If Harris went for a $250,000 condo, she would need 20%, or $50,000 for a down payment. “It’s just out of her price range right now,” Brown says. “She doesn’t have enough current savings for a down payment and it would just be very difficult for her to save that amount of money for two years. She might have to look at a different area or a different size place.”
• Build emergency fund. Harris should focus on building her emergency savings of at least six months’ expenses, plugging an additional $150 of her discretionary money into her savings account each month. She should also use her $2,000 contest winnings to shore up that account. While she continues to save she can educate herself on the home-buying process.
“There are all sorts of programs. In New York City there is a lottery for houses that have been rehabbed that are sold at special prices or set aside for lower-income people.” n Don’t fret about the car loan. Brown says there is no reason to rush to pay off the car loan early. “She’s just irked to pay $350 a month because she’s so unaccustomed to debt, but it’s her only debt, so I don’t have an issue with it.”
However, since her interest rate is 5.99%, she could likely refinance to 2% given Brown’s research. It might give her an additional $30 a month. Instead of worrying about paying off the car loan faster, Brown prefers Harris build her emergency fund. When she has built that emergency fund she can bump up her 401(k) contribution to 10%.
What impresses Brown is Harris’ maturity. “She is trying to put herself on the right track early. At 24, she’s thinking of things some people don’t until 44.” Her priorities, Brown says, should be studying up on investing so she’s comfortable being more aggressive, and to learn more about purchasing a home. “She has great goals,” Brown says. “She just needs to be more realistic about timing, because when people set unrealistic goals and can’t reach them, they stop setting them.” And Brown doesn’t want anything to slow down Harris’ great start.