Saving for a home/real estate purchase

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  • #84274 Reply

      My 22 year old daughter just started her career in Engineering with a Fortune 500 Company. Good pay and benefits. But, it is still starting pay. I’ve counseled her,in this order; matching 401k, max Roth, then max 401k.

      She’s still under my healthcare, so we haven’t talked HSA. There certainly will be an emergency fund in there, and she has some money set aside. I don’t believe in having a lot of money set aside that isn’t working for you. She just put $10k into T-bills.

      It has occurred to me I have not talked to her about saving for a home/real estate purchase. We have talked about house hacking though, as I own several duplexes.

      How would you budget that into the equation, when there is not enough money to go around as of yet?

      I’m always interested in hearing from our great community here.

      #84275 Reply

        Coming from an engineer that didn’t do what most of you have already said. Don’t be like me. Match 401k, pay off anything over 4% interest as quick as you can, and don’t buy a new car/truck yet.

        #84276 Reply

          Engineer here who just started their career last year and was in the same position as your daughter!

          For me, bonuses and such were great for me to start off with a good emergency fund and I think her 10k in T-bills should probably be sufficient.

          I have a little more than that sitting in CDs, but I wouldn’t focus on adding too much to an EF right now as she’s still gonna see what her cash flow really looks like now that she’s starting her career.

          Maxing the Roth IRA is the right move and is what I do. I also contribute to me 401k, but I’m not maxing it out because I am saving for a downpayment.

          I would encourage you guys to come up with a budget to decide how much she wants to save for downpayment vs 401k since I understand you can’t max the 401k and save for a downpayment. I currently save ~$12k to my 401k (also get $6k match on top of that) and $9k for a downpayment yearly.

          I have had the discussion with my parents about shifting these numbers around, and largely we couldn’t really decide if it’s better to put more in 401k and less in downpayment savings or vice versa. It’s also hard because I don’t want to buy a house in the state I am now, so am unsure of how many years of downpayment savings I will really have.

          Useful: This question is for Texas real estate pros

          #84277 Reply

            At minimum, I would prioritize 1) match 401k, 2) pay off high-interest debt, and 3) max Roth IRA. Then the investment decisions become more personal. Does she want to be a homeowner?

            House-hacking is a good strategy but it is much harder to find good real estate deals than it was 5+ years ago. That said, first-time homeowners don’t need to put much down, so saving for a new home doesn’t necessarily mean she has to put all of her other investments on pause.

            #84278 Reply

              Congrats to your daughter. I wouldn’t stress out too much and let her enjoy life but I’m glad she has you to provide such valuable nuggets of wisdom at this early stage.

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