Baby Step 3B – Explained

If you are here, you are halfway to Baby Step 7! You have scraped and clawed your way out of debt, you have intentionally built up your 3-6 month emergency fund, and now you are on your way to building your down payment (further to be noted as DP) for a home. Sound about right?

If you are anything like us, you are sick and tired of renting apartments and seeing rent increase every year makes you cringe. You have been anxiously waiting for this moment almost like a perpetual “nails on chalkboard” sound. I look back on the 10 years that I have been renting and think, “what the heck did I spend my money on?”

Let me put this into perspective for you: before I met my wife, I spent $26,000 on rent in three years. When we got married, we joined our income and savings, but we also shared the expenses. The past 6 years, we have spent almost $100,000 on rent!

Don’t get me wrong, renting an apartment has been a blessing for us, but it is a bit maddening to not be able to call something our own. There are pros and cons when it comes to renting. Pros – no maintenance, utilities included (sewer, trash) renter’s insurance is a lot cheaper. Cons – no equity, paper thin walls and neighbors (need I say more?). Although, my energetic, early riser toddler could also get us in trouble with neighbors. I guess we can’t complain too much.

We don’t own a home, so we are furiously trying to compile a large sum of money to have for the DP; and since we live in California, it’s expensive. We don’t want to have PMI (private mortgage insurance). To avoid that, we need to have at least 20% down. We would prefer to keep the mortgage around 25% of our monthly take-home pay. We want to own the house, we don’t want the house to own us.

Mind you, we are doing this because our 2 bedroom apartment will not likely work if/when we bring in another human to the world. Both of us are working, neither of us makes 6 figures individually, but combined, we can do anything! Working together on this goal has been such a delight because we have seen exponential growth over the past year. We are pleased to say that we have 40% of the DP available.

We enjoy being close to family. We have toyed with the idea of moving out of state, but ultimately we decided that California is where we will stay. All in all, it should take us a total of 2.5-3 years to save up the DP having 1 year under our belt. We keep track with a paper thermometer that we can color in as we move the needle. Payday is so exciting because we get to tell large chunks of money to “Go to the House Fund!”

This journey has taught us patience, contentedness, and working toward a goal/vision together. While it has not been easy with juggling one job each, watching our growing child and keeping somewhat of a social life, we are extremely grateful for what we have and hope to be a blessing to others when we finally reach Everyday Millionaire status (more on that later) and Baby Step 7. Generous giving is the ultimate goal, and we will get there: one step at a time.

Published by MadsenFinancialCoaching

Madsen Financial Coaching was created to bring awareness to personal finance. When you pay attention, you win! We work with clients to understand their behavior and relationship with money, as well as basics of personal finance such as: following a budget, eliminating debt and building an emergency fund to name a few. We want you to succeed, and it starts with your willingness to put in the work.

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