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Started By
Message
Paying off everything off while young
Posted on 11/1/13 at 1:34 pm
Posted on 11/1/13 at 1:34 pm
I'd like some opinions on this matter. I'll be heading out of state soon to work on a large project. I stand to clear between 300-400k over the next 3 years that will for the large part be saved as I have zero debt. That number excludes any potential bonus money after the completion. I am 27, unmarried although will likely soon be engaged.
Would it be wise for me to use that money to come home and pay for a nice home and some acreage cash? I know I'd clean out a chunk of my savings doing so (I'll still have money in the bank, I would be responsible with it). I'd be ~30ish, with a paid for home, and no significant debt. Or would I be better off setting a large chunk of it in a retirement account.
My reasoning is that with me being young, I'll have the rest of my career to be debt free and putting every spare cent into investments and retirements without worrying about a mortgage or debt payments.
Would it be wise for me to use that money to come home and pay for a nice home and some acreage cash? I know I'd clean out a chunk of my savings doing so (I'll still have money in the bank, I would be responsible with it). I'd be ~30ish, with a paid for home, and no significant debt. Or would I be better off setting a large chunk of it in a retirement account.
My reasoning is that with me being young, I'll have the rest of my career to be debt free and putting every spare cent into investments and retirements without worrying about a mortgage or debt payments.
13
Posted on 11/1/13 at 1:42 pm to braindeadboxer
If you won't need the money for a long time, you should invest it and let it grow. Buy and hold. 
Posted on 11/1/13 at 1:53 pm to braindeadboxer
I wouldn't blow it on a nice house when young. Your taste and decision making on a nice home will change.
I would pay cash for vehicles and invest the rest. In fact, I've never financed a car. Paid $900 for a used car when I was 16. The money I would have spent on a note I placed in savings and accrued enough to pay $1,550 for a better used car at 19.
I continued that habit of saving the 'non note' until I was able to pay cash for a cheap new car by 25 and a nice new car by 35.
As for investing..I'm all for blue chip buy and hold.
I would pay cash for vehicles and invest the rest. In fact, I've never financed a car. Paid $900 for a used car when I was 16. The money I would have spent on a note I placed in savings and accrued enough to pay $1,550 for a better used car at 19.
I continued that habit of saving the 'non note' until I was able to pay cash for a cheap new car by 25 and a nice new car by 35.
As for investing..I'm all for blue chip buy and hold.
Posted on 11/1/13 at 1:57 pm to braindeadboxer
I think if it was me, I'd dedicate 50-60K for retirement and 100-125K, for a good, solid down payment on a house, then you can always pay extra on the house note every month if you want to pay it off early.
If you're just now getting engaged, assuming you don't have kids, you don't need to buy your forever home yet, so buy you and "the little wife" a nice sized starter home and save some money for your upgrade.
If you're just now getting engaged, assuming you don't have kids, you don't need to buy your forever home yet, so buy you and "the little wife" a nice sized starter home and save some money for your upgrade.
Posted on 11/1/13 at 3:15 pm to braindeadboxer
Nevermind, this damn thing was up to nine posts. 
What field are you in by the way, if you don't mind me asking?
What field are you in by the way, if you don't mind me asking?
This post was edited on 11/1/13 at 3:18 pm
Posted on 11/1/13 at 4:01 pm to braindeadboxer
I see where you're head is at, but interest rates are currently significantly below expected ROI. Certainly put up enough for the house to avoid PMI, but beyond that, I wouldn't let "finance" be a dirty word.
In my opinion, you're vastly overpaying for peace of mind with lost opportunity costs.
In my opinion, you're vastly overpaying for peace of mind with lost opportunity costs.
Posted on 11/1/13 at 4:48 pm to braindeadboxer
i want to do what you describe
Posted on 11/1/13 at 5:15 pm to braindeadboxer
In your situation I'd probably put 20% down on a decent home with a 15 year mortgage. You could then set some money aside to pay cash for land when you find what you want and then invest the rest. As was said earlier, your tastes will change even with that small town attitude. Also with a potential new bride her input may change the plans you have now. I wanted 20-25 acres away from everyone but had to compromise with a 7 acre lot with a neighbor she could at least see. Kids will come and so on.
I wanted 20-25 acres away from everyone but had to compromise with a 7 acre lot with a neighbor she could at least see. Kids will come and so on. Posted on 11/1/13 at 5:44 pm to braindeadboxer
Debt isn't a bad thing... Especially when money is cheap like it is now.
I'd invest it wisely and buy/mortgage what I could comfortably afford monthly.
Kids are expensive, as is the rest of life.
Keep 50k or so back in emergency funds/savings account.
JMO
I'd invest it wisely and buy/mortgage what I could comfortably afford monthly.
Kids are expensive, as is the rest of life.
Keep 50k or so back in emergency funds/savings account.
JMO
Posted on 11/1/13 at 6:47 pm to braindeadboxer
Look at interest rates.
If any debt is costing you more than 8%, pay it off immediately.
Invest the rest in a buy and hold investment strategy in an index fund or a low cost actively managed one.
Under the current circumstances, it is still fairly adventagous to have secured debt in the form of housing, due to both the low interest rates and the tax write offs it provides.
So if you are looking at a house, and plan on being there for at least 8 years or so, go ahead and buy one putting down the minimum and investing the rest of the cash flow.
As interest rates increase, look to increase principal payments.
If any debt is costing you more than 8%, pay it off immediately.
Invest the rest in a buy and hold investment strategy in an index fund or a low cost actively managed one.
Under the current circumstances, it is still fairly adventagous to have secured debt in the form of housing, due to both the low interest rates and the tax write offs it provides.
So if you are looking at a house, and plan on being there for at least 8 years or so, go ahead and buy one putting down the minimum and investing the rest of the cash flow.
As interest rates increase, look to increase principal payments.
This post was edited on 11/1/13 at 6:49 pm
Posted on 11/1/13 at 8:10 pm to braindeadboxer
quote:
Would it be wise for me to use that money to come home and pay for a nice home and some acreage cash?
There is a lot to be said for no house payment. You'll have the flexibility to take opportunities, leave a job you hate, etc., all because you don't have the mortgage hanging over you.
On the other hand, if you live to be 80, you'll likely never see interest rates as low as they are right now, again. So, if you can "gap" your investments and mortgage rate, that's essentially free money.
Now, if you don't have a mortgage (because you pay cash for the house) you have a lot more flexibility every month to meet "unbudgeted" contingencies, so that you are not borrowing money or robbing the emergency fun - but rather, you just dial back your retirement contribution that month.
That's why I lean towards paying cash - if that's an option. In any event, if you do finance, I recommend you put 20% to 25% down and go 15 years on the mortgage - that is sort of "the middle ground" strategy - this leaves you with a chunk of cash to front load your retirement/investment, at the cost of a higher monthly P&I, but half the total payments and less than half the finance charges.
It will also be much, much easier to get back out of the property, in a cost effective manor, if you have a change of tastes in 3 to 5 years.
This post was edited on 11/1/13 at 8:11 pm
Posted on 11/3/13 at 12:56 pm to braindeadboxer
quote:
clear between 300-400k over the next 3 years
Invest all of it and keep doing this for about 15 years and retire in your early/mid 40s.
Posted on 11/4/13 at 9:06 am to braindeadboxer
The benefits of having 300-400k compound for more years would likely offset the benefits of having your house paid off, particularly in this historically low interest rate environment.
Use some to put a nice downpayment on a house (20-30%). Let the rest compound forever.
Use some to put a nice downpayment on a house (20-30%). Let the rest compound forever.
This post was edited on 11/4/13 at 9:07 am
Posted on 11/7/13 at 9:51 pm to braindeadboxer
I would invest it. I think you can beat the interest rate that the banks will charge you for the loan.
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