Name: Tariq and Courtney P.*
occupations: Courtney is a lawyer and Tariq is a government contractor and disabled veteran.
Salary: $45,000 and about $80,000, working
Goals: Buy a house and save for retirement
Courtney P.* is a lawyer who flourished in her profession later in life. The 40-year-old tried to get into law school for a decade before finally being accepted. As a new lawyer, she earns a salary of $45,000 and works in criminal defense, business, and family law.
Her husband, Tariq*, 40, is a disabled veteran and government contractor. His working pay fluctuates from zero, when the work dried up, to over $80,000.
Georgians want to buy a home once the white-hot real estate market cools and save for retirement. But they have no retirement savings. “I want to have something other than Social Security to live on,” Courtney says.
As a couple, Tariq and Courtney are both frugal and fabulous: they drive their cars “until the wheels fall off,” said Courtney, who married Tariq eight years ago. And dine at the Cracker Barrel.
However, the DINK (double earner with no kids) will splurge on Caribbean cruises, flights to Sydney, Australia, and vacationing in Hawaii. The lovebirds have invested in monthly couples massages from their favorite Buckhead Atlanta spa to keep up with Courtney’s rigorous law school curriculum. They subscribe to the Hello Fresh meal delivery service ($70 a week) and spend $500 a month on food.
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As a disabled veteran, Tariq receives a monthly income which he uses to cover the $2,300 rent for their four-bedroom, three-and-a-half-bathroom home with a bonus bedroom. Courtney uses the extra income she earns – $8,000 a year – as a choir pianist to pay for their $400 car tickets. And luckily, they don’t have any credit card debt.
Courtney spends $56 a month on health care; the government covers Tariq because of his military service. His student loans are about $300,000. The couple have earned extra money in the past, purchase of tax liens, a yield of about 20%. Courtney works under contract to help indigent clients get into rehab, earning $30 an hour.
Due to Tariq’s irregular income, the couple basically learned to live on one income as protection, which saved them over $50,000.
Even with this considerable amount of savings, they are hesitant to buy a house in the post-pandemic real estate market. Home prices in Atlanta have risen 18.8% over the previous year, selling at a median price of $404,000, according to Redfin.com.
“You’re going to overspend for what you’re getting at this point,” Tariq said.
Both Tariq and Courtney are willing to wait to save enough to buy a house with cash if needed. “You want to own something and not live in something that somebody else owns your whole life,” he said.
Courtney and Tariq are like many Americans who need more retirement savings. twenty-five percent of American adults have no retirement savings and only 36% believe their retirement planning is on track, according to PriceWaterhouseCoopers. The accounting firm estimates that the median retirement savings account for people aged 55 to 64 is $120,000, offering only less than $1,000 a month for 15 years.
Neal Hansen, Financial Advisor at Net Worth Advisory Group, suggests that someone who starts saving for retirement late should save at least 15-20% of their salary each year. Hansen is a fan of using an employer-sponsored plan such as a 401(k) and enjoys the employer game.
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“Most employer plans have the option to automatically increase or increase employee contributions each year. Additionally, some plans even allow you to add some or all of your premium to the account,” said Hansen.
If a spouse doesn’t have an employer plan, consider saving in a Roth IRA at a discount brokerage firm such as Vanguard, Fidelity or Schwab, he said.
Hansen also said late savers may need to retire later or work part-time in retirement to meet their spending needs. Retirement calculators such as Retirement Planner Calculator (dinkytown.net) and Retirement Calculator | Your retirement savings | Charles Schwab can help with planning, he said.
To reduce student loan debt, borrowers have several options, such as working at a job that offers student loan repayment assistance, said Andre Pentis, one of Student loan heroes certified student loan counselors and higher education finance expert. Additionally, a borrower with good credit may consider refinancing private student loans at a lower interest rate. Shop around for the best rate.
RELATED: Watch your money: How this HBCU graduate is saving for her first home with $80,000
Another way to manage the monthly bill is to enter an income-driven repayment plan, which limits payments based on your income, Pentis said. While figuring out the best way to pay off student loan balances is overwhelming, some nonprofits offer student loan repayment advice, but be sure they’re certified, Pentis said.
Home is where the heart is
the Neighborhood Aid Society of America is a non-profit economic justice advocacy organization that helps people get desirable mortgages. Members (as customers are called) can get mortgages with no down payment, closing costs or fees at a below market interest rate. NACA does not look at credit scores.
Instead, it looks at payments potential homeowners may have had over the past year. The agency advises potential owners as long as it takes to get into a house.
“We’re doing it the right way,” said NACA CEO and Founder Bruce Marks. “It’s a character-based loan.”
Editor’s note: *names have been changed.
Natalie P. McNeal is the author of The Frugalista Files: How a Woman Got Out of Debt Without Giving Up the Fabulous Life.