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re: What % of your income should your mortgage be?
Posted on 5/7/13 at 11:40 am to wegotdatwood
Posted on 5/7/13 at 11:40 am to wegotdatwood
quote:
Read the millionaire next door if you haven't yet.
I'm actually reading that now.
Great book....although so far I'm not sure I completely agree with his "what should your wealth be" formula.
Posted on 5/7/13 at 11:56 am to dewster
Are you an UAW or a PUAW? it's been like 9 years since I read that book, was influential in my long term thinking
Posted on 5/7/13 at 2:39 pm to Vols&Shaft83
quote:
Are you an UAW or a PUAW?
I thought saving about 20% of my income would classify me as a "Prodigious Accumulator of Wealth" even if I didn't count the equity in my home, but his formula makes absolutely no sense for people my age because we lack the advantage of compounding intrest that people 40 or 50 years old have.
The formula he uses for the cutoff is: (Number of years of age * annual income)*10%
A 24 year old teacher 2 years out of undergrad earning $30,000 per year should not expect to be worth $72,000 for years without help. That's not really a fair expectation under normal circumstances.
My parents are in their 60s. They've actually never had the "money" discussion with myself or my brother. I have no idea what their income is or what they have saved or any clue about their weath or if I should worry about my father's prospects for retirement from his small business(s). Wouldn't shock me if they were classified as PAW by that same formula, having benefited from decades of capital gains, business income, tax shelters, real estate appreciation, and compounded interest.
A 24 year old isn't going likely to own commercial real estate or a significant source of "unearned" income like people my parents age probably have. If they do, they haven't been around long enough to accmulate much of it. I'd consider it a major accomplishment if that teacher had accumulated $30,000....but she'd still be considered a UAW.
That's really the only critisism I have about the book.
At least it serves to highlight the importance of putting money away when you are young.
This post was edited on 5/7/13 at 2:57 pm
Posted on 5/7/13 at 2:53 pm to dewster
quote:
At least it serves to highlight the importance of putting money away when you are young
My biggest complaint with most of my friends. We are all mostly mid 30's, some of them have 0 savings. I mean nothing. And I'd say they average 100k/yr as a couple.
Posted on 5/7/13 at 2:58 pm to ItNeverRains
quote:
We are all mostly mid 30's, some of them have 0 savings. I mean nothing. And I'd say they average 100k/yr as a couple.
Now that is definately UAW :)
That's horrifying on two levels. Their lifestyle is clearly more extravagant than it should be, and they are not prepared to support ANY kind of lifestyle after retirement with 0 savings.
Posted on 5/7/13 at 3:17 pm to ItNeverRains
quote:
My biggest complaint with most of my friends. We are all mostly mid 30's, some of them have 0 savings. I mean nothing. And I'd say they average 100k/yr as a couple.
So stupid. I enjoy the debt-free, live under my means life.
So glad I got my wife (before marriage)off the "well, I'm used to having a car payment. I'll be fine always having one" deal. She now enjoys this way of living because before we were together it was paycheck-to-paycheck.
This post was edited on 5/7/13 at 3:32 pm
Posted on 5/7/13 at 3:28 pm to ItNeverRains
quote:
mostly mid 30's, some of them have 0 savings
Hello poverty.
Posted on 5/7/13 at 3:29 pm to wegotdatwood
quote:
So glad I got my wife (before marriage)off the "well, I'm used to having a car payment I'll be fine always have one
Car notes aren't necessarily a bad thing in every circumstance. I could have paid cash for a Honda we bought in March....but I decided to borrow at 0.9% rather than pull money out of savings that have been earning about 13% lately. My gamble can be wrong if the market takes a nose dive though....I still put down about 40% of the value of the car, which is more than I probably should have.
Otherwise I agree. I hate having car notes. I have a 6 year old high mileage domestic pickup truck and a new Accord that I hope we won't outgrow. I buy with the expectation that we'll put 150,000 or more miles on cars before even considering replacement...which for us is about 7 or 8 years. I can probably get 200,000 out of the Silverado before a major overhaul and maybe even more out of the Honda.
I hate buying furniture, but I take the same stance on it. I avoid buying it, but if I can borrow at 0% and keep my savings.....I'll do it in a heartbeat.
This post was edited on 5/7/13 at 3:33 pm
Posted on 5/7/13 at 3:33 pm to dewster
Yeah, for me, it's cash flow that kills when you get used to having one.
Both of our cars paid off. My car has 38k on it, wife's car suv, 75k.
She works very close to work so I'm hoping it will last at least another 7 or 8 years.
Both of our cars paid off. My car has 38k on it, wife's car suv, 75k.
She works very close to work so I'm hoping it will last at least another 7 or 8 years.
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