You’ve recently seen news about how student debt prevents people from taking the next steps in life. This is not one of those stories.
Not that Anthony Yarnal had no student debt. The 26-year-old graduated from the University of Washington with a degree in urban development ք $ 55,000 in debt.
That was not supposed to be the case.
“I went to the University of Washington with a record scholarship,” says Yarnal. “But two years later, when I became an urban planning major, I was wasting a lot of time studying and going to meetings. I had to stop running. ”
It proved to be an expensive decision. Yarnal lost his scholarship րեց borrowed $ 30,000 a year to pay for his study abroad. “I joined the National Guard to get the tuition fee, but I still have to finish it because of a lot of things,” he said.
Becoming allergic to debt. Growing up in Santa Clarita, near Los Angeles, he witnessed what happened in 2008 when California became the epicenter of a subprime loan collapse. That was terrible. “
Yarnal also uses the word “scared” to describe how he treats his student debt, which had a 7% interest rate. His strategy? Get rid of it quickly.
He got a job as a program analyst at a public transit agency, borrowing a hammer, repaying at least $ 2,000 a month. In less than two years, he repaid $ 55,000 in student loans. How is this possible? Yarnal earns $ 71,000 a year from her job, earning $ 3,000 a year to serve in the National Guard, but she spends no more than she did as a college student.
“I pay $ 550 a month to live in a comfortable home in West Seattle. I have five rooms,” says Yarnel. “I may try a little bit to live with so many people, but mostly I like it.”
Yarnal hopes that the next place he will live will be his house. That’s why she reached out to Money Makeover. Our partner, the Puget Sound Financial Planning Association, teamed up with financial planner Holly Dice և Jon Onathan Coleman with Arrivity Financial Planning in Seattle.
Davis was immediately impressed by Yarnal’s discipline. “She was saving $ 2,000 a month, which she saved on her school debt, which she used to pay home. He is a kind of executor, saving 44% of his income before taxes. That’s why I give Anthony a big kick. “
In addition to buying a home, Yarnal also wants to save money for graduate school so that he can achieve his ambition to become a project manager for a major transit project. Because he has competitive financial goals, the planners asked him what his priority was.
“He said he wanted to buy a house in about three years, and his target was a house worth about $ 600,000,” said DG. “He predicts having a family, he wants a family home that will allow him to grow.”
Here are some work planners who do not like it. They squeezed the numbers and found out that there was no Seattle dream home in the immediate future. Probably a toilet in Kent. There are several reasons for this portion of reality.
By the time he met with the developers, he would have saved $ 20,000 և hoping it was all for his house. Yarnel thought the planners would have an idea where he could put the money so that he could earn more than his current savings account.
“He wanted to increase his savings. “Especially in the light of market volatility these days, it’s not a good idea for a short-term goal,” says Davis. “Apart from anything other than a FDIC-backed savings account, you are putting those funds at risk.”
Slightly worse news for home account. Planners estimate that Yarnal needs $ 16,000 in emergency funds to cover his six-month expenses. Cash deposit will allow you to reduce your car insurance premiums by charging charges. That reduced his savings account to $ 4,000.
With a sigh of relief, Jarnel says he is worried as house prices rise and fall in the greater Seattle area, he worries that he misses the boat.
Coleman says. “Anthony was kind of scared of the housing situation.” “The more he puts in the bank, the more houses go up. “It is more difficult to achieve this dream than before.”
But not impossible. According to Davis, the secret is to make the advance payment by jumping into the housing market with more expensive property.
“Many people in Seattle are in the same situation. “We advise Anthony to target a less expensive house and put his foot in the door,” said Davis. “It will appreciate at the same rate as the dream house և Anthony will gain capital in the real estate market.”
Based on what he created, the designers say that Yarnal could afford a house in the $ 400,000 range. He will want to wait until he has a 20% down payment to avoid paying for private mortgage insurance.
“Holly and Jon Onathan did a fabulous job showing what I can afford. They also advised me to get a roommate to help pay for the expenses. I really appreciate that, ”says Yarnal.
The big idea here is to prevent Yarnal from becoming poor at home, which means that the vast majority of his income is related to paying for the house.
“Anthony has to keep his monthly mortgage payment for less than $ 1,700 a month, or 28% of his income,” says DG. “Moreover, he could have trouble meeting other expenses to save for his pension.”
During the three years he worked, Yarnal did a good job pulling his pension funds off the ground. He invests 10% of his salary in 401a, and the employer – 12%. (401a is offered by state-owned և non-profit organizations. Unlike 401 (k), the employer sets the pay levels for the employee.) Within 12%. says that it is that the employer does not participate in social insurance.
“I retired $ 53,000 during my last 401a check. “It’s in a managed fund, because because it’s managed, Holly and Jon Onathan say it will cost me a lot of money over time.” Arn reporters found funds with much lower cost ratios under the Yarnali program և he passed them. They have the same aggressive stock effect as its predecessor.
Although he did not always like what he learned about how much home he could afford, he is grateful to the developers for his success.
“As for the purpose of buying a house, they can not give you more money,” says Yarnal. “When it came to my pension overhaul, I did not have the financial literacy to find out. Holly և Jon Onathan has saved me money all my life. Literally. “
Receiving a VA loan. When does it make sense?
“If I had not joined the Guard, my student debt would have been more than $ 100,000, it would have been ugly,” said Anthony Yarnal.
He says he saved $ 50,000 by joining the National Guard to receive state training at UW. And now he could reap another financial benefit.
The following year, when he served six years on guard, he would be eligible for a veterans’ loan. This would make it easier for him to get home, as he could have financed the purchase of the house for less than $ 0 without having to pay a mortgage.
But is that a good idea? VA loan interest rates are usually lower than regular mortgages. Currently, according to Caliber Loans, which provides VA loans in Washington state, VA loans are slightly lower than 3%, and conditional loans average 3.25%.
Although VA loans are not free. Financial planner Jon Onathan Coleman notes that there is a fee that can be as low as 1.4% with a 10%: more down payment. The down payment of less than 5% is 2.3%
Coleman says. “If you have a 20% down payment, it will be three times cheaper to get a conditional loan.” “Avoiding mortgage insurance is one of the main benefits of VA loans for people with less than 20% down payment.”
In addition, the VA loan payment is increased for the second time when the buyer applies. So the planners say that Yarnal could be better off if he goes to buy his first, probably more modest, house և get a VA loan when he is ready to buy the house of his dreams.