life into a few pieces of furniture, etc.), but I think with the historical data from old-YNAB this would average out to more like $15.

I really hope my SO will have more than $5,000 to contribute towards the down payment, but I'm trying to make a game plan for if he doesn't. We had a long talk about money on Saturday and it did not go super-well, which is typical. He feels like I can be really judgmental, and since I don't have to deal with student loans and have never been unemployed, he feels like I don't know his lived reality and don't get to have opinions about what he does with his money, basically. I would really like us to do some kind of premarital financial bootcamp mediated by a third party (is that a thing?) because I feel like our conversations about money never end up being productive. He's open to trying something like the Frugalwoods Uber Frugal Month, but August and September are not great times to do that because we have a lot of friend + family stuff going on that's technically optional but that would be huge bummers to miss.

I will say that he's doing a lot better financially now than he was when we first started dating--he has an emergency fund, has been making progress on his student loans, and has started contributing to retirement accounts. And he wants to get better about buying lunch out all the time. It just sucks because he would actually be much more likely to want to RE and pursue entrepreneurship than I would; I love my field and would want to keep working in some capacity even after FI, whereas his dream situation is to quit his job and make custom furniture all day. I send him MMM and Frugalwoods posts from time to time, but he just doesn't think it's possible with his loans. And his loans aren't so bad that he couldn't knock them out in a year or two if he really tried, even if I didn't kick in any money.
« Last Edit: August 08, 2017, 07:45:41 AM by fluffmuffin »

Snow

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Re: Case study: Saving for down payment vs. retirement
« Reply #5 on: August 08, 2017, 07:39:30 AM »
I agree to the above that your bf contributing only 5 000 on a potential down-payment seems very low. My SO currently makes only 30% of what I do (student), but he would never accept providing less-than equal contribution to buying a house. Even if that means I put down most up front and he paid more over the course of a loan, resulting in a net-equal investment.

That is not what he wants, mind. He wants to contribute fully 50% from the get-go. Is there a reason the two of you are planning for you to contribute the most, even as you state you have pretty equal salaries?

You seem guilty about the restaurant/coffee/eating out part. Maybe you could slash it in half? For instance going once a month instead of twice a month (or whatever increment you are currently doing)?

Laura33

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Re: Case study: Saving for down payment vs. retirement
« Reply #6 on: August 08, 2017, 12:24:36 PM »
Don't commit on the house until you guys are on the same page about the finances -- doesn't even matter what page that is, but you're not on it yet.  It seems from this like you are covering the bulk of the expenses, and you are the one pushing for the house, and he is feeling pushed and lectured because he isn't tackling his loans as you'd like him to.  That's a recipe for a parent-child relationship developing, where over time you get resentful over being the responsible one and carrying the load, and he feels distrusted and impotent because you're not happy with how he manages things.  So for now, just keep socking the money away towards your retirement -- you guys have plenty of time to figure this out, so take the time now to work on agreeing on joint goals and a plan to get there (financial counseling is a great idea if you can find it, btw).  Once the two of you agree together that it is time to buy a home, you have enough set aside for a downpayment that the two of you can knock out the rest in short order.

Also, if you think $50 is a lot for "house" stuff every month, just wait until you actually buy one.  ;-)
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Feivel2000

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Re: Case study: Saving for down payment vs. retirement
« Reply #7 on: August 08, 2017, 01:52:06 PM »
Talking about money is really really really hard to get right. I know. I failed multiple times myself.

Keep trying to lead by example but without being a smartass and judgemental. Look for the thread how to turn a spouse into a mustachian in 50 easy steps (or something like that).

I think he needs time to realize what's really possible. He is far away from having crushing debts (unless he pays 33% interest). If he really wishes to quit his job, you have a good chance to convert him.


Snow

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Re: Case study: Saving for down payment vs. retirement
« Reply #8 on: August 09, 2017, 12:27:32 AM »
I really hope my SO will have more than $5,000 to contribute towards the down payment, but I'm trying to make a game plan for if he doesn't. We had a long talk about money on Saturday and it did not go super-well, which is typical. He feels like I can be really judgmental, and since I don't have to deal with student loans and have never been unemployed, he feels like I don't know his lived reality and don't get to have opinions about what he does with his money, basically. I would really like us to do some kind of premarital financial bootcamp mediated by a third party (is that a thing?) because I feel like our conversations about money never end up being productive. He's open to trying something like the Frugalwoods Uber Frugal Month, but August and September are not great times to do that because we have a lot of friend + family stuff going on that's technically optional but that would be huge bummers to miss.

I will say that he's doing a lot better financially now than he was when we first started dating--he has an emergency fund, has been making progress on his student loans, and has started contributing to retirement accounts. And he wants to get better about buying lunch out all the time. It just sucks because he would actually be much more likely to want to RE and pursue entrepreneurship than I would; I love my field and would want to keep working in some capacity even after FI, whereas his dream situation is to quit his job and make custom furniture all day. I send him MMM and Frugalwoods posts from time to time, but he just doesn't think it's possible with his loans. And his loans aren't so bad that he couldn't knock them out in a year or two if he really tried, even if I didn't kick in any money.

I'm sorry, I didn't see this the first time I posted.

If he hasn't responded to you sending him some posts from time to time, I think it is time to step back and give him a breather. As others have stated, you risk introducing resentment and conflict if you push your case too much. He may very well feel like you are bashing him over the head with your financial opinions and grow to oppose you out of sheer human nature.

Although it might be hard to see him "throw away" his hard earned money on things you consider unnecessary, try to give him a break. Lead by example. Get excited (and read the thread about how to convert your SO to musthachianism. But above all, give him a bit of rest). Get excited about how much your own investments have grown over time (but don't push him. Just share it like you might share any other bit of positive news. And not too often). My own SO has been intimidated by investing in funds for years, both because of the learning curve and the inherent risk. Only now, 3 years into the relationship and over 6 years since I started a (tiny) monthly savings plan, has he stated that he wants me to show him some of the ropes. The carrot here is easy: Our mortgage account gives a 3.2% interest but has to be used for a house. That sounds pretty good, until you realize that my funds, on average, have been gaining more than 10% annually, even during the rocky years a while back. Even though about 30% of any profits have to be taxed, that's still a 7% increase, or more than double the earnings on the mortgage account (commonly considered the "best" way to save in my country).

Also, don't let yourself shoulder most of the burden of saving for the down payment. If my SO was not on board, I would simply save for FI slowly and steadily on my own. Maybe SO would notice my increased happiness/calmness and be curious, but in the end, I don't need my SO to want FI just because I want it. If a great house presented itself, I would expect to put down the same as my partner, keeping the rest of my finances separate.

fluffmuffin

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Re: Case study: Saving for down payment vs. retirement
« Reply #9 on: August 09, 2017, 08:21:21 AM »
Thanks, all. We don't talk about money that much, and I basically do exactly what Snow outlined already. I don't nitpick his spending, I don't say a word about him eating lunch out (other than being encouraging when he's independently expressed the desire to work on this), and when I say I send him articles occasionally, "occasionally" is like once every couple of months. It's never out of the blue--he mentioned maybe wanting to try an Etsy shop, I saw Mrs. MMM's Etsy article a couple of days later, and sent it to him; he was complaining more than usual about his loans so I sent him something about strategies to pay down debt faster. In the day to day, I focus on running my own race, and share financial milestones every once in awhile. I just feel like he doesn't see what I do as relatable, because I don't have loans. It's as if "yeah, but you don't have loans" negates anything I may know about financial planning.

And it's okay if he doesn't want me to be his financial guru, even if I have read the "how to turn your spouse mustachian" post like 8 times ;) Not everyone is into tracking their spending, and like I mentioned in my OP he's doing better than so many other people since he has no car payments or consumer debt, and only $20K in student loans. I don't want the parent/child gross dynamic to develop, and I have no interest in nagging him into anything he doesn't want to do. I just feel like he's on a hair trigger to turn defensive if I mention anything that could be even an oblique reference to how helpful it would be to save more.

The thing is, I'm not the one pushing for the house, which I feel like may have been the impression I gave in my OP since a couple of people have mentioned it. He wants the house as much as I do, maybe more in some ways. He does want to contribute! But he doesn't seem to have a sense of the numbers that are actually involved with purchasing a $250,000 house, and is also (of course) the one with the champagne housing preferences. He puts away like $125/paycheck, which is fantastic and I'm so proud of him for doing that since it was definitely not his norm when we started dating, but that amount of money isn't going to move the needle significantly. Because of the specific shittiness of the housing market in our target city, I don't feel like I can wait for him to realize on his own that we can't afford the payments on a $250k house without at least $35k to put down (which would still land us with PMI), and only start getting serious about saving then. Renting would be a money-drain--for various reasons we can't realistically downsize from what we have now (which to be clear is a pleasant-but-basic 2br 1ba duplex with a shared backyard, not some McMansion), which would put us at $1,400 in rent in our target city. Maybe I'll give it a few weeks and sit him down with the Zillow mortgage calculator? But then, ugh, we're back to me telling him things about money.

And Laura33...yes I am totally aware that considering $50/month in house stuff high is a luxury of renting ;) I'm enjoying it while I can.

Laura33

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Re: Case study: Saving for down payment vs. retirement
« Reply #10 on: August 09, 2017, 11:49:17 AM »
The thing is, I'm not the one pushing for the house, which I feel like may have been the impression I gave in my OP since a couple of people have mentioned it. He wants the house as much as I do, maybe more in some ways. He does want to contribute! But he doesn't seem to have a sense of the numbers that are actually involved with purchasing a $250,000 house, and is also (of course) the one with the champagne housing preferences. He puts away like $125/paycheck, which is fantastic and I'm so proud of him for doing that since it was definitely not his norm when we started dating, but that amount of money isn't going to move the needle significantly. Because of the specific shittiness of the housing market in our target city, I don't feel like I can wait for him to realize on his own that we can't afford the payments on a $250k house without at least $35k to put down (which would still land us with PMI), and only start getting serious about saving then. Renting would be a money-drain--for various reasons we can't realistically downsize from what we have now (which to be clear is a pleasant-but-basic 2br 1ba duplex with a shared backyard, not some McMansion), which would put us at $1,400 in rent in our target city. Maybe I'll give it a few weeks and sit him down with the Zillow mortgage calculator? But then, ugh, we're back to me telling him things about money.

So, first, thanks for the clarifications -- it helps with the understanding a lot.  Sounds like he is somewhat pie-in-the-sky about money, and you are much better at putting together the concrete plans to get there, which has got to be frustrating as hell.

My one further comment/suggestion is:  the way not to be back to you telling him about money is not to tell him about money.  Listen instead.  Sit down and talk to him about the kinds of houses he wants, and look at what those cost.  Say that's $300K.  So assuming the parental help will cover closing costs, moving, setup costs, etc., say that means you need to save $60K.  OK.  Then discuss how you should split that?  Maybe you take the first $20K (since he has $20K in loans to pay -- that way you are acknowledging his burden) and split the rest 50/50, since you make about the same.  So that means you need to save $40K and he needs to save $20K.  Then talk about when you want to buy, so you know when you need to come up with this $40K by (note that you don't need to talk at all about how he will pull together his $20K).  And then you and he together can decide if the timing is right, or if you should look for a cheaper house so you can get in quicker, etc. -- or maybe he decides that a house will cut too much into the other stuff he wants to spend money on and you should rent instead.  The point is to negotiate a mutually-agreed-on goal, budget and target date, and then you are each responsible for getting there on your own. 

Also:  you are NOT wasting money renting.  By the time you add in taxes, insurance, utilities, and the relative maintenance and upkeep expenses associated with a house, I would be extremely surprised if a house didn't end up at or near that $1400 figure.  And even if it's more, you're using that extra $ to buy time -- time to save your 20% down, time to work through your money differences with your BF, and time for him to pay off his loans.  Please trust me when I say that you really, really, really do not want to lock in six figures of mutual debt until you are on completely the same page about how to pay for it.
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fluffmuffin

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Re: Case study: Saving for down payment vs. retirement
« Reply #11 on: August 09, 2017, 01:11:37 PM »
Laura33, you nailed it even though I've never thought about it that way before. He is totally pie-in-the-sky about money and trusts that by the time we're ready to move and buy a house, everything will work out. His parents never talked about money growing up and were pretty comfortable so he just...trusts in the universe. My mom, on the other hand, was a single parent who was always 100% upfront with me about money and having to stick to a budget. There was never any concern about having a roof over our heads or food on the table, but she was very clear that in order to afford a future goal (retirement, putting me through college without loans, etc.) you had to be willing to make sacrifices and start saving early. So I trust the numbers in my bank account, not in some nebulous idea that the money will work itself out. My dad is also a complete trainwreck with money, so I've seen how badly trusting that a magical payout is around the corner can go.

And also thank you for the the framing on the conversation. His schedule is absolutely nuts right now but once things settle down I'll try working through it the way you've laid it out.

Snow

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Re: Case study: Saving for down payment vs. retirement
« Reply #12 on: August 09, 2017, 11:56:13 PM »
I think Laura made some good points.

While I think that you could tighten your belt a little bit on things like entertainment, restaurants and workout (provided your clothes etc really are lower on average), I think that getting on the same page as your bf is one of those slow moving, glacial goals that could eventually make a big difference.

On the positive side, he is financially hopeful! While the ideal would be a financial realist, I think that is quite a bit easier to deal with than a financial doomsayer. You know, the kind that sees the down payment as such an insurmountable amount that they never even start saving? And the fact that he's already saving means he is building the habit. Gradually adding on a $10 or $25 to that monthly amount will be easier since he has already started. Once he realises that 1 + 1 ≠ 3 in terms of savings, I hope the rest will work out for you!

I've had one totally pie-in-the-sky friend who knew jack about money, yet thinks she's the best, most frugal person there is. I hope your bf is not quite as bad as her. Good luck! :)

MommyCake

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Re: Case study: Saving for down payment vs. retirement
« Reply #13 on: August 10, 2017, 06:39:00 AM »
The others have given great advice so far.  I would just like to add that, in my opinion, your retirement contributions seem very low.  I would increase my tax-deferred retirement savings before adding to house savings.  As a first time home buyer, you will likely be eligible for a low down-payment and a penalty-free $10k withdrawal from retirement account, if your down payment savings is a bit short.  I'm a little fuzzy on this, it was many many years ago, but I know I was able to take money out for my down payment. 

fluffmuffin

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Re: Case study: Saving for down payment vs. retirement
« Reply #14 on: August 10, 2017, 07:47:51 AM »
The others have given great advice so far.  I would just like to add that, in my opinion, your retirement contributions seem very low.  I would increase my tax-deferred retirement savings before adding to house savings.  As a first time home buyer, you will likely be eligible for a low down-payment and a penalty-free $10k withdrawal from retirement account, if your down payment savings is a bit short.  I'm a little fuzzy on this, it was many many years ago, but I know I was able to take money out for my down payment. 

Yeah, I was also wondering about this. The widget-thing on my organization's retirement planning portal keeps telling me I'm maxing out my contributions, but I don't think I actually am after re-reading my on-boarding paperwork. I have an individual planning meeting with a consultant next week and will see what I learn there. Even if I am, I'd like to find $25-50 per paycheck to start putting back in my Roth. Also, I love that on this community contributing 10% of gross is considered low :)

I've looked into first-time homebuyer programs through my state, and we would be eligible for some of them. I'm just leery of planning on a low down payment, because with housing prices in our target city, we need a sizeable chunk of change in order to knock the monthly expenses down into the manageable range. We would definitely rent before taking on monthly payments that are a substantial step up from what we're paying now.

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Re: Case study: Saving for down payment vs. retirement
« Reply #15 on: September 04, 2017, 02:00:49 AM »
The thing is, I'm not the one pushing for the house, which I feel like may have been the impression I gave in my OP since a couple of people have mentioned it. He wants the house as much as I do, maybe more in some ways. He does want to contribute! But he doesn't seem to have a sense of the numbers that are actually involved with purchasing a $250,000 house, and is also (of course) the one with the champagne housing preferences. He puts away like $125/paycheck, which is fantastic and I'm so proud of him for doing that since it was definitely not his norm when we started dating, but that amount of money isn't going to move the needle significantly. Because of the specific shittiness of the housing market in our target city, I don't feel like I can wait for him to realize on his own that we can't afford the payments on a $250k house without at least $35k to put down (which would still land us with PMI), and only start getting serious about saving then. Renting would be a money-drain--for various reasons we can't realistically downsize from what we have now (which to be clear is a pleasant-but-basic 2br 1ba duplex with a shared backyard, not some McMansion), which would put us at $1,400 in rent in our target city. Maybe I'll give it a few weeks and sit him down with the Zillow mortgage calculator? But then, ugh, we're back to me telling him things about money.

So, first, thanks for the clarifications -- it helps with the understanding a lot.  Sounds like he is somewhat pie-in-the-sky about money, and you are much better at putting together the concrete plans to get there, which has got to be frustrating as hell.

My one further comment/suggestion is:  the way not to be back to you telling him about money is not to tell him about money.  Listen instead.  Sit down and talk to him about the kinds of houses he wants, and look at what those cost.  Say that's $300K.  So assuming the parental help will cover closing costs, moving, setup costs, etc., say that means you need to save $60K.  OK.  Then discuss how you should split that?  Maybe you take the first $20K (since he has $20K in loans to pay -- that way you are acknowledging his burden) and split the rest 50/50, since you make about the same.  So that means you need to save $40K and he needs to save $20K.  Then talk about when you want to buy, so you know when you need to come up with this $40K by (note that you don't need to talk at all about how he will pull together his $20K).  And then you and he together can decide if the timing is right, or if you should look for a cheaper house so you can get in quicker, etc. -- or maybe he decides that a house will cut too much into the other stuff he wants to spend money on and you should rent instead.  The point is to negotiate a mutually-agreed-on goal, budget and target date, and then you are each responsible for getting there on your own. 

Also:  you are NOT wasting money renting.  By the time you add in taxes, insurance, utilities, and the relative maintenance and upkeep expenses associated with a house, I would be extremely surprised if a house didn't end up at or near that $1400 figure.  And even if it's more, you're using that extra $ to buy time -- time to save your 20% down, time to work through your money differences with your BF, and time for him to pay off his loans.  Please trust me when I say that you really, really, really do not want to lock in six figures of mutual debt until you are on completely the same page about how to pay for it.

Listen to Laura.  Great insight.

You shouldn't need to apologize for him....he has to grow in this area. It's a trick learning how to help him without preaching at him.

Never buy until you're on the same page. Related: don't buy jointly before you're married. (Oh the stories I could tell...thankfully not my own story.).

Sounds like you're headed the right direction, but also sounds like some big red flags to deal with before you proceed. Premarital counseling is invaluable. 

Today, these are annoying. Once you're married and tied to him, the frustrations increase dramatically and you're powerless to do anything about it.  (Marriage can be amazing, I'm just illustrating what you face.  It's also challenging.) 

Ask yourself: will I be ok if he makes ALL of our household's money decisions as he does today? If not, there's work to be done....

Finally, a practical note: you probably can't use that gift for the home loan.  Many lenders won't allow it. It'll jack up your approval.  You may be able to work around by using your EF and then lending back into that (if you don't have to lie on the loan application).  Just something to be aware of.

Totally feel you re housing cost by the way!  I'm looking at very similar numbers/decisions re housing. As others said, the costs are significant once you own....would recommend a good calculator for it. $50 sounds *way* low.