Ages: 29 me, 25 wife.
Income: Me, $110,000 gross, half self employment half wages. Wife, $50,000 state job.
Debt: 0
Assets:
Ally bank (emergency fun): $35,200
457 (wife): $1,000
IRA (wife): $4,200
IRA (me) : $3,000
SIMPLE (me): $43,000
TOTAL: $86,400
Savings rate: Max SIMPLE ($12,500). Wife Max 457 ($18,000) plus an additional $3,500 per month available for savings. Total savings per year $72,500.
Wife just got her first career type job and we just recently paid off her $20,000 of student loan debt. That was our goal to begin with. Now we are at the point where we have an excess of $3,500 per month that we can save. We are currently renting a house from a family friend for $750 per month (in socal, which is insane. Our neighbor is renting the same house as us and is paying $2,600 per month). Personally I dont ever want to leave this house, its amazing. One caveat to living here is that the house it totally furnished with his things, so its not like we have our own stuff and an empty house. We are like permanent house sitters. But it could go at any time, if the owners kids want to move back in it, if the owner wants to sell, or if the owner wants to move back in. We could be kicked out. My question is this. What should I do with the extra $3,500 per month.
1. Save it in an ally bank account for a downpayment on our own place
2. Save it in taxable index funds with Vanguard?
3. Combination of both?
I really have no desire to buy a home in socal, everything just seems so over priced and owning a home seems risky to me. But, I do see how they are great investments, since you have to live somewhere. In a perfect world, I would continue living here and buy a house and rent it out and keep paying my $750 per month to this landlord. We are covering all of his costs, and he is really, really cool. If we do buy a home, it would be $450,000-500,000 at least to live near work and in a decent neighborhood. Being in socal, there are some really bad neighborhoods with homes in the low $400s or even high $350s, but I would never live there. So, down payment would be $100,000.
We've had little goals since we started and that has helped us stay on track, but now that we are debt free, and have the ability to save. I dont want to get lax and start spending alot more for no reason, I want our next goal. What would a mustachian do?