Our five-step five-year buying a house plan

by Erika Torres

Within the next five years, we want to buy a car, buy a home, and start a family. These are all big goals and we need to be financially stable to accomplish them. So–what’s the plan?

First–you all know I am not a Dave Ramsey fan. I don’t think he lives in reality. Or at least he doesn’t live in southern California. According to Dave Ramsey, we would have to pay off all our debt first, and by then we’ll definitely need a new car and have to pay cash upfront for that, and then saving up for a house down payment will be pushed back even further and it may never become a reality because of everything else that needs to paid. I don’t know how you can save up for a car and a house at the same time.

If we were to put 20% down for a home, we would need $80,000. And that’s seriously the minimum for a starter home in Orange County, CA in the cities that we would be willing to live, where homes tend to start in the $400,000’s. So how are we ever supposed to save that much and buy a car and have an emergency fund and pay off debt?

Anyway, good thing I don’t care what other people think, and I’m doing my own plan.

Here’s the rundown:

1. Pay off car and credit card debt.

We are thinking of paying off my car by the end of this year (so yeah, next month). This will remove about $4,000 of debt. And then in the first few months of 2012, we will pay off the rest of our credit card (which is currently at 0% interest until April 2012). This will leave us with just my student loans left.

2. Save up for a house down payment.

With the card and the car paid off, we will have an extra $500 to put toward savings. Since we were pretty easily contributing $1,000 a month toward savings this past year, we are hoping to contribute $1,500 a month in 2012 for total savings of $18,000 by the end of the year. (But we hope to finish with a strong $20,000).

3. Move out of the Love Shack.

After saving $20,000, we hope to move out of this love shack. We moved in here because we knew we were going to have to live off one income while Eric was in the fire academy. We prepared for it by downsizing into this shack, but now, after a year of living here, I think it’s safe to say we’re over it. We’ll stick with it for another year to pump up the savings, but then we’re going to try and find an actual townhome to lease with a yard and a washer/dryer and a dishwasher, and –oh I dunno–an actual bedroom with a door? Those are my new non-negotiables. We are wiling to increase our rent by $500, lowering our monthly savings to $1,000 a month after the move.

4. Continue saving for a home and buy a new car.

This is where Dave Ramsey pisses me off. We are going to need to buy a new car in the next few years and unless we use our house down payment fund, we won’t be able to pay for the car in full. Eric’s car has over 115,000 miles on it. And with his new job about a 45-minute drive away, he’s going to be putting a lot more miles on it. Plus it’s a two door–same as mine. What does a two-door car mean? You can’t fit a baby seat in it! Duh. Ok, Eric and I have had the “baby talk” and I swear, the older I get, the longer I want to put off having babies. When we were first married, it was all “oh definitely by the time I’m 30” now that I’m 27, it’s more like “Oh maybe more like 32″…there’s just so much we want to do. And once you have a baby, you can’t put them back, you know? But we will need to buy a bigger car…eventually. We’ll put it off for as long as possible or until Eric’s car dies on us. Whichever comes first.

5. Eric gets a firefighter job, we buy a house, we pop out babies (in that order)

I don’t want to buy a house until Eric secures a firefighter job. Now that he is actually hired by a firefighter company (although as an ambulance driver, not an actual firefighter), his chances of getting hired increase a lot. I still think it will be another two or three years before he is hired, though, depending on the economy. But once he is hired, we will have the savings to buy a house, even though it may not be a full 20% ($80,000), it will still be something substantial. When Eric is hired, I will feel a lot more comfortable with the idea of having a mortgage now that we will have two sturdy and stable incomes.

Bonus: Traveling

I still want to travel as much as possible before we have kids. And even though our honeymoon to Costa Rica won’t happen this year, it will one day. I also want to go to Europe. I want to try and fund our travels through a separate “extra” fund. Meaning, any extra income we earn that doesn’t come from our immediate income, such as mileage reimbursement checks from work, mystery shopping money, blog advertising, and tax returns.

Do you have a five-year plan? What do you think of our 5-year plan?

*Every time I make plans, God laughs in my face. Hopefully, He doesn’t laugh at me for a while.*
This post was provided by Emortgage Calculator



Alice November 27, 2011 - 9:59 am

I take parts of Dave’s plan, parts of Suze Orman’s plan, parts of Gail’s plan and make it my own plan.

While I do not agree with everything he says, I credit him in making me believe I could pay for grad school as I go. Thanks to his teachings and motivations, I chose a cheaper school and to go part-time as opposed to full-time, and will graduate without grad school student loan debt. Which is good, because I am entering a helping profession that doesn’t pay a whole lot and I still have student loans from undergrad.

You don’t have to believe in all that he teaches but you can take parts of all the financial “gurus” and make your own plan, as you did.

The major thing is setting goals. If you set goals and write them down, you are more likely to achieve them.

Meghan November 21, 2011 - 11:39 pm

You are amazing! I was just married on October 9th, and set out right away setting us up on our newlywed budget. I found your blog, and I absolutely love it!

I have been feeling sort of financially lost or discouraged lately because I just wish our debt would be paid off sooner! So I found my way back to your blog tonight, and I feel rejuvenated! I LOVE your 5 year plan, and I totally know what you mean about babies. It sort of scares me actually! I’ve looked in to what people say about saving for having babies, and it’s anywhere from $5k to $10k… Theres always something to save for, I guess!

Anyways, thanks for the inspiration, keep doing what you do!

Mary November 9, 2011 - 8:48 am

As someone who struggles with how it’s possible to save up that kind of money, seeing you break things down like this is really helpful! Your plan seems totally doable considering how dedicated you guys have been so far to sticking to your budget. Great job!

Lindy Mint November 8, 2011 - 12:54 pm

This is a very impressive five year plan indeed. And it all makes logical sense in my book, God’s laughing aside. πŸ™‚

Our five year plans are a lot less detailed – like “hey, let’s live in Phoenix for five years and then move somewhere cooler.” Six years later we’re still here with no plans for leaving. Things don’t really get accomplished with our five year plans.

Elysse November 8, 2011 - 12:07 pm

I am really impressed by your plan! Should be no surprise since I know you have long-term plans. I hope you are able to stick to it, and that life doesn’t throw too many wrenches your way. Plus, I’m excited for you to move to a nicer place and BUY A HOUSE πŸ™‚ Crazy!

MAH November 8, 2011 - 10:07 am

Your plan looks very strong and well thought out. It is obvious that it was the right fit for your family and situation.

Michelle November 8, 2011 - 7:57 am

I think this is great. This is the way that I would do it.

Taylor November 8, 2011 - 7:17 am

How much do I love your blog??!!
I think your 5 year plan is great. DH and I have no plan for home-ownership any time in the near (or distant) future, but that’s partially because our lives still feel ‘in limbo’ as far as income/job/career path.

Z November 8, 2011 - 5:05 am

I agree with you on the subject of the Dave Ramsey. I think he’s really for people who have absolutely no clue that if you have a credit card, it’s not free money.

We’re closing on our first home in 2 weeks today (!!!), and we went the FHA route. great part with the FHA program we got is that in the future, if we want to sell the home, we can transfer our 4.0% interest rate to the next owner!

I think your blog is great.

Sarah H November 8, 2011 - 4:30 am

Woah! Your plan is awesome! I’m a newlywed myself and I like reading your blog as reference for how to manage our finances.
As for us, we don’t have a five year plan because, like Niki said, we’re also in the military so my husband’s career leads us to the most unexpected places.

Niki November 8, 2011 - 3:03 am

Looks like a good plan. I love your quote at the end though. Flexibility is always helpful.

I have been working on 5 year plan but they are so hard to do in our case, with the military, in five years we will probably moved two times and our pay fluctuates with each move. My five year plans have multiple personality disorder.

Erin Branscom November 7, 2011 - 6:12 pm

Whew! I thought I was the only one on the planet who didn’t drink the Dave Ramsey kookaid! I just don’t think his stuff is for my family.

My family is doing the War on Debt program with Dani Johnson. It is way more functional and realistic for us. And Dani is from California! ha!

I think you have a great plan! πŸ™‚ I love reading your blog. You are so smart to get everything secured and figured out. I am 30 and have 3 kids and desperately trying to pay off student loans to be a stay at home mom. It is so hard!

I love reading your blog! πŸ™‚ Erin

jobo November 7, 2011 - 6:02 pm

That plan is right-on. I hate those gurus that give you these guidelines that are just so unachievable and not realistic in this market! So I like your meet-in-the-middles on these. I don’t have a 5 year plan but if I did, it would look similar πŸ˜‰

LBC Teacher November 7, 2011 - 5:49 pm

I just have to speak up here…I too live in Southern California, and there are plenty of starter homes for under $400,000. If you want to live in certain areas or if starter means a certain size to you, that’s fine. It’s personal finance, after all. But a blanket statement about Southern California bothers me. Yes, it’s a very expensive place to live. But there are choices we make that determine cost. I don’t begrudge where you want to live, but I don’t think your statement was quite accurate.

That being said, you’re one of my favorites. Not hating, just had to speak up! πŸ™‚

Sonya November 7, 2011 - 5:34 pm

We are beginning that stage of planning for once husband’s job starts. We know there are certain things we need to do and then those we want to do. You seem to have a good plan in my opinion!

Dancy November 7, 2011 - 5:28 pm

I second checking into the FHA loan. We’re married slightly over a year ourselves and live in the suburbs outside NYC (Westchester County, which – as of last Sept. officially has the highest property taxes in the whole country ). We were able to find a great house in a good school dist with decent taxes & the only way we’re able to start the process is with FHA. We close this Thursday – it was rough at first but we saved close to 50k & were able to contribute a little more than the down payment and now to cover the closing costs. Good luck!! πŸ™‚

ariel November 7, 2011 - 4:30 pm

“And once you have a baby, you can’t put them back, you know?”

That made me laugh so hard! I think Ramsey is very over rated. Maybe in his world everyone goes to college on full scholarships and never ever racks up any sort of unnecessary debt? Anyway, personal finance is, uh, personal. We’re all different and have different variables going on in our lives. Where we live a 400k house is a sprawling mansion that comes with a gaggle of peacocks, we bought our house for under 100k and no money down due to the type of loan. NO ONE around here aims for 20% down, usually it’s 10% or way less. I think as long as the mortgage is fixed then just go from there.

As for kids…I’ll borrow my friends and put them back for now πŸ™‚

Melissa November 7, 2011 - 2:24 pm

This seems like a wicked fie year plan. I am so impressed!

And seriously, I’m not a big fan of Dave Ramsey either. I feel like all of his advice are for people who just can’t handle any sort of financial responsibility, so it needs to be as simple as possible. (In the way that you tell a five-year-old that when he gets his allowance on Saturday, THEN he can buy his candy bar, but not before.) Like, if I was in the market for a car, even if I COULD pay it in cash, if I could get zero-percent financing, no way in hell would I pay for it in cash!

I feel like if regular people follow Ramsey’s plans, they won’t end up having kids until they’re in their 40s. It’s just not realistic. I think working on goals concurrently, like you’re trying to do, is the better way to go. It’s sort of what I’m doing, too, except I have no plan other than “save up a bunch of money so one day when you want to spend a bunch of money, it’ll be there!” Not…the best plan.

Lauren November 7, 2011 - 1:51 pm

Have you thought about the possibility of using an FHA loan? We got one plus the first time home buyer tax credit last year and it has worked out great for us! While the down payment was lower, we had saved for a bigger payment, applied that to pay off some major school debt and now we plan on paying off our mortgage 5 years early with no prepayment fee. This is our plan of course, life may take a different course, haha

Jennifer November 7, 2011 - 1:34 pm

Can I just say how impressed I am that you have a five year plan at all? Awesome!

Claire November 7, 2011 - 1:29 pm

I think your plan sounds very good and well thought-out!

As of right now, my fiance (ok ok, he’s not proposing til Christmas but close enough πŸ˜› ) and I have no debt but we’re both starting grad school next year… So far, our plan is to have as little debt as possible, pay off all the bills, and save anything that we have left over!

I’m happy to have found your blog because I know things for us are going to be very similar to what you and Eric are going through. Please keep sharing your ideas and successes with readers! You are a big inspiration to us! πŸ™‚


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