2009: pay of student loans- 2010: fund 3 months expenses emergency fund
- 2011: buy a townhouse with 20% down
- 2011: have some babies
- 2012: begin savings for college/pension supplement
- 2020: move into house to fit all 3.5 kids
- 2030: begin handing out college tuition
- 2050: pay off house completely
- 2050: retire, collect Social Security (or not), play with grand kids
- 2070: sell the house and move with my old lady to a "home" that can wipe our drool
- 2085: die driving a motorcycle on the open road while smoking a Cuban cigar in Brazil
With all this talk of savings it got me looking into how much I'll actually have to set aside, especially once Traci starts to stay home with the kids. I've talked before about how the stock market is so complex that it is essentially random. What this means for the average person is that stock market is for long term, not short term saving. Historically there’s an 55% chance that the stock market will give a 10% return over one year. There’s an 85% chance over a decade. But, there is a 100% chance of earning that return over a 30 years. Here's a resource for calculating how much you have to save/invest each month to reach your goals. For example, you have to only have to invest $442.38 a month in the stock market at 10% over 30 years to reach a million dollars! I'm looking forward to sitting down with a professional financial adviser in the near future to see if my opinions, which are a combination of my economics background and financial radio talk show host Dave Ramsey, make sense in the real world.
This is creepy but congrats on paying off your loans!
ReplyDeleteagreed...my husband is weird.
ReplyDeleteWow, that was funny.
ReplyDeleteOverall I think the plan is solid. If you are confident you will be in the area for awhile, I would get into a home right away because of the historically low rates and perks for first time buyers. Also, the house should be treated as a liability, not an investment. I would get the cheapest home I can find within reason and put the lowest down payment on it as possible so that you can put the money you are saving into tax-sheltered investments. The number one thing is to start investing early because, as you state, what matters more than anything is time.
TMI? I mean it's just an estimation. It's totally possible that the cigar could be a cigarette, ha ha.
ReplyDeleteI'm with you on houses being treated as a product, not necessarily an investment. But I disagree with your comment about paying a small down payment and putting the extra money somewhere more profitable. Sure the stock market will give me a better return, but I don't like debt. I don't think it is inherently a bad thing (I took out loans for school after all) but it does limit your future choices. If I want to move to Ghana next week I can because I don't have anything holding me back. If I ever want to be a home buyer (and I do) and I don't like the weight of debt, then my goal is to pay it off as soon as possible.
That said it will probably still take me 30 years to pay it off on a teacher's salary.
I've thought alot about this lately too (granted not to the somewhat morbid extent that harrison did), but more along the lines of goals and investments. I'd be interested to hear about your meeting with a financial planner (future blog post?). Sounds like a solid plan, but I agree with Justin with the interest rates this low it would be best to max out a ROTH IRA, then pay off a house, etc.
ReplyDelete