How my partner & I saved up for a house while paying off our debt

Saving for a house while paying off debt could be easy if you team up with your partner to help. Teaming up with your partner may help eliminate debt over time, along with successfully saving for a home.

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According to research conducted by Twine, 43% of 1,000 25+ year olds surveyed said they talk to their partner about financial goals on a regular basis, and the majority of the conversations are strictly casual.* Still, whether they're being spoken about or not, there are countless financial considerations that exist between couples: from saving up for a house or wedding to combining incomes (or not) to paying off student loans.

Before we got married, my partner and I made sure we were aligned on 2 very important issues. One, we wanted to be debt-free as soon as possible. Two, we wanted to invest in a house rather than dumping rent into an apartment every month only to never see it again. Managing the home-buying process—saving for a down payment, navigating the lightning-fast Nashville housing market, and preparing to forgo freedom in exchange for (hopefully) financial independence in the future—was a lot. Trying to pay off as much debt as possible while doing so? It might sound counterintuitive, but it was actually easier than we imagined.

In order to afford a down payment on our home, we started by pooling our earnings, tightening our budget, and looking at our spending habits with a critical eye. It was painful at first, especially when we realized how much we'd inadvertently spent on Amazon Prime over just a few months, but it helped us make a list of all the things we actually spent money on. Instead of starting with our bills and working from there, we started with our bank statements for the last 3 or 4 months and worked backward.

If we normally spent $800 on groceries and eating out (way easier to do than it sounds), then we knew dropping our food budget to $150 for an entire month was probably unreasonable. We could eliminate eating out, but we also knew a too-tight grocery budget would make us resentful while we saved for our house. Instead, we looked at where cuts weren't just possible but relatively painless. Food delivery went out the window. Every subscription we had was debated over, which definitely sucked in the beginning (RIP Netflix and Hulu). We kept Amazon Prime because the need for essentials like dog food meant the amount we saved from free shipping was it "worth it." We also switched to lower-cost grocery stores for our weekly food shopping and saw our grocery bill decrease drastically without us sacrificing variety. We started meal prepping to cut out costs around lunchtime (and reduce waste) and brushed up on our cooking creativity. Ramen might seem inevitable when you're trying to save as much money as possible, but planning ahead was a luxury that saved us from too many tiny square packages.

We looked at where cuts weren't just possible but relatively painless.

Our next strategy involved planning out our bills biweekly instead of monthly. We wanted to see what we had at the end of every paycheck, a real number, so we looked at the past year of utility bills and started sending biweekly payments for just over the average bill amount (checking the account regularly, just in case we were short). This meant we constantly knew how much money we had to work with in our checking account; instead of needing to remember that rent payments come out on the 7th and student loans on the 17th, we spread everything out evenly.

This helped us turn savings—both saving for a mortgage and paying off student loans—into a "bill" that we could pay out biweekly, too. Because we knew exactly what we were working with, we could start prioritizing where the extra money went. Some months there was less extra money than others, but that additional hundred dollars toward the principal of a high-interest student loan definitely adds up.

High-interest debt became our primary target. We ranked our various student-loan accounts according to interest rate and principal remaining, and then we started picking them off one by one instead of letting autopayments take care of it for us. Anything that had a lower interest rate was set to a minimum payment, and everything extra was thrown at a single target in order to chip away at the remaining principal balance.

While all of this sounds harsh, we also knew that we needed room for play. We'd already determined the amount we could afford for our down payment, so—once it was set to the side and "untouchable" —we figured out a weekly "allowance" that we called our Fun Money. This was direct deposited into our separate debit accounts from our joint account, and it was 100% discretionary. My partner could spend all of his money on eating out and video games, while I could let mine build up to spend it on a shopping spree or a trip to Toronto. Pre-determined Fun Money gave us the freedom to enjoy life without sacrificing everything.

Tightening our budget helped us realize that our financial goals weren't as counterintuitive as they seemed. Even better? They didn't have to be incredibly painful. It took a lot of honesty—mostly with ourselves—and learning to say "no" to a lot of things, but it ended up being totally worth it.

Buying a house is stressful enough, but tightening our budget helped us save for a reasonable down payment while paying off debt, which helped us get a lower interest rate on our house. This might not seem like much, but having a lower interest rate meant our monthly mortgage payments would be lower, more manageable, and give us more financial wiggle room when it came to paying the bills (and paying off the rest of our student loans). In the end, buying a house actually made it easier for us to stay on top of our debt payments because we could be strategic about getting a mortgage we could afford, increase our student loan payments, and know that we were more financially secure.

We saw it as an investment in our future, even if we only end up staying there for 5 or 10 years, and that made signing a mortgage feel way better than giving up rent money every single month with no potential payoff. In the end, we were able to save for a house and pay off our debt in 5 years. We'd been so successful with saving for a house that, after we finally purchased it, we realized it made more sense to continue our smart savings habits until our debt was completely paid off. The mental freedom of knowing that we don't have any strings—besides a house (that we could sell)—was exactly what we'd hoped for, and it was totally worth the dual savings grind.

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Sources:
* Twine, 43% of 1,000 25+ year-olds surveyed said they talk to their partner about financial goals on a regular basis, February 12, 2018.
Article copyright 2018 by Refinery29. Reprinted from the October 25, 2018 issue with permission from Refinery29.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
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