Author Topic: Case Study: Advice For Saving First 100k  (Read 13811 times)

Rekon

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Case Study: Advice For Saving First 100k
« on: September 29, 2015, 06:15:37 PM »
Here are my financials:

Income:

Wife (PI Paralegal) = $35,360/yr

Myself (Operations Manager) = $75,000/yr 

Sub Total (net) $4,264 + $2,696 = $6,490/mo

Current expenses:

   Rent $1,500 (2 bedroom apartment in Los Angeles County) my wife and I work < 10 miles away from work -- I ride my bike 3 days a week.  Days that I'm lazy to ride we share the car. 
   Gasoline $100
   Internet $47.50
   2 Cell Phones $89
   Utilities $130
   Auto Payment $392.32
   Auto Insurance $110
   Groceries $400
   Restaurants $200 (this varies but $200 is the max)

Sub Total =$2968.5/mo

Savings:

$5,400 - We just got out of student and CC debt.  However, we are now able to save $3,000/mo comfortably.  I like to have a $500 monthly buffer just in case of anything, if I don't use it each month I end up saving it.

Assets:

   401k:  $40,000 account value;  6% + 3% company match = 9%/mo
   Company Sharematch: $4100 account value

   780/750 Credit Scores - I consider this an asset :)

Liabilities:
 
   Auto loan -- 0% APR on a Toyota Corolla.  4 more years to go.


I am 28, my wife is 25

Two questions: 

(1) Our goal is to buy a house in the near future and start a family.  We would like to save 100k towards a house.  At our savings rate it would take approx. 3 years.  This is without borrowing from 401k.  How can we save 100k faster than 3 years?  Should we invest in US bonds to earn a higher rate and ultimately speed up the saving process?

(2) I see so many people here earning 100k before they're 25 and I find this extraordinary.  We started off a bit late in savings and had a ton of expenses during our twenties.  For example, we paid my bachelor degree which was not cheap.  Also, we paid for my wife's residency here in US -- which was roughly 10k.  I'll probably be 31 when we'll save our first 100k.  Having said that, are we doing well for our ages? 

Thank you,
Jay

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Re: Case Study: Advice For Saving First 100k
« Reply #1 on: September 29, 2015, 06:33:17 PM »
I don't see obvious ways to cut in your budget - but I am just trying to cut my budget right now :).
As I don't know the salary for your jobs in USA I also can't suggest changes there.

What I can tell you is that patience is important.
If it makes you feel better, I am 37 and I just started saving this year.
So I will end up with 100K after 40 years of age... if all works out fine.

Disclaimer - I might end up with 100K earlier if I count the RSUs from my company but I am trying to treat them like a windfall.
I am talking about getting to 100k from regular savings because those regular savings are the ones which create a special mindset which helps on the long run.

I am still thinking that even starting at 37 I can get to FI before I am too old to work :).
I will see about the RE thing, perhaps that will happen too.

Just take it one step at a time.

Easye418

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Re: Case Study: Advice For Saving First 100k
« Reply #2 on: September 29, 2015, 08:23:21 PM »
1.  I make a bit more than you combined (for now) and need the around $60k cash in two years. I feel your pain.  Just keep putting cash away. Throw in a 1% savings.

2.  We're both 26. We had to pay Bs Fin/MBA/ASN/BSN. So again I feel your pain.

3.  Granted, we've only been dual income greater than $100k for 9 months, but without a little inheritance, we would be fucked. Instead of, $100k+ in Retirement and $90k house equity and looking to start a family, we would be 5 years behind, maybe more. We may move up to $140k-$150k dual income shortly here for 18 months then start a family and drop to one.

You are doing fantastic.
Good luck.
« Last Edit: September 29, 2015, 08:30:59 PM by Easye418 »

firewalker

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Re: Case Study: Advice For Saving First 100k
« Reply #3 on: September 29, 2015, 08:30:14 PM »
How bad do want to speed things up? Price out a 1 bedroom instead of settling with your $1,500 rent. Reconsider your dining costs instead of accepting $600 a month as required for food. Shop for cheaper cell options instead of paying so much for a couple of phones. You might be able to go up to $4,000 a month toward the down payment.

Axecleaver

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Re: Case Study: Advice For Saving First 100k
« Reply #4 on: September 30, 2015, 08:00:04 AM »
You seem to be doing really well. You have no student loan debt and you have a savings rate over 50%. You're doing better than most of your peers in their 20s.

In terms of how to reduce your savings timeline... there is no magic bullet for accelerating your timeline. You need to either make more money or spend less. Consider a side hustle for one or both of you. Always be on the lookout for better jobs. Job hopping can give you rapid wage growth in the early part of your career. You can check out the investment forums for advice on how to invest for a short-term goal - generally, safe investments like bonds and t-bills are appropriate when preservation of principal is a key goal. Three years is very short term.

You might also look at your savings goal - why 100k? Shoot for a 20% down payment to avoid PMI, and you'll save a lot over the long term. Putting more than that down on a house doesn't make a lot of sense with rates as low as they are today. That could be different in three years, of course. Rates will almost certainly be higher than today, but are also likely to be lower than historic averages. 

lostamonkey

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Re: Case Study: Advice For Saving First 100k
« Reply #5 on: September 30, 2015, 08:46:12 AM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

Easye418

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Re: Case Study: Advice For Saving First 100k
« Reply #6 on: September 30, 2015, 08:48:09 AM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.
« Last Edit: September 30, 2015, 08:50:00 AM by Easye418 »

FLBiker

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Re: Case Study: Advice For Saving First 100k
« Reply #7 on: September 30, 2015, 09:00:23 AM »
If you really want to save more, you could reduce your cellphone cost (http://forum.mrmoneymustache.com/share-your-badassity/communications-tech-son-of-the-superguide!/), sell your car for a cheaper one, eat out less.  Other than that, it looks good.

That said, I agree w/ folks who say you're doing fine.  20% is a better down payment anyways, with interest rates as low as they are.

Pooplips

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Re: Case Study: Advice For Saving First 100k
« Reply #8 on: September 30, 2015, 09:06:24 AM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.

+1

mozar

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Re: Case Study: Advice For Saving First 100k
« Reply #9 on: September 30, 2015, 10:46:37 AM »
I second how bad do you want it? I would rent a studio closer to work (unless you are going in opposite directions, in that case I would get a roommate). Sell your car and buy a 6k car in cash. Cut $200 from groceries and restaurants. I don't think phone and internet are that bad.

Altogether that is another $1200 you could save a month (assuming you got a roommate who pays $500 or moved to a smaller place for 1k).
Also, there is no such thing as being "late." Lots of people don't even find out about early retirement until 40s or 50s. I'm 32 with 60k in assets. I spent my 20's paying off 125k in student loans (still 13k to go).

4alpacas

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Re: Case Study: Advice For Saving First 100k
« Reply #10 on: September 30, 2015, 10:53:23 AM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.
Some people without student loans figured out a way to pay for it themselves. 

FrugalWad

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Re: Case Study: Advice For Saving First 100k
« Reply #11 on: September 30, 2015, 12:03:41 PM »
Downsizing the apartment will probably get you the biggest gain.

When you go out to eat, you could try splitting the meal, cut that in half. That's what we do, basically just buy one entree since portion sizes are so huge, split it in half. That's if you're not willing to stop eating out altogether.

It'd be more upfront investment, but getting a cheaper phone plan could save you $50/month or so. I have Wifi and cell calling through Republic Wireless, and for two phones it's $25.something. I used to have Cricket Wireless living in San Diego, the reception and price was great.

Could you get a higher deductible with the insurance? Eat more basic foods to cut your grocery bill by $100 (or more)?

nereo

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Re: Case Study: Advice For Saving First 100k
« Reply #12 on: September 30, 2015, 12:34:34 PM »
Hello Jay

Quote
(1) Our goal is to buy a house in the near future and start a family.  We would like to save 100k towards a house.  At our savings rate it would take approx. 3 years.  How can we save 100k faster than 3 years? 

(2)... Having said that, are we doing well for our ages? 

Let's start with the easy one, #2.  Yes, you are doing very well for your ages.  I haven't checked in a while but I believe the average net worth for people age 25-29 is negative.  Median retirement savings is only a few $k, and the vast majority of individuals in your age bracket spend between 80-100+% of their income each month.   So well done there

Now... #1)
First, as axecleaver mentioned, I believe you goal should be 20% of whatever a home costs in your area - no more, no less.  If that's $100k so be it.  If it's more... save more.  If it's less, that will get you to your goal that much quicker.

Now, how to get there in less than 3 years?  Well this isn't rocket science here, but it all boils down to how bad do you want this? 
For starters, you are spending $600/month ($7,200, or 7.2% of your goal) on car-related expenses.  Eliminating your car payment or going carless entirely would be a huge step.  Downsizing your car, changing insurance and driving less will still save you thousands/year.
Second - your $1500/mo 2Bedroom apartment.  If you can optimize this either by adding a roommate or renting a 1BR apartment you could save several hundred per month.  I'd estimate you could save $500/mo, or $6k/year.  Moving closer to work may allow you to go carless entirely (step 1)
Third - your restaurant budget.  you want to save for a home as fast as possible?  stop eating out for an entire year.  Save $2400.
Forth - cell phone plans. Lower this to $40 total and you've saved another $600/year.

So - if you really, really, really want to get to your goal ASAP, do steps 1-4.  My back-of-the-envelop estimates show you could save $16k more each year.  Add this to the $42k that you are currently capable of saving and you can have your $100k approximately 18 months. 

Second is to start a side-hustle or pick up overtime.  Dollar for dollar everything you earn here can go towards the down payment on a home (we're ignoring slight tax changes for the moment).  So - if you each increase your income by only 10% you'll have almost $8k extra per year towards your down payment... allowing you to reach your goal in about 14 months.

It's up to you how drastic you want to change your current life.  You could make 2016 "the year of extreme saving and earning!" and find yourself able to buy a home by around Christmas 2016.  The nice thing about this plan is you'll find yourself being pushed along on the asset wave later in life.

g'luck.
« Last Edit: September 30, 2015, 12:36:08 PM by nereo »

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #13 on: September 30, 2015, 03:39:04 PM »
Thanks everyone!  This is all REALLY good advice.  2016 is the year for us to buckle down and save as much possible.  We'll stop eating out period.  I may consider selling my car and buying one cash for 6k.  Also, I might consider renting out a room for $500 a month. 

I forgot to mention above but 100k is for a 20% Down Payment.  Our goal is to buy a house <=500k in West Hills, CA.

As I'm saving, should I put my money in safe short term investments like bonds or T-Bills?

Thank you all!  I truly appreciate the feedback so far.

Easye418

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Re: Case Study: Advice For Saving First 100k
« Reply #14 on: September 30, 2015, 07:14:42 PM »
In b4 "too much house"

$500k is a lot on a $100k salary. Maybe it's different in CA.

crazy30

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Re: Case Study: Advice For Saving First 100k
« Reply #15 on: September 30, 2015, 07:25:00 PM »
This is tricky (and does not work for everyone) but my husband and i are living on whoever's salary is higher then stashing ALL of the lower income. In your case, it will be like you are the only one earning. Again not for everyone but it worked for us since 1 direct deposit can never be touched. You will be surprised that you can actually work around 1 income :)

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #16 on: September 30, 2015, 08:04:03 PM »
This is tricky (and does not work for everyone) but my husband and i are living on whoever's salary is higher then stashing ALL of the lower income. In your case, it will be like you are the only one earning. Again not for everyone but it worked for us since 1 direct deposit can never be touched. You will be surprised that you can actually work around 1 income :)

Yes! This is exactly what we are doing.  We are direct depositing my wife's checks straight into savings and not touching.  Then, I'm depositing the left over that hasn't been spent each month.  Great strategy -- thanks sharing.

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #17 on: September 30, 2015, 08:05:36 PM »
In b4 "too much house"

$500k is a lot on a $100k salary. Maybe it's different in CA.

500k is the norm in my area.  I can buy a $300k house but I would have to commute 80-100 miles to work.

okits

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Re: Case Study: Advice For Saving First 100k
« Reply #18 on: September 30, 2015, 08:35:24 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

Pooplips

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Re: Case Study: Advice For Saving First 100k
« Reply #19 on: October 01, 2015, 06:07:16 AM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.
Some people without student loans figured out a way to pay for it themselves.

I dont think he was talking about those people. I am happy for anyone that can do what you did.

nereo

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Re: Case Study: Advice For Saving First 100k
« Reply #20 on: October 01, 2015, 08:10:31 AM »

As I'm saving, should I put my money in safe short term investments like bonds or T-Bills?


This is short-term savings.  I'd strongly advise putting everything into something safe, like a "high-interest" savings account.  The interest you accrue over 1-3 years isn't going to amount to much vs the safety of not loosing money to a market crash.

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #21 on: October 01, 2015, 12:11:51 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

500k house gets a 4 bedroom house where I live.  Rent is cheap relative to house prices in my area -- I could probably rent it for ~$2.5k.

We could just stay in an apt. our whole lives and save $100k every 3 years, but we would like 2 kids in the near future.  They will need their room and a backyard. 

One could argue that we could rent even with two kids, but renting a house for $2.5k doesn't seem practical -- when we could have a $2.3k payment the buying a house with 20% down.

I understand your point but I really don't want to live in a 2 bdr apartment my whole life.

Easye418

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Re: Case Study: Advice For Saving First 100k
« Reply #22 on: October 01, 2015, 12:19:30 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

500k house gets a 4 bedroom house where I live.  Rent is cheap relative to house prices in my area -- I could probably rent it for ~$2.5k.

We could just stay in an apt. our whole lives and save $100k every 3 years, but we would like 2 kids in the near future.  They will need their room and a backyard. 

One could argue that we could rent even with two kids, but renting a house for $2.5k doesn't seem practical -- when we could have a $2.3k payment the buying a house with 20% down.

I understand your point but I really don't want to live in a 2 bdr apartment my whole life.

Surely, that payment cannot include property tax/Home Owner's Insurance?  Assuming that is $400k over 30 years.  I would guess property tax on a $500k house would be at least $10k a year??  So you would be looking at $2,700 monthly??
« Last Edit: October 01, 2015, 12:29:14 PM by Easye418 »

nereo

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Re: Case Study: Advice For Saving First 100k
« Reply #23 on: October 01, 2015, 12:29:13 PM »

Surely, that payment cannot include property tax/Home Owner's Insurance?  Assuming that is $400k over 30 years.  I would guess property tax on a $500k house would be at least $10k a year??  So you would be looking at $2,700 monthly??


Currently a 30yr fixed is 3.89%.  Given a purchase price of $500k and 20% down, the mortgage payments would be $2,551 assuming property taxes of 1.25% and home owners insurance of 0.35% (roughly median estimates, but it could vary by quite a bit).  Starting payments would be $587 towards principle (about 23%).

OP - I'd strongly recommend first plugging the numbers into this rent vs buy calculator and at least getting an estimate of where the 'break-even' point would be for renting in your area.  I did some quick estimates and concluded renting would be better than buying if you could find a similar rental for <$2k in your area.  Of course, I made a lot of assumptions about how long you'd be there, taxes, etc.
YMMV

Less

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Re: Case Study: Advice For Saving First 100k
« Reply #24 on: October 01, 2015, 12:46:03 PM »
first up you are doing incredibly well. Good on the two of you for getting focused and working on this together at such a young age. You will build an incredible foundation.

I feel your pain on house prices. We are also working to 20% deposit for our first home but it is a lot more then 100k. (and yes i am being realistic about the type of house we are looking at, though am questioning the merits of living in this city).

I didn't see it anywhere above but one obvious answer is work more. if you want to hit that 100k mark, brining in some extra cash can actually be easier then saving it. Time spent working is often time not spent spending. Make something and sell it. Be a weekend hammer hand and learn some skills. If you have a skill (instrument/language/fitness guru) then teach others.

Kill your television. It will make you more productive.

In working towards 100k i kept a safety net in the bank, and invested a good chunk. It worked out for me but i didn't go into anything too high risk. Just a couple of big company shares that pay steady dividends. Everyone loves indexed funds, and i am into those too now.


Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #25 on: October 02, 2015, 01:48:09 PM »

Surely, that payment cannot include property tax/Home Owner's Insurance?  Assuming that is $400k over 30 years.  I would guess property tax on a $500k house would be at least $10k a year??  So you would be looking at $2,700 monthly??


Currently a 30yr fixed is 3.89%.  Given a purchase price of $500k and 20% down, the mortgage payments would be $2,551 assuming property taxes of 1.25% and home owners insurance of 0.35% (roughly median estimates, but it could vary by quite a bit).  Starting payments would be $587 towards principle (about 23%).

OP - I'd strongly recommend first plugging the numbers into this rent vs buy calculator and at least getting an estimate of where the 'break-even' point would be for renting in your area.  I did some quick estimates and concluded renting would be better than buying if you could find a similar rental for <$2k in your area.  Of course, I made a lot of assumptions about how long you'd be there, taxes, etc.
YMMV

Thanks -- Assuming i'm going to stay in the house until it's paid off, buying works out to be better.

Baron235

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Re: Case Study: Advice For Saving First 100k
« Reply #26 on: October 02, 2015, 02:09:54 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

500k house gets a 4 bedroom house where I live.  Rent is cheap relative to house prices in my area -- I could probably rent it for ~$2.5k.

We could just stay in an apt. our whole lives and save $100k every 3 years, but we would like 2 kids in the near future.  They will need their room and a backyard. 

One could argue that we could rent even with two kids, but renting a house for $2.5k doesn't seem practical -- when we could have a $2.3k payment the buying a house with 20% down.

I understand your point but I really don't want to live in a 2 bdr apartment my whole life.

You don't have to stay in an apartment your whole entire life. Remember there is nothing wrong with having a child in an apartment for a  few years before you buy a home. 

So don't rush to buy a home for kids you don't even have yet.  That is just not wise move financially or personally.

Also,  I would focus on saving as much as I can, so I can move to an area with much more affordable homes.  Buying a 500k home is going to really strap your cash and your retirement plans.   If you want to be tied to the home and your job for 30 years, it is a fine plan. But if you want to really save and become FI, then you should not buy the 500k home. 
« Last Edit: October 02, 2015, 02:56:11 PM by Baron235 »

AllieVaulter

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Re: Case Study: Advice For Saving First 100k
« Reply #27 on: October 02, 2015, 02:41:20 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

500k house gets a 4 bedroom house where I live.  Rent is cheap relative to house prices in my area -- I could probably rent it for ~$2.5k.

We could just stay in an apt. our whole lives and save $100k every 3 years, but we would like 2 kids in the near future.  They will need their room and a backyard. 

One could argue that we could rent even with two kids, but renting a house for $2.5k doesn't seem practical -- when we could have a $2.3k payment the buying a house with 20% down.

I understand your point but I really don't want to live in a 2 bdr apartment my whole life.

You don't have to stay in an apartment your whole entire life, but there is nothing wrong with having a child in an apartment a few years before you buy a home. 

So don't rush to buy a home for kids you don't even have yet.  That is just not wise move financially or personally.

Also,  I would focus on saving as much as I can, so I can move to an area with much more affordable homes.  Buying a 500k home is going to really strap your cash and your retirement plans.   If you want to be tied to the home and your job for 30 years, it is a fine plan. But if you want to really save and become FI, then you should not by the 500k home.

+1

I understand your desire to buy a house, I fell for it at your age.  However, I'm going to suggest holding off on buying a house. 

1)  If you invest that money, you'll have compound interest on your side.  Historically housing prices only keep up with inflation:  http://www.ritholtz.com/blog/wp-content/uploads/2009/06/case-shiller-updated.png

2)  You've already got a two bedroom apartment.  There's an entire room for a newborn who arguably, only needs the space of a sock drawer. 

3)  Yards are fun, but so are parks.  Your kid isn't going to be running around for a year after s/he's born anyways.

4)  You could probably save up enough money to RE (or go part time) in a lower cost of living area.  You could probably buy that same house in 90% of the country for $150k.

Half a million dollars is a HUGE commitment.  If your goal is to build wealth and/or retire early, tying up all that money in a house is not the way to do it. 

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #28 on: October 02, 2015, 04:56:22 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

500k house gets a 4 bedroom house where I live.  Rent is cheap relative to house prices in my area -- I could probably rent it for ~$2.5k.

We could just stay in an apt. our whole lives and save $100k every 3 years, but we would like 2 kids in the near future.  They will need their room and a backyard. 

One could argue that we could rent even with two kids, but renting a house for $2.5k doesn't seem practical -- when we could have a $2.3k payment the buying a house with 20% down.

I understand your point but I really don't want to live in a 2 bdr apartment my whole life.

You don't have to stay in an apartment your whole entire life, but there is nothing wrong with having a child in an apartment a few years before you buy a home. 

So don't rush to buy a home for kids you don't even have yet.  That is just not wise move financially or personally.

Also,  I would focus on saving as much as I can, so I can move to an area with much more affordable homes.  Buying a 500k home is going to really strap your cash and your retirement plans.   If you want to be tied to the home and your job for 30 years, it is a fine plan. But if you want to really save and become FI, then you should not by the 500k home.

+1

I understand your desire to buy a house, I fell for it at your age.  However, I'm going to suggest holding off on buying a house. 

1)  If you invest that money, you'll have compound interest on your side.  Historically housing prices only keep up with inflation:  http://www.ritholtz.com/blog/wp-content/uploads/2009/06/case-shiller-updated.png

2)  You've already got a two bedroom apartment.  There's an entire room for a newborn who arguably, only needs the space of a sock drawer. 

3)  Yards are fun, but so are parks.  Your kid isn't going to be running around for a year after s/he's born anyways.

4)  You could probably save up enough money to RE (or go part time) in a lower cost of living area.  You could probably buy that same house in 90% of the country for $150k.

Half a million dollars is a HUGE commitment.  If your goal is to build wealth and/or retire early, tying up all that money in a house is not the way to do it.

I guess buying a house in Los Angeles doesn't make a lot of financially sense...

My alternative would be to move to another city -- away from our hometown and family...

use2betrix

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Re: Case Study: Advice For Saving First 100k
« Reply #29 on: October 02, 2015, 06:25:46 PM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.

Really? That's a terrible outlook to have at life. Whining because others had it better than you. The smart way to look at it, as I do, is you didn't have a silver spoon in your mouth and actually developed a work ethic that those who were given everything, didn't have. If indeed you did get that work ethic?

I had 40k in student loans with only a tech school and associates degree. Now, with just that, I'm 27 and have made 150k+ for the last 3-4 years. This year, way, way more (I've saved 10k a month the last 3 months and will save about 18,000 this month, after buying a $1500 computer and a weekend vacation)

All of that with an associates and a tech school degree that I paid way way too much for.

No offense, but I have zero sympathy for those who whine about others who's parents helped them more than others. My parents may not have given me a lot of money, but I got work experience and ethic that can be matched by very few.

AllieVaulter

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Re: Case Study: Advice For Saving First 100k
« Reply #30 on: October 02, 2015, 06:37:08 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

500k house gets a 4 bedroom house where I live.  Rent is cheap relative to house prices in my area -- I could probably rent it for ~$2.5k.

We could just stay in an apt. our whole lives and save $100k every 3 years, but we would like 2 kids in the near future.  They will need their room and a backyard. 

One could argue that we could rent even with two kids, but renting a house for $2.5k doesn't seem practical -- when we could have a $2.3k payment the buying a house with 20% down.

I understand your point but I really don't want to live in a 2 bdr apartment my whole life.

You don't have to stay in an apartment your whole entire life, but there is nothing wrong with having a child in an apartment a few years before you buy a home. 

So don't rush to buy a home for kids you don't even have yet.  That is just not wise move financially or personally.

Also,  I would focus on saving as much as I can, so I can move to an area with much more affordable homes.  Buying a 500k home is going to really strap your cash and your retirement plans.   If you want to be tied to the home and your job for 30 years, it is a fine plan. But if you want to really save and become FI, then you should not by the 500k home.

+1

I understand your desire to buy a house, I fell for it at your age.  However, I'm going to suggest holding off on buying a house. 

1)  If you invest that money, you'll have compound interest on your side.  Historically housing prices only keep up with inflation:  http://www.ritholtz.com/blog/wp-content/uploads/2009/06/case-shiller-updated.png

2)  You've already got a two bedroom apartment.  There's an entire room for a newborn who arguably, only needs the space of a sock drawer. 

3)  Yards are fun, but so are parks.  Your kid isn't going to be running around for a year after s/he's born anyways.

4)  You could probably save up enough money to RE (or go part time) in a lower cost of living area.  You could probably buy that same house in 90% of the country for $150k.

Half a million dollars is a HUGE commitment.  If your goal is to build wealth and/or retire early, tying up all that money in a house is not the way to do it.

I guess buying a house in Los Angeles doesn't make a lot of financially sense...

My alternative would be to move to another city -- away from our hometown and family...

You don't have to go far, not even out of state.  There's definitely Mustachians living in CA, some of which are even FIREd already. 

I bought my house before I found MMM and before I was comfortable with the stock market, so I was considering my purchase to be an investment.  I just wish that someone had shown me that house prices don't inflate faster than inflation.  I definitely would have been better off maxing out my retirement accounts instead of making a down payment on my house. 

There's a lot to think over and discuss with your wife.  I'm hoping you'll be able to consider all your options.  Usually the status quo is not the most efficient path to financial independence.  Good luck with your journey.

Nudelkopf

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Re: Case Study: Advice For Saving First 100k
« Reply #31 on: October 04, 2015, 06:15:31 PM »
This is tricky (and does not work for everyone) but my husband and i are living on whoever's salary is higher then stashing ALL of the lower income. In your case, it will be like you are the only one earning. Again not for everyone but it worked for us since 1 direct deposit can never be touched. You will be surprised that you can actually work around 1 income :)
Imagine if you did it the other way around - live on whoever's salary is lower, and stashing ALL of the higher income! :D

stashing_it

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Re: Case Study: Advice For Saving First 100k
« Reply #32 on: October 05, 2015, 06:38:59 AM »
I recommend shopping around for car insurance

$110 seems like a lot to me for 1 car   =   660  every 6 months, which is approximately what I pay to insure 2 cars with these features


-  4 drivers  (myself, wife, wifes parents)
-   no collision insurance on 1,   $1000 deductible on the other
-   the highest  liability coverage my insurance company offers

Easye418

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Re: Case Study: Advice For Saving First 100k
« Reply #33 on: October 05, 2015, 10:58:28 AM »

Really? That's a terrible outlook to have at life. Whining because others had it better than you. The smart way to look at it, as I do, is you didn't have a silver spoon in your mouth and actually developed a work ethic that those who were given everything, didn't have. If indeed you did get that work ethic?

I had 40k in student loans with only a tech school and associates degree. Now, with just that, I'm 27 and have made 150k+ for the last 3-4 years. This year, way, way more (I've saved 10k a month the last 3 months and will save about 18,000 this month, after buying a $1500 computer and a weekend vacation)

All of that with an associates and a tech school degree that I paid way way too much for.

No offense, but I have zero sympathy for those who whine about others who's parents helped them more than others. My parents may not have given me a lot of money, but I got work experience and ethic that can be matched by very few.


Cool story...  Do you feel better?  Did you get it all out?

Is this just a poor attempt to gloat about your life? Rags to middle class?

Not to mention, you are stretching reality when you said I was "whining".  I just stated the facts that someone people have their daddies pay their loans and I am jealous of the fact that they don't have to repay $100k to begin their life.  I never said the problem was with their daddies paying the loan.  I will probably pay for my own childrens schooling so they don't have to be shackled with debt.

Please read the post, (consume it, digest it, think about what you are going to say) before spewing nonsense out of your mouth.

« Last Edit: October 05, 2015, 11:07:53 AM by Easye418 »

BarkyardBQ

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Re: Case Study: Advice For Saving First 100k
« Reply #34 on: October 05, 2015, 11:04:31 AM »
This is tricky (and does not work for everyone) but my husband and i are living on whoever's salary is higher then stashing ALL of the lower income. In your case, it will be like you are the only one earning. Again not for everyone but it worked for us since 1 direct deposit can never be touched. You will be surprised that you can actually work around 1 income :)
Imagine if you did it the other way around - live on whoever's salary is lower, and stashing ALL of the higher income! :D

We do this... or that was the original goal, we went way below that. The psychology of living off the lesser income, means either job could disappear and we'd be ok, that's comforting.

Rosy

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Re: Case Study: Advice For Saving First 100k
« Reply #35 on: October 05, 2015, 02:23:07 PM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.
Some people without student loans figured out a way to pay for it themselves.

(5) VA - military

EAL

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Re: Case Study: Advice For Saving First 100k
« Reply #36 on: October 05, 2015, 02:51:09 PM »
Jay,
I understand how this can get frustrating.  You feel like you are doing everything right, you're saving quite a bit every month, but you want to see more growth more quickly.  Is there any way you or your wife could increase your income to be able to save more each month in order to get you guys' closer to your goal of $100,000 sooner? Perhaps an extra part time job. If you or your wife have a particular skill you could tutor. If either of you speak a foreign language, translating gigs can pay a lot and you can manage your own schedule and do that on the side.  What about selling online. Do you guys have stuff sitting around that you could sell on eBay? I tried doing this and ended up making over $1000 in two months.  What about etsy, do either of you have side hobbies you could monetize and sell online? The nice thing about you being in a bigger community is if you sell anything locally, you have such a huge market you can start there and not even worry about shipping.

georgialiving

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Re: Case Study: Advice For Saving First 100k
« Reply #37 on: October 05, 2015, 03:04:15 PM »

You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.
Some people without student loans figured out a way to pay for it themselves.

(5) VA - military
+1


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Jack

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Re: Case Study: Advice For Saving First 100k
« Reply #38 on: October 05, 2015, 03:25:54 PM »
This is a slightly radical suggestion, but you might want to consider having the kid(s) immediately (while you're still living in the apartment). Not only is 2 bedrooms plenty big enough for an infant/toddler, but the extra exemptions and tax credits would let you save that much more (and said tax credits are most valuable while your income is still relatively low).

See http://rootofgood.com/make-six-figure-income-pay-no-tax/ for the details. The idea is that kids are worth $3900 in AGI reduction + $1000 in tax credit each, plus said AGI reduction could also help you qualify for things like the Saver's Credit and (if you're really frugal / low income) the Earned Income Credit, compounding the savings.

(Obviously, if you're not ready to have kids, don't have them just for the tax advantages... but if you want them anyway, it's a good reason not to wait.)

I bought my house before I found MMM and before I was comfortable with the stock market, so I was considering my purchase to be an investment.  I just wish that someone had shown me that house prices don't inflate faster than inflation.

In aggregate, the housing market does not increase faster than inflation.

Individual properties, on the other hand, can vary (a lot).

For example, my house really is an investment. Why? Because I bought a fixer-upper in a gentrifying neighborhood in late 2009, during the depths of the market crash, and used as much leverage as I could (I was required to have a bare-minimum $1500 cash at closing, and even that I borrowed from my parents). Five years later, it's more than doubled in value. If or when I decide to move, I'll be keeping it as a (very profitable) rental. That's how you buy a house!

But the point is that (a) I was specifically evaluating it as an investment, not just a place to live, and (b) it's at least a little bit risky and speculative, like trying to pick stocks instead of buying an index fund. The situation 5 years ago made buying a no-brainer, but that's not usually the case (and even then, I screwed up -- if I'd bought a more expensive house in the next neighborhood over, I'd probably have an even higher return).

Buying a $0.5 mil place (that's barely affordable on $100k income) in a HCOL area, on the other hand, is a relatively terrible idea.

use2betrix

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Re: Case Study: Advice For Saving First 100k
« Reply #39 on: October 05, 2015, 07:01:10 PM »

Really? That's a terrible outlook to have at life. Whining because others had it better than you. The smart way to look at it, as I do, is you didn't have a silver spoon in your mouth and actually developed a work ethic that those who were given everything, didn't have. If indeed you did get that work ethic?

I had 40k in student loans with only a tech school and associates degree. Now, with just that, I'm 27 and have made 150k+ for the last 3-4 years. This year, way, way more (I've saved 10k a month the last 3 months and will save about 18,000 this month, after buying a $1500 computer and a weekend vacation)

All of that with an associates and a tech school degree that I paid way way too much for.

No offense, but I have zero sympathy for those who whine about others who's parents helped them more than others. My parents may not have given me a lot of money, but I got work experience and ethic that can be matched by very few.


Cool story...  Do you feel better?  Did you get it all out?

Is this just a poor attempt to gloat about your life? Rags to middle class?

Not to mention, you are stretching reality when you said I was "whining".  I just stated the facts that someone people have their daddies pay their loans and I am jealous of the fact that they don't have to repay $100k to begin their life.  I never said the problem was with their daddies paying the loan.  I will probably pay for my own childrens schooling so they don't have to be shackled with debt.

Please read the post, (consume it, digest it, think about what you are going to say) before spewing nonsense out of your mouth.

Considering in another thread you mention your 5 years ahead of where you would've been due to an inheritance, you're the LAST person who should be here whining about others not having student loans. Talk about entitlement... You'd think someone like you would feel more fortunate?



3.  Granted, we've only been dual income greater than $100k for 9 months, but without a little inheritance, we would be fucked. Instead of, $100k+ in Retirement and $90k house equity and looking to start a family, we would be 5 years behind, maybe more. We may move up to $140k-$150k dual income shortly here for 18 months then start a family and drop to one.

« Last Edit: October 05, 2015, 07:20:22 PM by Trixr606 »

Easye418

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Re: Case Study: Advice For Saving First 100k
« Reply #40 on: October 05, 2015, 07:48:37 PM »

Really? That's a terrible outlook to have at life. Whining because others had it better than you. The smart way to look at it, as I do, is you didn't have a silver spoon in your mouth and actually developed a work ethic that those who were given everything, didn't have. If indeed you did get that work ethic?

I had 40k in student loans with only a tech school and associates degree. Now, with just that, I'm 27 and have made 150k+ for the last 3-4 years. This year, way, way more (I've saved 10k a month the last 3 months and will save about 18,000 this month, after buying a $1500 computer and a weekend vacation)

All of that with an associates and a tech school degree that I paid way way too much for.

No offense, but I have zero sympathy for those who whine about others who's parents helped them more than others. My parents may not have given me a lot of money, but I got work experience and ethic that can be matched by very few.


Cool story...  Do you feel better?  Did you get it all out?

Is this just a poor attempt to gloat about your life? Rags to middle class?

Not to mention, you are stretching reality when you said I was "whining".  I just stated the facts that someone people have their daddies pay their loans and I am jealous of the fact that they don't have to repay $100k to begin their life.  I never said the problem was with their daddies paying the loan.  I will probably pay for my own childrens schooling so they don't have to be shackled with debt.

Please read the post, (consume it, digest it, think about what you are going to say) before spewing nonsense out of your mouth.

Considering in another thread you mention your 5 years ahead of where you would've been due to an inheritance, you're the LAST person who should be here whining about others not having student loans. Talk about entitlement... You'd think someone like you would feel more fortunate?


[/quote]

Stop hijacking the thread to troll me. 

Sorry for this guy OP, best of luck on your situation
« Last Edit: October 05, 2015, 07:51:04 PM by Easye418 »

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #41 on: October 12, 2015, 01:23:58 PM »
I recommend shopping around for car insurance

$110 seems like a lot to me for 1 car   =   660  every 6 months, which is approximately what I pay to insure 2 cars with these features


-  4 drivers  (myself, wife, wifes parents)
-   no collision insurance on 1,   $1000 deductible on the other
-   the highest  liability coverage my insurance company offers

Yup - I've shopped around.  $110 is the lowest I've been quoted.  Car insurance is pricey in Los Angeles compared to other markets.
« Last Edit: October 12, 2015, 01:28:32 PM by Rekon »

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #42 on: October 12, 2015, 01:27:47 PM »
This is a slightly radical suggestion, but you might want to consider having the kid(s) immediately (while you're still living in the apartment). Not only is 2 bedrooms plenty big enough for an infant/toddler, but the extra exemptions and tax credits would let you save that much more (and said tax credits are most valuable while your income is still relatively low).

See http://rootofgood.com/make-six-figure-income-pay-no-tax/ for the details. The idea is that kids are worth $3900 in AGI reduction + $1000 in tax credit each, plus said AGI reduction could also help you qualify for things like the Saver's Credit and (if you're really frugal / low income) the Earned Income Credit, compounding the savings.

(Obviously, if you're not ready to have kids, don't have them just for the tax advantages... but if you want them anyway, it's a good reason not to wait.)

I bought my house before I found MMM and before I was comfortable with the stock market, so I was considering my purchase to be an investment.  I just wish that someone had shown me that house prices don't inflate faster than inflation.



Hmm... I'm not sure I understand how we would save more by having kids.  There cost is substantial when you factor in child care and medical expenses.  According to my insurance plan, I have to pay 3k out of pocked for the hospital birth cost.  Also, my wife can only take a few months off of work.  She can stay home but then we will have NO savings income. 
« Last Edit: October 12, 2015, 01:29:38 PM by Rekon »

Terrestrial

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Re: Case Study: Advice For Saving First 100k
« Reply #43 on: October 12, 2015, 02:11:14 PM »
You are doing alright for your ages. The people who have >$100K net worth and are younger than 25 (myself included) often have one or more of the following:
 (1) parents paid for school
 (2) great wellpaying job after a four year degree
(3) well paying side gig

(4) windfall

Jealous as fuck for the kids whose daddies took care of their student loans.... With my wife, nearly $100k in total student loans for BS Fin/MBA and BSN.
Some people without student loans figured out a way to pay for it themselves.

(5) VA - military

(6) Bust ass to get a scholarship and work jobs while in college to pay for living expenses.   For MBA - go to exec nights/weekends program and cash flow it while working full time.   

Incidentally these are also great ways to build work ethic and time management skills that help further your career.

Setters-r-Better

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Re: Case Study: Advice For Saving First 100k
« Reply #44 on: October 12, 2015, 04:08:23 PM »
How much of an upgrade is the 500k house compared to the $1500/m rental apartment?  Financially, it sounds like a huge step up.  Is buying the house a big "want"?  Can you rent the same-value house for $5k/m (basic rent vs. own comparison)?

I ask this as part of a couple that rents a comparatively modest apartment, though we can afford to buy an expensive house. Buying would have consumed most of our financial assets, kneecapped our ability to invest (mortgage), and locked us into inflexible work arrangements.  We've focused on building our financial assets, and we're at a point where our portfolio is big enough to generate its own momentum (compounding, distributions.)

Wanted to ensure you understand why you're pursuing the house, and giving you an alternate route if the goal is wealth accumulation.

500k house gets a 4 bedroom house where I live.  Rent is cheap relative to house prices in my area -- I could probably rent it for ~$2.5k.

We could just stay in an apt. our whole lives and save $100k every 3 years, but we would like 2 kids in the near future.  They will need their room and a backyard. 

One could argue that we could rent even with two kids, but renting a house for $2.5k doesn't seem practical -- when we could have a $2.3k payment the buying a house with 20% down.

I understand your point but I really don't want to live in a 2 bdr apartment my whole life.

You don't have to stay in an apartment your whole entire life, but there is nothing wrong with having a child in an apartment a few years before you buy a home. 

So don't rush to buy a home for kids you don't even have yet.  That is just not wise move financially or personally.

Also,  I would focus on saving as much as I can, so I can move to an area with much more affordable homes.  Buying a 500k home is going to really strap your cash and your retirement plans.   If you want to be tied to the home and your job for 30 years, it is a fine plan. But if you want to really save and become FI, then you should not by the 500k home.

+1

I understand your desire to buy a house, I fell for it at your age.  However, I'm going to suggest holding off on buying a house. 

1)  If you invest that money, you'll have compound interest on your side.  Historically housing prices only keep up with inflation:  http://www.ritholtz.com/blog/wp-content/uploads/2009/06/case-shiller-updated.png

2)  You've already got a two bedroom apartment.  There's an entire room for a newborn who arguably, only needs the space of a sock drawer. 

3)  Yards are fun, but so are parks.  Your kid isn't going to be running around for a year after s/he's born anyways.

4)  You could probably save up enough money to RE (or go part time) in a lower cost of living area.  You could probably buy that same house in 90% of the country for $150k.

Half a million dollars is a HUGE commitment.  If your goal is to build wealth and/or retire early, tying up all that money in a house is not the way to do it.

I guess buying a house in Los Angeles doesn't make a lot of financially sense...

My alternative would be to move to another city -- away from our hometown and family...

I think the worst part about this is that a $400K mortgage on a 100K income is just too much. Plus it requires both of you to work full time to earn the $100K annually. If you made $125K annually and your wife made $75K annually, I think the responses could be a bit different. Perhaps your incomes will be in that range in a few years when you plan to buy anyway. People generally recommend to have a mortgage about 2-3x your annual income.

You can definitely have one baby in a 2 bedroom apartment and surely there are 3 bedroom apartments you can rent as well if/when you had a second child. You do want to be prepared for the scenario where one of you wants/needs to take a while off to care for children. Also, as soon as you buy that house, if you ever need/want to sell it, you lose 6% right off the top to real estate agent fees, not to mention any moving costs or buyer closing fees you have to pay. 6% of 500K is a lot of money. Never know when you might have to move for a job.

rmendpara

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Re: Case Study: Advice For Saving First 100k
« Reply #45 on: October 12, 2015, 09:22:43 PM »
You both seem to be mostly on the frugal side. Keeping spending for 2 to ~30k in a mid/upper cost location is impressive.

A 500k house is certainly a stretch, but that's more an issue of the location than anything else. I've been around LA quite a bit, and 500k is very modest (depending on the neighborhood). It's really a question of whether you can afford it in the long term. If you expect your incomes to grow over the next 10 years meaningfully, then a 500k purchase could turn out to be a fair deal, but if you over-reach on how much you can afford, you may be stuck working forever in a house you can barely afford.

It doesn't seem you have issues saving money, as 3k/mo is very admirable on a 100k income. The issue I see is that almost all of your savings will be tied up in your home. 3 yrs of saving at 3k/mo and then a large part of your cash flow toward the mortgage and related housing costs for many years to come.

If you do have a child, your budget will get even tighter. So again, in the near term, not really any glaring issues. In the medium to longer term, income needs to increase a bit if you want to afford a reasonable home and also save/invest for retirement and other long term savings.

Rekon

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Re: Case Study: Advice For Saving First 100k
« Reply #46 on: October 19, 2015, 04:13:24 PM »
You both seem to be mostly on the frugal side. Keeping spending for 2 to ~30k in a mid/upper cost location is impressive.

A 500k house is certainly a stretch, but that's more an issue of the location than anything else. I've been around LA quite a bit, and 500k is very modest (depending on the neighborhood). It's really a question of whether you can afford it in the long term. If you expect your incomes to grow over the next 10 years meaningfully, then a 500k purchase could turn out to be a fair deal, but if you over-reach on how much you can afford, you may be stuck working forever in a house you can barely afford.

It doesn't seem you have issues saving money, as 3k/mo is very admirable on a 100k income. The issue I see is that almost all of your savings will be tied up in your home. 3 yrs of saving at 3k/mo and then a large part of your cash flow toward the mortgage and related housing costs for many years to come.

If you do have a child, your budget will get even tighter. So again, in the near term, not really any glaring issues. In the medium to longer term, income needs to increase a bit if you want to afford a reasonable home and also save/invest for retirement and other long term savings.

You're right location is more of the issue.  Ideally, I would like to be able to move to a low cost area and make the same amount or more... Certainly possible once I finish my MBA program.