A Librarian Just Bought Her First Home. Now She Needs to Start Saving More.


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Sarah Howison turned the key on her first home earlier this month, something she never thought possible while she was still paying off her student-loan debt. But earlier this year, once she had met the conditions, the Public Service Loan Forgiveness program canceled her more than $40,000 in debt remaining.

Now the 37-year-old children’s librarian in Cincinnati jokes about having celebrated the “three minutes of debt freedom between the loans and buying the house.” She currently has a $135,000 mortgage with a 7% fixed rate, which she hopes to refinance when rates fall.

Ms. Howison got on track to pay half the 20% down payment—her parents paid the other half—during the pandemic when the government suspended her $300-a-month student-debt payments. Instead of spending that money, she put it aside.

Her main financial asset is 11 years of accruals with the Ohio Public Employees Retirement System which will provide an estimated monthly benefit of $3,577 if she retires at age 55, and up to $5,561 a month if she works until age 67. She also defers compensation in the Ohio 457 plan, which, it is currently estimated, will add another $1,332 a month in retirement income that will be taxed on withdrawal. Both these sources of retirement income will grow, assuming her library salary rises.

Ms. Howison makes about $55,000 a year in gross salary, netting about $2,900 in take-home pay each month after deductions for health insurance and retirement contributions. She will now pay about $1,275 a month in housing costs. Her other monthly expenses total about $1,125, including $250 for utilities, Wi-Fi and cable, $450 for food and about $160 for gas and car insurance. She has a 2018 Toyota that she owns outright.

She hasn’t had a credit card in recent years but plans to get one now that her home transaction has gone through. She has a checking account, with $1,000 left after her closing, and no savings accounts. She wants to pay her parents back for their help with the home purchase.

“I try pretty hard to live within my means, but I’m not very good at putting money in the place where it’s going to work best for me,” she says.

Advice from a pro

Lynn Chen-Zhang,

certified financial planner and CEO of Zhang Financial in Portage, Mich., says Ms. Howison should consider building an emergency fund first to cover some of the things that could go wrong with a home built in 1875. Her budget is lacking in liquidity, but if she can put $500 a month into a savings account she’ll have three months’ worth of expenses saved in about 15 months.

Then Ms. Howison should begin saving more for retirement. Ms. Chen-Zhang suggests opening up a Roth individual retirement account and making monthly automated deposits.

Refinancing at some point should cut Ms. Howison’s housing costs considerably. “The savings earned here should accelerate retirement savings and could also be contributed to her Roth IRA,” Ms. Chen-Zhang says.

She says a “side hustle” like renting out a room, using her research skills as a freelance editor or writer, or even delivering restaurant meals could help boost Ms. Howison’s savings.

If Ms. Howison obtains a credit card for recurring monthly expenses, that will begin building her credit score with banks and lenders for any future endeavors, while avoiding credit-card debt.

“Saving is just like exercise,” Ms. Chen-Zhang says. “Don’t give yourself an excuse to stop. If you stop it’s very hard to pick back up. And you don’t see results overnight.”

Ms. Gallegos is a news editor for The Wall Street Journal in New York. She can be reached at [email protected].

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