Author Topic: Some advice would be nice:-)  (Read 5994 times)

jtk2515

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Some advice would be nice:-)
« on: October 14, 2014, 12:24:57 PM »
Good day,

I got a lump sum of money coming my way 210,000$ after taxes. I make around 55,000$ a year I am also a single male with no children age 27. Here are a list of my debts.

26,000 2014 Toyota Avalon @1.9%
11,000 student loan @4%&6%
9,000 NH skid steer @4.9%
5,000 credit card @0% till July 2015
15000 401k loan @ 100$ a year

Things I would like to do.
Build a triplex cost 240,000
Take a new job at norfolk southern in the next 3 years, but takes 2 years to hit 29.00$ and I would only get 40 hours.
My current job will let me take a 6 month leave to take a diesel mechanic certificate program (cost 5000$ and not working). I want to finish this program before I move to ns.

What would you do?

solon

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Re: Some advice would be nice:-)
« Reply #1 on: October 14, 2014, 12:33:05 PM »
Good day,

I got a lump sum of money coming my way 210,000$ after taxes. I make around 55,000$ a year I am also a single male with no children age 27. Here are a list of my debts.

26,000 2014 Toyota Avalon @1.9%
11,000 student loan @4%&6%
9,000 NH skid steer @4.9%
5,000 credit card @0% till July 2015
15000 401k loan @ 100$ a year

Things I would like to do.
Build a triplex cost 240,000
Take a new job at norfolk southern in the next 3 years, but takes 2 years to hit 29.00$ and I would only get 40 hours.
My current job will let me take a 6 month leave to take a diesel mechanic certificate program (cost 5000$ and not working). I want to finish this program before I move to ns.

What would you do?

Pay off everything. Even the cheap debt. That will leave you with $144k.
Use the $144k to build your $240k triplex, in which you will have 60% equity.
Payoff the building loan as soon as possible and don't take on any more debt. You'll love life.

Bob W

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Re: Some advice would be nice:-)
« Reply #2 on: October 14, 2014, 12:48:41 PM »
Pay off everything.   Invest the balance in an S and P 500 Vanguard fund and save like crazy.   (at least 50%) of income.

At that rate you would be financially independent within 7 years. 

Oh yeah,  and the most important thing.   Keep reading this forum!

MotoMM

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Re: Some advice would be nice:-)
« Reply #3 on: October 14, 2014, 01:16:49 PM »

What would you do?

I would...
Agree with the "pay off everything" sentiment.  Also, I'd sell that 2014 Avalon and pick up one that's 8-10 years old.  Plenty of money leftover to build - especially if you live on half your income.

Calvawt

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Re: Some advice would be nice:-)
« Reply #4 on: October 14, 2014, 01:23:39 PM »
I agree with paying off all debt first.  Then take a look at the career options based on your new monthly expenses.


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skunkfunk

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Re: Some advice would be nice:-)
« Reply #5 on: October 14, 2014, 02:04:45 PM »
Pay it all off, then do what you wanted to do. Sounds like a good plan. What's the starting pay on the other job? That's roughly $58k at 29/hr for 40 hours.

jtk2515

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Re: Some advice would be nice:-)
« Reply #6 on: October 14, 2014, 09:33:26 PM »
Norfolk southern starts you out at 17$ish for 90 days,21$ for 1st year,24$ for 2nd year and then 29$ after that. I make 21.07 now and will make around 61k this year but next year I don't want to work so much overtime. I have been thinking about selling the Avalon and now I'm really going to do it. The insurance on it is ~100$ a month and taxes this year were 570$. I got a lot more I want to say but I'm typing on my phone and I'm so tired right now. I will write down some more tomorrow.

Overseas Stache

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Re: Some advice would be nice:-)
« Reply #7 on: October 15, 2014, 04:21:04 AM »

Can you explain why you want to build a Triplex? I don't know the area that you live in, and how the numbers work out. In many areas it is a lot cheaper to buy than to build new.

little_owl

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Re: Some advice would be nice:-)
« Reply #8 on: October 15, 2014, 05:18:23 AM »
Please invest the balance after paying off your debts!  I am assuming, given the types of loans you have,that you do not have a tremendous amount invested or in savings.

Do not use this money for anything but securing your future - getting rid of those debts will be amazing.  Meet with a tax expert next to understand what, if any, taxes you will have to pay on this money, then put 4 months of expenses in cash for an emergency fund, and start an investment account with the balance.

You will not regret investing if you invest carefully (index funds from a reputable company, perhaps something like VFINX or VTSAX).

Good luck in making wise choices with this money, and I would not use it to build a triplex.  At all.

former player

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Re: Some advice would be nice:-)
« Reply #9 on: October 15, 2014, 09:18:47 AM »
You've currently got $66,000 in debt, which is $5,000 more than your annual income. 

The first thing you need to do is pay this off.  You can't move jobs without paying off the 401k loan, so as want the freedom to choose where you work, that has to be paid.  You've got 9 months interest-free on the credit card, but it's not worth faffing about with bank interest on $5,000 for 9 months ($50?): pay it off.  Student loans at 4% and 6% are a no-brainer: pay them off.  If the skid steer is a business/income-producing asset, the interest on it may be set against tax BUT even with a tax deduction it is still costing you money, so pay it off.  A new car at that price is totally un-mustachian and you are mechanically minded and could keep an older car in good shape, so sell it and pay that debt off too.  Long story short: pay off everything.

The second thing you need to do is work out how you ended up owing so much in the first place, and putting in place the thought-processes which say "I am allowing myself to buy this because 1) I can afford it and 2) I have worked out that it has a great return increasing my education/increasing my income."

You could mosey on over to the Real Estate forum for informed advice on the potential triplex and to see whether your projected figures add up.  Otherwise look at the Investor Alley forum for other things to do with your lump sum.

It sounds to me as though you have good job options: your current place gives you overtime and training opportunities, after 90 days your proposed new place will be paying you the same as you get now and more in the future but without the overtime.  So, do what will make you happiest: you are young, have a track record at work, have no dependents and have the ambition to learn new skills: my guess is that your working life will be fine whichever way you go.

Exflyboy

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Re: Some advice would be nice:-)
« Reply #10 on: October 15, 2014, 10:31:48 AM »
Heheh.. I rather enjoyed the almost knee jerk reaction of everybody.. I.e "PAY IT OFF".. and I agree pay everything off and never go into debt again.. Maybe a mortgage but to be honest house are pretty poor investments and you should only buy a house if rents are higher than a mortgage repayment in your area or you like owning your own space.

Which brings me to the triplex.. if houses are a poor investment than manufactured homes are TERRIBLE!.. They almost universally loose value I have one that I rent out and to be honest I consider it a throwaway building. Yes I know a mfd home can be made as good as a stick built house, but the truth is that just doesn't matter, people don't want them so they loose value no matter how well they are built.

In my case the building cost $40k to put in in 1995, its now worth about $25k.. If I keep it for another 10 years it will make about $150k in rent.. then it will probably be close to worthless.. Not a bad deal for me.. but to buy one as an investment?.. Disaster!

As other's have said.. buy a stock index fund.. as the market is down right now I'd put about half in know and if the market starts to rise.. put the rest in.. If it pulls back further I'd be looking for another 5 to 10% then put the rest in... Even if you throw it all in now its the bst thing to do.

Then take all the money your not spending each month and add that to your savings as well.

Make sure you max out your 401k contributions first ($17,500), then your Traditional IRA ($5500).. although the year you first get the income you'll be well over the limit to get a tax deduction for a traditional IRA so instead invest in a Roth IRA for that tax year.

The Avalon.. yup sell it, the skid steer?.. depends what its for.. but you can prise my tractor with its front loader out of my cold dead fingers..:)

Frank

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Re: Some advice would be nice:-)
« Reply #11 on: October 15, 2014, 11:32:23 AM »
Hey,

I'm also a single male, no kids, and 27, here is my advice.

Definitely pay off your student loans and everything else. That will leave you $144,000 remaining.

How are you doing on your savings? What are your current annual expenses? Do you have a goal of achieving FIRE, and if so, when are you aiming for?

For me, I hope to achieve FIRE in 8 years (by 27), so had I been you I would pay off all debt and then put the rest into index funds. It sounds like the job you want to do in a few years will require a wage decrease for an extended period of time, are you able to live within that should you take the job? The reason I ask this is because I try to treat any windfalls like this as extra cash, not to change my style of lifestyle but instead be invested, would you need to dip into this to survive a new job?

I don't know anything about the diesel mechanic program, is this something that is necessary for the new job? If it is then you will need to do it, but do see an accountant as there is a way to deduct part of it from taxes (unsure about the opportunity cost of lost work time).

You indicated that you didn't want to work as much, would you be able to stay at your current job working 40 hours a week? Would you be able to live with that?

jtk2515

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Re: Some advice would be nice:-)
« Reply #12 on: October 15, 2014, 03:59:39 PM »
Here is the three questions you guys brought up in your posts I will try my best to answer them.

1. Why build a triplex?

2. How did you get into this much debt?

3. How's your savings?

1. I want to build a triplex because... I love building houses. I love the planning
Process. I love the idea of being a LANDLORD. Will I make money at it? Not
The way I want to build the 1st one(or not for 7 years). I want to build a two story
With basement and live on the ground floor and rent the top and basement. Cost around 280k and
I could rent both units for around 950$ each. It would take me 3-4 years to build. I have the skid steer
And dump truck but I would need to buy a 20k boomlift.

2. I got into this much debt because I used to make more money. Now that I don't. I need to pull back my spending but I'm very much a procrastinator. I want to try get it right now. Here are a list of my monthly expenses.

950$ for food and eating out.
200$ rent but I got two roommates
340$ skid steer payment
540$ Avalon payment
110$ student loan payment
200$ gas
27$ phone
400$ 401k payment
10% on what I make for tithes
10% goes into 401k

3. I don't have much savings. I got 38k in my 401k (-15k loan = 23k). I got about 4k in the bank.

Yup going to make 61k this year and I feel strapped
« Last Edit: October 15, 2014, 04:01:15 PM by jtk2515 »

Beric01

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Re: Some advice would be nice:-)
« Reply #13 on: October 15, 2014, 04:07:46 PM »
950$ for food and eating out.

Step #1 is to stop eating out. You should NOT be eating out with over 60K in debt, period. Your hair is on fire! Cook or make all of your own meals. Get that expense down to $100 a month. Then you can talk about other long-term investments.

$950/month for food+eating out is over $11,000 a year! For eating!

jtk2515

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Re: Some advice would be nice:-)
« Reply #14 on: October 15, 2014, 04:20:29 PM »
I don't think I can do 100$. I might be able to get it down to 400$ a month.

I eat
1 pack tuna 2.00
1 can green beans 1.15
1 can fruit 1.00

At 9am and 12pm that's like 8.30$ right there. Let me think about it and see how I can cut.

former player

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Re: Some advice would be nice:-)
« Reply #15 on: October 15, 2014, 04:27:14 PM »
I don't think I can do 100$. I might be able to get it down to 400$ a month.

I eat
1 pack tuna 2.00
1 can green beans 1.15
1 can fruit 1.00

At 9am and 12pm that's like 8.30$ right there. Let me think about it and see how I can cut.
Stop buying food in cans, and teach yourself to cook.

Specifically, buy a slow cooker and use the internet to look up some recipes that use mostly cheap bulk ingredients (rice, beans, etc.) and in-season vegetables.

Beric01

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Re: Some advice would be nice:-)
« Reply #16 on: October 15, 2014, 04:44:37 PM »
I don't think I can do 100$. I might be able to get it down to 400$ a month.

I eat
1 pack tuna 2.00
1 can green beans 1.15
1 can fruit 1.00

At 9am and 12pm that's like 8.30$ right there. Let me think about it and see how I can cut.
Stop buying food in cans, and teach yourself to cook.

Specifically, buy a slow cooker and use the internet to look up some recipes that use mostly cheap bulk ingredients (rice, beans, etc.) and in-season vegetables.

Agreed! It doesn't even have to be that hard. I have a rice cooker (<$20) so rice is as easy as pouring in rice+water and pressing a button. I can have oatmeal or bread for breakfast. A banana/apple/etc. is way cheaper than a can of fruit, and healthier. If you're going to eat a lot of meat, buy some chicken or ham. Make your own bread - I've been making cornbread from a mix I got at Costco lately and all you need to add is water. Beans are excellent.

You need to sit down and entirely rethink your diet. What you are eating right now is costing you your financial freedom! You do not need to spend $13/day to eat healthy food that doesn't take a lot of effort to prepare.

Mother Fussbudget

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Re: Some advice would be nice:-)
« Reply #17 on: October 15, 2014, 04:46:20 PM »
+1.  A new top-of-the-line rice cooker at CostCo (~$40) is an $80 value - it's a rice cooker, food steamer, and slow cooker in one pot.   Also pick up a 20 lb. bag of rice, and another of pinto beans.  Then spend the next couple of months finding recipes for slow cooked rice & beans.  Boston Baked beans, etc.  Take containers of same to work for lunch.

jday

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Re: Some advice would be nice:-)
« Reply #18 on: October 15, 2014, 05:34:01 PM »
When you guys say rice and beans all I can think of is this...

"move the beans! move the rice! Look! Its Maria!"

https://www.youtube.com/watch?v=kw0C_B-Zm6A

Overseas Stache

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Re: Some advice would be nice:-)
« Reply #19 on: October 16, 2014, 01:08:03 AM »


1. I want to build a triplex because... I love building houses. I love the planning
Process. I love the idea of being a LANDLORD. Will I make money at it? Not
The way I want to build the 1st one(or not for 7 years). I want to build a two story
With basement and live on the ground floor and rent the top and basement. Cost around 280k and
I could rent both units for around 950$ each. It would take me 3-4 years to build. I have the skid steer
And dump truck but I would need to buy a 20k boomlift.

Ok so even you realize that your triplex won't make you money for at least 7 years so it probably isn't the best investment. Really buying a run down duplex would be a lot better investment wise. You could use your skills to fix it up and get a lot better return on your money. Have you build houses in the past? why do you think you need a boomlift (sounds like just an excuse to buy some more equipment)? I used to frame houses and me and one other guy could frame a 2 story house without any big machinery. Plus think of the opportunity cost you are missing out on if it takes you 3-4 years to build something that is 280K of money sitting there that wont be making you money. I get that building houses is fun and rewarding, hey sometimes I just want to give up my office job and go back and do it too, but I think you can find better ways to use your time and money. Like buying a place and putting an addition on it or something like that.