Decisions
6 April 2008 by gildedbutterfly
After contemplating possiblities about my living situation, the time has now come to make a decision. So here it is: I am going to resign a 2-year lease in my current apartment, with a plan to buy an apartment at the end of that time. That will give me two years to agressively save. If I save at the same rate that I paid off my credit card, I should have about $26k after two years, which will be a perfect little downpayment. 
That decision has also helped me make another decision I’ve been struggling with, what to do with my extra money now that I’ve paid off my card. I was struggling with my desire to really stash away big bucks for retirement or to quickly build up my cash reserves. Here’s what I’ve decided to do:
1. Put 10% into my 401(k). Right now, I’m putting in 8%, which gets me the maximum employer match of 4%. Even though I have a more immediate savings goal (my downpayment), I still want to up my 401(k) contribution.
2. Max out my Roth. Last year was the first time that I didn’t max out my Roth since I started contributing several years ago. 
I want to get back on the bandwagon with it this year, contributing $5k. If I need the money later, I can take it out to help with my downpayment ($10k or the amount I’ve contributed, whichever is higher). But ideally, I won’t have to raid my retirement accounts for that.
3. Sock away as much as I can into a downpayment fund. This is something I never really thought about doing; who buys an apartment in NYC?! But I think the time is now; in two years, when I’m getting ready to buy, I’ll be 30, which feels right to me. Besides, I’ve been in the city for ten years, so it’s home and barring some force beyond my control, I’ll probably be here for a lot longer.
So there it is: what I’ll be doing with the next two years! I really like having a set, short-term goal in mind: while saving for retirement or for emergencies is good, in order to agressively save (and spend so little), I have to have something concrete and soon to keep me going, like paying off credit cards or saving for a downpayment.
Congrats on your decision! How exciting to have a goal like that. Also, you know you can still contribute to your Roth for 2007, right? At least for another week or so…
Best of luck with your new goal! (A home of your own… that’s going to be incredible!)
I think there’s something so… fantastic… about being able to say you think you’ll be somewhere for quite a while. It’s so put-down-roots and all. I’m hoping to get to that point soon.
Anyway, this all sounds like a smart plan to me. Happy saving!
Meg–Thanks! I know I can contribute, but I don’t have the money to do so now, unless I took it out of my emergency fund, which I don’t want to do.
Oh, well. New year, new chance.
shuchong–Thanks! (I know; I’m already excited, and I have at least two years before anything happens!)
GG–I go back and forth on that; either I feel really happy to have roots or I feel really scared at the prospect of putting those roots down. Realistically, I know I’m not going anywhere; I’ve lived in the same 10-block radius for 10 years, 6 of which have been in the apartment I’m currently renting. On the other hand, buying is a whole new level of commitment. That’s part of the reason I decided to wait, to get myself emotionally prepared.
[...] at lunchtime today to get everything squared away so that my automatic savings are in line with my new savings goals. First, I spent about 3 minutes logging into my 401(k) account and changing my contribution rate [...]
I love your goals. They make perfect sense for you and are simple, but challenging. I think waiting two years to buy is a great decision. I’m looking forward to seeing how you do!