I hate to say this.. but I spent money quite lavishly until now and I want to get serious on my financial planning.
Me and my wife are 30yrs old.. and currently we are saving for house downpayment. (next year purchase may be)
Question: Does it make sense to keep the money in saving account for house downpayment ?
Question: I always wanted a luxury car and I am thinking about purchasing one (~65k with 15k down). Do you think it is a good call to purchase the vehicle?
Question: Any financial advise regarding the numbers?
Thanks a lot!
Fri Dec 04, 2015 4:07 am
dozulu Preferred Member
Cash: $ 40.15
Joined: 30 Jun 2015
Location: Eastern Oregon
I have to ask...you are spending $19,800 on rent, which leaves an enormous sum annually, even after expenses for you to do work with.
Okay, you have been a spender. But now you are realizing that you can do better.
Go immediately to HR at both workplaces and max out that 401k for both of you. The company match is free money and you guys are not getting any younger and compound interest is magic. You need to get working on retirement savings because that time goes by quickly and you will need 25 times your annual spending, which will be a tidy sum.
Actual tracking of spending, ALL SPENDING, so that you can see where your money is going. t
This is going to be shocking if you have been spending everything. Doing this will help you get control of your habits.
The people who do well with money usually plan and discuss and have a HIGH AWARENESS of what they are doing long term. You will find that it is very satisfying to have a known outcome. There should be a monthly budget and a saving account designated for emergency fund.
INVEST INVEST INVEST
I have a professional wealth advisor who helps me plot and plan. You can do it yourself, many here do, but I am more comfortable having someone manage my highl diversified portfolio for me. My High Poohbah of Money is top drawer advisor, not all are as good.
The required caveat....
If you buy houses and luxury cars and spend at high levels, you will become accustomed to consuming virtually everything you make. It is common to find many people in big houses with fancy cars who can just make the payments and never really accumulate real wealth, real assets. Focus on accumulating real assets while you can. None of us has a guarantee on what tomorrow holds.
I hope that a bunch on this forum begin advising you. There is much wisdom here.
We all have to start somewhere. Better tiday than tomorrow.
Sat Dec 05, 2015 1:44 am
oldguy Senior Member
Cash: $ 715.40
Joined: 21 May 2006
One easy approach is to put $17,500 each into your 401k accounts. In your tax bracket, that gives you about a $12,000/yr tax break so, the $35,000/yr investment cost is about $23,000 out-of-pocket.
Invest that $35k/yr into a SP500 Index Fund (almost all 401k plans have them). The average longterm return is historically 11%/yr.
That should be about $6,200,000 when you are age 60. That said - you are free to enjoy spending every dime that you earn AFTER your $6M Plan is funded every year, safe in the knowledge that you are on Plan to be multimillionaires.
The good thing about that Plan is that it is fully diversified across all 500 major corporations of the US, no buy/selling/monitoring is needed. Simply invest incrementally, never sell/trade, only accumulate.
As for the car (all cars) it depreciates to about half price in 4 to 5 years. So a $65k car will cost about $7500/yr for deprecation, and an extra $1000/m ($12,000/yr) for tune-ups & maintenance. So it's a matter of 'wants', if that is your dream and you're willing to pay the bill, no problem.
A friend has a new 495hp Supercharged Jag convertible - I've taken it for a drive. Top goes up/down in 11 seconds, it corners scary flat (computerized suspension control), zero to 60 in about 4 secs w/o even squeaking a tire (computer equalizes traction). It's a blast to drive - but I don't really want to own it, it needs a lot of attn/money to keep going).
As for the house DP (and a car DP) I don't store money in savings - we have a large Taxable SP500 fund, the money is available in one day for needs/emergencies. The criticism is that I could be forced to sell in a 'down' market - but after about 40 years of doing this, the 11%/yr return has FAR outpaced any forced sales. I normally make the smallest DP that I can negotiate. The US mortgage provides some of the cheapest capital in the world, all other nations require 10 yr 'resets', etc. Only in the US can the average person go to a bank, ask for a $400,000 loan, ask for a 4% fixed rate, ask for 30 years, full amortization with no balloons, prepays, etc. I get the biggest loan, longest period, fixed rate. (We had several rental houses, all were bought that way over the past 44 years).