Stash, House, or (future) loans?

[divsnowball]

Mustachians,

I'm a new user here to the forum (and relatively new reader) and I'm seeking some advice.  A case study perhaps.

I recently graduated college and have a pretty solid job.  My savings rate is around 50% of my salary (although I have a side business that bumps up my income and thus savings rate to about 75%).  I have no loans and own a condo worth about 90k with 49k left on a mortgage.  Its a great property downtown in a midsized city and is ideal for a rental property, so I plan to hold onto it.  In my (pretty accurate) estimates, I could be about $500 cash flow positive/month if I rented it today.  I hold about 27k in investments (11k in taxable brokerage, 13k in a ROTH, and about 3k in 401ks.

My dilemma lies here: I am awaiting the college graduation (1.5 years) of my future wife who will bring 16k in loans on board. 

So Im deciding between saving for 1. A down payment on a suitable house for a family 2. The ability to pay 16k of the loans in full the day after graduation 3. Investing. 

As a secondary question... Hold my savings (for house or loans) in a savings account or in index funds?

thanks!

[divsnowball]

I guess I should have read the "how to write a case study" snippet before writing that...


Income: 47k salary 5k possible in bonuses plus 5k (estimate) made with a side business

Current expenses: 1.2k month fixed expenses.


Assets:
Condo: 90k
13k Roth
11k taxable brokerage
3k 401ks
9k cash

Liabilities:
49k mortgage @4.2%

Specific Question(s): Another option to my first scenario... Should I aggressively pay off the small mortgage that I could wipe out in a few years

[Seņora Savings]

It sounds like you're doing great!  Whatever you choose, you're going to be entering marriage with some pretty sizable assets.

A lot of this depends on your fiancee.  What are her student loan rates?  How does she feel about you paying down her loans?  Does she want to live in a "suitable home for a family" right after you get married?  I would avoid going into marriage with money earmarked for anything.  If you plan to do joint finances (which it sounds like you do) you should have an equal share in derision making.  That's easier if you have a 20k emergency fund than if you have a 20k down payment account.

Personally, I would go with investments.  That will give the two of you time to figure out your finances together.  If it's a goal you can pay down the student loans in a few months after you get married or save up for the down payment in a year, but you'll be doing it together and figuring out together what you want and don't want in a house.

[divsnowball]

So you're thinking general "stash" fund for now. Once she graduates in May 2016 there's no Fire drill to buy a house. We will most likely move in together but only if it makes sense and we find something that makes sense to buy (or possibly rent until loans and down payment are ironed out)

[humbleMouse]

Just going to chime in hear and say I think it's ridiculous to plan a year and a half ahead to pay somebody else's student loans.  In addition to that, she "may" be moving in with you.  You don't even know if she is going to live with you and you are already planning to pay all her loans?  Not to say moving in automatically makes that ok but I just find that whole situation odd.   

EDIT:  Just thought about it a little more.  If she is going to move in with you and will have a job, will you have her split rent?  If not, will you be paying all the rent AND her loans?  Just some questions.

[divsnowball]

Well, normally I would agree. Sounds ridiculous. But we've been together for 5 years so we're definitely moving in and moving on with life/relationship. But the "may" part comes in because she still basocally lives with her parents (outside of school) so sticking around for a few months while we iron out living situations isn't a problem

To answer your questions. She will have a job and "splitting rent" will probably be more like combining finances. It's not just some "girl of the month" it's a long term thing that's gone on for a long time. She should have a decent job but she doesn't have any savings or anything like I did when I graduated

[r3dt4rget]

It doesn't have to be a 1, 2, or 3 decision. Cash savings for a down payment and savings for student loans is the same thing, so let's say the decision is between saving cash for planned expenses vs investing for long term growth. The first thing I would do is figure out how much you need for a down payment. That would be my cash savings goal. Anything else would be going into retirement accounts.

When your gf gets a job, she can easily pay off her student loan balance in less than 6 months. At that rate, the interest is negligible. Also, not saving cash for the loans allows that money to be invested and potentially return more than the interest rate of her loans. So IMO plan on having her pay off her own loans with the new job.

[divsnowball]

Makes sense. I just don't know where to draw the line betwee saving for a house and "cash hoarding"