24/7 Insights

• This Redditor is considering making home improvements to their starter home. 
• She and her husband recently paid off outstanding credit card debt. 
• There is a question about using savings or taking out a home equity loan. 

One of the best and most hopeful things any homeowner or someone hitting adulthood can do is find themselves debt-free. Where debt is typical, like with a mortgage or car payment, running up credit card debt can harm your financial well-being. Instead, when you find yourself debt-free, it opens the door to doing things you couldn’t do before, like potentially renovating your home. 

A Redditor finds herself and her husband in this exact situation. In r/personalfinance, the post indicates that the Redditor has a little bit of savings and is thinking about working on their starter home. The real question is whether or not this is a good investment, especially as she’s wondering if she should consider taking out a home equity loan. 

I find this post interesting because it addresses the age-old question of how to use money best. Not enough people in their mid- or late 20s or even early 30s have received a proper financial education, which leads to questions like how to handle home repairs or improvements. 

The Scenario 

Okay, so let’s break down what we know. We have two young adults who likely haven’t been married for long and recently paid off their outstanding credit card debt. They also have approximately $8,000 cash in a savings account. They are considering making some home improvements soon, but what kind of improvements are not specified. The other side of the question is whether they should use their savings to make home improvements instead of taking out a home loan. 

Unfortunately, that’s all we know, outside of their lack of financial smarts and understanding of their next move. This isn’t a knock on the Redditor itself, but she readily admits to not understanding how this process should work, which led her to Reddit and this group of strangers for financial advice. 

Later in the comments, we learned that this couple has approximately $375,000 of home equity to draw against for a loan. We also know they earn around $300,000 annually and estimate home repairs at around $50,000. 

The Recommendation 

While I can’t give anyone financial advice as I am not a financial planner, my gut would be to say to this Redditor that she should do nothing. Only having $8,000 in savings is hardly enough for a rainy day should something happen to a source of income. This couple should only be worried about building up their savings to a meaningful level before tackling anything remotely resembling home repairs. 

Having $300,000 in income and only $8,000 in savings tells me they either had a huge amount of credit card debt or weren’t financially responsible. There is no question they have enough equity in the home loan, but the fact that interest rates are still pretty high is a good indicator to wait. 

What’s concerning is that when asked, the Redditor can’t explain why she and her husband don’t have more savings. The only recommendation here is to work on a budget and learn to live within your means before taking on new debt immediately after paying off other debt. 

The Takeaway

The most important takeaway is that you shouldn’t do anything without comfortable savings. With $300,000 in annual income, I’d emphasize again this couple should focus solely on building up an emergency savings fund and then start focusing on a fund to bankroll their home renovations. Taking out a bank loan will force them back into debt with a high interest rate and hurt them in the long run. 

Now, if the poster had said something about a broken roof that needed immediate repairs; otherwise, it could cave in, it would be a different story. Barring some extreme situation like that, nobody in their right mind should be tackling home repairs with only $8,000 in savings.

Are You Covered?

Just like this couple, who recently paid off their credit card debt and are now exploring their financial options, it’s crucial to consider the broader picture of financial security. While they’re thinking about home renovations, it’s equally important to ensure their family’s future is protected.

Whether you’re planning for home improvements, building up your savings, or simply looking to safeguard your loved ones, understanding your life insurance options is a smart move. A quick, no-obligation quote can provide valuable insights into the types of coverage available and what might best fit your family’s needs.

With customizable policies and affordable rates, life insurance is a step you can take today to help secure peace of mind for your loved ones tomorrow.

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