| Just turned 30, not sure what to do with my money |
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oldguy
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quote:
No asking price is posted on Pre-Foreclosures because these properties are not formally listed on the market for sale yet. Instead, the original loan balance is presented.
That $160k was the loan balance at some point between 1966 and now, they don't say when the most recent sale occurred. Mostly, that is a phishing ad looking for sales leads, they want your name, phone, yada. Urban legend has it that you can buy foreclosures cheap and end up with great deals.
But not so much - a friend in the construction business did them to keep crews busy during the recession - he'd buy several houses - in general, he'd pay $200 for a house, put several crews in at once - flooring, int painters, ext painters, landscape, new kitchen & appliances, new bathrooms, new garage door opener, etc - spend about $35k average. Give it to a realtor at a price to turn it in about 2 weeks, sell for $260k - a $25k profit, about $15k after taxes. And then quickly put that $200k into another house - he would try to 'turn' that $200k eery month. So, if he got 12 turns a yr, he would make about $180k on each $200k lump that he was running. And if he had 10 $200k lumps going simultaneously, he could make $1.8M/yr.
But if you just bought one house to live in, you would book that $15k profit, IF you had crews available to work very efficiently. If you did it yourself on w/e's it probably lose the $15k and still be stuck with a year of work, lol.
But again - what ties you to that region - seems like you could get another $50k job and pair it with a $150k lovely home in many places in the US - and the $150k home would be bigger, nicer, newer than the $850k home in the picture. Looking out your east window - NV, UT, CO, NB, SD, IA - to name a few. Thousands of under-$100k homes for sale.
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At that point, you would start putting the $1,000 a month extra into a Vanguard account, ideally the S&P500, and continue with minimum payments on the debt until they're all paid off?
The minimum payments on your remaining loans would be $200/m less than you now pay - so you could put that $200/m + the $1000/m into the SP500. Sounds like a pretty good plan - $1200/m ($14,400/yr) invested at 11%/yr climbs to a million surprisingly fast.
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Mon Dec 15, 2014 3:38 am |
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Wino
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quote:
Originally posted by oldguy
And if he had 10 $200k lumps going simultaneously, he could make $1.8M/yr.
Ten good complete crews would also be needed. I think that you'd be lucky to get three going simultaneously.
Syz, I want to caution you again about oldguy's plan. It works mathematically, but untili you have a nest egg (cash to fall back on), it is very risky. Oldguy now has the wealth to back missteps in the plan. You do not. First, build some wealth, then you can try his plan, if you feel the need to multiply your assets.
The best way to build wealth is to eliminate debt and invest wisely. It is best, because it is safest and surest.
I once again support oldguy's suggestion that you look to places with cheaper housing. To buy your first place at over $500K is nearly impossible for most people.
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Mon Dec 15, 2014 3:56 am |
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SyZ
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http://i.imgur.com/pKqS9no.jpg
Here's a snapshot of my 401k activity (well, the market actually) for an entire year: basically, I lost 4% as of last week, but the S&P rose 9.71% (oldguy says average is 11%) - I'm not understanding why small caps and aggressive markets is rising lower than established companies without much room to grow, but I guess it's been a bad year - nothing I would worry about, as I wrote about earlier
Why am I here? I don't know. I like living < 10 miles from work in Livermore. Tracy is an hour drive each way. Fremont is an hour drive each way. Oakland is an hour drive each way and dangerous. San Leandro is cheaper, but not as nice. Dublin, Livermore, Pleasanton, San Ramon are all expensive. Danville is maybe 45 minutes away and expensive. Walnut Creek is expensive. Pittsburg, Brentwood, Oakley, Concord are all cheaper but over an hour drive away. It's not worth it to me to save a little on a home and then lose 10-15 hours of my life a week sitting on the freeway
I sat with my manager and we wrote up an internal resume for me. I said I'm looking for statistical or analytical positions. Underwriting, finance, accounting, controller's office, wherever. Preferably midwest, northwest, west, southwest, or (perhaps) New England. I don't do well with cold, so really anything where you're going to get a winter of 20 degree snow I probably wouldn't want to do.
Where are these places with $100k-$200k homes? I've looked in North Dakota, Vermont, Massachusetts, Connecticut (would LOVE to live in some of the gorgeous green/blue areas here but the weather would kill me), New Jersey, Georgia, Montana, lots of places and I don't really see much. I'd also need to find a job before moving. Then we have my girlfriend of 19 months who lives in Fremont, works in Milpitas, and REALLY doesn't want to move to Pleasanton/Dublin/Livermore/etc. We just came up with a plan yesterday where she can be 100% out of debt within 9 months and she makes about 30k a year. I'm telling her to aggressively invest in her 401k and she's stuck in the party, shop, charge phase. Which is fine, but if we stay together I don't know how I'll feel in X years when I have 90% of a down payment and she has 10% and wants to buy it with me.
It really makes me wonder. How I could have graduated at 22, worked in California making maybe $50k a year for 5 years and been totally out of debt while contributing 15-20% to my 401k. Move somewhere east, buy a $200k home and invest 50% of my income. I'd be a millionaire in net worth by 40, by myself. I'd be able to retire by 50 and do nothing for the rest of my life but vacation and ride nice vehicles and visit beach homes in different states. But I can't go back, only forward. And part of me thinks it's best to get out of debt before leaving the high income jobs of California. 35k of debt here is 35k of debt in a town where homes are 80k, but my income there will be half of what it is here. Might as well get out of debt first (another reason I'm leaning towards paying it all down)
http://www.homes.com/for-sale/san-leandro-ca/?maxprice=250000
The San Leandro area I had mentioned. Not that great of an area, some of those look like scams, but I could probably find a starter home for < $200k somewhere in a few years, if I'm still here
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Thu Dec 18, 2014 6:40 am |
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oldguy
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http://www.realtor.com/realestateandhomes-detail/301-Quincy-St_Luverne_IA_50560_M81854-09489
Near-new, $54,000. There are hundreds of these in fly-over country. But not many jobs. Nice retirement homes.
Yeah, don't go to Oakland, it is getting dangerous, they recently made nat'l news for their gang wars.
Looks like the SP500 return for the latest yr was 16.88%, Nov to Nov.
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
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Vermont, Massachusetts, Connecticut (would LOVE to live in some of the gorgeous green/blue areas here but the weather would kill me), New Jersey, Georgia,
The east coast has the same issues as the west coast - obscene taxes, uber-high real estate, and dense crowding. The fly-over states have the low taxes, LCOL, low-cost housing, open spaces. And the 'fringe states' have a mix of both. SC is nice - and NC. So is UT, NM, AZ.
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Thu Dec 18, 2014 1:56 pm |
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oldguy
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I was looking at your 401k choices. I can't tell for the sheet what ones you chose - the ones with a check mark? Looks like you could put 100% in the SP500 and not dilute your return with bonds, etc? Do you have a substantial amount or are you just starting the 401k process?
FYI, if you have $100k, that represents about $2,200,000 at age 60. Ie, much of your work is already done (the early investments make all the difference).
Conversely, if you're starting now (age 30), you'll need to invest about $10,000/yr for 30 yrs ($300,000) to get to $2.2M at age 60.
The point is - the money that you sock away early has a way bigger effect on yje outcome than money that you add later. (Another reason to retain loans and focus on investing).
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Thu Dec 18, 2014 4:06 pm |
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SyZ
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Because I had issues earlier I wasn't able to start working until late 20s and now I'm 30 and putting 15% of my 45k salary away - $6,750 a year at this point. Company matches 75% up to 5% so that's another 3.75% = $1687.50. Total I'm putting in a year (starting in January 2015) is therefore $8437.50. It currently has $3,000 in it
I've worked at other jobs and have contributed to the max the company matched (usually 5% at 100% so 10%), but I've never done anything with them. As far as I know, I've lost them as I never contacted a bank to get it transferred
Up until two months ago I had 55% in the 2050 retirement, 10% in S&P, small, mid, large, and 5% in Emerging, company stock (company stock went up 27% this year....) and International - two months ago I swapped to 75% in the 2055 target, 15% small, 5% international, 5% emerging
The 401k / Vanguard account is still confusing me. Assuming I had no debt, the plan was 15% in the 401k, and then whatever extra I'm saving a month (which would be a lot, at least $1,000) would go into a Vanguard account with a lean towards S&P500... but if I can just invest it via the 401k, what's the point of the Vanguard?
I mean, you're saying I need to invest $10,000 a year. I'm currently (well, starting in January 2015 -> December 2015 barring a raise) putting the $8,437.50. Just putting another $150 a month in it and $150 less towards loans hits the $10,000 mark. But then what am I investing in a Vanguard account for?
I.e., if I boost my 15% contribution to 19%, then we factor in the 3.75% from the company, that's 22.75% = $10,237.50, so we're at the point where, statistically, you're saying I can get to the $2.2m by 60. And getting a raise in March puts even more towards it. (for reference, what calculator are you using to do the math?)
If I then start putting $500, $600, $750 a month towards the high interest student loans, and eventually I'm down to just minimum payments on the 1.9%, 2.8% loans, what is the point of the Vanguard account? Is the 401k literally just something I never touch until I retire, and then the Vanguard account is something I can take out of when I'm ready for a down payment and have $X in it, and need $.75X for the down payment?
Essentially, I would have 19% going towards retirement and using math from the past this would translate to $2.2m at 60 (you're saying 60 and not 62, 65 ... if I could retire at 60 off this, what would it take to retire at 55? 50? When are you advocating I take SS?)
I would then have 81% to put towards loans and saving, but saving in a Vanguard account (also the S&P500) and one day when I need to take out a large amount I can withdraw it as it's fairly liquid
Side note: WF just increased my credit limit from $4,800 to $6,500, but my balance is currently $200. Is this a good sign? Bad? Does this just continue forever and this is how people end up with $50k credit limits on one card?
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Fri Dec 19, 2014 4:42 am |
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oldguy
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quote:
two months ago I swapped to 75% in the 2055 target, 15% small, 5% international, 5% emerging
OK - but scattering 25% across various stocks probably isn't helpful, the Target2055 already does that for you - so a 100% Target allocation would simplify for you.
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As far as I know, I've lost them as I never contacted a bank to get it transferred
I doubt that they've lost anything, companies are very careful about accounting and avoiding legal actions - you should get those old 401k's moved into a TradIRA at a no-load fund company.
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The 401k / Vanguard account is still confusing me. Assuming I had no debt, the plan was 15% in the 401k, and then whatever extra I'm saving a month (which would be a lot, at least $1,000) would go into a Vanguard account with a lean towards S&P500... but if I can just invest it via the 401k, what's the point of the Vanguard?
A couple reasons for the Vanguard.
(1) tax status diversity - the Tax Code continually changes, we have no idea what it will be in 30 or 40 yrs. Maybe they will do away with Income Tax and switch to Fair Tax (huge federal sales). That would make the Roths undesirable cuz you've already paid tax on the Roth money when you earned it, and then you would pay a 20% or 25% Fed Sales Tax on it when you used it. So it's better to have some investments in each of the 3 tax statuses - taxable, pretax (401), posttax (roth). That way you won't end up 100% wrong when you retire.
(2) a taxable fund is immediately available (a 401k is essentially locked away), you can use it as a backup EF, you can keep a much smaller EF (less 1% money sitting idle). The taxable fund grows tax-deferred, it's available in case of a job loss, available as a house DP, car DP, etc. And your heirs get it tax-free if there is any left.
Your $8750/yr at 11%/yr for 30 yrs would be about $1,860,000. If you direct $500/m to an 11%/yr taxable fund, that would be another $1,335,000. In general, I avoid interrupting that 11%/yr compounding - eg, when I buy more houses I try to borrow the DP (I refi one of the other houses). Same with a new car, I borrow the entire cost and leave my own money in the 11%/yr fund. But the fund is always there as backup if we need it.
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Fri Dec 19, 2014 3:25 pm |
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SyZ
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I think I just got a 2.5% raise without even doing it
I went to my old supervisor who's retiring shortly and asked if she knows the company match (what I thought was $.75 up to 5%), and she said it's either $1.25 or $1.50 depending on company profits that year ...
So I just went from 15 + 3.75 = 18.75 to either 15 + 6.25 = 21.25 or 15 + 7.5 = 22.5, which is, *ding ding*, just about $10,000. If I boost my contribution just 1% more to 16%, and it's a $1.25 match and not $1.5, that's 16 + 6.25 = 22.25 -> $10,125
And, moving forward, will only get larger as I get raises
What is a 'no-loan fund company?' Can I go to Wells Fargo and open one? Do they just look me up by my SS# and see what I have? And this would have to be separate from my company 401k, as I'm assuming my company wouldn't roll over funds from previous positions ...
If I understand correctly, then, you're saying on point 1) that the company 401k isn't being taxed and won't be taxed until I retire, at which point I'll be hit with a huge deduction (what's the tax hit on 2.2m anyways...), but my Vanguard 401k would be a traditional Roth IRA, and because I'm using take-home money which has already been taxed, when I go withdraw it at retirement there's no penalty
So, realistically, the 401k will be larger, and then taxed, whereas the Roth will be smaller, but not taxed
On point 2), you're saying that the 401k is locked away until retirement, but the Roth IRA could be withdraw from for major purchases ie a down payment in X years (isn't this, in principal, the same as taking out from a 401k? I mean, if I'm funding both for retirement...). But you don't advocate this, as you want to just grow the compound interest. Essentially, I would never really be able to buy a house, then, since I'm putting 30% + of my income just towards retirement planning
$45000 - $10000 into a 401k - $6000 ($500 a month) which has been taxed, so closer to $8000, leaving me with $27000 gross income a year. After taxes, closer to $22000. That's rough.
I can just picture myself living in a 300 sqft 1 bedroom apartment for the next 25 years driving a 7 year old Prius, and then all of a sudden I can retire at 55 with 2m in accounts while living off of $50k a year and not even collecting SS until 70. Doesn't seem normal to me, but who knows if it's right
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Sat Dec 20, 2014 8:35 am |
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oldguy
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quote:
>$10,125
Congratulations!
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'no-loan fund company?' Can I go to Wells Fargo and open one?
The no-load fund companies sell their mutual funds directly (without the 5% fee that 3rd party banks & brokers charge.) The big-three are Vanguard, Fidelity, and TR Price. I would not use WF - in general banks are good at banking - checking, savings, CDs, house loans, car loans, etc - but they are not good at investing, they have high fees, not-so-good products. Better to go to an investment company (such as Vanguard, Fidelity, etc).
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So, realistically, the 401k will be larger, and then taxed, whereas the Roth will be smaller, but not taxed
Yes. Eg, $1000 in your 401k might grow to $25,000 and be taxed by $5000, ie, $20,000 net. And $1000 in a Roth will be taxed before you invest it leaving you with $800 to invest. And that might be worth about $20,000 (tax-free). So the net, in both cases, is $20,000.
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On point 2), you're saying that the 401k is locked away until retirement, but the Roth IRA could be withdraw from for major purchases ie a down payment in X years (isn't this, in principal, the same as taking out from a 401k? I mean, if I'm funding both for retirement...). But you don't advocate this, as you want to just grow the compound interest. Essentially, I would never really be able to buy a house, then, since I'm putting 30% + of my income just towards retirement planning
I use all 3 tax-statuses. Ie, 401k, RothIRA, and a taxable account. I don't sell from the first two, I use the taxable account for that - cars, kids' colleges, rental houses. It's a SP500 Index at Vanguard. But, in general, I replace most of what I take with loans, so that account has grow quite large over the past 40 yrs (high 6 figs).
As for buying a house - over time it is less expensive to own a house than it is to rent an apt. Eg, if you spend $1000/m now it will be $2000/m in 25 yrs. If you sign up for a $250k house, the cash-flow will be about $1200 + $300 for tax/ins. And in about 10 yrs, the house will still cost $1500/m and the apt will have increased to $1500/m. And the unrealized house gain will be about $150,000 (that ads to your Net Worth). And at Year30 the house payment will end and the paid-for house will be worth maybe $1,000,000. The $1000/m 2014 apt will be costing $2500/m at Year 30 - and it will head ever upward as long as you live.
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Sat Dec 20, 2014 3:48 pm |
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SyZ
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So I need to
1) Up my 401k another 1% to hit 10k contribution yearly
2) Change from 75% in the 2055 retirement plan (it has 75% stocks and 25% bonds/safe investments) and 25% elsewhere to just put 100% in the S&P500 since it's averaging 11% a year since forever
3) Open up the Vanguard Roth account and immediately put all my past 401ks into it to get a small head start, then invest 100% of this into the S&P500 as well (which one? https://investor.vanguard.com/401k-rollover/options)
4) Get rid of the 5.8 and 6.8 student loans, and make the minimum payments on the 2.8 and my 1.9 car loan
5) Somehow do 1) -> 4) and still save for a down payment on a home
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Sat Dec 20, 2014 9:51 pm |
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oldguy
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1) Yes
2) Yes
3) No, not a Roth, that would be a taxable event. Roll them into a Traditional IRA. BTW, this Trad IRA is where all of your retirement money will reside some day - each time you change jobs you'll add an old 401k to this - and when you retire, your last 401k will go here.
4) If you insist - lol. Personally I would probably keep them, at least the 5.8% one.
5) Open a taxable fund at Vanguard and invest in the SP500 fund. That way your "DP savings" will be earning 11%/yr, longterm average. I've told my kids - save up for a house DP and then DON'T use it for a DP, borrow a DP and leave your own money growing at 11%. (That gives you bk protection - the bk's a few yrs ago happened to people who were over-extended - but if you do a zero DP but have the money in the bank, you won't go bk).
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Sat Dec 20, 2014 11:53 pm |
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SyZ
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It looks like I need a minimum of $1,000 to rollover from my last position and I don't know if I have that
Why a traditional IRA? I thought we wanted Roth because my 401k is not taxed, and the Roth is
I think I misread - I remember something about not wanting to take out any loans over 5% interest, so I assumed you would want to pay off the 6.8% and 5.8% ones ... although, mathematically, it's still below the 8-11% I would get in the S&P500
What about consolidating the loans if I really am going to just make minimum payments?
Confused again - you're saying use the Vanguard as my savings, but to gain 11% and not .00001%. Then when I actually have a down payment available, don't actually take out the money. Take out a loan (so I'm taking out a 20% down payment loan and then also a mortgage? ..) and just continue to keep my money growing at 11%. Why even wait until I have a down payment in the account if I'm not actually using the money in the account? This part is very confusing. And does bk mean bank? Broke?
Is the account you're describing 3) the same as the one in 5)?
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Sun Dec 21, 2014 1:33 am |
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Wino
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You are ignoring risk. The S&P 500 can go DOWN as well as well as UP. You can only do oldguy's plan if you have the temperment for it. You must be willing to watch it drop by 50% while continuing to buy, and NOT pulling out the money. Can you stomach watching $100,000 becoming $50,000?
If you do that, you'll PROBABLY be OK. Of course, until it goes back up, you won't know.
Get rid of both 5%+ loans.
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Sun Dec 21, 2014 2:03 am |
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oldguy
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quote:
Then when I actually have a down payment available, don't actually take out the money. Take out a loan
Yes - that is how you manage risk. Like wino says - if you buy with a zero DP and anything goes wrong you will lose the house (BTW, bk = bankrupt). So first you save up the DP, but then DON'T use it, you hold it in reserve (and earn 11%/yr, ie, double it about every 7 years). And you also manage your business moves - eg, if your fund goes down 50% (as wino says) be flexible enough to wait a yr or two. And if it happens to go UP 50% in a year, you can move your plans up. In summary - never try to time the Market - but time your business moves to accommodate the Market. By managing this way, you are actually using 11/yr money to meet your shortterm (.0001%) needs.
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Sun Dec 21, 2014 2:36 am |
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SyZ
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As of now, I have 13.5k debt that's greater than 5%, so if I got rid of that and was just left with the rest my minimum payments would be about $225 and I'd have about $20k worth of low interest, low risk debt
By the way, I've noticed that when I put a huge payment on a loan, my minimum payment the next month is almost non-existent. My one set of loans is usually $140 a month, after my $500 extra last month it's $30 this month. I don't like that, because now if I just pay the $30 instead of $140, all the interest I was trying to save on just racks up again
If I'm not taking money out of the Vanguard, even for a down payment, what does it matter if it goes down 50% in a year? I'm really not understanding what its purpose is
Yes, I get the 401k is not taxed, so when I retire I'll lose a lot of it. And yes, I know the IRA is using my after tax take home pay, so it's not taxed again when I remove it. But why am I doing this: So first you save up the DP, but then DON'T use it, you hold it in reserve (and earn 11%/yr, ie, double it about every 7 years).
If I default on the loan, I can't pay it off in a last ditch, remove everything from the IRA to quickly cover the loan type thing. The loan is for 80%, my IRA is the 20%. Why do I need to wait until it's at 20%, what does this do for me?
Everything posted after that was lost on me, the only thing I'm saving for at this point in my life and the foreseeable future is a home. I'd want to buy when the market is low, which (I believe) is independent of the stock market. Unless the only time the market is low is when it's a bear market and the only time it's high is when it's a bull market, which just seems to counteract itself
I mean, unless you're basically stating, regardless of what the real estate market is, wait until there's an amazing 50% increase in the S&P500 for a year, so that my 50k goes up to 75k. Then, I can basically say I 'saved' an extra 25k that year and now is the time to take out a mortgage. I can understand that, I don't understand why I would want to take out two loans, one for the down payment, and one for the mortgage. It's already next to impossible on my income to afford a mortgage, even with high 700 credit
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Sun Dec 21, 2014 4:49 am |
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