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Is a home and graduate school too much?

Chris Farrell May 17, 2011

Question: Hi, I have a bit of a long question, I apologize in advance. My wife and have been debating for some time now regarding the old question rent vs. buy. I’m a recent graduate, ~1 year from Nursing school, working as a nurse and currently the sole provider. We have one 7.5 mo. old baby (Naomi). Our expenses include: 2 cars and insurance, student debt (~20,000$, or ~300$/mo), and just additional costs, i.e. gas, food.

My current income is ~26$/hr. x 36 hr. / wk.
Our savings include ~64,000$ in stocks, and additional $20,000 in the bank.

And to the point. Rent is about 850$-1100$ (typical 3 bed. 2bath) while we found a house that is ~3000sq. ft. for 125,000$ which needs some repair (mainly new toilets, sinks…). I’m thinking of going to Grad school in the next 3-4 years (which is anywhere from2-3 years). Is this a good idea then to buy this house at this time? Or should we keep renting on? Please, please help us with this question, my wife and I don’t have much experience in the financial world and in dire need of help. Thank you so much for your help. Haim, Farmington Hills, MI

Answer: It’s a good question. My approach is that this is really an issue of risk and risk management. Going to graduate school is a big investment in time and money. Buying a home even at today’s lower prices is also a risky investment.

When I read your question a couple of thoughts popped in my head. Would you move after you graduate for a better job? How much debt will you have to take on to go to graduate school? The home repairs will cost money, too.

In other words, I would be wary of borrowing to own and borrowing to go to graduate school. A critical investment question is always: “What is the downside? What could go wrong?” I’d carefully think through the downside as well as the upside before acting on this investment. My two cents is that renting is the safer path at the moment.

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