WWYD Pay car down, down payment, emergency fund..CD

[Jms2687]

This is what I have going on. I am waiting to be discharged from BK 7 3/11/19 .

I really want to buy, so I am trying to make a plan for that to happen. I am single mom of two. 42k /year, but with overtime this year I hit 62k so it varies each year with union and employer raises. Plus bfs income-his only debt is his car for 28k and childsupport obligation, and some medicals for less than 300$ that will "fall off" by 2021.

I have 26k auto loan with Consumer Portfolio @ 15% which I am hoping to Refi with NFCU 6-12mos after discharge.

I have 36k in student loans. in IBR at 160/mo, but just went back so it is deferred currently. I work government so I don't know if i should keep paying to hit my 120 payments.

I elect 8% to my 401k and my employer matches half which =12%. Over the years I have moved it from 1-4% before BK and now I have it at 8%.

I have a BOA and NFCU account. I recently opened a 12mo easy saving certificate and have a deposit going into that every payday. ( My plan is this is money I can't transfer into checking to use, ultimately for my house down)

Haven't started Emergency fund yet, as I just am getting BK completed. I find it hard to not touch it! Should I have another certificate for Emergency fund...but then you cant tap into it if its a true emergency! 

My bf and I are trying to make a solid plan to get to the house! He wants to make double payments on our cars to pay them down. Saving all tax returns and throwing them into the CD so i cant touch it. 

I was thinking maybe lower my 401k contribution to up my house savings. I do plan on using 401k for down as well, but not sure what the best option is since that has to be repaid. This would be first home. I know there are a lot of programs out there. I live in WA. houses right now are 300-500k depending on area and size. I really would like to put as much down as possible so we are not house poor! 

HELP! Thoughts? 

TIA

[JTC-137]

This is just my opinion here, having been through a bk recently myself.

You have too many irons in the fire and it’ll take a long time to accomplish your goals.

I’d put $1k for a buffer in savings and knock your 401 down to 1%. Don’t pull from it for a down payment either. Get rid of your current car for something cheaper. It’ll need to be fairly dependable with having kids. I’ve seen some really nice ones with low mileage for $10k or less. Pay it off using tax refund, bonuses, overtime, etc. After that loan is gone, place your tax returns and overtime into a savings account and roll your car payments in there as well. Pay off your student loan and put that monthly payment in savings. Assuming you have no other debt, 2-3 years from now you have a paid off vehicle and no debt. Start funneling all available funds into that $1,000 savings account until you have 3-6 months of expenses. After this, start saving for your down payment. $300k mortgage on a $50k income is too high IMO. I’m afraid you’ll end up back at this point if you do that. I’d say in about 4 years you’ll be sitting in a great spot, no debt, emergency saving, and 10-20% to put down ready to buy a home based on your income alone.

Now if you and your bf get married, combining incomes is a possibility and will allow the 2 of you to accelerate the process. I’m doing exactly this but admittedly tried to rush it recently. Kind of thankful now that it didn’t work out.

I know you’re ready to hit the ground running but time is your friend after a bk.

[Jms2687]

I know it will take a few years to get where I want to go. We sort of imagined bare minimum two years for BK and all, but I am i no rush to be in Debt again..and like I said house poor because the mortgage would be  significantly higher than what I pay for rent(dirt cheap) ideally 4-5 years to buy.

I would ditch the Car, but it fits perfectly for my family, bf, and his daughter. It is a 2017 Kia Sedona with 30k miles and will last us a long time, and fits all the growing kids, 7,9,10 yo.

He could ditch the car, but is currently upside down in it from trading in w still a large balance and not doing BK like myself. He needs to build his credit also to prep for house as his auto is only thing on his credit including the baddies listed prev. 

I agree with the 401k. But student loans I am still unsure with because the government program will forgive the balance after 120 payments. Which would save some money? 

[Anonymous]

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@JTC-137 wrote:
Pay off your student loan and put that monthly payment in savings.

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I disagree with this part.  You are on an IBR plan, so likely you will pay much less staying on that plan over the duration of your loan than if you pay it off.  Forget about the Student loan and just pay whatever IBR asks.  After enough years of payments, they will forgive the rest.

Cars, ya you can probably get decently reliable transportation on the cheap.  You could even pick up a third spare family beater car to use if one of the daily drivers ever need to go to the shop for less than your loans now.  Almost all cars value goes to zero over time.

[JTC-137]

I’m not familiar with IBR, I just know federal student loans generally can’t be discharged through bk. My thinking was since the money is owed and can’t be discharged, why not get rid of it asap rather than letting it linger for years? Be done with it altogether in 18 months or less.

OP here’s another thought: what if you didn’t reaffirm the car? Maybe use your tax refund and cash to buy something in the $10k range?

[iced]

Do not reduce your 401k contributions. You have an employer match, which is nice - and it’s free money. Second, having a retirement nest egg can be the difference between a comfortable retirement and hoping the kids have a spare bedroom to put you up in. Do not borrow against it either - compounding is your friend and borrowing postpones it. Unless you live in the hottest of hot housing markets, home equity won’t return as much as stocks over a 20+ year period, so don’t fool yourself into making the mistake of thinking home equity is a substitute for retirement savings.

Step one is to make a budget and work to get it as lean as you can. It’s difficult to have an informed discussion about what to tackle first when you don’t really know what you have to work with each month...or more importantly what you should be working with. Once you have a budget and have proven you can stick to it, it’s easier to then determine what gets paid off or saved for next.