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I live in a college town with lots of demand for rental properties but also very high housing prices. I'm looking at $250K+ for the kind of property I want (duplex so I can rent part of it and recoup mortgage money). I earn $110K salary, 10% goes into my 401K, and after tax withholdings my take-home is $5000/month. I have $37K in student loans at 3.75% interest. Right now my rent is $900/month. I also had to take out a loan to pay my taxes for the last year, which should be paid off in a few months. I spend $500/month on food, $300 on student loans minimum payment, and $500/month on other expenses -- so I have $2.8K/month to budget with. Here are my goals: 1) $30K in savings -- I'm at $6K and had to stop while repaying the loan for taxes 2) money for replacement car -- mine is 10 years old with 100K miles so I should save sooner than later 3) down payment for house 4) pay off student loans 5) save in an IRA I'm not sure in which order I should do these things, though. Should I pay off the student loans first, or build up the emergency fund? Or go straight towards saving for the house and car?
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Apr 23, 2015 15:50
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| # ? Apr 25, 2024 05:11 |
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Something seems very wrong with your numbers. If you have 2.8k extra per month why did you have to take out a loan? Your take home already seems low so it's not like a lot isn't being withheld. Are you somewhere other than the USA? With that said, it seems like you have demonstrated that you can't really manage your finances well enough to jump into a house for awhile. You make $110k but have a tax loan and still need/want to add a car payment into the mix at some point. Your retirement savings could also be better than 10%. If I were you, I would: 1. Figure out what I'm wasting money on and fix it 2. Pay off the tax loan 3. Verify that my withholding is now correct so I don't have another surprise tax bill in the future 4. Save up $20k and set it aside as an actual emergency fund (NOT a "may as well buy a car or house with it" fund) 5. Buy a car 6. Increase retirement savings 7. Save for a downpayment on a house
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Apr 23, 2015 16:08
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What type of car do you have? A car built in 2005 with 100K miles should probably last several more years and miles (200K+) without major issues unless you got a crappy car or are very unlucky. I'd put this at the bottom of your list unless it is somehow very broken. I have a 2000 Ford Focus with 150K miles and it still runs fine, even if it shakes a little bit more than newer cars and isn't quite as shiny.
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Apr 23, 2015 16:21
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Droo posted:Something seems very wrong with your numbers. If you have 2.8k extra per month why did you have to take out a loan? Your take home already seems low so it's not like a lot isn't being withheld. Are you somewhere other than the USA? I use YNAB and track all my income. I had the massive tax liability ($9K) because of two reasons: 1) my withholdings were hosed and B) I sold a bunch of stocks (and dumped the money directly into my student loans). I think A should be fixed now -- my pay checks are equal to what they were at the job I held last year, even though my new job pays $20K more. Where do the student loans fit into your plan? Should I accelerate the payment to avoid interest? And when you say "increase retirement savings" what do you mean? I was planning on maximizing an IRA in addition to the 10% I already save. Is that good enough? Mind_Taker posted:What type of car do you have? A car built in 2005 with 100K miles should probably last several more years and miles (200K+) without major issues unless you got a crappy car or are very unlucky. I'd put this at the bottom of your list unless it is somehow very broken. I have a 2000 Ford Focus with 150K miles and it still runs fine, even if it shakes a little bit more than newer cars and isn't quite as shiny. 2005 VW Jetta. It is in fine mechanical condition, but my last car poo poo the bed out of nowhere so I don't want to be caught by surprise again.
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Apr 23, 2015 17:10
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ashgromnies posted:Where do the student loans fit into your plan? Should I accelerate the payment to avoid interest? At 110k income, your student loan interest is generally not going to be deductible so I would probably pay them off as 6.5 in my list, unless the perfect house that you just had to have came along first. As far as your 9k tax liability.. that seems like a lot due to stock sales considering you didn't even fully pay off your loans (did you realize 60k of gains? Some young people screw up and think they owe tax on the total amount of stock they sold instead of just the capital gain on it, so I thought I would mention it). As far as your withholding... if you are making 110k and only clearing 5k/month then you are basically losing 50k of your salary which seems a bit high. You have: $11,000 to 401k $8,415 to FICA $18,000 to federal tax ???? to state tax So you are at $37, 415 plus state tax, so I would think your takehome should be closer to $5,500+ per month.
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Apr 23, 2015 17:26
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Droo posted:At 110k income, your student loan interest is generally not going to be deductible so I would probably pay them off as 6.5 in my list, unless the perfect house that you just had to have came along first. For one two-week period: Gross pay: $4,230.77 Tax withheld: FED WTH $753.23 FICA $257.51 MEDFICA $60.23 STATE $158.54 == $1,229.51 Deductions/Benefits: 401K $423.08 MED $73.92 VISION $3.44 == $500.44 Net $2500.82 Re: the stock thing... I wound up netting $12K, so I assume ~$4k of taxes came from it.
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Apr 23, 2015 18:08
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ashgromnies posted:For one two-week period: At 110k income, I'd save ~10% in your 401k and max a Roth IRA annually. That gets you to ~15% of gross saved. Sounds solid. You need to reign in your budget so you can build an emergency fund and hit your other goals.
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Apr 23, 2015 19:24
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SiGmA_X posted:Why would 12k in stock sale result in 4k tax? Was this all STCG? More info is def needed. Yep, it was all short term capital gains, basically I had stock options at a company and had a three-month period after leaving where I could choose to purchase them or not. Since the value of the stock on the market was 15x my strike price it seemed like a good decision. I didn't have the money sitting around to purchase and hold on to the stocks so I had to sell immediately to cover the cost of executing the options.
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Apr 23, 2015 19:50
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You're netting $5000 every two weeks, not every month. $5000 a month is $60,000 a year; $5000 every two weeks is $65,000 a year. So, there is no straight-up "right" answer to this. It's going to largely depend upon your preferences. I strongly recommend looking through the homeownership thread in this forum before deciding. Since you didn't say anything about any other income or another person, I'm going to assume you're single. I would say the big reason you'd want to start going for the house immediately would be the lifestyle benefits; being able to do whatever the gently caress you want to your own place, having space that's yours, etc. Being able to lock in your housing costs in an area with climbing housing is good, too, but those aren't necessarily a forever thing. Also take into consideration the stability of your job, and the likelihood you'll want to move in the next ten years or so. 2005 VW Jetta is a pretty reliable car, I think. If I were you, I'd just bump the "emergency" savings to $35k-$40k, so that you can afford to flat buy a used car if something happened to it and still have a sizable emergency fund. So, you're currently just under the phaseout for Roth IRA income limits. That means saving money for a house instead of putting it in a Roth IRA is a significant opportunity cost, especially if you expect your income to go up in the next few years. The same goes with paying down your student loans. It's not a "no-brainer" per se, but I'm inclined to say maxing your Roth IRA contributions at least would be a good idea. You'll see some serious long-term benefits out of that. Student loans vs. down payment is more of a tossup, and I'd say lifestyle factors (i.e. how badly do you want to own a house) would be a big deal for that; the economic side isn't clear-cut, since the monetary benefit depends a lot on where housing/rent prices go, and if they go up, how quickly they increase. Buying a house is higher risk with a potentially higher benefit, paying down the student loans is the "safe" path but leaves you renting for longer.
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Apr 23, 2015 20:05
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Thanatosian posted:You're netting $5000 every two weeks, not every month. $5000 a month is $60,000 a year; $5000 every two weeks is $65,000 a year. No I'm not, I see my paychecks :/ I receive two paychecks per month, for $2500 net each.
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Apr 24, 2015 15:58
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ashgromnies posted:No I'm not, I see my paychecks :/ You are either getting 26 paychecks a year, or you are not making $110k, based on the numbers you posted.
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Apr 24, 2015 16:08
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ashgromnies posted:No I'm not, I see my paychecks :/ Do you receive your paychecks on set dates? Or is it just every other Friday or something like that. Because yeah, you're getting 26 checks in a year OR you are making $101k.
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Apr 24, 2015 16:14
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No Butt Stuff posted:Do you receive your paychecks on set dates? Or is it just every other Friday or something like that. Yeah I get paid every two weeks. 56 weeks/2 = 26 paychecks, times $4230.77 is $110K So I guess it's not exactly twice per month, but most months it is.  doesn't really matterI'm interviewing for a part-time teaching position at a local university that could add around $10K/year net. Plans are: 1) pay off tax loan 2) start contributing to IRA, throw spare income at savings until $30K 3) save $10-20K for car fund 4) save for house down payment ($60K is 20% of 300K) And I think I will continue just meeting the minimum payments on my student loans for the foreseeable future... It would be nice to get them out of the way because of the interest accumulating, but at the same time it would be nice to stop living in apartments before I'm in my fourties. ashgromnies fucked around with this message at 00:22 on Apr 25, 2015 |
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Apr 25, 2015 00:12
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Do you plan on not relocating for work/relationships? Do you have experience owning rental properties? Buying real estate especially if you are young/unattached can be a very bad idea.
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Apr 26, 2015 16:51
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Buying a rentable property in a college town isn't such a bad idea, since as long as the college is around the students will be looking for housing. He can just hire a property management company to take care of the details and rent out both halves if he decides to relocate in the future.
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Apr 27, 2015 03:21
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Aquatic Giraffe posted:Buying a rentable property in a college town isn't such a bad idea, since as long as the college is around the students will be looking for housing. He can just hire a property management company to take care of the details and rent out both halves if he decides to relocate in the future. Students are always the best renters that totally take care of where they are living and never trash places. Property management companies always have your best interests in mind and want you to make as much money as possible instead of just taking any most of the profits you'd get.
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Apr 27, 2015 16:45
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| # ? Apr 25, 2024 05:11 |
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n8r posted:Students are always the best renters that totally take care of where they are living and never trash places. Property management companies always have your best interests in mind and want you to make as much money as possible instead of just taking any most of the profits you'd get. We own a rental property in a college town. It's still standing. We did have to switch management companies after the first one kept dicking over our tenants though.
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Apr 27, 2015 23:19
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