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My husband and I are in our 30s, make $120,000 and pay $1,500 in rent. Will we ever own a house?

“The last few years have felt impossible, and it’s hard not to feel discouraged.” (Photo subjects are models.) – Getty Images/iStockphoto

Dear Quentin,

My husband and I are a 30-year-old dual-income couple with no children yet, making a combined $120,000 a year. We have $30,000 in debt in the form of a car loan. Our credit cards rarely carry a balance, and our rent, including utilities, never exceeds $1,500 per month. We both try to put €500 per month in savings.

I have a chronic illness/disability that I am managing. This does mean that we pay for doctor’s appointments, medications, treatments, etc. Our insurance runs through my husband’s employer and fortunately keeps our out-of-pocket costs for these medical costs on the low side. However, nothing in life is guaranteed and losing our insurance is always possible.

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One of our most expensive treatments is for my disease-modifying therapy, which costs $100,000 per treatment without insurance. I get this infusion of medicine twice a year. The drug manufacturer offers financial assistance, but if we do not have insurance, the costs associated with it may increase.

The nest egg

The past few years have felt impossible, and it’s hard not to feel discouraged. My husband’s job offers great benefits, including an employee stock purchase plan. His investment portfolio is $60,000, but it could be difficult to liquidate given the way restricted stock units are taxed. We both have 401(k), his total is $20,000 and mine is just over $56,000.

We also have a high-yield savings account with a balance of about $43,000 and an interest rate of 5.1%, as well as a CD with about $10,500 and an interest rate of 4.5%. We have never owned a house and clearly make too much money for any kind of down payment. We currently live in the Denver metro area (one of the most expensive metro areas).

We would like to invest in stocks, but I don’t want to liquidate our savings and become housing poor. We are willing to move outside the Denver metro area, but we both want my husband to keep his job with his great health insurance. We would like to start our family, but without a home it feels bleak.

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Do you think we’ll ever own a house?

Looking for hope in Colorado

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“Most people in their 30s would give up their two front teeth if they had more than $50,000 in a CD/high-yield savings account.”“Most people in their 30s would give up their two front teeth if they had more than $50,000 in a CD/high-yield savings account.”

“Most people in their 30s would give up their two front teeth if they had more than $50,000 in a CD/high-yield savings account.” – MarketWatch illustration

Dear Looking for Hope,

Yes, 1000 times, yes. You have to believe you can do it to do it, and you already earn more than the average wage in the US (which hovers at almost $46,000 per year). You are also a dual-income household, which helps enormously. There are millions of Generation Z and Millennial Americans trying to gain a solo foothold on the property ladder.

Most people in their 30s would give up their two front teeth if they had more than $50,000 in a CD/high-yield savings account. That’s exactly the right thing to do in this current environment of high inflation. And given the strong US jobs data released last week, it seems less likely that the Federal Reserve will cut rates in the near term.

You are both still so young, do everything by the book and don’t take unnecessary risks. Thank goodness you have health insurance through your husband’s employer and are managing your illness. So far, so good. It may feel bleak, but you don’t want to buy a house with an interest rate above 7%, so you still have plenty of time.

The average home in the Denver metropolitan area costs an average of $579,019, and prices have remained fairly stable over the past year (just 0.7%), with 48% of homes selling below price and nearly 30% of homes was sold above the price. price, according to the most recent data from Zillow Z.

The harsh truth is that many homebuyers violate the “30% rule,” which states that you should limit the size of your total mortgage payments (mortgage, taxes and insurance) to 30% of your monthly income. If you were to purchase a home at current market rates, you would pay a monthly mortgage payment of $3,200, assuming a 20% down payment.

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It’s not easy, and owning your own home comes with maintenance costs and property taxes, but a big mortgage at 35 might not feel so terrible when you’re 45 or 55. But I also don’t want to disguise the road ahead: it is not paved with cotton candy. Rising home prices, especially after the pandemic, have been exacerbated by a lack of inventory and stagnant wage growth.

Low tax rate

I am not the only one who thinks that you are financially strong. “Let me congratulate you on your financial discipline and early successes,” says Martin Schamis, a certified financial planner with Janney Montgomery Scott in Philadelphia, about your current situation. “It appears that you have successfully controlled your expenses and have been able to save for retirement as well as the unexpected.”

Take advantage of your current low income tax rate. “You don’t mention whether your 401(k) accounts are traditional or Roth accounts,” Schamis says. Given that, plus your ability to take advantage of the medical expense deduction for expenses exceeding 7.5% of your adjusted gross income and your ability to save effectively, “you should take full advantage of the tax-free growth which is offered within a Roth 401(k) if that is the case. something that is available from your employers,” he adds.

You also need an emergency fund. “The fact that you have the larger unknown quantity [medical] treatment-related costs make me think that your current cash position equal to about half of one treatment is a more appropriate reserve,” says Schamis. “You didn’t mention the interest rate on your car loan, but if it’s higher than the 4.5% you’re currently earning on your CD, you might want to consider paying off that loan on an accelerated basis.”

“Finally, you mention that you are interested in investing in stocks, but you list $136,000 in investment accounts, including your husband’s $60,000 investment account with restricted stock from his employer,” he adds. “These accounts should be invested primarily in stocks at your age, and you should also be careful about your overall diversification, since almost half of your investment portfolio is made up of stocks of one company.”

A win-win situation

Still, you’re in a win-win situation because you have the option to invest in a 401(k) plan. Since you’re in your 30s, you’re not yet close to your peak earning years, which typically happens between ages 45 and 54, according to data from the U.S. Bureau of Labor Statistics. The maximum individual contribution to a 401(k) is $23,000 in 2024.

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You’re already invested in stocks through your 401(k), and given the amount of runway you have before you retire, you have plenty of time to ride out any dips in the stock market. Not having the cash on hand has prevented you from investing in individual stocks and/or trying to time the market.

Over the next decade, you may want to consider applying for long-term care insurance. According to the American Association for Long-Term Care Insurance, the best time to get this insurance is around age 50, but you may want to start earlier given the nature of your illness, especially if it is a chronic illness that develops over time. will become increasingly clear over time. time.

In the meantime, it is important to put the current interest rate environment into perspective. Thirty-year mortgage rates rose to 16% in the 1980s. Some economists say 5% is the “magic number” that interest rates must reach before more sellers feel comfortable making the switch and more buyers feel the time is right to jump. Historically, that’s a pretty good figure.

Real estate is a long-term investment, especially since most people – when they sell – have to pay 6% in real estate agent fees, attorney fees and other closing costs. Put an amount on paper: how much do you need as a down payment? – and keep putting that $500 aside every month. That kind of extra money is a huge luxury for many people your age.

We always think that every chapter – whether we’re in our 20s, 30s, 40s, 50s or older – will last forever, but the older you get, the faster time passes, because the more years (and, hopefully, retirement savings) ) and percentage of your life that you have behind you. Continue building your war chest and prepare for the unexpected. Remember: house prices can go down as well as up.

And please don’t give up.

More columns from Quentin Fottrell:

“My husband and I have eight children”: We have $200,000 in a high-yield savings account at 3.75%. Are we beating inflation?

‘He’s an egomaniac’: My husband said he would flush his $1.5 million IRA ‘down the toilet’ rather than share it with me in our divorce. What can I do?

‘He has always been able to play golf’: My husband of 14 years has never worked and now we are divorcing. He wants half of my $1 million house. What now?

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