quote: I don't think paying cash for a home is stupid at all.
Well, maybe - but it can be costly. You may want to put your money to a higher and better use.
1. Say that you find a $100,000 house and use your $100k to buy it. The loan would have been $477/m. Instead you invest that $477/m into an 11%/yr index for 30 yrs - that's $1.260,000.
2. Or - you buy the house with zero down payment and use your $477/m to make the house payments. And you place your $100k cash into an 11%/yr fund for 30 yrs. That is $2,290,000.
Ie, an extra million. At the end of 30 yrs, with both scenarios, you have a paid-for house (worth maybe $250,000) and either $1.3M of $2.3M (using the same 11%/yr investment fund). I do this with all of my rental houses, been doing it since 1975
Your potential is awesome - to become wealthy it takes a good income stream plus 'time'. You are 25 - you have about 30 years of wealth-building time, then at 55 you must lower your risk level gradually as you transition into your wealth-preservation years.
Well again I'm thinking in the short term. I mean 30 years? LOL! I'm not even going to try and think that far ahead. Your advice is probably good for someone with a secure job but mine is not. If I can maintain what I have now and not loose anything I could pay cash for a pretty decent house that no one can take from me. That's all I care about right at the moment. My mind is made so no one is going to talk me out of it but would appreciate some advice on where to put my money so it isn't subject to market downturns.
Mon Jun 10, 2013 9:59 pm
Christine88 Member
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Location: SC
quote:Originally posted by braje My 401(k) is with Fidelity and available to me is a Stable Asset fund. It is basically the same as a savings account. Gains are practically nil but so are the potential losses. I also suggest you do the math before you pull it out of the retirement account.
Also there is a lot more to home ownership the the price of the house.
I'm with Fidelity as well. I'm going to check this out. Thanks!
Mon Jun 10, 2013 10:04 pm
oldguy Senior Member
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quote: Well again I'm thinking in the short term. I mean 30 years? LOL! I'm not even going to try and think that far ahead. - - - - my money so it isn't subject to market downturns.
I, too, am with Fidelity. My account, in addtion to my index funds, has a Fidelity Cash Reserves fund (FDRXX) often called a 'sweep account'. When I sell some stock, Fidelity first sells it inside the IRA and puts it in the sweep account, then they send me the cash from the sweep account. But you can move some or all of your money into that Cash Reserve.
The ones who avoided market timing became the multimillionaires of the past generation. Short term planning (market timing) didn't work for them. Just sayin'
Tue Jun 11, 2013 12:28 am
coaster Senior Advisor
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Location: Wisconsin
Christine, *NO* job is ever secure. If this is the main reason for your short-term time horizon then I suggest you will be thinking short-term for the rest of your life, and as has been the consensus here, it's only by thinking long-term that you can get ahead *and* be more-or-less (as much as life allows, in any case) "secure" later in life. You may think you're protected if you have a paid-for house, but I suggest you're not thinking of all the things that could go wrong for which *money* is the best resource. And you can't turn that house into money in short order. If it's paid for, "they" can't take it from you for that reason, but a fire could, a tornado could, a flood could, any number of things could, even "they" could if "they" want to build a shopping mall or office park where your house is.
Just sayin'