What’s our next step?

[snowshard14]

My husband (27 m) and I (26 F) make about 150k/year with about 35k of that being tax free.
Right now I have 28k in a Roth IRA, we have 11k in a HYSA currently earning 4.7%, my husband has about 5k in his 401k. His match is 5%, which he’s maxing out, as well as contributing 5% of each paycheck into a Roth TSP. His Roth IRA is starting this year at $6500 and we’ll continue to max both out from here on out. He’s currently set up to receive about $1200/month VA disability when he gets out of the military (lifetime and tax free)
My dad is a financial advisor/planner and most of my advice comes from him. I feel like there’s something we’re missing though when considering our next step.
We’re hoping to buy a house in the next year or so using a VA loan (I can’t figure out if this is a good idea or if we should go with a more traditional home loan?)

To make a long story short, I think we have about $1k leftover each month to put in investments or to potentially save for a house. I would appreciate any input at this point where to go from here

(We have about 40k of student loans between us at a ~4.6% interest rate)

ETA our current budget: (this income in new for us in the last 8 months). We have 2k to living, $1k to our travel fund (non-negotiable), $250 to HYSA, $1200 to Roth IRA, $300 to student loans, $250 to other CC payments until they’re paid off (all at 0% due to SCRA), $500 to food and HH goods, $642 to cars, $145 to insurance, $185 to wifi (we live in AK, our only option sadly), $42 to pet insurance, $92 to our phone. That leaves roughly 2k left. We end up doing about $500 in random expenses each month. That’s where my 1k number came from.

 

[massave]

@snowshard14 You should make a budget for yourselves before you do anything. You have a high income but not much savings comparatively. Not judging you, just stating that there's probably extra money going to places where it doesn't need to go. A budget will help you find this and redirect that money into savings.

VA loans are great. They have no needed down payment and great interest rates. I've used them for the last couple of mortgages I've had.

There's many first time home buyer programs out there though, so I would research that and see what you're eligible for. For instance, in NJ, first time home buyers can get $15,000 for a down payment plus if the buyer is a first generation immigrant, they can get $22,000 for a down payment. Check to see if your state offers any incentives and then let that guide you.

Also keep in mind, house maintenance is expensive. When it comes time to replace things like the roof or windows, it becomes even more expensive. You'll need to add hundreds of dollars to your budget to account for those things as well. For example, a roof for my house is almost $20k, new windows throughout is $13k, new heater/ac $10k. You'll want to be able to pay for any of these big expenses with cash saved up over the months/years, so budget for it now if homeownership is what you want.

You'll also want to pay off your debt as quickly as possible. Dump your extra $1,000 each month (plus whatever extra you can come up with in your budget) and get any debt paid off as quickly as you can.

Then once your debt is paid off, focus on really hitting those retirement accounts and max them out each year. You're young, you have many years for that money to work for you. Get it in there now and you could have millions by the time retirement comes around.

 

[snowshard14]

@massave We do have a budget! I didn’t include it, but maybe I should have. (also this income in new for us in the last 8 months).
We have 2k to living, $1k to our travel fund (non-negotiable), $250 to HYSA, $1200 to Roth IRA, $300 to student loans, $250 to other CC payments until they’re paid off (all at 0% due to SCRA), $500 to food and HH goods, $642 to cars, $145 to insurance, $185 to wifi (we live in AK, our only option sadly), $42 to pet insurance, $92 to our phone. That leaves roughly 2k left. We end up doing about $500 in random expenses each month. That’s where my 1k number came from.

Thank you for the input on the VA loan!

 

[massave]

@snowshard14 It's great you have a budget, good work! I'm going to give you my honest opinion, please know I'm not trying to be judgy or mean.

You really need to focus on getting that debt paid off. That's a lot to carry between the student loans, credit cards and car payments. You have $1200/month in debt repayment just to make the minimums.

The credit cards worry me the most because the SCRA is only when active if I'm remembering correctly.

Is he a reservist? How long will you be able to have the SCRA? When he returns, interest will resume. The CCs should absolutely be prioritized to be paid off prior to that date. You may now be also getting a housing benefit that will go away as well.

Also, if he's going to be collecting that much VA benefits, that means he has probably a 50% percent rating - are they letting him stay in or is he getting out of the military? He can't collect VA disability and his check from the AF at the same time though, so it's a bit confusing.

I know you said the travel is nonnegotiable but that is a luxury item for sure. Once you pay off that debt, you'll have $1200 per month to put towards your travel budget plus the original $1000 if you want to allocate that to travel as well and go on even more epic trips for just a couple of years of sacrifice.

 

[snowshard14]

@massave somebody else mentioned using $500 of our extra each month to pay towards student loan debt, which is what I think we’re gonna do. So we’ll be putting 750 towards those, and then 500 more towards the savings, which could go towards our house/emergency fund

 

[snowshard14]

@massave Not sure where you got $1200 in minimum, but it’s more like $800. We’re overpaying on CC and student loan minimums. I’m completely aware that SCRA benefits go away when he gets out, and we’re set to pay everything with that benefit off long before he does. 50% is (surprisingly) not that high of disability, and the reason he’s getting it doesn’t hinder his current job or deployable status at all.
He’s active duty, will be for about 5 more years, and his civilian pay will be significantly higher when he gets out due to his certificates and degree. He joined specifically to get the degree and certifications without taking on more student loan debt. I mentioned the VA disability to also help explain (theoretically) what we’ll have for retirement, since that is a lifetime benefit.
Travel is non-negotiable because we actually make money off of it due to social media. We’re making 8-9k a year on that, which is obviously a tax write off, so essentially it’s not actually 1k a month, considering we would lose income without the content. Hope that helps explain some things!

I also am not concerned about future loss of income simply because of the career fields we’re both in. I’m a nurse with a pretty extensive resume and obviously he’s military. If something (god forbid) happened to him he would either be medically d/c with an even higher disability rating or have an extensive life insurance pay out. I’m already out of a physically demanding side of nursing, and also have life insurance through him.

I also have the last resort safety net of my parents. That is something I never really mention considering all of the arguments of “what could happen to them and to not rely” on them, but they are EXTREMELY well off and I know there would be no hesitation helping. But if we ended up in that situation obviously something pretty terrible would have happened to lose both incomes.

 

[massave]

@snowshard14 Apologies, I thought the amounts you posted were minimums.

Is he getting his active duty pay or his VA Disability? You can't collect both, so you're only calculating that for retirement, right? I don't want you to be expecting that check from the VA just yet!

If you haven't already, check out the r/MilitaryFinance sub. It has a lot of good information about how to use all the benefits you get to your advantage. There's also the r/MilitaryFIRE sub that's focused on financial independence/retire early

You're young enough now that if you keep off the debt and save you'll be able to retire early and then go travel some more. Good luck to you

 

[snowshard14]

@massave Active! Yeah no we’re not relying on that existing, but his condition is an automatic 50% as long as nothing changes before he gets out.
I’m in that first sub but hadn’t seen the other yet, thanks so much!
We haven’t accrued debt for over 3 years now, and have no intention to (besides a mortgage lol). We’re pretty frugal so I’m not worried about frivolous spending, just the random emergencies of course

Thank you.

 

[snowshard14]

and by “nothing changing” i mean the VA rating system lol

 

[bensherie]

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[pturner0922]

@snowshard14 Very simple answer that might not make the most sense mathematically, but it makes sense to me -- take that $1k and put half in the HYSA for the house and use the other half toward student loans. You'll have more money to invest or save once that debt is handled.

 

[snowshard14]

@pturner0922 Thank you! that seems like the best option in my mind. Our budget does include $1200 to Roth IRA and $250 to HYSA already, but that makes a lot of sense with where to put the extra 1k

 

[snowshard14]

@sparrow4 Thank you! we’re currently maxing the Roth IRA’s (14k next year, yay!), so we don’t have more room to go up there. The Roth TSP is something we were viewing as the next step. I feel like that may be the best option.
Since our loans are less than the average market growth, I was thinking the money would serve us better in some sort of investment!

 

[jacobradly]

@snowshard14 You mention maxing the 5% match and then putting 5% into his Roth TSP. Does that mean he’s doing 5% Traditional TSP and 5% Roth TSP? If so, he could just do 10% Roth TSP and still receive the 5% match. It doesn’t have to be traditional contributions to be matched. He’ll receive the match as traditional in his TSP, but his contributions can be either Roth or Traditional.

 

[snowshard14]

@jacobradly No it was 5% 401k for match and 5% Roth TSP!

 

[snowshard14]

@jacobradly But ok we may change that then, I didn’t realize they’d match the Roth instead

 

[jacobradly]

@snowshard14 Does he work for another company in again to the federal government? From my understanding, the government does not offer a 401k, just a TSP.

 

[snowshard14]

@jacobradly I’m honestly not 100% sure, we’ll look into it and then change to 10% Roth!

He’s air force

 

[jacobradly]

@snowshard14 Not positive on military, but for civilian federal employees, there’s only the TSP. Under the TSP they have a traditional or Roth contribution. The TSP is essentially a type of 401k. Definitely double check to make sure he doesn’t have two for whatever reason. But you should be able to change it to 10% Roth and still get the 5% match. The government will only provide the match as traditional, but your contribution can be either.

 

[snowshard14]

@jacobradly Wonderful, thank you so much and we’ll look into it!