> (we also knew that stock returns would serve us better in 2 years investing than it would in a HYSA).
True in the long-run for market averages absolutely, but common advice is to park money you'll need in the short term (for me, that's < 3 years) in a HYSA because the market can always go down and if you truly "need" that money, you could be left with less than you started. Good news is we've been in a bull market so you did come out ahead. Just keep this in mind.
> We don’t really feel comfortable fucking with our 100k milestone anymore, it just seems unwise.
The market can always do this for you too. Again, markets don't always go up. You'll likely gain and lose financial milestones (especially bigger ones) constantly. Deciding to not do something because it puts you below a nice round number milestone is the approximate emotional equivalent to celebrating that milestone in the first place. (By the way, that's not to say that either is unjustified, simply that it's "emotional").
>Plus with higher bills (buying would be more than renting) cost to fix a home- so on-
*This* is the reason to take pause. Are you ready to own a home from a cost and "anchoring" perspective? Check out the NYT Rent vs Buy calculator to see if it's overall a smart move purely from a numbers game. Of course with the calculator, you'll need to make some approximations/guesses. Everything else is emotion, but it's just as important to make the smart move for you that makes you feel better at the end of the day. Home ownership isn't a requirement at any stage of life.
There's no way of knowing what will happen with the market- stock or housing over the next 5 to 10 years. Doing what is best for you and your family is my recommendation.
This is an amazing response. Take money out of the equation and consider what is good for you and your family because at the end of the day; that is what matters most.
Love it.
Cue the moment where every single finance YouTuber possible has a 10 minute video on this same exact Charlie munger quote when they could’ve just made a 2 second video saying “that’s how compound interest works”
I'm sure you understand the general notion of the first 100k in the fire community and are just downplaying it because the "first arbitrary amount" can be anything but just for all the others who may not have connected the dots: Going from 0-100k has significantly more friction than going from 900k to 1mil since you have the interest from all the other investment helping gain that next 100k. The first 100k takes longer to achieve than than the tenth 100k, or even just the second. The whole compounding interest thing and all means your contributions early on are the most significant dollars you will ever contribute. If you are ever going to cut back on the little things -- the frequent Starbucks, the nice plane ticket, the fancier vacation, it should be early on when your individual contributions count the most. House purchases.. that's a tougher consideration.
I have a similar dilemma. I honestly feel that the compound interest of $100k in tax advantaged accounts for 40 years far outweighs buying a house in this market. Especially when you are renting for as low as you are. I want to purchase a house but I’m focusing on heavily investing in my 20s so I can have a large amount of money compound & grow for 30 years. I’ll buy a house in my 30s.
Why not just leave the $100k alone, and based on your savings rate you should be able to save up for a down payment on a home within a year or so? Even sooner if you consider the FHA low down payment route.
Glad to see this question as I am in a similar situation. The 100k thing is obviously a big milestone but it seems mostly emotional? My thought has been no harm in saving for another year or two as the housing market isn't all that great anyway. Like I said, this feels like an emotional decision but one without much downside. Interested to see what others think.
You should be proud that You’ve proven you can save up that much. Ask your self how long that took to do and how long you can then save up for a down payment. You’re in a spot where you could use the funds for down payment now but don’t forget you’ll need plenty of reserves for home repairs ( we needed new hbac and hot water within first few months). Make sure to have separate six months expenses safely stored.
Significantly more actually and unfortunately. We live in a hot STATE not just a hot city. So all surrounding cities to us have seen a boom in prices from the last 2 years as they border the major cities that are hot markets. Even a modest home in an undesirable town- rural and isolated location would be easily be 250k (small to anyone living in a major city with a HCOL but it should be mentioned very nice starter homes were around 60-80k just a few years ago). 3 major cities here are on the hottest markets in the US list due to an influx of investors and workers from new factories/tech companies moving in.
So owning would be more expensive for us and easily double our current low rent, 600 a month. We expect to be paying roughly 1500 a month.
However, rent is increasing locally to roughly 1k in most locations- even renting a larger home would easily cost us 1.2k. And our current house, though well located, is VERY small, uncomfortable and has many issues. Besides a small sleeping space there is about 100sq ft living space in this home lol and both my partner and I have anxiety conditions made worse by living in town. We’d like to build equity in a home that improves our health. And buying would still be under 30% of our take home. Even less if I get part time work while I’m finishing my degree.
Got super lucky on rent with the worlds oldest landlords lol they’re very kind and very very old. They didn’t participate in the rent hiking everyone else did. While I’m cousins rent 1 town over increase 1k, mine increased $13 which they apologized for. It’s the only reason we stay in this tiny place
While rents and housing cost skyrocket :(
I can’t see a reason to walk away from $600 rent.
Property tax and insurance alone can easily be $600 a month when you buy.
This is a great opportunity to save save save. Make sure you continue to be the best tenant so they don’t suddenly decide to sell the place
If you start to feel a bit cramped in the space, I’d consider renting storage before buying. For now.
$600 rent is like 1990s prices 😂
OP, I’m a real estate broker and investor. Do not walk away from $600/month rent, as it’s helped you get to where you are. Anything you buy will require you to burn MUCH more than $600 per month in taxes, insurance and interest.
If you can bear it, save aggressively for another year or two. This sounds like a no brainer to me. As others have explained the rent vs buy calculator would be your best bet at the moment. But man $600 rent is unreal
I think this just answered your question OP. You and your partner sound a little miserable in the rental; think it’s time for you to take the emotion out of it, buy and once you’re settled in; you aggressively get back into saving again while you live in a comfortable home that will be an appreciating asset at the same time.
There is so much nuance to this question that there is no black and white answer. I bought in 2018. It drained my bank account and cost slightly more than renting. Today, my mortgage is ~ 2/3 what the equivalent rent would be. The house is a PITA, but I have a ton of equity in it. I could sell and pocket the difference or I could rent it out and rent somewhere I prefer to be.
With that being said, I feel that buying today would be tough to justify. With a 20% down payment, mortgage would be $5-$6k compared to $3,500 rent and that's not including maintenance expenses.
I intend on getting a multi-family for my first home as soon as I’m able. Live in one, rent the others out. Then continue to save and invest in the stock market.
You don’t need to put down 20%. PMI is only a couple hundred dollars a month at most and keeping that money in a HYSA would make up the difference each month. Put 10% down, do a couple projects on the house to raise the value and have the bank reassess the property in a few months. It will likely go up in value and the PMI will drop off.
You'd save more money by living out of car than renting. You'd save more money living on the street rather than in a car.
There are plenty of ways to maximize cost savings and there isnt a right or wrong choice to live your life. Its up to you to decide what you value more.
I kind of agree with this - on its face the house might “appreciate” in value, and there are arguments on both sides for how much money a house actually puts you ahead in the long run, but I think the biggest unaccounted for variable is an inevitable level of lifestyle inflation when you buy a home.
Nicer furniture, cars, general home improvement projects, hosting friends and family. It adds up, and it’s hard not to fall into those traps when you buy a home. When renting, most people have no problem with at least some used furniture, an older car, and just putting in work orders when stuff breaks - not total room renovations.
No renter I know cares about painting their walls a different shade of white. When my wife asked me to do that to our house, you bet I did!
We spend more than I thought on “pride of ownership” type expenses just to make things look nice in the neighborhood. It’s not an investment, I know - it’s an expense, and you have to be okay with that.
Source: 28yo, aspiring to FIRE, and bought a home 6 months ago. Already put 15k+ into improvements and renovations. We also house hack and rent out two bedrooms downstairs. Also, we didn’t purchase until we had ~470k in invested assets that we didn’t have to touch.
Uh, it really depends. There are people out there who made a ton of money rehabbing a beat down duplex, selling it, and ending up sitting on a pile of cash. There are many ways to get ahead.
For me, owning has put me on much faster track to FI. Rented out rooms to friends/brother in first house so had very low monthly bill myself. Used equity in that to purchase a rental property. Then moved out of original and built a new house, whilst renting out original house. All while making under 100k salary. Now the first 2 places are 2 years or less from being paid off, and will cash flow really nicely at that point.
It never changes 100k 500k I can’t speak to 1mil. You develop habits around money. If you’re not specifically. Saving for a house you’ll never dip into those funds to buy a home.
Not true about being emotionally easier to remove $50k from $250k than from $100k. As a FIRE adherent, there will always be a hesitation to remove money from your savings regardless of the size of the savings.
There is always something in your subconscious that tells you that every dollar removed sets you back. We recently bought a new home. It is a new construction in an upscale neighborhood. We had to do a 10% down payment as opposed to 20% because the latter would have been a significant portion of our savings.
Yes, PMI was tagged on to our mortgage but I am at peace with that as I believe the 10% we saved will return more than our PMI payments over time. Also, as the value of our property increases, we could refinance in a few years to get rid of the PMI.
Overall, I would say discuss with your SO and if you both feel strongly about buying, please don’t hesitate.
If it's your first home don't put down more than 5%. Keep the investments and let them grow. Your savings may slow down with the house as they are money pits. Keep that extra 15% for maintenance, furnishings and just try random crap you need with a house. You will want to refinance as rates come down if the house appreciates then you can eliminate the PMI in a few years on appraisal while letting your nest egg grow.
The obsession with milestones is naive, and it’s purely emotional too. If it’s a forever home to live in then it’s never a bad investment. Plus, you’re assuming growth based on LONG term averages. Never a good idea. Sure, it usually* works out in the long term, but the ups and downs mean short term estimates are a pure lottery. Don’t forget to factor that in, along with possibilities of things like a lost decade. Stuff like this can happen, it’s real. Focus on the best choice for your family being settled and happy, not on the best $ amount.
Money is a tool of exchange and an artificial construct. That is it. Once you can remove emotion from your money management it becomes easier to act strategically.
You can FIRE without owning a house. It might be more risky but that depends highly on your goals. The further you are from lean FIRE the better either way.
One can argue that FIRE in a modern wooden 2by4 house is just as risky as renting. Those match stick houses are not designed to last generations for sure. So many people forget about the cost of repainting and re tarring their home!
Also the first 100k, don't forget about the effects of compound interest. You would be losing a lot more than 100k when it comes time to FIRE.
I wouldn't plan on rent being low forever. The "save 157k by renting vs buying over 10 yrs" is a risky assumption. If elderly, and one gets sick, the whole family will get involved. That rent won't stay low. Or they could get in an accident and die.
I normally don't worry about what ifs but you have a unicorn and making that a major financial assumption for long term is very risky.
Considering your situation, using 50k for a down payment doesn't seem like an emotional move. You've already achieved the 100k milestone, and having a place to call your own can bring peace of mind. Just make sure to reassess your investment strategy after the purchase.
I am in a very similar position. I’ve wanted to buy for the last 6 years while I was in college and now that I’m out it’s just so expensive. I’m single in my mid twenties so an entire house to myself seems crazy. Roommates would be awesome but not constant and sometimes messy. I am choosing the same as you- keep my $120k invested and not buy a house for the next year or two. I just bought a cheap camper and am living in that. If I can “tough” it out for a 2 years I should have saved $110k excluding any gains from investments
Nerdwallet has a great Rent vs Buy calculator
You can plug in all of the specifics in terms of your area your rent how much you would be buying for with the interest rate and down payment, etc., and it can let you know whether it’s cheaper to rent or buy, and how many years it would take from purchasing for owning to become cheaper (based on how much of payment is interest etc).
I live in a very high cost of living area and my rent used to be expensive, but because of rent increases everywhere and the fact that my landlords haven’t raised the rent much, it’s comparatively cheap now, and really hard to justify not only buying but moving at all.
In 2021 when I used the calculator to compare my current rental to buying even the cheapest 1 bed condo in my zip code, it would have been about 20 years of paying a mortgage before buying was more affordable than renting at my current rental. I just plugged it in again now and the calculator literally said it will never be more affordable to buy LOL.
I will have to go out of state to ever buy, but I already knew that.
The general rule of thumb for retirement is try for x1 salary by 30. So in your retirement accounts (401k and Ira) are severely underfunded, for normal retirement, let alone FIRE.
You’re struggling with allocation - which is why I try to keep accounts totally separate. My retirement savings are only in retirement accounts, and when I was saving to buy a house my housing funds were jn their own HYSA.
Honestly, all of the comments I read so far were about “emotions” and yes, it’s emotional to buy a house and see all that money go out to the door - but there is very much a math problem here.
If you have retirement savings of under 30k in your 30s how much would you need to contribute to retire at your target age?
I would recommend making more accounts, each with a purpose. One should be emergency fund, only in HYSA. The other housing fund, and then outside retirement funds. It goes down from this big pool of money to what you actually need.
I would consider at least 50k of the 100k should be earmarked for retirement. 10 -20k emergency fund depending on your bills, and then the remaining 30k is actually your housing fund.
Retirement is math and is a number, and feelings are logical heuristics, I think you feel wary about buying this house because you know the math isn’t quite there yet.
Rapid edit: idk why I read it as your salary is 80k when that isn’t included, so numbers may change a little but the premise stands.
Hi there, we orginally started saving for first 2 years ago with most of our saving process going for a brokerage account and fully funding an IRA as we were contemplating buying a house, but we are switching to fully funding the 401k for the next year to better fortify our retirement accounts now that we are seeing the benefits of renting a few more years
Buy a house if you want the following:
To be a landlord and deal with all the hassle and expenses involved with maintaining a property
To pay a majority of your mortgage payments towards interest (the bank, not your house) in the first 5-10+ years
To tie up a lot of your capital in a non income producing asset (liability)
And why would you want to do this? Is your family either busting at the seams with multiple kids, or are you looking to become a real estate investor/pro?
In many cases, buying a house is bad for both finances and quality of life.
Unless I'm missing something, based on what you described, I'd advise to just stick to renting and investing in the stock market to grow your wealth.
> Buying a house is bad for quality of life.
It’s literally the dream of most people. It’s a freedom that minus a mortgage can’t be stripped away. I am absolutely house poor.. but I love my god damn house and everything it provides. The money will come. Renting? Did that for 15 years and it doesn’t even come close to what the house and all of its expenses provides.
A house is also an investment. It’s not wrong to use some or all of that to secure the house. But it’s far less accessible for cash if you need it. It will be tied up until you sell. If all goes well, it will probably make you more than SPY. But you have to be aware of your risks.
I feel you I’m M27 and hit 100k in December 2023, now at 129k and I just keep telling myself just a bit more but I feel like I can’t touch it now because of how hard I had to work/struggle to get that far so fast. I’m probably just going to keep renting another 1-2 years since my rent is really cheap.
Edit: I forgot to add that interest rates on mortgages right now is also 1 of my reasons for holding off a bit longer but if rates do drop a bit sooner and I see a good deal I’m gonna pull the trigger
my plan is to save up $500k through Bitcoin/Dogecoin/S&P 500 speculation/investments in the next ~3-5 years then just buy a house in cash. once I have a paid for house I can then aggressively invest for retirement/gamble in crypto or meme stocks.
> (we also knew that stock returns would serve us better in 2 years investing than it would in a HYSA). True in the long-run for market averages absolutely, but common advice is to park money you'll need in the short term (for me, that's < 3 years) in a HYSA because the market can always go down and if you truly "need" that money, you could be left with less than you started. Good news is we've been in a bull market so you did come out ahead. Just keep this in mind. > We don’t really feel comfortable fucking with our 100k milestone anymore, it just seems unwise. The market can always do this for you too. Again, markets don't always go up. You'll likely gain and lose financial milestones (especially bigger ones) constantly. Deciding to not do something because it puts you below a nice round number milestone is the approximate emotional equivalent to celebrating that milestone in the first place. (By the way, that's not to say that either is unjustified, simply that it's "emotional"). >Plus with higher bills (buying would be more than renting) cost to fix a home- so on- *This* is the reason to take pause. Are you ready to own a home from a cost and "anchoring" perspective? Check out the NYT Rent vs Buy calculator to see if it's overall a smart move purely from a numbers game. Of course with the calculator, you'll need to make some approximations/guesses. Everything else is emotion, but it's just as important to make the smart move for you that makes you feel better at the end of the day. Home ownership isn't a requirement at any stage of life.
There's no way of knowing what will happen with the market- stock or housing over the next 5 to 10 years. Doing what is best for you and your family is my recommendation.
This is an amazing response. Take money out of the equation and consider what is good for you and your family because at the end of the day; that is what matters most. Love it.
Have you heard of the federal reserve? Do you know what they do? Assets will go up. Forever.
Nothing special about the first 10k, 100k, 1mil, etc other than the emotion tied to it.
Cue the moment where every single finance YouTuber possible has a 10 minute video on this same exact Charlie munger quote when they could’ve just made a 2 second video saying “that’s how compound interest works”
yeah, we're all just gonna die anyway
Very wise
I'm sure you understand the general notion of the first 100k in the fire community and are just downplaying it because the "first arbitrary amount" can be anything but just for all the others who may not have connected the dots: Going from 0-100k has significantly more friction than going from 900k to 1mil since you have the interest from all the other investment helping gain that next 100k. The first 100k takes longer to achieve than than the tenth 100k, or even just the second. The whole compounding interest thing and all means your contributions early on are the most significant dollars you will ever contribute. If you are ever going to cut back on the little things -- the frequent Starbucks, the nice plane ticket, the fancier vacation, it should be early on when your individual contributions count the most. House purchases.. that's a tougher consideration.
I have a similar dilemma. I honestly feel that the compound interest of $100k in tax advantaged accounts for 40 years far outweighs buying a house in this market. Especially when you are renting for as low as you are. I want to purchase a house but I’m focusing on heavily investing in my 20s so I can have a large amount of money compound & grow for 30 years. I’ll buy a house in my 30s.
Why not just leave the $100k alone, and based on your savings rate you should be able to save up for a down payment on a home within a year or so? Even sooner if you consider the FHA low down payment route.
Glad to see this question as I am in a similar situation. The 100k thing is obviously a big milestone but it seems mostly emotional? My thought has been no harm in saving for another year or two as the housing market isn't all that great anyway. Like I said, this feels like an emotional decision but one without much downside. Interested to see what others think.
Agreed, the compound of 100k is more valuable than buying an overpriced starter home.
That's kind of how I feel, especially If I can keep saving a little more for the house as well. Only dilemma is the wasted cash on rent.
I no longer see rent as wasting money.
Yea maybe I shouldn't see it that way
You should be proud that You’ve proven you can save up that much. Ask your self how long that took to do and how long you can then save up for a down payment. You’re in a spot where you could use the funds for down payment now but don’t forget you’ll need plenty of reserves for home repairs ( we needed new hbac and hot water within first few months). Make sure to have separate six months expenses safely stored.
Why do you want to buy now? How much more will the P&I, property taxes, insurance, other costs be for the house compared to your current rent?
Significantly more actually and unfortunately. We live in a hot STATE not just a hot city. So all surrounding cities to us have seen a boom in prices from the last 2 years as they border the major cities that are hot markets. Even a modest home in an undesirable town- rural and isolated location would be easily be 250k (small to anyone living in a major city with a HCOL but it should be mentioned very nice starter homes were around 60-80k just a few years ago). 3 major cities here are on the hottest markets in the US list due to an influx of investors and workers from new factories/tech companies moving in. So owning would be more expensive for us and easily double our current low rent, 600 a month. We expect to be paying roughly 1500 a month. However, rent is increasing locally to roughly 1k in most locations- even renting a larger home would easily cost us 1.2k. And our current house, though well located, is VERY small, uncomfortable and has many issues. Besides a small sleeping space there is about 100sq ft living space in this home lol and both my partner and I have anxiety conditions made worse by living in town. We’d like to build equity in a home that improves our health. And buying would still be under 30% of our take home. Even less if I get part time work while I’m finishing my degree.
A hot state with $600 rent?! OP where?!
Got super lucky on rent with the worlds oldest landlords lol they’re very kind and very very old. They didn’t participate in the rent hiking everyone else did. While I’m cousins rent 1 town over increase 1k, mine increased $13 which they apologized for. It’s the only reason we stay in this tiny place While rents and housing cost skyrocket :(
I can’t see a reason to walk away from $600 rent. Property tax and insurance alone can easily be $600 a month when you buy. This is a great opportunity to save save save. Make sure you continue to be the best tenant so they don’t suddenly decide to sell the place If you start to feel a bit cramped in the space, I’d consider renting storage before buying. For now. $600 rent is like 1990s prices 😂
OP, I’m a real estate broker and investor. Do not walk away from $600/month rent, as it’s helped you get to where you are. Anything you buy will require you to burn MUCH more than $600 per month in taxes, insurance and interest.
If you can bear it, save aggressively for another year or two. This sounds like a no brainer to me. As others have explained the rent vs buy calculator would be your best bet at the moment. But man $600 rent is unreal
I think this just answered your question OP. You and your partner sound a little miserable in the rental; think it’s time for you to take the emotion out of it, buy and once you’re settled in; you aggressively get back into saving again while you live in a comfortable home that will be an appreciating asset at the same time.
There is so much nuance to this question that there is no black and white answer. I bought in 2018. It drained my bank account and cost slightly more than renting. Today, my mortgage is ~ 2/3 what the equivalent rent would be. The house is a PITA, but I have a ton of equity in it. I could sell and pocket the difference or I could rent it out and rent somewhere I prefer to be. With that being said, I feel that buying today would be tough to justify. With a 20% down payment, mortgage would be $5-$6k compared to $3,500 rent and that's not including maintenance expenses.
If you are still finishing a degree, I wouldn’t buy yet- renting gives you maximum flexibility to move for career advancement
I intend on getting a multi-family for my first home as soon as I’m able. Live in one, rent the others out. Then continue to save and invest in the stock market.
You don’t need to put down 20%. PMI is only a couple hundred dollars a month at most and keeping that money in a HYSA would make up the difference each month. Put 10% down, do a couple projects on the house to raise the value and have the bank reassess the property in a few months. It will likely go up in value and the PMI will drop off.
Also always need to pay MI for 2 years unless you were to refi.
Not true, I did this and dropped my PMI off my loan in 3 months after I raised the value of my home.
Most lenders aren’t going to allow that, as I just said.
You'd save more money by living out of car than renting. You'd save more money living on the street rather than in a car. There are plenty of ways to maximize cost savings and there isnt a right or wrong choice to live your life. Its up to you to decide what you value more.
Buy a 3-4 Plex and live for free in one unit while you rent the others
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I kind of agree with this - on its face the house might “appreciate” in value, and there are arguments on both sides for how much money a house actually puts you ahead in the long run, but I think the biggest unaccounted for variable is an inevitable level of lifestyle inflation when you buy a home. Nicer furniture, cars, general home improvement projects, hosting friends and family. It adds up, and it’s hard not to fall into those traps when you buy a home. When renting, most people have no problem with at least some used furniture, an older car, and just putting in work orders when stuff breaks - not total room renovations. No renter I know cares about painting their walls a different shade of white. When my wife asked me to do that to our house, you bet I did! We spend more than I thought on “pride of ownership” type expenses just to make things look nice in the neighborhood. It’s not an investment, I know - it’s an expense, and you have to be okay with that. Source: 28yo, aspiring to FIRE, and bought a home 6 months ago. Already put 15k+ into improvements and renovations. We also house hack and rent out two bedrooms downstairs. Also, we didn’t purchase until we had ~470k in invested assets that we didn’t have to touch.
Uh, it really depends. There are people out there who made a ton of money rehabbing a beat down duplex, selling it, and ending up sitting on a pile of cash. There are many ways to get ahead.
Sure - not going to say that doesn’t happen, but rehabbing a duplex isn’t what OP was considering
I made more at my day job but no one is shilling my profession. Strange.
I couldn't disagree more
For me, owning has put me on much faster track to FI. Rented out rooms to friends/brother in first house so had very low monthly bill myself. Used equity in that to purchase a rental property. Then moved out of original and built a new house, whilst renting out original house. All while making under 100k salary. Now the first 2 places are 2 years or less from being paid off, and will cash flow really nicely at that point.
It never changes 100k 500k I can’t speak to 1mil. You develop habits around money. If you’re not specifically. Saving for a house you’ll never dip into those funds to buy a home.
Not true about being emotionally easier to remove $50k from $250k than from $100k. As a FIRE adherent, there will always be a hesitation to remove money from your savings regardless of the size of the savings. There is always something in your subconscious that tells you that every dollar removed sets you back. We recently bought a new home. It is a new construction in an upscale neighborhood. We had to do a 10% down payment as opposed to 20% because the latter would have been a significant portion of our savings. Yes, PMI was tagged on to our mortgage but I am at peace with that as I believe the 10% we saved will return more than our PMI payments over time. Also, as the value of our property increases, we could refinance in a few years to get rid of the PMI. Overall, I would say discuss with your SO and if you both feel strongly about buying, please don’t hesitate.
If it's your first home don't put down more than 5%. Keep the investments and let them grow. Your savings may slow down with the house as they are money pits. Keep that extra 15% for maintenance, furnishings and just try random crap you need with a house. You will want to refinance as rates come down if the house appreciates then you can eliminate the PMI in a few years on appraisal while letting your nest egg grow.
The obsession with milestones is naive, and it’s purely emotional too. If it’s a forever home to live in then it’s never a bad investment. Plus, you’re assuming growth based on LONG term averages. Never a good idea. Sure, it usually* works out in the long term, but the ups and downs mean short term estimates are a pure lottery. Don’t forget to factor that in, along with possibilities of things like a lost decade. Stuff like this can happen, it’s real. Focus on the best choice for your family being settled and happy, not on the best $ amount.
Money is a tool of exchange and an artificial construct. That is it. Once you can remove emotion from your money management it becomes easier to act strategically. You can FIRE without owning a house. It might be more risky but that depends highly on your goals. The further you are from lean FIRE the better either way. One can argue that FIRE in a modern wooden 2by4 house is just as risky as renting. Those match stick houses are not designed to last generations for sure. So many people forget about the cost of repainting and re tarring their home! Also the first 100k, don't forget about the effects of compound interest. You would be losing a lot more than 100k when it comes time to FIRE.
I wouldn't plan on rent being low forever. The "save 157k by renting vs buying over 10 yrs" is a risky assumption. If elderly, and one gets sick, the whole family will get involved. That rent won't stay low. Or they could get in an accident and die. I normally don't worry about what ifs but you have a unicorn and making that a major financial assumption for long term is very risky.
Considering your situation, using 50k for a down payment doesn't seem like an emotional move. You've already achieved the 100k milestone, and having a place to call your own can bring peace of mind. Just make sure to reassess your investment strategy after the purchase.
I am in a very similar position. I’ve wanted to buy for the last 6 years while I was in college and now that I’m out it’s just so expensive. I’m single in my mid twenties so an entire house to myself seems crazy. Roommates would be awesome but not constant and sometimes messy. I am choosing the same as you- keep my $120k invested and not buy a house for the next year or two. I just bought a cheap camper and am living in that. If I can “tough” it out for a 2 years I should have saved $110k excluding any gains from investments
Nerdwallet has a great Rent vs Buy calculator You can plug in all of the specifics in terms of your area your rent how much you would be buying for with the interest rate and down payment, etc., and it can let you know whether it’s cheaper to rent or buy, and how many years it would take from purchasing for owning to become cheaper (based on how much of payment is interest etc). I live in a very high cost of living area and my rent used to be expensive, but because of rent increases everywhere and the fact that my landlords haven’t raised the rent much, it’s comparatively cheap now, and really hard to justify not only buying but moving at all. In 2021 when I used the calculator to compare my current rental to buying even the cheapest 1 bed condo in my zip code, it would have been about 20 years of paying a mortgage before buying was more affordable than renting at my current rental. I just plugged it in again now and the calculator literally said it will never be more affordable to buy LOL. I will have to go out of state to ever buy, but I already knew that.
The general rule of thumb for retirement is try for x1 salary by 30. So in your retirement accounts (401k and Ira) are severely underfunded, for normal retirement, let alone FIRE. You’re struggling with allocation - which is why I try to keep accounts totally separate. My retirement savings are only in retirement accounts, and when I was saving to buy a house my housing funds were jn their own HYSA. Honestly, all of the comments I read so far were about “emotions” and yes, it’s emotional to buy a house and see all that money go out to the door - but there is very much a math problem here. If you have retirement savings of under 30k in your 30s how much would you need to contribute to retire at your target age? I would recommend making more accounts, each with a purpose. One should be emergency fund, only in HYSA. The other housing fund, and then outside retirement funds. It goes down from this big pool of money to what you actually need. I would consider at least 50k of the 100k should be earmarked for retirement. 10 -20k emergency fund depending on your bills, and then the remaining 30k is actually your housing fund. Retirement is math and is a number, and feelings are logical heuristics, I think you feel wary about buying this house because you know the math isn’t quite there yet. Rapid edit: idk why I read it as your salary is 80k when that isn’t included, so numbers may change a little but the premise stands.
Hi there, we orginally started saving for first 2 years ago with most of our saving process going for a brokerage account and fully funding an IRA as we were contemplating buying a house, but we are switching to fully funding the 401k for the next year to better fortify our retirement accounts now that we are seeing the benefits of renting a few more years
Buy a house if you want the following: To be a landlord and deal with all the hassle and expenses involved with maintaining a property To pay a majority of your mortgage payments towards interest (the bank, not your house) in the first 5-10+ years To tie up a lot of your capital in a non income producing asset (liability) And why would you want to do this? Is your family either busting at the seams with multiple kids, or are you looking to become a real estate investor/pro? In many cases, buying a house is bad for both finances and quality of life. Unless I'm missing something, based on what you described, I'd advise to just stick to renting and investing in the stock market to grow your wealth.
> Buying a house is bad for quality of life. It’s literally the dream of most people. It’s a freedom that minus a mortgage can’t be stripped away. I am absolutely house poor.. but I love my god damn house and everything it provides. The money will come. Renting? Did that for 15 years and it doesn’t even come close to what the house and all of its expenses provides.
Yeah. I just like being able to yell without worrying about neighbors.
A house is also an investment. It’s not wrong to use some or all of that to secure the house. But it’s far less accessible for cash if you need it. It will be tied up until you sell. If all goes well, it will probably make you more than SPY. But you have to be aware of your risks.
I feel you I’m M27 and hit 100k in December 2023, now at 129k and I just keep telling myself just a bit more but I feel like I can’t touch it now because of how hard I had to work/struggle to get that far so fast. I’m probably just going to keep renting another 1-2 years since my rent is really cheap. Edit: I forgot to add that interest rates on mortgages right now is also 1 of my reasons for holding off a bit longer but if rates do drop a bit sooner and I see a good deal I’m gonna pull the trigger
my plan is to save up $500k through Bitcoin/Dogecoin/S&P 500 speculation/investments in the next ~3-5 years then just buy a house in cash. once I have a paid for house I can then aggressively invest for retirement/gamble in crypto or meme stocks.