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Greetings. Huge friend and fan of the pod. I recently graduated and got a job paying about $70,000 a year as well as a $8,500 signing bonus. With very little savings, a 760 credit score, no debt, and an opportunity to live with my grandparents rent-free for the next year, am I crazy to be thinking about getting a starter home for about $150k within the next 15 months? Any advice in addition to the recent pod about “Rent vs Buying” will be greatly appreciated.

Thanks y’all!!!

Ultimately, home buying is a very personal decision. From my experience, I would recommend the advantages of living rent free as long as you can. Instead of immediately buying a starter home with a number of unforeseen expenses, I would use this unique opportunity to prioritize the following:

  • Set aside money, at least an additional $1,000, for unexpected homeownership expenses
  • Practice living on a budget that would include the cost of your future home to establish positive spending and saving habits before the bills and real life kick in
  • Establish an emergency fund to sustain you for at least three and up to eight months of living expenses
  • Save at least 10- and up to 20-percent of the down payment towards your home
  • If one exists, ensure you’re fully maximizing your employer’s 401k match during this time to jumpstart or accelerate your retirement savings

For example, if you saved just $416/mo from 25-35 and never invested again, you may have well over $600,000 in compounded interest and savings by retirement. Starting early and young is one of the easiest and best investment strategies.

Even an aggressive home loan is typically 10-15 years and most are 20-30 years. While interest rates are at historic lows, I don’t believe there is a rush to make your first home purchase when you have a chance to live completely rent and mortgage free. This seems like a great chance to grow, save, and invest your money. Sometimes these opportunities don’t come again so I would take advantage while you’re young.

Regarding other resources, if you haven’t already, check out wealth advisor and Episode 48 guest, Kirk Chislom’s pros and Cons of Renting versus Buying:

Best of luck!

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