YM victory of the day

[Tiny]

Dec 6, 2023 13:02:37 GMT -5 azucena said:

Dec 6, 2023 10:15:28 GMT -5 soupandstew said:

I feel there are a couple of pitfalls in delaying home ownership until one can pay cash.  The first pitfall is that there may be a period of years where the individual misses out on the tax benefits of home ownership, thereby having a higher tax bill.  The second pitfall is that diversion of income to savings for a house may mean the person doesn't have enough cash flow to fully fund an IRA or other tax-sheltered investment, or to qualify for the maximum available employer match.  Again, more ordinary income is taxed and future retirement income is possibly reduced.

A third problem can arise when a person puts a large portion of their assets into something with fluctuating liquidity - a house.  For those in their working years, market conditions including interest rate fluctuations can make it difficult to relocate for career advancement or to be near family members needing assistance.  For retirees, market conditions can make it hard for them to get their cash out when needed for lifestyle changes such as moving near loved ones or accessing care in a facility.  

Of course, these considerations will come into play more for lower-income earners more than those with higher income and net worth.  

Not picking on you, but I struggle with the bolded. With the rise in property taxes, I'm not sure mortgage tax deductions are net favorable. Our property tax in StL suburbs just rose 30% to $5500/yr on a house that we purchased in 2017 for above market value at $340,000 in bidding war (list price was $325,000). Redfin has it up to $470,000 which is probably too high but there have been comps $425k+ sold this year.

In comparison, for my 15 yr mortgage at 2.75% interest, I've only paid $5,700 in interest this yr. As mathy as I am, I avoid tax calculations, so I'm not sure exactly how much I can deduct, but it's gotta be close to a wash in this case.

FWIW, we and many others in our area contested the tax increase with data. Almost everyone lost those appeals.

I too struggle with the idea that homeownership is a "tax benefit" or the same wonderful "tax benefit" for every homeowner.   

The thing about the deductibility of property taxes and mortgage interest is that it's very "local".    So for someone with high property taxes and/or a big mortgage it may be useful.    For someone with low property taxes and a small mortgage (balance) it might not be so useful.   Being Single, Married, or Head of Household may also effect this.   

There may even be some tax "credit" or something at the State income tax level.  


For someone to be able to reliably say that home ownership gives them a meaningful tax break - they need to know how home ownership effects their Federal and State (and maybe County) income taxes.    

[nidena]

Dec 7, 2023 8:22:50 GMT -5 azucena said:

Dec 7, 2023 8:18:25 GMT -5 raeoflyte said:

I've always felt that owning a home is one of the easiest paths to building generational wealth. It's disheartening with how expensive house prices are now, but rent isn't affordable either. Locking in a payment is still a better option in most cases in my opinion when at all possible. Still have to deal with taxes and insurance but there's a little control you can exert over insurance and still better than across the board rent increases year after year.

My girls are already jokingly bickering about who gets this house when DH and I are 'mega old'. Right now, we're just old. DD15 even asked when the mortgage would be paid off. I told her 2035 which she said works for her.

Enjoying this part of this stage of parenting.

That's around the same time that my Dad's house will be paid off but he and his wife will be in their 80s and 90s.  

Between the two of them, there are five kids and I'm the youngest.  Their age and health has me pondering the "what will happen when" question often.

[Rukh O'Rorke]

Not sure I have any YM victories right now, lol!

I know I am doing well. But I feel like I am struggling again. I guess I don't care about payments if I can max out my 401k and HSA and Ibonds. If I do that and can pay all bills and have a few splurges through the year, I am satisfied, That model is under pressure right now and it is really hard to keep the last 2 paydays on course to max the 401k. Been shuffling around stuff, taking some from savings this month to keep the 401k full. Had 3 big bills around July that were over 10k combined and still trying to balance out from that.

So I am struggling while saving 50k+ a year. If I stop maxing 401k in 2024 I will feel like a big poopy fail, lol. So trying very hard to turn things around now through early 2024. I will figure this out . A short term squeeze that I am learning from.

[haapai]

My original motivation for getting rid of my credit card debt was to go back to spending more.  I laugh about this now, but that is how I thought at the time.  I started lurking on Liz's YM board around then for tips on how to do that faster and I kept on hearing about EFs and sustainable budgets and quickly figured out that I had a lot to learn. 

At the time that I started lurking, about 80% of my pay was consumed by needs and I was living with a friend and not paying rent.  I had a lot to learn and I kept a box of tissues (or a roll of TP) and a bucket for vomiting into next to my PC as I spent months figuring out that I was in much thinner ice than I had ever imagined.  Ironically, there were few hiccups in repaying the debt.  I had windfalls instead.  But there were so many "What was I thinking?" and "How did I not learn this earlier?" moments. 

I was also lucky to have decent math and accounting skills.  I found most of the bad news myself.  Quite frankly, I could not have done it any other way.   No friend or kind voice could have convinced me that I needed to change.  It took spreadsheets to tell me that. 

[soupandstew]

Dec 7, 2023 12:54:18 GMT -5 Rukh O'Rorke said:

Not sure I have any YM victories right now, lol!

I know I am doing well. But I feel like I am struggling again. I guess I don't care about payments if I can max out my 401k and HSA and Ibonds. If I do that and can pay all bills and have a few splurges through the year, I am satisfied, That model is under pressure right now and it is really hard to keep the last 2 paydays on course to max the 401k. Been shuffling around stuff, taking some from savings this month to keep the 401k full. Had 3 big bills around July that were over 10k combined and still trying to balance out from that.

So I am struggling while saving 50k+ a year. If I stop maxing 401k in 2024 I will feel like a big poopy fail, lol. So trying very hard to turn things around now through early 2024. I will figure this out . A short term squeeze that I am learning from.

I think the key words are short term and learning.  You are very far ahead of the curve compared to many.  We've had the squeeze periods too when immediate needs were very challenging and we had to play either-or.  This too shall pass.

[Rukh O'Rorke]

Dec 7, 2023 19:03:07 GMT -5 soupandstew said:

Dec 7, 2023 12:54:18 GMT -5 Rukh O'Rorke said:

Not sure I have any YM victories right now, lol!

I know I am doing well. But I feel like I am struggling again. I guess I don't care about payments if I can max out my 401k and HSA and Ibonds. If I do that and can pay all bills and have a few splurges through the year, I am satisfied, That model is under pressure right now and it is really hard to keep the last 2 paydays on course to max the 401k. Been shuffling around stuff, taking some from savings this month to keep the 401k full. Had 3 big bills around July that were over 10k combined and still trying to balance out from that.

So I am struggling while saving 50k+ a year. If I stop maxing 401k in 2024 I will feel like a big poopy fail, lol. So trying very hard to turn things around now through early 2024. I will figure this out . A short term squeeze that I am learning from.

I think the key words are short term and learning.  You are very far ahead of the curve compared to many.  We've had the squeeze periods too when immediate needs were very challenging and we had to play either-or.  This too shall pass.

Thank you soupandstew! I guess on some level I feel like I shouldn't be learning at this stage, but that is silly too! It's call life. 

[bean29]

Dec 5, 2023 16:47:21 GMT -5 wvugurl26 said:

My general assumptions are lots of debt and no savings for tomorrow. Money from relatives could be another reason.

I also live in a HCOL area and some people in the private sector are pulling down crazy money. We do very well and beyond my childhoid/teenage wildest dreams. But we live where it's not uncommon for the private school and college bill to run 7 figures and for run of the mill houses to start at that.

I just don't belong and my brain does not compute.

If you are public sector and have a pension, your real income is probably close to or way better than them, you just have an adequate amount allocated to retirement.

[Opti]

Dec 7, 2023 11:03:35 GMT -5 nidena said:

Dec 7, 2023 8:22:50 GMT -5 azucena said:

My girls are already jokingly bickering about who gets this house when DH and I are 'mega old'. Right now, we're just old. DD15 even asked when the mortgage would be paid off. I told her 2035 which she said works for her.

Enjoying this part of this stage of parenting.

That's around the same time that my Dad's house will be paid off but he and his wife will be in their 80s and 90s.  

Between the two of them, there are five kids and I'm the youngest.  Their age and health has me pondering the "what will happen when" question often.

You will find out. I am very curious to know how my Dad actually bought his current house and how it is titled. When his home on a very busy street near the industrial park finally sold he did many things I thought were foolish. Dec of 2022, the house was already sold, however he was paying rent possibly to be there several months because he wasn't willing to move quickly and leave crap behind. This led to him falling I think and the actual move out being done by others I think Jan 2023. Which brings us to Jan 2024 where he got hospitalized and is expected to not leave there alive.

He is anti facility living and wants to leave a legacy. I don't know if he managed his affairs well enough to do the latter. Certainly how he bought this current house implies to me, we three children will take a bath if we sell it to split. He is a smart guy but stubborn. My mom also did the refiance thing on her townhome at an advanced age, however it probably was a better idea than a reverse mortgage. I was not the executor of her estate, MS was, so I don't know the impact that decision had on the selling of it.

With dad, I have an idea of what the math is, and I try not to shudder. I have had two homes in NJ, and both times I needed to sell at almost the worst possible time so I made no money on either. First was because of divorcing during a significant economic downturn and the other was because I was laid off and all IT jobs were being dropped or cut because of 9/11. 

[TheOtherMe]

Jan 15, 2024 6:57:02 GMT -5 bean29 said:

Dec 5, 2023 16:47:21 GMT -5 wvugurl26 said:

My general assumptions are lots of debt and no savings for tomorrow. Money from relatives could be another reason.

I also live in a HCOL area and some people in the private sector are pulling down crazy money. We do very well and beyond my childhoid/teenage wildest dreams. But we live where it's not uncommon for the private school and college bill to run 7 figures and for run of the mill houses to start at that.

I just don't belong and my brain does not compute.

If you are pblic sector and have a pension, your real income is probably close to or way better than them, you just have an adequate amount allocated to retirement.

I believe @wvugirl works for the federal government.  She will have a 401K and whatever else she put into the TSP.  

I started many years before her and I am under CSRS and I do have a pension.  That kind of pension went away a good 30 years ago.  We had the option to split.  None of my work friends switched.