Six months ago, I sat down one night and did some math. I discovered that my wife and I had spent $1300 more that month than what we had earned. Uh oh. We've made some changes and are now heading in the right direction. When you see my expense breakdown below, you will immediately see that there is still some serious work to do in cutting out wastefulness. However, we've come a long way. We've gone from spending 118% of our monthly income in June, to about 80% in December.
This is what I'm trying to figure out: My wife and I are currently living in an apartment, but desperately want to be in a house. I know that we will be renting for at least the next three years given our financial situation. However, should we be saving for an eventual 20% downpayment on a house, or using that money to aggressively pay off student loans? I"m worried that even with drastic changes to our spending and very aggressive debt payment, it will take at least 6-8 years to pay off all our debt. So if we wait until that point to start saving for a mortgage, it will be at least 8-10 years from now before we can buy a house (I'm assuming it will take 2-3 years to save for a 20% downpayment). Does it make sense to rent for the next 8-10 years, or to save up for a downpayment and buy a house in 2-3 years? Thank you for your suggestions.
Income: $6740 month (after taxes)
Savings: $450/month into 401(k) (+$255/month employer match)
Expenses:
Rent: $1123/month
Car Payment #1 - $283/month
Car Payment #2 - $317/month (we are attempting to sell this car)
Student Loans - $464/month
Donations to church - $100/month
Gym Memberships - $187/month (my wife and I do Crossfit)
Cell Phones - $92/month
Electricity - $80/month
Water/Trash/Pest Control - $67/month
Credit Card Payment - $685/month
Prescription Medication - $250/month (I'm on some special meds not covered by insurance)
Cable/Internet - $120/month (plan on cancelling cable soon)
Gas - $185 month
Groceries - $450/month
Haircuts - $40/month
Drycleaning - $45/month
Eating Out - $50/month
Household - $100/month
Auto Costs - $80/month
Other Medical - $100/month
TOTAL MONTHLY EXPENSES - $4698/Month
Remaining Monthly Income after Taxes and Savings - $1592
Assets: 401(k) - $47,000
$ in checking account - $5000
Liabilities:
Credit Card #1 - $10,900 (11.9% interest rate)
Credit Card #2 - $3,700 (12.99% interest rate)
Student Loans - $73,300 (5.75%)
Car #1 - $4,500 (7%)
Car #2 - $15,100 (4%)
I know the first priority is paying off credit cards and car loans. If we are aggressive, we can easily do this in 2-3 years. But after that, when our only liability is student loans, is where my question arises.
Thanks again.
Chris