I am an avid reader of Moolanomy…I read it every morning at work. I love reading personal stories about people with personal finance questions, and now I have one myself!
I am 23 years old and getting married in June 2009. We are mostly paying for the wedding ourselves, and have been saving up. We’d also like to buy a house around April 2009. A background on us, we collectively have around $35,000 in student loan debt, no credit debt, no car loan debt. We are pretty frugal. Our incomes will collectively be around $72,000 by the time we get married.
We’re in a pretty good situation, but we’re still trying our best to save enough money for a wedding, honeymoon and a house – all around the same time. I just received a generous check (windfall) from my grandfather for $10,000 to be used for whatever I want. My question is, at my age, would it be smart to put this toward a down payment and build some equity in a house? Or put it toward the wedding? Or should we try to pay down some of our student loan debt? I have been putting money into my employer-sponsored 401k…should I throw some that way? There are so many options, and this is a very unexpected windfall. So what would you do?
First, thank you for being an avid reader — it’s a great feeling to know that someone is finding my articles useful. I think you are doing terrific for a 23 years old — no bad debt and already contributing to your 401k. Now, let’s look at your situation more closely and I will just list out some points that you may want to consider as you make your decision:
Please remember that these are just ideas to help you get started in your decision making process. Whatever you decide, I think you are already in a terrific financial position…congratulation. Now, here are what other bloggers have to say:
Because your financial life appears to be in decent order, I believe this situation is all about your own priorities. There are three possible expenses: wedding, house, student loans. If you want nice wedding/honeymoon and don’t think you’ll be able to save enough, then you put all or part of the money towards that. If you feel passionate about debt-repayment and would really like to see that gone, then put it towards that.
But since it appears that you’re already saving for the wedding and I assume you already had a debt-repayment plan of some sort, I’d suggest putting the money towards a down-payment fund. If your down-payment is high enough, you shouldn’t have to worry about private mortgage insurance, which will save you money. And you’ll be that much closer to owning your house.
As far as buying the house, I would hold off until after the wedding. I’ve known several weddings called off at the last minute (some rescheduled, some not) and believe it’s the wisest step to hold off on major joint purchases until afterward.
Congrats on the upcoming wedding, no debt (except the loans), and the nice windfall. You’re definitely on your way, and a step ahead by reading Moolanomy everyday.
If I were you I would first consider the interest rate on YOUR student loan debt. If it’s above 6% I would strongly encourage you to use it towards that debt. If it’s below that (more likely) then I would use the money towards your portion of the wedding expenses, paying just the minimums on your student loans. The left over amount I would put in the 401K.
I would not buy a house with someone prior to getting married, nor would I pay their debts off. I would wait on the house and her debt till you get married. Then, rent for a while and save up money for a down payment. That’s the proper order of things here in my opinion. It will feel more rewarding that way too.
I would say wait to buy the house, weddings are a lot of stress and work and you are better off just doing one thing at a time so you can enjoy it. Get married next year and then start looking for a house when you recover from that. The year I got married we had fixed up and sold my old house, moved into my wife’s house, got married, and bought another house all in the space of a few months which was very difficult and not very enjoyable (and very unnecessary).
As for the finances, I would make sure you take advantage of any company match in the 401(k). After that, rather than making any big financial decisions with so many unknowns ahead (cost of wedding, house etc) – maybe just put the $10,000 into a high interest savings account until after the wedding.
Well, if you think about it, money is all the same. If you put the inheritance into one thing, that’ll give you more cash each month to put towards something else and all your goals will be closer.
So, for that reason, I’d put the windfall into whichever thing you want to finish first. Although it’s a good idea to fund your 401(k) for example, that’s such an ongoing thing that I don’t think you’ll feel the benefit as much. Similarly, unless your student loan interest rate is high (in which case you should probably be putting it ahead of your other goals) I wouldn’t bother with that.
That leaves you with three remaining goals: wedding, honeymoon or house. If you can stick to your original budgets then this windfall will allow you to have all three funded sooner than expected. If you think you’d find that difficult (e.g. putting the money towards your wedding meaning that you’d upgrade the wedding) then it would be most sensible to use the windfall towards a house deposit. If that wouldn’t be the case I’d put it towards whichever you wanted to fund first – probably the wedding since you’re saving for that already – and put the money you’re saving every month towards your other goals.
Don’t forget to spend about $100 of the money on some completely frivolous purchase. Windfalls are meant to be fun.
A wedding, a house and a honeymoon all within a few months? That sounds like a lot to deal with so quickly! Personally I would put off buying a house. You don’t NEED to buy a house right away, and my opinion is that it is a common mistake a lot of young couples make, to just jump into a house that they can’t afford as soon as they get married. Adding a mortgage debt to the financial equation right away can be stressful. There is no shame in renting, and renting at an affordable price will allow you to do some work on saving a nice big down payment for a house (so that you can avoid paying private mortgage insurance) as well as paying down a chunk of that student loan debt. It sounds like you’ve got a nice income to start out, so working on that shouldn’t be a huge problem.
I would put the money down towards your wedding and honeymoon expenses, and hopefully you’ll be able to save enough to not have to worry about carrying wedding debt into your new life together as well. Good luck and God bless!
Making a decision with $10,000 is probably too much stress right now considering what is going on in your life. You don’t HAVE to decide right now. Since this truly IS a “windfall,” I would recommend putting it into a CD that will mature 6 months AFTER your wedding. That will give you time to sort out your priorities and get some really good financial advice. There should be NO PRESSURE on you right now to “do” something with this money. Sometimes we put pressure on ourselves! Don’t. Slow down. Think. Don’t act without thoroughly thinking through what all your options are. Making a wise decision now has the potential to improve your life for years to come, but don’t allow others or yourself to put undue pressure on you to make a decision today.
First off, congratulations on your wedding and for taking an interest in your finances at such a young age. You are both in a very good financial position right now and are well ahead of many of your peers. That said, your financial decisions in the next few months will have a lasting affect on how your next few years will turn out.
I would hold off on buying a house right away. You will be right in the middle of planning your wedding and honeymoon during the time you hope to purchase a house. A less stressful route would be to space these events out if possible. Consider going on your honeymoon a couple months after your wedding if possible. That way you have time to settle into a routine and don’t have the added stress of preparing for the honeymoon while preparing for the wedding. This may also allow you go on your honeymoon out of season to save money and avoid crowds.
As for the $10k, I think it is best to sit on it awhile before spending it. As you approach your wedding, you will have a better idea of what your wedding and honeymoon expenses will be. Getting married and setting up a household can be an expensive endeavor, and it’s best to start off with as little debt as possible.
As for the house, there really is no rush. When you are young you typically have more flexibility in where and how you live and aren’t tied down to one location. One of you may decide to change careers which could involve a move, or you may have children and need a larger home. Until you know exactly what your needs will be, it’s probably best to wait before buying a home.
I hope this helps.