Author Topic: Please help with my case study.  (Read 4126 times)

flowerofsun

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Please help with my case study.
« on: December 11, 2018, 11:58:29 PM »
I am a single mom, family of 4
I live in Phoenix
make 115K per year
bring home 6K after taxes ( I think my top tax braket is 30%)
100K in 401K (about 70% in S&P)
250k st loans total ,  I pay 660$ monthly on it  ( I am in a student loan forgiveness program, and have 15 years left on it before the balance will be forgiven. the good thing is if I lose/quit my job, I will be paying according to my income according to my financial situation then)

Paid off car
My house where I live : 1.8K mortgage (10 years left on it, 2.9% interest rate). House worth about 320-350k, I owe on it about 145K
Utilities about 1K (utilities plus internet plus tv, etc. Electrical 250$ per month, water 155$ per month, Sling 40$, Internet 90$, gas 50$,+phone verizon 3 lines 270$ per month )
2K everything else (food 800$ or so per month, closer to 1-1.2K, +gas 200$ per month+medical depending on the month+ lunches for my son he buys at school, so about 200$ per month, I also pay 200$ to neighbor to drive him to school and back because I work during that time and cant pick him up, he problems riding the bus, gym for family 100$ per month, etc)
I do not eat out at all. Always take food from home to work.

Assets:
3 rentals, not making cash flow on it:
1) One is almost paid off and worth 80K (rent 400$/month, owe 3K on it, once its paid of it will make 100-200$ cash flow after  capex+maintenace fees) Interest rate is about 6%
2) second rental I owe on it 165K, no cash flow, will be paid off in 14 years, Its worth anywhere from 230-250K. interest is 3.7%
3) third rental is in Florida, 20 years left to pay it off and it breaks even, Interset I think around 4%

Ideally, my goal is to have about 6K-7k in cashflow from real estate per month
I hate my job and cant wait to retire from it (plus my health is not that great so I dont think I can last at my job more than 5 years) I cant save at all, so I would not be able to save more than 1 mln in my 401K within next 20-30 years. So my only hope for retirement is the cashflow from real estate.
And with my house being paid of in 10 years, and rental being paid of in 14 years, I think I will be  may be ok...But I was hoping to have at least 6K in cashflow so I could enjoy some life (like travel, afford good medical insurance, etc)

For insurance I have Allstate. I pay 1K per 6 month for my car insurance (Toyota 2016), I think about 2K for my house where I live (its all included into escrow so my mortgage monthly payment includes taxes and insurance)
On my rentals its all included into payments as well...

1) Can you guys give me your input on my strategy?

2) Do you think I overspend in this category: 2K everything else (food+gas+medical etc)

Thank you so much!







« Last Edit: January 02, 2019, 01:08:00 AM by flowerofsun »

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Re: Please help with my case study.
« Reply #1 on: December 12, 2018, 03:52:22 AM »
Hello and welcome to the forum.

Congratulations on your income of $115k a year.  Good work on that.

Your monthly net income is given as $6k.  Out of that you specify spending of $5.8k.  That level of spending is not "retire in 5 years". 

At the moment you are pretty vague on assets (how much equity in your home and the rentals?, are you on track for full social security, any financial arrangements with the kids' father) and expenses (the utilities and everything else categories are too general). There should be more detail in your case study if advice is to be given - https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/  How old you and the kids are would also help.  What happens to the student loan forgiveness if you give up working rather than losing your job?

Going by previous case studies you almost certainly overspend on food, phone and utlities.  You definitely overspend on them in relation to your income and your retirement plans.  Whether the rentals are a better investment than the stock market, given that they are not making cash flow and the stock market has had better returns is also a potential issue.

Linda_Norway

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Re: Please help with my case study.
« Reply #2 on: December 12, 2018, 05:09:53 AM »
From what I have understood from this forum, rentals are supposed to make a cash flow, even when you have a mortgage on them. Did you invest in houses that were initially too expensive, and maybe not very suitable as rentals?

Edit: Here is a sticky about evaluating rentals:
https://forum.mrmoneymustache.com/real-estate-and-landlording/evaluating-a-rental-property/

You can get more feedback on your case study if you break up your expenses in detail for each post. E.g. Food, eating out, entertainment, phone, etc.
« Last Edit: December 12, 2018, 07:49:12 AM by Linda_Norway »

Freedomin5

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Re: Please help with my case study.
« Reply #3 on: December 12, 2018, 06:28:14 AM »
You also need to tell us the interest rates on all of your mortgages, and the interest rate on your student loans. If you have student loans from several different places, you need to break it down and tell us the amount of each loan and its interest rate.

Look over the "How to Write a Case Study" link provided by former player, and provide us with the info we need, so that we can provide you with info you need.

Also, you wrote, "I can't save at all..." Why is that?

ysette9

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Re: Please help with my case study.
« Reply #4 on: December 12, 2018, 09:52:38 AM »
I second what everyone else has said about needing more details.

Off the top of my head though I’ll say that if your rentals aren’t cash-flow positive and giving you a good return on your investment then you need to dump them in favor of something that is higher performing. That might be a better real estate investment or it might be something easy like a stock market index fund. There is an opportunity cost of having part of your net worth tied up in real estate: you are giving up the potential better returns had you invested that money in something else.

Real estate is not your only hope of retiring early; getting ahold of your finances and making conscious decisions about how you spend and invest is your only hope of retiring early. For example, you could sell a rental and put the equity into Vanguard in some mix of investments that is likely to perform better than inflation over the long term (real estate on average appreciates at the rate of inflation). If your rentals aren’t giving positive cash flow then the only way to make money is on appreciation, though in a place with infinite land like Phoenix I doubt that is a good strategy.

In short, lots to think about. Give us more details and we can make better suggestions.

Abe

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Re: Please help with my case study.
« Reply #5 on: December 12, 2018, 09:24:40 PM »
After your listed expenses, you only have $540/month to save. That will not work for a 20 year horizon, much less 5 years.
http://networthify.com/calculator/earlyretirement?income=115000&initialBalance=100000&expenses=108520&annualPct=5&withdrawalRate=4

Your last two rentals are clearly not making you much money. Sell them if you can and put those proceeds into a safer, more productive investment (bond funds, stock funds, some combination).

Why are your utilities $1k/month? Is that a Phoenix-specific issue due to the climate?
I understand supporting 4 people is difficult, but your current strategy will not work. You need to reduce costs and save more.

Kronsey

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Re: Please help with my case study.
« Reply #6 on: December 12, 2018, 10:24:45 PM »
Why so little take home as a percentage of your salary? $6,000 take home of approximately $9,584 gross is about 62%. That level of withholding seems high for being able to claim head of household and having 3 refundable child tax credits running around the house (assuming here since you didn't provide ages). Are you receiving a large refund each year, or are you saving a good chunk in your 401K?

If your rentals don't cash flow (or have negative cash flow), sell them. Period. Especially if you have equity that you could use for paying down debt or increasing your 401K or possibly traditional IRA contributions.

What is your profession? Can you look for a new job, or do you just hate the overall career that much?

Way too vague on your expenses. You need to go through the painful process of looking at bank statements and categorizing your spending so you know exactly how much you are spending on what. You can't improve if you have no idea where your money is going.

Mortgage of $1,800 for your primary residence? Any equity available here? Could you find cheaper housing? I'm not extremely familiar with the Phoenix market, but I would assume you might be able to save some money here.

$1K on utilities seems really high.

Provide us some more detailed info so we can help you out.

Laura33

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Re: Please help with my case study.
« Reply #7 on: December 13, 2018, 07:16:52 AM »
You say you can't save -- why is that?  Do you mean that you don't have enough in your budget to save?  Or is it an emotional thing where if you have money accessible, you spend it, so you put it in real estate so you don't blow it on something else?

If it's the former, then more detail in the case study will help people give better advice.

If it's the latter, then it sounds like real estate is a reasonable way to manage your own weaknesses.  But the problem is that real estate requires more effort than the stock market.  If your retirement plan is to invest in the stock market, then you can just pick something like VTSAX or a target-date fund and be done with it -- the investment company manages everything else for you.  But if you want to rely on real estate, you are effectively running your own business, with no one else to make the right decisions for you.  Which means you need to treat it like a business:  you need to learn everything that you can about real estate investing so that you can identify good buys from bad ones.

In particular:  a "good" real estate investment will make money for you now -- it will cover the costs of the mortgage, insurance, taxes, repairs, expected vacancies, and all the rest, and still hand you extra cash each month.  A property that just breaks even now, or that requires you to pay off the mortgage before it will show a profit, is not a good investment.  Once you know enough to identify good investments, you can get a little snowball going:  while you are working and don't need the money, you take the profit from your existing units and save it up and use that money as a downpayment on a new unit.  If you do that a few times, you will eventually end up with a nice little collection of properties that generate enough cash that you can cover your expenses.  But you can't do that if your first unit doesn't generate enough free cash to save up for your next one! 

If you want to hit your $6-7K/mo goal, spend a lot more time learning and scrutinizing the numbers so that you know how to identify a good deal.  Then apply that new knowledge to your current units and sell the ones that don't make the cut.  Meanwhile, look actively for good values -- you'll probably have to look at 50 or more before you find one where the numbers are really good -- and then be ready to jump quickly when you find one, because there are a bunch of other people trying to do the exact same thing. 

flowerofsun

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Re: Please help with my case study.
« Reply #8 on: December 17, 2018, 01:04:31 AM »
Sorry guys, I am not really good at explaining things. Tend to miss stuff...

Monthly expenses  in Dollars
House:   
Mortgage   1900
electricity 250 (I double checked today and it is 250$ per month)
-water-sewer   150
grass/pool/household+trees+gas    50
Internet/TV    145


Car   
gas+other car expenses   200
car loan   550 (my last payment in Jan of 2019 so basically car is paid off)

Other   
Phones   270
student loans   660
food   800 but usually 1-1.2K
other expenses+Home improvement   50 (this category tends to go up and down depending on the month)

Child   
transportation 200
school lunches   200
junk food   50
car insurance   2K per year
clothes +travel   100


« Last Edit: January 02, 2019, 01:11:10 AM by flowerofsun »

Linda_Norway

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Re: Please help with my case study.
« Reply #9 on: December 17, 2018, 01:28:07 AM »
Sorry guys, I am not really good at explaining things. Tend to miss stuff...

Monthly expenses  in Dollars
House:   
Mortgage   1900
electricity 178
-water-sewer   150
grass/pool/household+trees+gas    50
Internet/TV    145
health+gym everybody+cosmetic   55

Car   
gas+other car expenses   200
car loan   550

Other   
Phones   300
student loans   550
food   800
other expenses+Home improvement   50

Child   
transportation 200
school lunches   200
junk food   50
car+home insurance   185
clothes +travel   100


I do have equity in my house about 120-150K depending on what the market is doing at the moment

Can you sell the car and buy a cheaper one that you don't need to borrow money for? Then: car loan saved.

Do you pay for more TV-channels than you basically need? Can you cancel some?

Your food-post is very high. Stop eating out. Start making food from scratch with reasonably priced ingredients. Binge cook and freeze portions to have something available on days that you don't have the energy to cook.

For your child: are school lunches obligated? I think $200 is an insane amount to pay for lunch. Can you make a packed lunch for the child? Even I eat sandwiches from home for lunch, while I can buy lunch at work for $66 a month.

Junk food is something you can cut out completely by planning better. Always bring a bottle of water and some sandwiches from home. And if you ever plan badly, make sure you buy your improvised food at a grocery store and not at a fast food restaurant.

How about the child transportation? Could you organize co-driving several children in the neighbourhood? Are there other means of transportation?

former player

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Re: Please help with my case study.
« Reply #10 on: December 17, 2018, 01:52:15 AM »
Monthly expenses  in Dollars
House:   
Mortgage   1900 What is your interest rate?  Can you remortgage cheaper?  Can you sell and move into one of the rentals?
electricity 178   Can you get a cheaper deal on this?  Where is the waste going?  Because over $2k a year says waste to me.
-water-sewer   150 That's high too.  Are you metered, and if so how can you cut this down?
grass/pool/household+trees+gas    50 Trees?? And is the pool what explains the ruinously high utilities, or is yours just a generally wasteful household?
Internet/TV    145 You need to cut cable and get a cheaper deal on internet
health+gym everybody+cosmetic   55

Car   
gas+other car expenses   200 Do you have a long commute?
car loan   550

Other   
Phones   300   Ridiculous.   See IP Daley's threads here for cheap phones.   Should be able to cut this down to $50.
student loans   550
food   800  With school lunches and junk food you are paying over $12k a year on food.  There are lots of threads here about eating cheaply.  Cut down on meat (better for your health), cook using raw ingredients not prepared foods, plan ahead.  Should be able to halve this.
other expenses+Home improvement   50

Child   
transportation 200  Between your car, your travel and this you are spending £12k a year on transport.  Either you are planning badly or you live in an unsustainable location.
school lunches   200
junk food   50 This is not only expensive, it is setting your child up for a lifetime of unhealthy eating.  Perhaps move over to an allowance system which covers junk food and eg clothes/personal grooming and let them choose what's important to them?
car+home insurance   185  When did you last shop around for deals?
clothes +travel   100

Overall, you appear to be spending without thinking, which is why you are not saving.  If you start paying attention to what you spend, you should be able to start saving.
« Last Edit: December 17, 2018, 01:54:30 AM by former player »

Freedomin5

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Re: Please help with my case study.
« Reply #11 on: December 17, 2018, 06:08:11 AM »
No expense line for insurance? What would happen to your kids if something were to happen to you? As a single parent, you may want to make sure that your kids are provided for in case anything happens to you.

You also have no expense line for entertainment? Is that accurate or are those expenses included in one of your other line items?

Laura33

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Re: Please help with my case study.
« Reply #12 on: December 17, 2018, 10:43:54 AM »
I'm confused -- your first post says you have a paid-off car, but your more detailed one says you have a $550/mo loan -- what's the story there?

Also, I am assuming from your posted budget that you don't track your spending, because there are far too many rounded-number categories.  That is the first step to saving.  If you're not paying attention, there are always a gazillion things around for you to spend money on -- especially when you make a good income (and so $10-$20 doesn't seem like so much), and especially especially when you have kids who are exceptionally good at wallet-draining if you let them.  So take a month and write down every penny you spend, and I guarantee you will be surprised at all of the crap that is in there.

Once you have that information, you can take a look at your priorities and re-align your spending so that your higher priorities don't get overwhelmed by all of the tempting-but-lower-priority stuff.  Is that takeout more important than your health insurance?  Is your kid's extra pair of shoes worth more than their college fund?  Was that movie more fun than being able to quit your job and retire?  Etc.  Yes, you could do that now -- it's easy to look at a blank computer screen and type in numbers that are logical and make sense.  But it tends to sink in much better once you see in black and white exactly how much money you're actively throwing away each month on crap that you can't even remember.

The quickest way to financial independence is not to work harder/save more, but instead to cut back on stuff you don't really need -- because that both lowers your overall savings target AND frees up extra money every month to get you there sooner.  There are any number of people on this board who have fulfilling lives with extensive travel for well below $7K/mo. income -- and I guarantee you they do not feel deprived.  But that's why you need to look at your actual spending:  to see just how much money you are blowing on things that do not add any value to your life, so that you can divert that money to other things that do. 

SweatingInAZ

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Re: Please help with my case study.
« Reply #13 on: December 17, 2018, 12:25:00 PM »
I think that the biggest problem is your house.

I live in Chandler, AZ, so I can relate to your utility numbers. However, my house (1600sq ft) is much smaller than yours (I hope, given that your mortgage is double mine!). I don't see the age of your kids. Hopefully you consider downsizing as they move out.

You have grass in Arizona... Does your HOA require grass? A desert landscape will reduce your water bill probably by $50 or so per month. If they require grass, move! It should be criminal to require grass in a place that averages 8" of rainfall per year!

You have a pool... Does it get used frequently? It is just a money pit in your backyard into which chemicals, water, and a huge amount of electricity (lots of pump hours in the summer) fall. You can make sure that you seasonally change the amount of hours that it runs, but you're FAR better off just moving to a house without a pool. I find it hard to believe that you only pay $50/month for grass and pool care. I thought the pool chemicals alone are that much, plus averaging out the inevitable pump and filter repair. There is a recent blog post doing some simple (and shocking!) math about pools. The math is much worse in AZ because we average 6 FEET of evaporation loss per year, and faster chemical breakdown. http://www.mrmoneymustache.com/2018/07/25/the-twenty-dollar-swim/

Your thermostat must be on a timer. Let the temperature rise when nobody is home, and then cool it when someone is there. I aim for ~86 when nobody is home, 80 when we're there, and 78 to sleep.

Ensure that your electricity plan is good for your usage. SRP has a page to check if you're on the optimal plan here: https://myaccount.srpnet.com/MyAccount/ChoosePricePlan
Click on the 'compare' tab. I attached a screenshot of mine, so you know what to look for.
I can't really help if you have APS, but I wouldn't be surprised if they have something similar.

If you can optimize your air conditioner in the summer (if nobody is home in the afternoon), the different plans can help. Otherwise, the basic plan is most likely best.
« Last Edit: December 17, 2018, 04:41:53 PM by SweatingInAZ »

flowerofsun

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Re: Please help with my case study.
« Reply #14 on: December 18, 2018, 12:51:53 AM »
I'm confused -- your first post says you have a paid-off car, but your more detailed one says you have a $550/mo loan -- what's the story there?

Also, I am assuming from your posted budget that you don't track your spending, because there are far too many rounded-number categories.  That is the first step to saving.  If you're not paying attention, there are always a gazillion things around for you to spend money on -- especially when you make a good income (and so $10-$20 doesn't seem like so much), and especially especially when you have kids who are exceptionally good at wallet-draining if you let them.  So take a month and write down every penny you spend, and I guarantee you will be surprised at all of the crap that is in there.

Once you have that information, you can take a look at your priorities and re-align your spending so that your higher priorities don't get overwhelmed by all of the tempting-but-lower-priority stuff.  Is that takeout more important than your health insurance?  Is your kid's extra pair of shoes worth more than their college fund?  Was that movie more fun than being able to quit your job and retire?  Etc.  Yes, you could do that now -- it's easy to look at a blank computer screen and type in numbers that are logical and make sense.  But it tends to sink in much better once you see in black and white exactly how much money you're actively throwing away each month on crap that you can't even remember.

The quickest way to financial independence is not to work harder/save more, but instead to cut back on stuff you don't really need -- because that both lowers your overall savings target AND frees up extra money every month to get you there sooner.  There are any number of people on this board who have fulfilling lives with extensive travel for well below $7K/mo. income -- and I guarantee you they do not feel deprived.  But that's why you need to look at your actual spending:  to see just how much money you are blowing on things that do not add any value to your life, so that you can divert that money to other things that do.

Sorry if I confused you guys. I am really bad at budgeting and really bad at explaining things.
Last car payment is in January, so basically I have only one payment left till the car is paid off, so I consider its paid off...

You are very right, my huge, if not biggest, expense is "20 $ here and 20$ there."
I always struggle with that!

flowerofsun

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Re: Please help with my case study.
« Reply #15 on: December 18, 2018, 01:10:42 AM »
Thank you all of you guys!
You are all very smart and I have a lot to learn from you!
But can you guys please explain to me how saving 20 bucks here and 20 bucks there will help me retire soon?
if lets say I am able to save extra 1k per month, then its 12K per year, I would have to save keep saving for the next 50 years probably to save 2-3 mln?
(that is what they say is needed to retire nowadays, right? about 2-3 mln). It does not really fit my retire early scheme....



mrmoonymartian

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Re: Please help with my case study.
« Reply #16 on: December 18, 2018, 01:28:52 AM »
Thank you all of you guys!
You are all very smart and I have a lot to learn from you!
But can you guys please explain to me how saving 20 bucks here and 20 bucks there will help me retire soon?
if lets say I am able to save extra 1k per month, then its 12K per year, I would have to save keep saving for the next 50 years probably to save 2-3 mln?
(that is what they say is needed to retire nowadays, right? about 2-3 mln). It does not really fit my retire early scheme....
Do you even lift read the blog?

https://www.mrmoneymustache.com/2011/08/01/a-millionaire-is-made-ten-bucks-at-a-time/

https://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

former player

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Re: Please help with my case study.
« Reply #17 on: December 18, 2018, 02:46:00 AM »
I am really bad at budgeting

Can you please stop saying that?  You are perfectly good at budgeting: you have saved for a house, acquired equity, avoided consumer debt, bought three rentals.   You posted figures for your monthly expenditures which match your income (some people who come here for advice struggle with that.  Many of them struggle with large consumer debts.) You even managed to break your expenditures down into more useful categories when asked.   So your problem is not that you are bad at budgeting: to have managed all that you are very good at budgeting.   Your problem is that you have been spending everything you earn in the moment, without thinking about the money you need to put away for retirement (other than the magical thinking that rentals which break even are the solution to all your problems: presumably you are here because you have now realised they are not).

So tell us (or tell yourself), why can't you save?  Is it the big house with the pool?  Stressful job with no energy left over for planning and cooking meals? Three kids running all over you and whining for things?  If you want to save for retirement (and no one here has any other way to do it except start saving) you are going to have to investigate that "I can't save" idea that you have stuck in your head, and change it.

As to how much you have to save, you haven't told us much about your assets.  How is the 100k in your retirement funds invested?  Is it in low cost index funds?  What might be coming to you in social security?  Do you have any rights to your ex's retirement funds?  You aren't going to get any useful advice about when you can retire without providing that information.  But if you start by reading https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ and then go on to moony's links, you will start to understand how cutting expenses and putting money into tax-free, low cost index funds will get you there, quite possibly sooner than you think.

Laura33

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Re: Please help with my case study.
« Reply #18 on: December 18, 2018, 08:25:18 AM »
Thank you all of you guys!
You are all very smart and I have a lot to learn from you!
But can you guys please explain to me how saving 20 bucks here and 20 bucks there will help me retire soon?
if lets say I am able to save extra 1k per month, then its 12K per year, I would have to save keep saving for the next 50 years probably to save 2-3 mln?
(that is what they say is needed to retire nowadays, right? about 2-3 mln). It does not really fit my retire early scheme....

You are thinking of it backwards.  If you save an extra $1K/mo, then yes, you have $12K more per year to save.  After ten years, with compounding, you will have close to $200K.

But you will also have reduced your expenses by $12K/yr.  And that means you have reduced the amount of money you need to have invested in order to retire by $300K.  That's a $500K swing -- "just" from that $1K/mo.

The bigger question is where will you be in 10 years if you don't cut back on that "20 bucks here and 20 bucks there"?  Answer:  right where you are today. 

Change doesn't happen by chance; if you do what you've always done, you get what you've always gotten.  There is no magic pill, no shortcut to make money appear.  Track what you spend, cut back where you can, and invest the difference (whether you choose VTSAX or high-quality investment properties is up to you).  Rinse, repeat.

flowerofsun

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Re: Please help with my case study.
« Reply #19 on: December 24, 2018, 12:43:27 AM »
I am really bad at budgeting

Can you please stop saying that?  You are perfectly good at budgeting: you have saved for a house, acquired equity, avoided consumer debt, bought three rentals.   You posted figures for your monthly expenditures which match your income (some people who come here for advice struggle with that.  Many of them struggle with large consumer debts.) You even managed to break your expenditures down into more useful categories when asked.   So your problem is not that you are bad at budgeting: to have managed all that you are very good at budgeting.   Your problem is that you have been spending everything you earn in the moment, without thinking about the money you need to put away for retirement (other than the magical thinking that rentals which break even are the solution to all your problems: presumably you are here because you have now realised they are not).

So tell us (or tell yourself), why can't you save?  Is it the big house with the pool?  Stressful job with no energy left over for planning and cooking meals? Three kids running all over you and whining for things?  If you want to save for retirement (and no one here has any other way to do it except start saving) you are going to have to investigate that "I can't save" idea that you have stuck in your head, and change it.

As to how much you have to save, you haven't told us much about your assets.  How is the 100k in your retirement funds invested?  Is it in low cost index funds?  What might be coming to you in social security?  Do you have any rights to your ex's retirement funds?  You aren't going to get any useful advice about when you can retire without providing that information.  But if you start by reading https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ and then go on to moony's links, you will start to understand how cutting expenses and putting money into tax-free, low cost index funds will get you there, quite possibly sooner than you think.

Thank you so much for your encouragement!
You know, Ive always felt like the biggest loser! You are right, I need to focus on positives more...
I will try to answer your questions:
my 401K (100K) is in SMP mostly (60%), then 10% in international stock,...
Not sure what might be coming into my social security.
May be I have the right to my ex's retirement but I dont want to touch his stuff, dont feel right about it...
« Last Edit: December 24, 2018, 01:39:30 AM by flowerofsun »

flowerofsun

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Re: Please help with my case study.
« Reply #20 on: December 24, 2018, 01:41:30 AM »
You guys have all been amazing!
You gave me a lot of good topics to read!
Thank you so much!

Tuskalusa

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Re: Please help with my case study.
« Reply #21 on: December 24, 2018, 04:15:30 PM »
Actually,I think you are pretty amazing. You’re raising 3 kids as a single mom and you have a house and 3 rentals. You have a good job. You’re not losing money every month. You’re pretty awesome.

I think you have some good starts here. Maybe it’s time to evaluate your assets in terms of how you’d like to enjoy the years before your kids launch. With all of your earned cash getting spent every month, I can see how you’d be questioning what retirement looks like.

Overall, it looks like the rentals are not throwing off and cash to supplement your retirement savings.  I wonder if you’d be better off selling them and throwing that cash against debt or retirement. By selling those assets, you might be able to rebalance your portfolio so that your retirement feels a bit more stable.

Good job paying off the car. That frees up a good amount of cash. Looking at your expenses could free up more cash each month, which will get you more savings/flexibility in the New Year!  Do your best not to “reallocate” those funds into new spending. Better to scoop that into savings.

calimom

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Re: Please help with my case study.
« Reply #22 on: December 24, 2018, 06:27:57 PM »
Just chiming in to say I think you're on the right path, flowerofsun. @Tuskalusa and others have so much great advise it's hard to add more. Agree that some consideration of offloading a couple of the rentals might be in order. Keeping #3 might be workable. I'm also a single mom of 3 and have a couple of rentals. They cash flow and appreciate decently, otherwise I'd sell them. Your salary is impressive! Anything you can do to optimize that for retirement savings will show incredible return.

You can do this you know. We've got your back.

flowerofsun

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Re: Please help with my case study.
« Reply #23 on: December 26, 2018, 01:58:10 AM »
Actually,I think you are pretty amazing. You’re raising 3 kids as a single mom and you have a house and 3 rentals. You have a good job. You’re not losing money every month. You’re pretty awesome.

I think you have some good starts here. Maybe it’s time to evaluate your assets in terms of how you’d like to enjoy the years before your kids launch. With all of your earned cash getting spent every month, I can see how you’d be questioning what retirement looks like.

Overall, it looks like the rentals are not throwing off and cash to supplement your retirement savings.  I wonder if you’d be better off selling them and throwing that cash against debt or retirement. By selling those assets, you might be able to rebalance your portfolio so that your retirement feels a bit more stable.

Good job paying off the car. That frees up a good amount of cash. Looking at your expenses could free up more cash each month, which will get you more savings/flexibility in the New Year!  Do your best not to “reallocate” those funds into new spending. Better to scoop that into savings.

Thank you so much for your support!
I think I may have misspoke somewhere, I am a single mom of one teenager. The remainder of my family are relatives who live with me and do not contribute to the household (like my mom, she does not drive and has some health issues, etc)
So I apologize for the confusion.
I only have one kid .
Thank you so much for your encouragement!  :-) It means a lot to me! :-)

flowerofsun

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Re: Please help with my case study.
« Reply #24 on: December 26, 2018, 02:00:07 AM »
Just chiming in to say I think you're on the right path, flowerofsun. @Tuskalusa and others have so much great advise it's hard to add more. Agree that some consideration of offloading a couple of the rentals might be in order. Keeping #3 might be workable. I'm also a single mom of 3 and have a couple of rentals. They cash flow and appreciate decently, otherwise I'd sell them. Your salary is impressive! Anything you can do to optimize that for retirement savings will show incredible return.

You can do this you know. We've got your back.

Wow! Three kids with rentals living in California!
Great job!
And thank you so much for your support ! :-)


flowerofsun

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Re: Please help with my case study.
« Reply #25 on: December 26, 2018, 02:01:39 AM »
I just wanted to tell all of you guys what an amazing job you are doing!
You have families, and kids, and work and you find time to answer questions from people like me.
Thank you all so much!


zoe2dot

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Re: Please help with my case study.
« Reply #26 on: December 26, 2018, 11:05:20 AM »
flowerofsun, please take a few minutes to edit your original post to clarify and add details.
You can add your phone provider, interest rates, that you have one kid, that the car has one payment etc--everything ppl have been asking for more details on.  There will be another wave of ppl logging in to read the case studies post-holidays and it will save a lot of time if you edit your original post.

I got SO MUCH help from these forums on general concepts but what also significantly helped was the small things like changing phone plans, calling Geico for a better rate, revisiting health and beauty costs, changing the way I did grocery shopping.  Those dollars really added up in the past year.

So get going on the details and you'll start to see specific directions/advice come from the veterans on this forum.

Good luck!

z2d

ItsALongStory

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Re: Please help with my case study.
« Reply #27 on: December 27, 2018, 02:00:41 AM »
I just wanted to tell all of you guys what an amazing job you are doing!
You have families, and kids, and work and you find time to answer questions from people like me.
Thank you all so much!

Don't mean to be rude but other than thanking everyone, have you taken any steps yet to make conscious changes that can change your retirement picture? Will you cut back anywhere to help accomplish your dream of retiring early or does it all seem too hard? Take a small step at first (meal planning for example) and go from there. Perhaps your relative(s) can assist with prepping home made meals?

flowerofsun

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Re: Please help with my case study.
« Reply #28 on: January 02, 2019, 12:48:52 AM »
I just wanted to tell all of you guys what an amazing job you are doing!
You have families, and kids, and work and you find time to answer questions from people like me.
Thank you all so much!

Don't mean to be rude but other than thanking everyone, have you taken any steps yet to make conscious changes that can change your retirement picture? Will you cut back anywhere to help accomplish your dream of retiring early or does it all seem too hard? Take a small step at first (meal planning for example) and go from there. Perhaps your relative(s) can assist with prepping home made meals?

I did take some small steps.
For instance, I just went to California and brought food with me +stayed at friends house. So the whole trip was 300$ (gas 200$ and 100$ as a gift to my friend)
Another small step was not to rush buying for my mom. She got used to bring a pile of clothes at Costco to me and I would just buy it. Last week I told her that I do not have the money and if she wants that clothes she should wait till it comes on clearance at other stores.
I started to become more penny pinching, so as a result I have only 500$ on my credit card now, usually I have about 2K per month. This month probably will be around 1K (since I already have 500$ on it)

flowerofsun

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Re: Please help with my case study.
« Reply #29 on: January 02, 2019, 01:05:12 AM »
flowerofsun, please take a few minutes to edit your original post to clarify and add details.
You can add your phone provider, interest rates, that you have one kid, that the car has one payment etc--everything ppl have been asking for more details on.  There will be another wave of ppl logging in to read the case studies post-holidays and it will save a lot of time if you edit your original post.

I got SO MUCH help from these forums on general concepts but what also significantly helped was the small things like changing phone plans, calling Geico for a better rate, revisiting health and beauty costs, changing the way I did grocery shopping.  Those dollars really added up in the past year.

So get going on the details and you'll start to see specific directions/advice come from the veterans on this forum.

Good luck!

z2d

I tried to edit and add what I missed the first time. I hope I did not miss much...

Somebody was asking how old is my kid- he is 15 years old. Soon will need a car for him. Plus college payment will be starting soon
« Last Edit: January 02, 2019, 01:12:45 AM by flowerofsun »

flowerofsun

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Re: Please help with my case study.
« Reply #30 on: January 02, 2019, 01:18:38 AM »
No expense line for insurance? What would happen to your kids if something were to happen to you? As a single parent, you may want to make sure that your kids are provided for in case anything happens to you.

You also have no expense line for entertainment? Is that accurate or are those expenses included in one of your other line items?
I used to have insurance at work, in case if I die, but I did not want to pay for it anymore. Wanted to get less money subtracted from my paycheck, so now I do not pay for it anymore.

Entertainment- its included into "other" category

Villanelle

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Re: Please help with my case study.
« Reply #31 on: January 02, 2019, 01:35:29 AM »
I just wanted to tell all of you guys what an amazing job you are doing!
You have families, and kids, and work and you find time to answer questions from people like me.
Thank you all so much!

Don't mean to be rude but other than thanking everyone, have you taken any steps yet to make conscious changes that can change your retirement picture? Will you cut back anywhere to help accomplish your dream of retiring early or does it all seem too hard? Take a small step at first (meal planning for example) and go from there. Perhaps your relative(s) can assist with prepping home made meals?

I did take some small steps.
For instance, I just went to California and brought food with me +stayed at friends house. So the whole trip was 300$ (gas 200$ and 100$ as a gift to my friend)
Another small step was not to rush buying for my mom. She got used to bring a pile of clothes at Costco to me and I would just buy it. Last week I told her that I do not have the money and if she wants that clothes she should wait till it comes on clearance at other stores.
I started to become more penny pinching, so as a result I have only 500$ on my credit card now, usually I have about 2K per month. This month probably will be around 1K (since I already have 500$ on it)
Your mom lives with you and doesn't contribute at all, and you are buying her clothes?  Does she get SSI?  I greatly respect you taking care of your parent, but if she isn't contributing, then I think even clearance shopping needs to be out.  I'm guessing she has plenty of clothes.  She will not go naked.  So that ends immediately.  Perhaps she needs to be on a budget as well.  $50/mo.  Full stop.  That's all her fun money.  She can save it and buy something big after several months, use if for non-necessary clothing items, take herself to a movie or out to lunch, or whatever.  You can't afford to let her live wastefully on your dime.  (And I notice expenses for her aren't broken out in your case study.  It seems to me like much of your case study is just guess work, not actual tracking, which isn't terribly useful.)

And "OTHER" is a stupid, meaningless category.  That can be lottery tickets or required school fees.  Those items are very different.  What is your entertainment budget.  Frankly, with things the way they are, you are never going to retire in 10 years, much less 5.  If you want those things to be even slightly possible, your entertainment budget should be about $25.  Make it work.  Library books and hikes are free. 

And of all the places to cut, you choose life insurance?  Really?

I suggest you read the blog, starting with the first entry and going through at least the first year.  Your comment about needing $2-3million because "they" say that's what is necessary tells me you haven't read it.

mrmoonymartian

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Re: Please help with my case study.
« Reply #32 on: January 02, 2019, 02:02:03 AM »
I just wanted to tell all of you guys what an amazing job you are doing!
You have families, and kids, and work and you find time to answer questions from people like me.
Thank you all so much!

Don't mean to be rude but other than thanking everyone, have you taken any steps yet to make conscious changes that can change your retirement picture? Will you cut back anywhere to help accomplish your dream of retiring early or does it all seem too hard? Take a small step at first (meal planning for example) and go from there. Perhaps your relative(s) can assist with prepping home made meals?

I did take some small steps.
For instance, I just went to California and brought food with me +stayed at friends house. So the whole trip was 300$ (gas 200$ and 100$ as a gift to my friend)
Another small step was not to rush buying for my mom. She got used to bring a pile of clothes at Costco to me and I would just buy it. Last week I told her that I do not have the money and if she wants that clothes she should wait till it comes on clearance at other stores.
I started to become more penny pinching, so as a result I have only 500$ on my credit card now, usually I have about 2K per month. This month probably will be around 1K (since I already have 500$ on it)
Well done on the improvement!

I see you put $100 on your CC to give it to your friend (whether you thought so at the time or not, this is the net result). Do you think that was a great idea or do you regret it now?

Also you mentioned needing a car and college payment for your son soon. I know things are different in the US, but where I come from those things are extra privileges rather than basic expectations. Maybe you need to question some of your preconceptions a little more and make some compromises?

former player

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Re: Please help with my case study.
« Reply #33 on: January 02, 2019, 02:16:46 AM »
Thanks for the additional details.

Villanelle is right: you need to read the blog, to understand where you are, where you need to be financially to meet your life aims, and how you are going to get from here to there.  It will give you the overall concepts within which we are giving advice.

Now, as to your additional info.  You say you are a family of four: you, your 15 year old son, your mother.  One other you haven't mentioned yet.  You don't mention anyone else bringing in money.  That makes me think you have too many people mooching off you and you are letting them run the show.  From now on you need to make sure that any other adult in the house gets no more than room and board from you.  You don't buy them clothes, you don't buy them snack food or meals out, you don't buy them tickets to anything.  They either need to earn their own money or go on benefits/retirement money.  And if they have more than $100 a month in benefits/retirement money they need to be contributing to their room and board.  You are being generous enough in letting them live in your big house with the swimming pool and the lawn and the trees for which they apparently contribute nothing and then walk all over you.

As to your other expenses: phones at $270 stands out.  How many phones?  Unlimited plans?  Newest iphones?  This has to go.  You never again buy anyone a phone except yourself.  You all go on pay as you go plans rather than contracts, and limit your usage to what you can afford.  Should get the cost down to something closer to $50 a month.

Stop buying your 15 year old son junk food.  It's bad for his health and it's costing $600 a year that could be put to much better use.  Also, tell him now that you won't be able to buy him a car and have nothing set aside for his college costs, and you and he need to get together to work out how he is going to pay for those things.


Well done on the start you have already made.   Keep optimising, and remember to stand up for yourself and your own needs - in particular your retirement so you won't be mooching off someone else in your old age the way others are mooching off you.  Good luck.

Villanelle

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Re: Please help with my case study.
« Reply #34 on: January 02, 2019, 02:24:21 AM »
What kind of car?  Can you sell it and buy something cheaper (and cheaper to operate)?

And Former Player brings up a good point.  Who is this mysterious 4th person?  Why aren't they driving your son to work for free (in exchange for room and board)?  Why aren't they and your mom cooking all meals from scratch, packing lunches for your son, etc.?  If these people are living for free, at a bare minimum they should be lightening your load--emotionally, time-wise, and financially.  If they don't want to pitch in, they are welcome to find some other free place to live.

Also, is there no child support from your son's father?

zoe2dot

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Re: Please help with my case study.
« Reply #35 on: January 02, 2019, 05:11:07 AM »
@flowerofsun thanks for the update and foradding more details.  You are starting the change!  Others have asked some good questions. 

What are you going to do w the $550 month previously spent on car payment?

I don't see details about an emergency fund. 
That could be one use for it. 
Or an IRA or 401k.

ItsALongStory

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Re: Please help with my case study.
« Reply #36 on: January 02, 2019, 07:26:05 AM »
I did take some small steps.
For instance, I just went to California and brought food with me +stayed at friends house. So the whole trip was 300$ (gas 200$ and 100$ as a gift to my friend)
Another small step was not to rush buying for my mom. She got used to bring a pile of clothes at Costco to me and I would just buy it. Last week I told her that I do not have the money and if she wants that clothes she should wait till it comes on clearance at other stores.
I started to become more penny pinching, so as a result I have only 500$ on my credit card now, usually I have about 2K per month. This month probably will be around 1K (since I already have 500$ on it)

Good job, but I agree with some other posters after this reply. Take a good look at needs and wants, I know where a car for a teenage kid would sit for me but you may have a different perspective. Perhaps he can pay for most (or at least part) of it should it be necessary. Also thinking that your mom may not be someone you wish to impact but in your situation she is potentially a big expense driver.

Tuskalusa

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Re: Please help with my case study.
« Reply #37 on: January 02, 2019, 09:31:46 AM »
For 2018, I think there are some quick hits for you:

- Get quotes on life insurance. A portion of your car payment savings needs to go to this, as you have others depending on you.
- Ask the other adult family members for help. Can your mom do the grocery shopping and meal prep?
- Really evaluate upcoming car and college expenses. You need a plan for this. Maybe selling a rental and setting that money aside specifically for college and a car. I’m assuming your son would be working to pay for at least gas and maintenance. If not, the. Id question whether he’s ready for a car.

Then read the blog start to finish and decide what to do next. You have a good income and real estate. Now it’s just a matter of optimizing those things. 

flowerofsun

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Re: Please help with my case study.
« Reply #38 on: January 02, 2019, 11:03:45 PM »
What kind of car?  Can you sell it and buy something cheaper (and cheaper to operate)?

And Former Player brings up a good point.  Who is this mysterious 4th person?  Why aren't they driving your son to work for free (in exchange for room and board)?  Why aren't they and your mom cooking all meals from scratch, packing lunches for your son, etc.?  If these people are living for free, at a bare minimum they should be lightening your load--emotionally, time-wise, and financially.  If they don't want to pitch in, they are welcome to find some other free place to live.

Also, is there no child support from your son's father?

This 4th person is my boyfriend. He is the only one who helps me financially (he gives me 1.5K per month and I do not touch these money because I save it up and use it for down payment to buy rentals)
My mom does cook from scratch, which is a huge help.
My son did save up 2K for a car, but he wants me to take out a loan and buy him a used sports car for 16K, which after reading your comments I am going to decline. He does not want a cheap car (I told him I will match what he saves) so I guess he will be without car...
No support from the father of the child.

flowerofsun

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Re: Please help with my case study.
« Reply #39 on: January 02, 2019, 11:06:53 PM »
@flowerofsun thanks for the update and foradding more details.  You are starting the change!  Others have asked some good questions. 

What are you going to do w the $550 month previously spent on car payment?

I don't see details about an emergency fund. 
That could be one use for it. 
Or an IRA or 401k.
That is a very good question. Ive been thinking about that myself as well. I could add extra 550$ towards my housepayment and then I will pay off my house in 7 years (instead of 10 years)...Or, I could att 1K towards my house payment then I will pay off my house in 5 years (instead of 10 years)
What do you guys think?

I have an emergency fund, 4K...Probably not enough...
And you guys are right about life insurance. I need to reconsider it...

flowerofsun

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Re: Please help with my case study.
« Reply #40 on: January 02, 2019, 11:16:52 PM »
Thank you all of you guys for your encouragement and support!

You make me feel better! Because I was feeling guilty that I did not buy at Costco clothes for my mom (she has tons of clothes! And what makes me sort of upset sometimes because she also buys for my sister who lives in a different country, who also has lots of clothes as well, and sometimes even sells the clothes that she wore and is not needed anymore online!) So, I am glad you guys expressed your opinions because I just felt guilty, because I felt like my mom raised me and was always very generous with me ( paid for part of my education and bought me apartments in a different country, so I feel like she would give me the last money if she had to...)

You are also very right about my "Other" expense category. Its the most difficult category for me, because 20$ here and 20$ there adds up. But its hard to pin point because every month its different.


Villanelle

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Re: Please help with my case study.
« Reply #41 on: January 02, 2019, 11:39:15 PM »
What kind of car?  Can you sell it and buy something cheaper (and cheaper to operate)?

And Former Player brings up a good point.  Who is this mysterious 4th person?  Why aren't they driving your son to work for free (in exchange for room and board)?  Why aren't they and your mom cooking all meals from scratch, packing lunches for your son, etc.?  If these people are living for free, at a bare minimum they should be lightening your load--emotionally, time-wise, and financially.  If they don't want to pitch in, they are welcome to find some other free place to live.

Also, is there no child support from your son's father?

This 4th person is my boyfriend. He is the only one who helps me financially (he gives me 1.5K per month and I do not touch these money because I save it up and use it for down payment to buy rentals)
My mom does cook from scratch, which is a huge help.
My son did save up 2K for a car, but he wants me to take out a loan and buy him a used sports car for 16K, which after reading your comments I am going to decline. He does not want a cheap car (I told him I will match what he saves) so I guess he will be without car...
No support from the father of the child.


So does that mean you actually have a large savings fund somewhere?  And that $1500/mo isn't reflected in the budget you posted?

Dump the crappy rentals.  They aren't good investments.  Put most of the money in the market, and use the rest to buy a rental that is actually a good investment (read up on the 1% rule).

And you have three adults and an older teen in the house.  Everyone should be cooking.  If your mom is cooking from scratch, why are you spending $1000+/month on food? 

Laura33

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Re: Please help with my case study.
« Reply #42 on: January 03, 2019, 07:15:28 AM »
My son did save up 2K for a car, but he wants me to take out a loan and buy him a used sports car for 16K, which after reading your comments I am going to decline. He does not want a cheap car (I told him I will match what he saves) so I guess he will be without car...

Good call.  Sports car + teenage boy = recipe for disaster.  The only thing I would consider paying that amount of money for for a teenage driver is technology that makes him less likely to crash not more (newer car with active crash avoidance technology, maybe; sports car, over my dead body).  This is an excellent time for him to learn that needs come before wants, and that if he wants a super-expensive toy, he can work harder and save more to earn it himself.  (Though as a mom, I'd still say "oh hell no" to the sports car until he was out of my house).

On your extra money, do not pay down the mortgage.  Good Lord.  You have a 2.9% mortgage rate -- that is basically free money!  And your house is going to appreciate the exact same amount whether you have 100% equity or no equity at all.  Put that money towards something that will improve your financial situation -- emergency fund, another rental (preferably one that turns a worthwhile profit), stock market (your $100K is well short of what you will need to retire), college savings, etc. 

Your best choice for extra money is your 401(k), because it will decrease the amount of taxes you pay -- you say that you are in the 30% marginal bracket, which means that for each $1 you have available to save, you could put $1 into your 401(k), or $0.70 toward your mortgage or some other rental property.  You don't have to be a math major to see that investing $1 is better than investing $0.70 and sending $0.30 to the taxman, right? 

In addition, the 401(k) helps with the "I can't save" mentality -- it comes right out of your paycheck before you ever see it, so it's not there to spend. 

reeshau

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Re: Please help with my case study.
« Reply #43 on: January 03, 2019, 07:53:16 AM »
My son did save up 2K for a car, but he wants me to take out a loan and buy him a used sports car for 16K, which after reading your comments I am going to decline. He does not want a cheap car (I told him I will match what he saves) so I guess he will be without car...

Good call.  Sports car + teenage boy = recipe for disaster.  The only thing I would consider paying that amount of money for for a teenage driver is technology that makes him less likely to crash not more (newer car with active crash avoidance technology, maybe; sports car, over my dead body).  This is an excellent time for him to learn that needs come before wants, and that if he wants a super-expensive toy, he can work harder and save more to earn it himself.  (Though as a mom, I'd still say "oh hell no" to the sports car until he was out of my house).


It's not just the purchase price--have him get a quote to insure himself driving the sports car.  And tell him that will be his responsibility--if he can get a quote at all.  Lesson in economics, and squashing an irrational "need"--a twofer!