Getty Images; Chonce Maddox; BI
Almost two years ago, my husband and I moved to a new state. Getting settled cost more than I expected. In 2022, we ended up draining most of our emergency fund, and I quickly racked up close to $5,000 worth of credit-card debt.
My husband and I are renting for now, but we'd like to buy a house again in the future. I know I need to limit my debt as much as possible and build up savings again to get into a comfortable financial position to even consider shopping for homes.
I have not only paid off my debt but saved $10,000 toward our down-payment fund so far this year. This will make it easier to get my ideal home when my husband and I are ready to buy.
It's a good rule of thumb to decrease your debt before considering a home purchase, so my goal has been to get a lower debt-to-income ratio. Lenders look at DTI to assess your ability to manage monthly payments and repay your debt on time. Interest rates and housing prices have both gone up in recent years, and qualifying for a home loan has become even more of a numbers game.
Lenders like to see a DTI of no more than 43%, with 36% or less considered ideal. Carrying more debt will limit your ability to borrow. Nearly everything costs more now, and I don't want to be house poor, so I've been more concerned about keeping our DTI significantly below the desired threshold.
One of the best things I did last winter to streamline paying off my credit-card debt was getting a seasonal part-time job. There's an Amazon warehouse about 10 minutes from my home, and it was hiring for the holidays.
Applying and onboarding were easy. I was scheduled to work four days a week from 1:30 to 5:30 p.m. I could work remotely for my main job as I usually do.
Amazon offered a $1,000 bonus after 30 days. Because it was a peak season, I was able to increase my hourly rate by picking up more hours. I never worked more than 20 hours a week, but I earned more than $3,000 working for two months. All of this went toward my credit-card debt, along with any money I budgeted for extra debt payments from my main income.
I quit in January after the holidays, but the opportunity gave me a good start. While most people were shopping and spending money, I was finding ways to increase my income while sticking to my budget.
Like many financial goals, homeownership takes time to achieve. My credit, income, savings, and debt will all affect this one purchase, and it's nearly impossible to focus on everything at once.
Paying down credit-card debt was just one thing I needed to do. I've found it more effective to focus on one thing at a time and set shorter deadlines. I tend to enjoy multiple sprints more than long marathons to avoid getting overwhelmed and discouraged.
I have a $9,000 car loan I plan to pay down this year. Now that my other debt is gone, I can focus more on this. Freeing up more money last year has also helped me save almost $10,000 to add to our down-payment fund.
It has still been a lot of hard work pursuing extra-income opportunities and cutting expenses. But choosing to divide and conquer my to-do list has helped me pay off debt, replenish my savings, and make a big goal more manageable.
