I'm really in need of some financial/life advice

[significantshawn114]

So my wife and I (33/36) have been married 10 years and for the duration of our marriage we have rented an apartment. About a year into our marriage we moved into her father's church, which has a living quarters. We suggested this idea as we would be paying rent to the church instead of a landlord and we would be closer (we are there 3-4 day a week). Her dad liked the idea as we could be there to make sure doors are locked, lights are off and keep the apartment in good shape. He charged us $500 a month total (utilities included) but has since dropped it to $400 a month with a small increase in responsibilities at the church.

I'll try to put the relevant info below in an effort to shorten this as much as I can

• Current salary is 70k & 45k
• We have a side business that brings in about 15-30k a year
• We drive an old 2002 Ford sedan and a 2013 Kia sedan
• We have 40k in a HYSA that's at 4.3%
• We have 24k in VTI
• We have 105k in mutual funds
• We live in a low cost of living area
• We would be interested in buying a house around 200-230k

We've been wanting to buy a home for years, but have just put it off in an effort to save money for a downpayment.

I feel like I messed up not buying when interest rates are low. Now we are looking at a 7% interest rate and I'm just sick thinking of what we could have had a couple years ago. The 105k in mutual funds was up to 120k at one point when interest rates were low and we could have pulled that out and bought but we didn't and I feel stupid and feel like I let my wife down.

Secondly, we need a new car. I want to just go buy, but again, the car market is wild right now. I hear it's getting better, but it's just frustrating enough to make me want to wait. I drive the 2001 sedan and it doesn't have A/C and I have an hour commute each day. While we don't live in Texas or Florida where it gets really hot, we still have hot summers. I'm fine to suffer through if it means saving a few thousand dollars in the fall.

So all of that said, here's another issue on top of it all - my wife and I volunteer a lot at her father's church, but over the course of the last couple years I have gone through a bit of a spiritual journey and now no longer believe in any of it. Not saying I'm atheist (maybe I am, I'm not sure) but I just don't think the way I was raised is what I believe anymore. No one knows except my wife and, while she's been very supportive of my change of heart, she still believes. That said, she is tired of a lot that is going on at our church and has said that when we buy a house, she would like to go to another church. This is a big deal within the family and could cause some issues so I never thought I would hear her say that. I think at the end of the day her family will be okay with it, but they may take it personally. If we leave, that means that she will no longer need to volunteer and I could either stop attending altogether or go and listen to nice music and hear an uplifting message - which I get neither of at my current church.

So we are getting $400/month rent and it's been hard to give that up, but we would obviously prefer to leave and get some privacy, normalcy, etc into our lives.

I just don't really know what to do. My wife has talked about wanting a little sports car - maybe a BRZ or a Miata. We'd likely spend 25-30k on one if we did buy. That would be an easy way to bring some fun into our lives and relieve some stress. That said, it's said not to buy a car too soon before you get a mortgage because the DTI ratio will hurt your interest rate.

Should I just take 120k and put down on a house? Should we suck it up and keep renting at $400/month and save until the market gets better? That seems like it could be a couple years at least. Should we just go buy a car and have fun and worry about a house later?

Any advice and suggestions would be great.

[disneysteve]

Welcome to the site.

You raise numerous issues, not all of which are financial, so let's stick to the ones that are.

Besides rent, what are your monthly expenses? How much do you spend each month beyond the $400? You have 40K in savings, which I'm assuming is your emergency fund. How many months of expenses would that cover?

Are there any savings other than what you listed? You didn't mention any retirement accounts. You also didn't mention if you have any debt: student loans, credit cards, etc. What percentage of income are you currently saving?

Without more details, it doesn't sound unreasonable for you to buy a house in the 200-230K range. You'd need 40-46K for a down payment of 20%. Of course, that would increase you monthly expenses quite a bit so you need to run the numbers on that.

As for a car, 25-30K sounds like a lot, especially if you buy a house first. Keep in mind that a house comes with a lot of other costs, both one-time things like furniture and decorating and ongoing expenses like taxes and insurance and maintenance. You can certainly buy a perfectly good used car that will be a lot better than your 21 year old Ford for under $20,000, even under $15,000. My daughter bought a 2018 Hyundai in November for about 19K and there were plenty of options less than that. So I'd say to lower your expectations in the car department.

It concerns me that you say buying the car will bring some fun and reduce stress. The two of you need to find better and cheaper ways to do that. A snazzy sports car might make you feel good initially but that will wear off quickly, especially if you overspend for it.

The whole church issue really isn't an topic for this forum. Only you and your wife can decide that one.

[Jluke]

A lot going on there

I would not touch the 40k for any reason.

it sounds like a house is your top priority. You need to focus on that.

I am not seeing exactly where you are coming up with 120k other than the investments. But if you sell at a gain you are going to probably need money to cover the taxes. Unless your income doesn’t require capital gains tax. Not sure of the tax brackets.

I would figure out what mortgage payment works for you (principal, interest, taxes and insurance (PITI)).

that might help determine exactly how much of a loan you will need. And don’t forget closing costs, moving costs, furnishings, lawn care, snow care etc. And all the unexpected things that come with moving into a new to you home.

[bjl584]

Welcome.

Can you post more details about your budget and average monthly expenses?

On the surface, it looks like you are doing fine. You've managed to save up a decent amount.
Assuming the 105K is in a taxable account and is earmarked for a house?
If so, then you are looking at nearly 50% down. I wouldn't call that a failure. No one can time the market, so I wouldn't worry much about the "loss" you have.
Interest rates are high, but with the downpayment you have your payment is going to be low.

[MonkeyMama]

My question is how much you have saved for retirement. Any advice would hinge on that info.

[significantshawn114]

Welcome.

Can you post more details about your budget and average monthly expenses?

On the surface, it looks like you are doing fine. You've managed to save up a decent amount.
Assuming the 105K is in a taxable account and is earmarked for a house?
If so, then you are looking at nearly 50% down. I wouldn't call that a failure. No one can time the market, so I wouldn't worry much about the "loss" you have.
Interest rates are high, but with the downpayment you have your payment is going to be low.

As far as how much we are looking to put down, if we were going to get a 3-4% rate, we were likely just going to put down 20% and keep the rest invested, but with interest rates at 7% we are thinking more down would be the wiser move. We are open to advice though

[significantshawn114]

My question is how much you have saved for retirement. Any advice would hinge on that info.

I should have included that in the initial post.

Between my wife and I, we have $80,000 in retirement currently and we contribute $1,500 a month to those accounts.

[significantshawn114]

Welcome to the site.

You raise numerous issues, not all of which are financial, so let's stick to the ones that are.

Besides rent, what are your monthly expenses? How much do you spend each month beyond the $400? You have 40K in savings, which I'm assuming is your emergency fund. How many months of expenses would that cover?

Are there any savings other than what you listed? You didn't mention any retirement accounts. You also didn't mention if you have any debt: student loans, credit cards, etc. What percentage of income are you currently saving?

Without more details, it doesn't sound unreasonable for you to buy a house in the 200-230K range. You'd need 40-46K for a down payment of 20%. Of course, that would increase you monthly expenses quite a bit so you need to run the numbers on that.

As for a car, 25-30K sounds like a lot, especially if you buy a house first. Keep in mind that a house comes with a lot of other costs, both one-time things like furniture and decorating and ongoing expenses like taxes and insurance and maintenance. You can certainly buy a perfectly good used car that will be a lot better than your 21 year old Ford for under $20,000, even under $15,000. My daughter bought a 2018 Hyundai in November for about 19K and there were plenty of options less than that. So I'd say to lower your expectations in the car department.

It concerns me that you say buying the car will bring some fun and reduce stress. The two of you need to find better and cheaper ways to do that. A snazzy sports car might make you feel good initially but that will wear off quickly, especially if you overspend for it.

The whole church issue really isn't an topic for this forum. Only you and your wife can decide that one.

We have $80,000 in retirement currently and we contribute $1,500 a month to those accounts.

We have zero debt at the moment (no credit cards, no student loans etc.) We don’t have many other expenses honestly.

We bring home about $6,000 a month at the moment. $2,000 goes into savings and $1,100 goes into retirement.

[Fishindude77]

My suggestion would be to get moved away from that church housing situation, put that behind you and get that stress out of the picture.
Just rent something so you can get moved soon, then slow down, relax and take your time on the house purchase decision.

Overall, you're in pretty good shape.

[MonkeyMama]

We have $80,000 in retirement currently and we contribute $1,500 a month to those accounts.

That's great. It sounds like you are in a good financial position.

As to interest rates. Woulda coulda shoulda... Buy what you can comfortably afford re: monthly payments and you will have more motivation to pay down faster if interest rates remain high. If they don't remain high, you can always refinance and take advantage of lower rates in the future. We paid 7%+ interest rates for the first 10+ years of our mortgage. It sounds amazing to have started out our 20s (or even 30s) with 4% interest rates (as I've seen many younger people on this site do). But life isn't fair and it will serve you well to just move on. The great news is that you can still afford a house. Higher interest rates will quickly price out people who are less financially prepared.

As to the car, we recently had a 2001 vehicle and my kids have a 2004 vehicle. We both upgraded to 2017 vehicles and they feel like spaceships in contrast. Nothing wrong with my kids' car, but my car feels about 100 times nicer. You are doing well financially. Buy the car if you want the car. (I am not a car person whatsoever, but I spent recent years of my life driving old clunkers. Also, car technology has made significant advances in recent years). Of course, you don't have to borrow for a car. We pay cash for cars. One reason is because it just forces us to be more frugal about it. Less question of what we can afford.

It sounds like you have roughly $130K available, in addition to emergency fund.

Option A - Put the $130K down and get a $100K mortgage. That's a $665 monthly mortgage payment, plus property taxes/insurance maintenance.
Or make that a 15 year mortgage. Presuming a slightly lower interest rate, you'd have a $870 monthly mortgage payment.
I'd probably figure out the house first and then circle back to the cars. If you are want to finance, I guess I don't see the point of hanging onto cash for that. & you also have the $40K cash that you can tap, if you need some of that for a car down payment.

Option B - Put $100K down and take the $130K mortgage. You can always pay down faster, as money allows.
30 Year mortgage = $865 monthly
15 Year mortgage = $1,132 monthly
Take the $30K and keep as a car fund for when you are ready. Or just go buy what you want now.

I think emotionally and logically, the house is more important. Moving on with the next steps of your life, having that stability, etc. Focus on the asset that is less likely to depreciate rapidly. After that, figure out the car. I do also think you will have a clearer head about it, once you buy your own place and give it some time. But regardless, you need to make a plan to replace the 2001 vehicle (eventually).

At the risk of sounding wishy washy. After typing all that out. I have bought cars for $500. I would personally never drive a car without A/C. I don't care if my car is ugly, but it does need to be reliable and comfortable. I don't know, maybe I would just take care of the car first. You have the money, I don't see why you don't just buy a nicer car. Unless you will only do it with financing, I suppose that is a reason to wait and sort out the house first. If It was me, I'd just go write the check and move on. Get something nicer before summer. If it was fall, I'd be more inclined to just suck it up another 9 months. & I mean, maybe some of feeling this way is because you didn't post that you change your cars every 5 years. If you are willing to keep a car for 20 years, I don't understand why you don't just buy what you want then. Of course, paying cash also removes the "what if I change my mind later" factor. If you find after a few years you don't want the sports car. So sell it and buy something more practical. I feel this is *shrugs* when you pay cash for cars.

Obviously there is no one clear answer You just need to sort out your own personal priorities. Good Luck!

Edit: The last comment is good too. Consider Option C to just rent and take your time. You can wait or you can lock it in. No one has a crystal ball.

[disneysteve]

We have $80,000 in retirement currently and we contribute $1,500 a month to those accounts.

That's great. That's about 12-14% of income. Well done.

We have zero debt at the moment (no credit cards, no student loans etc.)

Also great. You're clearly doing the right things with money.

We don’t have many other expenses honestly.

I'm a little concerned about this statement. Of course you have other expenses. Food, gas, utilities, auto insurance an maintenance, health insurance, clothing, entertainment, travel, donations, gifts, cell phone, internet, streaming services, subscriptions, etc.

We bring home about $6,000 a month at the moment. $2,000 goes into savings and $1,100 goes into retirement.

This speaks directly to my point. If $2,000 goes into savings, $1,100 goes to retirement, and $400 goes to rent, that's only $3,500. What I was asking about is the other $2,500. It certainly doesn't sound like you have any spending issues since a third of your take home is being saved. Honestly, it doesn't greatly matter how you're spending the rest. You're living well below your means.

I stand by the advice I gave in my initial reply. 20% down on the house. A modest car. And keep a close watch on the rising expenses that will come with being a homeowner.

As for interest rates, that's just noise. When we bought our house in 1994, rates were 9%. We put down 20% and kept funding our investment accounts. Now 29 years later we have a multi-million dollar portfolio and we paid off the house about 4 years ago.

You're in great shape. The one thing you didn't mention is kids. I'm guessing you don't have any. Do you plan to?

[significantshawn114]

That's great. That's about 12-14% of income. Well done.


Also great. You're clearly doing the right things with money.

I'm a little concerned about this statement. Of course you have other expenses. Food, gas, utilities, auto insurance an maintenance, health insurance, clothing, entertainment, travel, donations, gifts, cell phone, internet, streaming services, subscriptions, etc.

This speaks directly to my point. If $2,000 goes into savings, $1,100 goes to retirement, and $400 goes to rent, that's only $3,500. What I was asking about is the other $2,500. It certainly doesn't sound like you have any spending issues since a third of your take home is being saved. Honestly, it doesn't greatly matter how you're spending the rest. You're living well below your means.

I stand by the advice I gave in my initial reply. 20% down on the house. A modest car. And keep a close watch on the rising expenses that will come with being a homeowner.

As for interest rates, that's just noise. When we bought our house in 1994, rates were 9%. We put down 20% and kept funding our investment accounts. Now 29 years later we have a multi-million dollar portfolio and we paid off the house about 4 years ago.

You're in great shape. The one thing you didn't mention is kids. I'm guessing you don't have any. Do you plan to?

Yeah you are right - I mean we have several expenses (Spotify, cell phone, gas, insurance, etc.)

We don’t have children and don’t plan to.

I’ve really tried to be as efficient as I can with our money so the current car and housing market has me a little down - especially when it comes at a time when we are interested in making two big purchases.

You are probably right though and we can just refinance down the road. Good to hear about how well you are doing now even with starting at a 9% rate

[LivingAlmostLarge]

I also bought with 7% interest in 2002. So you win and lose. It's life. I like having gotten a head start for DH and I. We wouldn't be where we are today had we not bought when we did. We lucked into our house because of it. People on this board were on this board in 2006 when we flipped and bought our next house which translated into the house we are in now. So to me homes have always provided us the down payment for the next house. We were those lucky people who didn't save our down payment except we lived there.

Car? Well we both bought new cars in 2000 but a corolla and focus were not exactly high end. Mine was a 1 year old trial car at dealership and his was the on 1 standard car in the flyer. So we got deals on our cars. They lasted us 10 and 12 years respectively because he wanted something else when we had kids. Personally I wouldn't have minded keeping our cars. But the truth is that having a passenger airbag is pretty nice and power windows.

But even now we don't drive super fancy cars, although right now I keep getting back on the fence going "that tesla Model Y is $50k". Guess we'll have to wait and see.

[scfr]

Am I correct in assuming that the house is a higher priority for you and your wife both than a sports car? The following is based on that assumption.

You stated that you have a 1-hour commute. You also stated that you and your wife would both like to find a new church home.

What I would do in your shoes is move to an apartment rental in an area that you think you might like, closer to your work (assuming you plan to stay at your current job for at least a few years), within a reasonable commute distance for your wife, and also not too far from churches you are interested in exploring. Knowing that it's temporary, go for the smallest & least expensive apartment that is also comfortable for the both of you.
Once you're settled in to the new apartment, start to really explore the local real estate market. Visit open houses. Talk to real estate agents. Scour publicly available property information. Take walks & hang around in neighborhoods you are considering at all times of day. Areas you are considering might be ruled out. You may become aware of new neighborhoods you never considered. You'll learn about construction quality and refine your needs/wants list.

Visit churches in the area, narrow down your options, and then give them a trial run.

You may find that the difference of a mile or two can make a huge difference in neighborhood and livability. Areas you are considering might be ruled out. You may become aware of new neighborhoods you never considered.

I'll give you a personal example: When DH & I were househunting we always took walks around the neighborhoods we were considering buying and imagined walking our dog there. We walk her twice a day, so that's a big part of our lives. We examined safety (sidewalks or not, busyness of streets, etc) and scenery. There were a couple houses we ruled out because they just wouldn't work for the dog walks. That might seem like a weird criteria to some people, but for us it was kind of a big deal.

While you are doing this exploring, work on refining your budget. We can get to that part later. Ask for advice when you get to that point. We'll be able to offer suggestions about things to include that you might otherwise overlook. That will help you determine how much you really can comfortably afford to spend.

For the record, we also bought our first place (a condo) when rates were higher. It was the 93/94 winter. I don't remember exactly when we closed.

And regarding the sports car, once you have a travel and/or entertainment component to your budget, perhaps you could scratch the "want to drive a sports car" itch by renting something sporty for a weekend? That will help your wife especially determine how important it is to her. Is she willing to scale back somewhere else in order to make room in the budget for a sports car rental?

[AllyStreelman]

First of all, no one can predict the market so don't feel stupid; hindsight is always 20/20. The advice here is sound - focus on the house first, which you can certainly afford with your savings/budget and which will likely improve your quality of life/reduce stress from the family/church situation. You can also likely find a nicer used car than you currently drive for $10-20K, but if you're willing to wait on the market than don't rush to buy as you focus on purchasing a home. Good luck!