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How much have you saved and should have saved? Here is mine

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I have around $60k in various locations. Currently in my late 20s. Really focused on making more money so that I can start saving and investing more (only doing employer match in my 401k e.g.). Just finished getting a new degree so I hope to have the money I spent (no extra loans), will begin to benefit me. My parents have no money saved so I don't want to be be in their position when I'm their age.

Edited by ceemee

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You can only put $5500/yr in IRAs, so after you do that max out I-bonds (10k/yr per SSN - if you're married). Max out HSA if you have one and ideally your retirement plan at work as well. Anything left over should be dumped into an 2-3 fund portfolio consisting of low cost index funds.

 

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Late 30s here, I screwed up my credit a little after I turned 30, was only making about $40k/yr at that time (that is nothing for a large urban city). My net worth is well over a half a million now.. I just started living _below_ my means and saving at each and every opportunity I could. Granted, I make twice that much now but I'm spending way less than when I was making half as much.

 

I know I'll get absolutely roasted for saying this, as that usually happens, but the easiest thing was to quit worrying about credit. Utilization is something that can be fixed in one month if you lived at or below your means, have money saved up, and pay in full anyway. Only just now my CL hit 4 digits thanks to auto-CLI. I was more interested in watching monthly spending trend down while my savings, then later interest on that and later investments (low cost index funds) trend upwards.

 

It just snowballed and in a few short years I had enough money to buy a large house outright in cash if I wanted to (of course I wouldn't do anything silly like that though). I get more fulfillment out of life now, even without keeping up with the Joneses, having a large house and multiple vehicles I can't afford. It's definitely not for everyone and was difficult until I started to see positive results.

 

My only regret is I didn't do this when I first lived in the real world on my own. I would have retired years ago.

 

Seriously, Bravo for saving and being diligent.

 

In what way is it silly to pay cash for a home? Do share as I find it illogical to NOT pay cash if its readily available. Why line the banks pockets or worry in cases where employment would be lost? The tax incentive is a farce in more ways then owning.

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Maybe silly wasn't the best word depending on certain scenarios. But yes, paying off a house right away will lose a lot of money in the long run. Mark zuckerburg doesn't do that even.. Think about it, you have good credit and get a 3% mortgage - you have to expect to avg an annual rate of return at 8 or 9%.

 

You've lost an expected rate of return by 5-6% over 30 years. In zuckerbergs case he has a 1% loan and takes that millions and invests it. In our case, a 100k or half that is still sizeable. And also the deductions on the interest does help.

 

If have bad credit and get a sub par rate it would likely be better to pay it off though

 

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Maybe silly wasn't the best word depending on certain scenarios. But yes, paying off a house right away will lose a lot of money in the long run. Mark zuckerburg doesn't do that even.. Think about it, you have good credit and get a 3% mortgage - you have to expect to avg an annual rate of return at 8 or 9%.

 

You've lost an expected rate of return by 5-6% over 30 years. In zuckerbergs case he has a 1% loan and takes that millions and invests it. In our case, a 100k or half that is still sizeable. And also the deductions on the interest does help.

 

If have bad credit and get a sub par rate it would likely be better to pay it off though

 

Sent from my Nexus 5 using Tapatalk

 

I do understand your side. Paying in 8 times the original cost is rarely an investment.

Anyways, still impressed with how you are managing to maintain and invest so wisely. Keep it up!

 

 

 

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Just to put this in perspective, here are some numbers:

 

Assuming an 8% return putting $100k away for 30 years, compounded yearly without putting anything else in would be about $1M and you'd end up paying $150k on a $100k house over that time.

 

Buying it outright would save you $50k but you'd lose 900k at opportunity cost.

 

This assumes the expected rate of return holds up, which it should be pretty close if you invested it wisely - not picking stocks but matching the market over time (index funds). If it doesn't, we all have worse problems and either option wouldn't be viable as it would mean the market would have been bad for 30 years

 

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The above assumes a 3% mortgage rate, forgot to note that

 

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Thanks Dockworker.

 

Morgage- 15 year: @ 5% Loan amount: 365,000 , Interest paid : 154,000. That is a 44% waste in interest payments .

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I wouldn't do it at 5% and I'd only do 30 year to invest the capital. But if I did get a subprime rate I'd hope I could be in the position to refi :)

 

But let's say 365k got 6% over 15 years, thats 875k at the end.. 15 years is short to recover in the event that 2008 happens again at the tail end of it though.

 

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Here is a better explanation, especially point 5 - in my first example the monthly payment would be roughly $450/Mo if I remember - something that could easily be earned in dividends alone over the year - it all depends on your financial footing

 

http://www.forbes.com/sites/robrussell/2014/07/10/should-you-payoff-your-mortgage/

 

I feel like the amount I saved in the Bay Area is not enough to buy a house and be comfortable. The prices are too crazy. If I was in Colorado, Oregon, or Minnesota, I'd feel much better!

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dockworker has good advice.

 

The issue you are facing, you said it yourself, is - YOU LIVE IN THE BAY AREA.

LOL :grin:

 

Your smartest move is to elimate your expensive monthly housing expense. You need to go over numbers, and most likely paying a mortgage for a condo would be cheaper than continuing to rent. Once you have that going, you can start paying down that mortgage early, all the while putting some on the side for 401K and RothIRA.

 

Does you job require you to live in the Bay Area? If not, try moving to a more affodable area. My friend moved from super expensive LA to a cheaper area and was able to pay for a nice house cash in only two years of saving.

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dockworker has good advice.

 

The issue you are facing, you said it yourself, is - YOU LIVE IN THE BAY AREA.

 

LOL :grin:

 

Your smartest move is to elimate your expensive monthly housing expense. You need to go over numbers, and most likely paying a mortgage for a condo would be cheaper than continuing to rent. Once you have that going, you can start paying down that mortgage early, all the while putting some on the side for 401K and RothIRA.

 

Does you job require you to live in the Bay Area? If not, try moving to a more affodable area. My friend moved from super expensive LA to a cheaper area and was able to pay for a nice house cash in only two years of saving.

 

I pay $1,700 for a one bedroom, so for the Bay Area, I am doing very good. But it is still very expensive in my opinion. If I had $200,000 for a down payment, I'd consider getting a house. But the $2,500+ monthly mortgage payments does not pay sense when I pay far less than that.

 

No, my company is a startup in SF and has no other offices elsewhere.

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You're losing a LOT in opportunity cost (like someone mentioned up thread) by not maxing out 401ks and Roths now. You're 31, you won't retire for three decades. 30 years of growth at 8% (or even a more conservative 5%) equates to a LOT of money. Also, if you're not contributing enough to at least get whatever company match you can get for your 401k you're actually LOSING money. That should be your first priority - contribute enough for the max employer match. Every year you don't do it you lose what could be tens of thousands of dollars down the line. Depending on who your 401k is with and what funds are offered, I'd say to skip going above the max for an employer match fund a Roth next just for the tax free growth. Then go back and add more to the 401k if you want - or keep saving for a condo.

 

You have enough liquidity for now, you need to think about the long-term.

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Oh and as for me - $54K roughly in retirement accounts. About a 60/40 split between my 401k at my current job and my IRAs. Rolled all of my my old 401ks and IRAs over two years ago and have been slowly converting to Roths. (Also already HAD some Roths which all got moved to giant Roth so I don't have to pay extra fees). I have about two more years (give or take) to finish converting what's left in the regular IRA unless I want a huge tax bill. About $10K in liquid accounts such as savings, checking and money markets. Goal is to obviously up the liquid savings for now and maybe throw a little more into the Roth for 2014 before April 15th

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You're losing a LOT in opportunity cost (like someone mentioned up thread) by not maxing out 401ks and Roths now. You're 31, you won't retire for three decades. 30 years of growth at 8% (or even a more conservative 5%) equates to a LOT of money. Also, if you're not contributing enough to at least get whatever company match you can get for your 401k you're actually LOSING money. That should be your first priority - contribute enough for the max employer match. Every year you don't do it you lose what could be tens of thousands of dollars down the line. Depending on who your 401k is with and what funds are offered, I'd say to skip going above the max for an employer match fund a Roth next just for the tax free growth. Then go back and add more to the 401k if you want - or keep saving for a condo.

 

You have enough liquidity for now, you need to think about the long-term.

 

My company does not have a match.

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Dead people can not spend money. Perhaps your heirs will make use of it.

 

I have this philosophy also.. I used to focus so much on savings that I never had any fun. Fast fwd I am 50 now -- I have started taking yearly vacations. I save up all year long. I have a small savings & a modest amount in a 401k; I'll have a house paid off by the time I retire...whenever that will be. My dad is still working at 71 - I will likely work in some capacity as long as I can. All I can do is think positive and keep moving forward, keep my debt down / bills paid down or off -- and hope for the best. I spent a lot of years worrying about the future and "what if" . My paternal grandmother lives like this.. she is 88. She's been like this her whole life - worrying about the future - and not having any fun. I don't want that to be me.

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You're losing a LOT in opportunity cost (like someone mentioned up thread) by not maxing out 401ks and Roths now. You're 31, you won't retire for three decades. 30 years of growth at 8% (or even a more conservative 5%) equates to a LOT of money. Also, if you're not contributing enough to at least get whatever company match you can get for your 401k you're actually LOSING money. That should be your first priority - contribute enough for the max employer match. Every year you don't do it you lose what could be tens of thousands of dollars down the line. Depending on who your 401k is with and what funds are offered, I'd say to skip going above the max for an employer match fund a Roth next just for the tax free growth. Then go back and add more to the 401k if you want - or keep saving for a condo.

 

You have enough liquidity for now, you need to think about the long-term.

 

My company does not have a match.

 

It's still a pretty hassle free way to save :) the money comes out before you even see it.

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I am 31, and have $110K saved up now. $10K is in my Roth IRA (401K converted) and remaining $100K breaks out to $80K in stocks and $20 in an emergency fund. Next year, I plan to save aggressively against and have $200K saved up in stocks. I need to put more money into my retirement accounts, but I don't feel save not be able to withdraw them in case I need it.

 

What do you think of this plan? What is your plan? I grew up rather poor, so I wasn't taught a lot of financial advice, just to be frugal.

 

For someone who didn't learn about money you're doing a great job. There are tax advantaged retirement accounts where your money can be liquid and average 6-8% if that is your main concern. What do you in invest in stock wise? Individual or Mutual Funds? Be careful with the volatility and fees inside a lot of these funds. If you are going to go the stock route I'd highly recommend looking into Tactically Managed platforms. Above average returns at below average risk. The drawdown on your money will be significantly less in the case of another market correction. Your on the right path. Just make sure you address market, inflation, and tax risk in your planning.

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You're losing a LOT in opportunity cost (like someone mentioned up thread) by not maxing out 401ks and Roths now. You're 31, you won't retire for three decades. 30 years of growth at 8% (or even a more conservative 5%) equates to a LOT of money. Also, if you're not contributing enough to at least get whatever company match you can get for your 401k you're actually LOSING money. That should be your first priority - contribute enough for the max employer match. Every year you don't do it you lose what could be tens of thousands of dollars down the line. Depending on who your 401k is with and what funds are offered, I'd say to skip going above the max for an employer match fund a Roth next just for the tax free growth. Then go back and add more to the 401k if you want - or keep saving for a condo.

 

You have enough liquidity for now, you need to think about the long-term.

 

There are much better alternatives than maxing out a 401k especially if you are looking for tax free growth, tax free withdrawal, and protection of your principal. There is too much risk involved with a 401k. Risk of the market crashing. Risk of taxes going up in the future. Risk that your feeadjusted return wont beat inflation. Why take those risks when you don't have to? I'd only advise contributing up to your dollar for dollar match, never over. The match gives you a buffer for the taxes on future withdrawals so technically you wont be using your money to pay the taxes. Anything above that is what I call naked money. You could be getting the same returns in a safer, tax advantaged environment. Roths are good but have too many limitations and are also subject to market risk. Not to mention high income individuals cant even get one.

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Dead people can not spend money. Perhaps your heirs will make use of it.

 

I have this philosophy also.. I used to focus so much on savings that I never had any fun. Fast fwd I am 50 now -- I have started taking yearly vacations. I save up all year long. I have a small savings & a modest amount in a 401k; I'll have a house paid off by the time I retire...whenever that will be. My dad is still working at 71 - I will likely work in some capacity as long as I can. All I can do is think positive and keep moving forward, keep my debt down / bills paid down or off -- and hope for the best. I spent a lot of years worrying about the future and "what if" . My paternal grandmother lives like this.. she is 88. She's been like this her whole life - worrying about the future - and not having any fun. I don't want that to be me.

 

 

You can still save for the future and live a good life if done the right way. Most people think it have to be either or but that't not true. You can definitely Live Well and Build a Legacy simultaneously

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