Paul and I met with a budget coach yesterday. He is a volunteer through Crown Ministries who is meeting with us to discuss our budget and keep us accountable to sticking with it. He is certified through Crown and through Dave Ramsey. Our first meeting was yesterday, and we discussed our plan for our finances. This is what he recommended:
1) $1000 Emergency Fund
2) Pay off all loans
3) 3-6 Months Living Expenses Emergency Fund
4) Save for retirement
5) Save for our children’s college education
6) Save for big purchases
We asked him where buying a house would fall in, and he said #6. He said we shouldn’t buy a house until we have a 20% down payment. I left the meeting frustrated about that part, because it seems like we’ll be renting for the next 30 years. Also, for Paul and I, we feel strongly that we should save for a house BEFORE paying for our kids’ college. Ideally, we hope to have a college fund, but we don’t think it’s a horrible thing for kids to take out loans. (That’s all I’m going to say about that.)
We had planned to rent for a few more years, at least. There are advantages: because we live in/near a nice area, the cost of houses is very high, whereas renting is within our budget. We don’t have to worry about repairs; we can call one maintenance man to come take care of everything and we don’t have to pay for it. We aren’t so tied to the area, which frees us up for changes in future plans. The negatives: we aren’t building any equity in the amount we’re paying in housing every month. We can call a maintenance man to fix things, but that doesn’t mean he’s going to come and fix it so we have to put up with broken/annoying stuff. Any improvements we make (painting, minor “remodeling”, etc.) come out of pocket and don’t add to anything except our personal enjoyment. We don’t have the stability you have with a house (which is okay for us right now).
I understand that our budget coach is really debt-averse, Dave Ramsey style. That’s okay and I think it’s good to strive for that too. However, Paul and I both are concerned about his proposed plan. As our family gets bigger, so will our housing size. We will probably have to move to a bigger apartment once we have two children (in Georgia, it’s illegal to have two or more children of opposite genders in a 2 bedroom apartment). Of course if we have all girls or all boys, we’ll probably be okay where we are for a little while. Right now, 3 bedroom apartments run about $1000-1100 a month. Can you imagine how expensive it’s going to be in 4 or 5 years when we would need one? Is that really wise to be putting so much money towards renting, for so many years? And all for the sake of paying off loans that are only 3-5% interest to start with? And paying for retirement and college funds that are both so far away for us? And what do we do when Paul’s car dies, or we need a bigger car? Do we take out another car loan because we haven’t reached the “save for big purchases” yet? I put up this question to our budget coach, and his response is that I’m thinking of it the world’s way; I need to be thinking of it in a financially smart way. Saving to live better later. This frustrated me.
So, back to buying houses. We’re okay with renting right now, really. We’ll probably reevaluate in a year or two where we stand. I don’t want to discount his advice just because I’m a twenty-five year old who knows everything. :-) This is why we asked him to help us. I am curious, though, if other people have found this to be the best way to approach home buying. Is owning a house so not important that you should rent for a long time so you can get your other affairs in order first before you even start saving for a house? What has been your experience, for those of you who are homeowners? Is it okay to disagree with Dave Ramsey, or am I just “thinking the world’s way” and am going to end up in a financial mess?
For further reference: Is It Better to Buy or Rent? Online Calculator