Single parent in need of debt management/savings advice
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Anonymous
| OP here. That's why I'm in no rush to buy in the area; it's expensive and I'd want to ensure we're here for the duration. With no close family this is tough to do. I'm hoping DD's dad gets more involved and I do really enjoy living here; two good reasons to stay in the area for now. If his level of involvement with DD remains where it is now I may move us closer to my parents. He and I have discussed this option and he doesn't oppose the two of us moving. I'm glad for the lack of conflict, but saddened for DD as I feel their relationship is very important. |
Anonymous
MOVE and do it now. If he's not super involved now he won't ever be, it's silly to throw away money on high rent and high childcare cost for a relationship that may or may not happen. If he wants to be more involved when she's older she can spend summers here in DC with him. |
Anonymous
| I agree with the PP. I'm another single parent and have found that involvement either stays the same or wanes once the novelty wears off for guys. If they don't bond while kids are young, its rare that it does later. Being close to your family who actually wants to be around is priceless. I can't emphasize it enough. Plane tickets are cheap, dad can visit. |
Anonymous
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My medical school loans are like a noose around my neck. I am paying them off as quickly as possible (and my loans are now at 0% since I'm down to loans from family). I know it doesn't make sense money wise, but I am eager to be debt free.
Since I am single, I just bought a townhouse in this area. I figure it will be easier for me to maintain (and I'm not very handy and am exhausted after coming home from the hospital). Be careful about putting your house down payment in the stock market (although I do love Vanguard Index funds!). The Dow is doing fantastic now, but who knows when the next crash will be. It would really suck to have your down payment cut in half just before you are ready to buy. What price range are you looking at? We have similar salaries and I would take out much less than what the mortgage companies offer you. Try getting a 15 year mortgage so that you can retire eventually. I'm not sure what our salaries will be like in the future and you don't want to have to work forever just to save for retirement, pay down your house, and pay for college for your child. In terms of your budget, cut cable and lower your cell phone plan. How much do you actually spend on entertainment and food? I didn't see Umbrella Insurance on your budget. You don't have much yet and UI would probably be pretty cheap. All doctors are targets and you need to protect yourself as much as you can. In terms of nanny costs, is there any way you could do part time day care during the day and have the nanny for evenings/weekends? Would it be cheaper for you? Any possibility of sharing a nanny with another doctor? It's really awesome that you are staying in DC so that your child is closer to her father. He may not be very involved now, but he will likely be even less involved when he has to fly to see her.... |
Anonymous
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I would spend every single cent aggressively paying down that debt. I know it's only at 2.whatever but it is a HUGE debt hanging over your head and I know that would affect my well-being every day.
I'm generally pretty critical of people's budgets but I think you're doing a WONDERFUL job budgeting. If you use that extra $4,700 ish (your overage plus the extra you're already paying on the loan) you can pay it off in around 4 years (maybe a bit more after interest is taken into account). Then, if you keep saving aggressively, you will have enough for a down payment on a house. And hopefully you'll be making more at that point so you'll be able to save that down payment even faster. That would be exactly how I would handle it! Good luck OP! |
Anonymous
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I'd buy a home much sooner.You can always upgrade and use the equity you got in the 4-5 years.It's not a big deal to buy a home. Mortgage, taxes, HOA, insurance on a 2-bedroom in 20007 will run you less than $2500 a month(10% down,30 y fixed).
Your car insurance is high. |
Anonymous
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Single mom of kindergartener here, HHI a slightly less than yours My mortgage makes me nervous, and that's all the debt I have. You have too much debt to be thinking about taking on more, or if it is, it has to be very little. If you're figuring on what kind of mortgage you think you should have, you have to take it and subtract the $210k to figure out what is a feasible debt load. To be sensible, that only leaves you with about $200k more, and that won't buy you anything worth living in around here.
Remember that you are always one accident away from being on disability with little to no income. Keep renting and throw the money at additional retirement savings and those student loans. Renting gives you flexibility. If you use large pots of cash to buy, there is no guarantee that if you buy you will walk away with any equity when it comes time to sell (ask me how I know this). There is nothing wrong with not owning a house. Many city dwellers never own anything and do just fine. |
Anonymous
+1 |
Anonymous
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I would pay off your student debt asap. That means before your daughter's college fund. Remember this debt is not dischargeable in bankruptcy. I think college is going to change a lot in 20 years- this tuition bubble can't last much longer and many colleges are going online...
When I finally paid off my loans (undergrad and law school) I felt like I was able to BREATHE and it's a wonderful feeling. |
Anonymous
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Wow, your discretionary spending is very low. I'm a single parent with a similar HHI and housing costs but low childcare costs ($600/month now that DD is in afterschool) and no student loans. I spend about the same monthly overall. I do splurge on food and travel, but the extra also goes toward uncovered medical expenses (co-pays, prescriptions,etc.), transportation expenses beyond gas (i.e., car maintenance and repairs), gifts, clothing, etc. Have you been tracking long enough to say with certainty that you only spend $800/month on all that? If so good for you! I thought I was being pretty frugal saving as much as I do, but I've got almost $3K less in monthly bills than you do.
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Anonymous
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You're doing a great job of living below your means. That's the best way to accumulate wealth.
I would focus on paying off the student loans. I have seen too many people have to stop working either temporarily or permanently much younger than they planned because of family issues or health issues. I have a friend who is a surgeon and she had to retire at 50 because of back problems; she couldn't comfortably stand in the operating room anymore. Not having student loans will give you a lot more freedom to make choices in the future. You don't want to be paying off your own loans at the same time you are paying for college for your child. If you have $4,000 extra a month and put all that toward the student loans (in addition to the $1000 a month you are already paying) you should have them paid off in less than four years. If it will make you feel better, put $1,000 a month into your house fund and put the rest toward the student loans. I wouldn't put any money in the stock market that you might need in the next five years. I'm very comfortable with the stock market for long term investments (retirement, your young child's college fund, etc.) but it's not the place to save for the down payment on a house that you plan to buy in a couple of years. For straightforward stock market investing, the Vanguard Index 500 fund or the Vanguard Total Stock Market Index Fund are good choices. They are both low cost index funds. Also, you should have an emergency fund with a minimum of six months of living expenses in it. I'd shoot for a year since you are the single mother of a young child. When you get ready to buy a house, don't put all your liquid savings into it. Hold some back in case of emergency. You don't want to have to raid your retirement accounts before retirement age because you will owe a tax penalty if you do. |
Anonymous
OP here...you guys are awesome! I took a quick break from seeing patients tonight to check the thread and these are super helpful responses. Sounds like there are some proponents for aggressive home saving and others for more focused student loan debt repayment...I have to say I would love to pay down my loans in the next 5 years. I do well with a focused goal like that so it'd be nice to have something to keep me on track. 20:55 I do have the occasional month where I go over $800 in discret spending but I've been able to keep us there pretty consistently (lots of home cooking, no fancy organic groceries, take my own coffee to work, drive a hybrid, etc.). It also helps that my job only requires scrubs/clean face; eliminates dry cleaning and high-end cosmetic costs. Going to look into the Vanguard funds and re-eval my plan for DD's 529 (but that one makes me nervous; I enjoy the reassured feeling I get watching that account grow). Now if I could only get my mom off my back to "get out there and start dating!" I'd have it all figured out. 
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Anonymous
| Yeah get those loans paid off, you will feel fantastic when you no longer have those hanging over your head. Chances are your income will grow during that time and when you no longer have to make any loan payments you will have lots of options. Your DD will still be quite young, too, you still have a decent amount of time to save for college. |
Anonymous
| Maxing out the 401K, plus the company match equals how much contributed annually? |
Anonymous
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In addition to the 401K, are you contributing to an IRA? You should put aside another $5500/year toward that since you really need to catch up on retirement. Your income is too high for a Roth but you can open a traditional and then do a backdoor Roth. Or just keep it in the traditional if you prefer. But you should shoot for putting aside the maximum $23K annually in all tax-advantaged retirement space available to you before accelerating loan payments further. Of your $4700/month I would prioritize/allocate savings as follows:
1. Retirement ($458.33 monthly on top of the 401K contributions deducted from your paycheck) 2. Student loan repayment ($3500 month will pay off $210K in 5 years or so) 3. Home down payment savings ($600/month just to have something here - can also serve as additional emergency savings. If you push home ownership out till after you've paid off your loans you have a longer time horizon, and could consider putting the money into a balanced fund like Vanguard Wellington) 4. 529 savings (throw the remaining $140/month here, to roughly match her dad's contribution). Good luck! |