Retirement
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04-09-2014, 07:57 PM
RE: Retirement
(04-09-2014 07:15 PM)goodwithoutgod Wrote:  invest early and hard. ... 15-20% of your pay is what you need to do, and I can't afford that until the wife is working.

Best of luck

Ain't gonna work for MuffinStuffin 'cause 15-20% of his income is just a couple of servings of honey chicken noodles.

#sigh
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04-09-2014, 08:16 PM
RE: Retirement
(04-09-2014 06:26 PM)earmuffs Wrote:  Seriously though, I don't think it's that hard.
You just need to a) not have kids b) don't get married because when you get divorced there goes half your shit (unless they're richer then you in which case this becomes a valid strategy) c) don't buy an expensive car/vehicle. Car's are a huge money waste. They don't hold value and their purpose is the same if they're $500 or $50,000. Exceptions obviously, but as long as you have one that is fuel efficient and reliable then it doesn't need to be fancy. d) Have as big as possible deposit when you buy a home and don't buy one at your limit if you can find one that you like and fits your brief at a fraction of your limit. And never go over your limit. e) put money aside in a savings account (that you can't touch until a specific date/age) each pay check. Even 2% adds up, especially with interest. f) before you buy something on a whim stop and think, "do I need this or should I instead save the money". g) go on cheaper holidays and look out for deals and cheap flights. Often if you book several months in advance you can get it alot cheaper. h) get one of those things that tell you how much power you're using and use it to conserve power. Turn off lights, unplug stuff etc.. i) shop around, find cheaper power companies, phone companies etc.. j) shop at cheaper stores k) Don't buy lots of cloths, just what you need. l) Walk, don't drive. m) Cook, don't get fast food (plus it's healthier) n) some times more expensive is cheaper. ie: shoes (because they last longer), bulk buying. o) be on the benefit for 4 years, that'll teach you how to save.
Yep, I agree with almost all of these and do almost all already. I'm all about value over price, and "do I really need this?". There are other tips, but listing them all off....well I'm not gunna do it right now. I'm not earning a huge income, just "good". If I wasn't doing these things I would have no chance at retiring early.

I do plan to have kids and get married though. Which throw a small wrench in, but it's what I want in life. Can't forego my life goals just for early retirement haha.

I prefer fantasy, but I have to live in reality.
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04-09-2014, 08:24 PM
RE: Retirement
(04-09-2014 07:57 PM)GirlyMan Wrote:  
(04-09-2014 07:15 PM)goodwithoutgod Wrote:  invest early and hard. ... 15-20% of your pay is what you need to do, and I can't afford that until the wife is working.

Best of luck

Ain't gonna work for MuffinStuffin 'cause 15-20% of his income is just a couple of servings of honey chicken noodles.

Actually each serving of honey chicken noodles would be only 5% of my income.
So a couple would be 10%, not 15-20%.

Drinking Beverage

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04-09-2014, 08:39 PM
RE: Retirement
(04-09-2014 06:26 PM)earmuffs Wrote:  Seriously though, I don't think it's that hard.
You just need to
  1. not have kids (Get a vasectomy or tubal ligation)
  2. don't get married because when you get divorced there goes half your shit (unless they're richer then you in which case this becomes a valid strategy) (Check your state's community property laws.)
  3. don't buy an expensive car/vehicle. Car's are a huge money waste. They don't hold value and their purpose is the same if they're $500 or $50,000. Exceptions obviously, but as long as you have one that is fuel efficient and reliable then it doesn't need to be fancy. (Learn to thing of a car as a consumable item, like a roll of toilet paper.)
  4. Have as big as possible deposit when you buy a home and don't buy one at your limit if you can find one that you like and fits your brief at a fraction of your limit. And never go over your limit. (I don't agree. Every dollar you pay in rent is a dollar you will never get back. If you are a veteran you can buy a house with no money down. You can get an FHA loan for only 3-4% down.)
  5. put money aside in a savings account (that you can't touch until a specific date/age) each pay check. Even 2% adds up, especially with interest. (401k or IRA)
  6. before you buy something on a whim stop and think, "do I need this or should I instead save the money". (But remember, you can't take it with you. Don't get so wrapped up in saving that you forget to enjoy your youth.)
  7. go on cheaper holidays and look out for deals and cheap flights. Often if you book several months in advance you can get it a lot cheaper.
  8. get one of those things that tell you how much power you're using and use it to conserve power. Turn off lights, unplug stuff etc..
  9. shop around, find cheaper power companies, phone companies etc.. j) shop at cheaper stores
  10. Don't buy lots of cloths, just what you need.
  11. Walk, don't drive. (Consider a bicycle or small motor scooter.)
  12. Cook, don't get fast food (plus it's healthier)
  13. some times more expensive is cheaper. ie: shoes (because they last longer), bulk buying.
  14. be on the benefit for 4 years, that'll teach you how to save. (What's "the benefit"?)

Sapere aude
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04-09-2014, 08:46 PM
RE: Retirement
Quote:(Check your state's community property laws.)

Oh, forgot to add that bit, thanks for the reminder. And don't live with your life partner because after 2 years they'll take half your shit. Married or not.

Quote: (I don't agree. Every dollar you pay in rent is a dollar you will never get back. If you are a veteran you can buy a house with no money down. You can get an FHA loan for only 3-4% down.)

Never buy a home no-money down. Yuck! Rent can be a waste of money I agree, but if you have a high mortgage you are going to be paying a lot in interest which is most certainly wasted money. Plus, rent is cheaper. Even if you have a small deposit the point about buying a cheap home still stands. The point is that you want as low as possible mortgage because the interest is the part that kills you.
Some times it is better to rent and save then buy now and pay lots of interest.
If buying now costs you an extra $10,000 in interest but renting and buying later will cost you only $8,000 in renting then it's better to rent and buy later.

Quote:(What's "the benefit"?)

Benefit = welfare. We call it benefit here.

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06-09-2014, 04:50 AM
RE: Retirement
(04-09-2014 08:46 PM)earmuffs Wrote:  Never buy a home no-money down. Yuck! Rent can be a waste of money I agree, but if you have a high mortgage you are going to be paying a lot in interest which is most certainly wasted money.
Interest is simply rent on money. If you rent money the amount you owe goes down while the value of what you bought goes up, at least that's usually the case with real estate. If you rent real estate it's value goes up. Your landlord profits both by 1)the increased value of his property and 2)the increased amount he can charge you for rent.
(04-09-2014 08:46 PM)earmuffs Wrote:  Plus, rent is cheaper.
That has not been my experience. I admit that the mortgage on my first house was more than we had been paying in rent, but not much. Plus we moved into a much bigger house than the apartment we had been renting, so it was worth it.
(04-09-2014 08:46 PM)earmuffs Wrote:  Even if you have a small deposit the point about buying a cheap home still stands. The point is that you want as low as possible mortgage because the interest is the part that kills you.
Some times it is better to rent and save then buy now and pay lots of interest.
If buying now costs you an extra $10,000 in interest but renting and buying later will cost you only $8,000 in renting then it's better to rent and buy later.
Buying later will not save you money in interest because inflation will drive the price of housing up. The rate at which you save and earn interest on those savings will not keep up with the increasing value of the property you want.

This is what mathematicians call an optimization problem. Do all the math and you will find the person who utilizes a government guaranteed loan program to buy a home with little or no down payment is way ahead of the one who saves for years to make a big down payment.

The big unknown in this type of problem is inflation. How much will the price of the house raise before you have saved the down payment? How much will it be worth when you sell? Can you expect your income to raise at the same rate?

Suppose you want to buy a $100,000 home. To get it for nothing down you have to persuade the seller to pay all closing costs, yours as well as his. To do this he demands (and you agree) on a selling price of $105,000.

Here is the U.S. interest rates on mortgages are under 5%. No telling how long that will last. The monthly payment on a $105,000 loan for 30 years at 5% is $536.82. The bank will demand that you buy hazard insurance. That's $50 per month in my case. Property taxes are $100 per month. That's a total monthly payment of $686.82.

The mortgage payment is forever fixed at $536.82 per month. Taxes and insurance can be expected to raise with inflation. What will be your situation in 30 years?

You will have paid $193,255.20 for the mortgage.
You will have paid $120,000.00 in taxes and insurance.
Total $313,255.20

The house will be worth $432,000. A net profit of $118,775 on zero initial investment.

If your strategy is to save up a 20% down payment (which conventional loan makers demand) how long will that take.

A rule of thumb is that a $100,000 house rents for $1,000 per month. I think it's realistic to get one for $800 per month. Immediately you are paying $113.18 more by renting. But lets assume you can put $1000 per month into housing, $800 for rent and $200 to save.

How long until you have the down payment? Eight years! That's assuming
  • an inflation rate of 5%.
  • your income keeps up with inflation.
  • your investments return 10%
By that time the house you want will cost $140,000 and the down payment will be $28,000 of which $7,000 will go for closing costs. The amount you will have to finance will be $133,000. The mortgage payment will be $751.55, taxes and insurance will be $220 per month, a total of 971.55 (down from the $1100 per month you will be paying in insurance by then).

You will walk away from the closing with a house worth $140,000 and $21,000 in equity. You will have paid $91,000 in rent and $7,000 in taxes on your investments. That's $98,000 to buy $21,000 of net worth.

Where will you be in 30 years?

You will still have 8 years to go on your mortgage. You will still owe $48,000 on the note. It will be worth $432,000 and your equity will be $384,000.

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06-09-2014, 06:42 AM
RE: Retirement
I agree that buying a house as early as possible is good strategy.

If you are single (and at that stage you still should be) you can buy the crappiest house on the block. I did that when I was 18. The thing wasn't selling because it was half a step away from falling down. It was in a lower middle class neighborhood, the other houses were not spectacular but well taken care of. I approached the owner directly and proposed to him that I would buy it from him, with a tiny down payment for one year, the rest of the down payment and the entire balance being due a year from purchase. He was sick of owning the house (had inherited it) and agreed. I moved in and started working on it like a maniac. I took risks, I used credit cards to buy supplies. Remember, I was 18, I had no money. My income came from tutoring. At the end of the year, the basics were all working, the floors were solid, and with paint and cosmetics I had raised the value by 30%. The bank liked motivated buyers and lent me the money, keeping back the closing costs. The seller was happy. I was happy. I had a pocket full of cash left over after paying off the credit cards.

I used that pocket full of cash to start a tutoring agency. And an entrepreneur was born. (actually I started my first biz in grade school, but that's another story.)

I sold the house 10 years later for 3 times the purchase price. The market was booming and I got out and bought another rotting house in a much better neighborhood. I had a big chunk of money left over and used it to fix that place up.

The sale of the first business funded the second one. And so on and so on. After the third house and 4th business I was able to buy a house and start the next business without taking out a loan. No more mortgages. All that time I put 10% of income and 15% of profits from sales in savings.

A house is not just a place to live. If it is money you want, you can use houses as a starting point. Of course you have to learn a lot of stuff to make it all work, but I have always enjoyed learning new stuff. Today you have the added advantage of the web to look just about anything up. I had piles of books to work from. The younger you are when you start, the better. You do have to be willing to get your hands dirty and put in physical work if you are going to make a house your starting point. But most importantly, in anything you do, you need to research, research, research.

[Image: dobie.png]Science is the process we've designed to be responsible for generating our best guess as to what the fuck is going on. Girly Man
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06-09-2014, 07:06 AM
RE: Retirement
5 minutes ago I was 19 years old. After reading this thread I'm still 19 years old, but depressed.

Saints live in flames; wise men, next to them.
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06-09-2014, 07:43 AM
RE: Retirement
(06-09-2014 06:42 AM)Dom Wrote:  I agree that buying a house as early as possible is good strategy.

If you are single (and at that stage you still should be) you can buy the crappiest house on the block. I did that when I was 18. The thing wasn't selling because it was half a step away from falling down. It was in a lower middle class neighborhood, the other houses were not spectacular but well taken care of. I approached the owner directly and proposed to him that I would buy it from him, with a tiny down payment for one year, the rest of the down payment and the entire balance being due a year from purchase. He was sick of owning the house (had inherited it) and agreed. I moved in and started working on it like a maniac. I took risks, I used credit cards to buy supplies. Remember, I was 18, I had no money. My income came from tutoring. At the end of the year, the basics were all working, the floors were solid, and with paint and cosmetics I had raised the value by 30%. The bank liked motivated buyers and lent me the money, keeping back the closing costs. The seller was happy. I was happy. I had a pocket full of cash left over after paying off the credit cards.

I used that pocket full of cash to start a tutoring agency. And an entrepreneur was born. (actually I started my first biz in grade school, but that's another story.)

I sold the house 10 years later for 3 times the purchase price. The market was booming and I got out and bought another rotting house in a much better neighborhood. I had a big chunk of money left over and used it to fix that place up.

The sale of the first business funded the second one. And so on and so on. After the third house and 4th business I was able to buy a house and start the next business without taking out a loan. No more mortgages. All that time I put 10% of income and 15% of profits from sales in savings.

A house is not just a place to live. If it is money you want, you can use houses as a starting point. Of course you have to learn a lot of stuff to make it all work, but I have always enjoyed learning new stuff. Today you have the added advantage of the web to look just about anything up. I had piles of books to work from. The younger you are when you start, the better. You do have to be willing to get your hands dirty and put in physical work if you are going to make a house your starting point. But most importantly, in anything you do, you need to research, research, research.

I think I would love to flip a few houses but I'm afraid of becoming like so many people on HGTV who get way in over their heads! My aunt and uncle have done it a couple of times though, as far as I know they were successful. It seems so intimidating.

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06-09-2014, 07:48 AM
RE: Retirement
- Had a 401k since I was 18. It has snowballed pretty well.
- Also have some dividend stocks I've sat on. While they don't make tons, they also snowball since I often buy more stocks with the dividends. Eventually, I hope to have enough that it's a nice quarterly bonus for, "I feel like going and buying some nice shit."
- Also save money in my own savings account for emergency/happiness investment purposes

Had my own business on the side I ran for 3 years. Was good at it. Dissolved it due to divorce, will start it up again. Extra income. Primary job is good with benefits, side business works as well. Altogether was working 6 days a week, but I like money. Something has to pay for my toys.

Don't really have a "plan b", I just plan on working my ass off to do what I want, and have done so ever since. When things get slow, I start another business, do it for a while till I am interested in something else. Last 3 years though I think I finally found my niche. Bought a house about 6ish years ago, maybe it was 5. House isn't huge, it's small, fits within my means and I'm fine with it. Plan on paying it off early and having no debt. Paid off my cards and loans in my mid 20s, promised the house would be all I had in debt. So far I've kept that goal 100%. I own my vehicles outright, feels good. Disposable income is shoveled into savings and more dividends.

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