The great news is that, if the interest rate on your student loan is low (below 8%), it doesn’t have to be paid off before you start tackling longer-term goals like buying a home or saving for retirement. Instead, you can balance paying off your student loan debt vs saving a down payment for your home by tackling both simultaneously.

At any given time, most of us are juggling multiple financial goals: for example, paying off student loans, managing credit card debt or a car loan, setting aside a down payment for a home, or saving for retirement. The key to making it all work is understanding how to prioritize and balance these goals.

It’s natural (and motivating!) to look forward to the day when you can buy your own home. If you are carrying student loans or other debt, however, the smart move is to tackle things one step at a time.

First, make sure your current debt is manageable. Debt is a normal part of owning important assets, like a home or car, or in the case of student loan debt, investing in your future. But when it crosses over into “too much debt” territory, it’s time to take action. Overall, your debt payments should never total more than 20-25% of your monthly income. Keeping your debt within a manageable range relative to your income will allow you to meet other goals comfortably – such as one day owning your own home.

Assuming you are not under too much debt, the great news is that, if the interest rate on your student loan is low (below 8%), it doesn’t have to be paid off before you start tackling longer-term goals like buying a home or saving for retirement. Instead, you can balance paying off your student loan debt vs saving a down payment for your home by tackling both simultaneously. Use the following ratio: put 2/3 of your resources towards paying off your debt, and 1/3 towards saving a down payment on a house.

If you are paying more than 8% interest on your student loan debt, work on managing that more aggressively first. Look into refinancing/consolidation and pay it down like it’s your job!

Finally, know “how much house” you can afford (in most parts of the country, this would be 2.0 – 2.5 times your income) and plan to save 20% of that purchase price for your down payment. That will help you keep interest expenses lower on your mortgage over time.

That’s it.  Keep total debt low, and balance the rest of your priorities carefully, and you’ll get there!

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