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Yeah I would think timing the housing market in the general case would be just as hard as timing the stock market. If you live or want to live an an area with particularly inflated house prices(relative to other areas, not in an absolute sense) then they may depress disproportionately more when the stock market goes down, but judging that is hard.
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Mar 20, 2014 22:15
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Don't try to time the market. Barring any obvious signs of a bubble, buy a house when and if you feel is the right time for you to enter home ownership. Things like market price fluctuations are fairly minor compared to the ongoing expenses (time and money) of home ownership.
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Mar 20, 2014 22:38
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Also if you're bearish stocks are (almost always) a shitton more liquid than a house. Plus they don't tie you to a physical location or crash if a prison opens nearby. e. unless you know you're not gonna be moving for a long time or something, it's mentally easier to shrug off value dips if you don't think of your mortgage as an ~*investment*~ Guest2553 fucked around with this message at 01:48 on Mar 21, 2014 |
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Mar 21, 2014 01:45
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Cicero posted:I had a 'realization' the other day that I want a second opinion on. I had previously been thinking that I'd want to wait to buy a house when the market is weak, because of course then home prices are lower. Sounds logical enough, right? Except then I realized, wait, most of my money while saving for a house will be in stocks...which move roughly in tandem with the housing market. The stock market does not move completely in tandem with the housing market. Especially in the Bay Area, where when the stock market dips, the housing market barely dips.
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Mar 21, 2014 05:54
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The general advice is don't put money in the stock market you intend on using in the next 3-5 years. So if you plan on buying a house, put the money in something less volatile and hope that the dip comes during your timeframe. Sitting around on a pile of cash indefinitely though waiting for a crash is obviously market-timing and not recommended.
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Mar 21, 2014 07:02
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So I'm trying to retire within the next 4 or 5 years. We own our home and our car. Right now, I have 60k in the bank, 25k in a 401k, and 20k in investments (10 in individual stocks, 10 in a vanguard high dividend fund.) As of right now, my plan it to continue putting my money into my 401k while also putting extra money into the Vanguard fund. I transferred 30k into my brokerage account and plan on buying Vanguard with it. So that would put me at 50k invested, with 10k in individual stocks and 40k in the mutual fund. Then I'll play it by ear from there on out, but I'll avoid having less than 30k in the bank at any given time. Does this sound like a reasonable strategy or should I diversify the mutual fund account? baw fucked around with this message at 15:35 on Apr 1, 2014 |
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Apr 1, 2014 15:14
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Assuming your Vanguard fund is VYM, that's about 3% yield. With $40k that gives you $1,200 per year. Add $300/yr in dividends for your other $10k in stocks. How do you plan on living off of $1,500 per year? How much are you adding to your savings per year? The Vanguard fund is already diversified so if you are ok with the yield and the companies held in the fund, no reason to diversify.
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Apr 1, 2014 16:07
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It's VHDYX, and I'd like to put another 50k into it every year, and I'm keeping the bank account steady at 30k. Is there somewhere else I can put it for a higher yield?
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Apr 1, 2014 16:17
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baw posted:It's VHDYX, and I'd like to put another 50k into it every year, and I'm keeping the bank account steady at 30k. Is there somewhere else I can put it for a higher yield? Do you have a pension or social security coming to you relatively soon? Otherwise I don't know how you plan to live on ~$350k in investments. That would be rough even somewhere like SE Asia depending on how many years you need to support yourselves.
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Apr 1, 2014 16:37
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baw posted:It's VHDYX, and I'd like to put another 50k into it every year, and I'm keeping the bank account steady at 30k. Is there somewhere else I can put it for a higher yield? Higher yield comes with higher risk so it would seem to me if you're looking to need the money in 4-5 years you should be looking for pretty low-yield, low-risk vehicles.
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Apr 1, 2014 16:50
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No I guess I'll just have to invest more and wait longer. I think my current mutual fund is the most risk I'm willing to accept.
baw fucked around with this message at 16:54 on Apr 1, 2014 |
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Apr 1, 2014 16:51
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Nail Rat posted:...if you're looking to need the money in 4-5 years you should be looking for pretty low-yield, low-risk vehicles. This is all wrong in the context of a person doing FIRE. It's not like he's going to need all his money immediately, and the idea is that the investments are something that will last in perpetuity. A conservative 3% rate of withdrawal, moderate 4%, or high risk 5% of your assets, inflation adjusted every year, will be withdrawn. In the simplest case, this means 70% VTI and 30% BND *in perpetuity*. Rebalancing happens, withdrawals happen, but you stick to your asset allocation in general and keep up the same risk profile you used to grow your assets in the first place. You can play with high dividend stocks, REITs, or whatever else you feel like, but almost none of your assets should be low-yield, low-risk in a FIRE portfolio. baw, your cash allocation is starting way too high and probably ending up too high as well. Your aversion to risk will hurt you in the long run (probably). Also, you need roughly $250-300k in assets for every $10k a year you want to withdrawal.
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Apr 1, 2014 19:08
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Don't forget to budget for a new SUV when you have a kid.
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Apr 1, 2014 19:11
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Cicero posted:Don't forget to budget for a new SUV when you have a kid. I love MMM.
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Apr 1, 2014 19:17
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Just realized who he reminds me of, in terms of writing style: Maddox.
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Apr 1, 2014 19:20
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baquerd posted:baw, your cash allocation is starting way too high and probably ending up too high as well. You mean as far as keeping $30k in the bank? I suppose that's just as long as I'm actually working, not sure what I'll keep on hand when I don't have to work anymore.
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Apr 1, 2014 19:20
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baw posted:You mean as far as keeping $30k in the bank? I suppose that's just as long as I'm actually working, not sure what I'll keep on hand when I don't have to work anymore. Yes. I'm far less conservative than you to start with, but I also have faith in being able to use my credit/other assets/spouse to stretch that out if I had to and I'm not trying to time the market. If $30k is less than 6 months expenses, which I would personally consider highly conservative for a cash fund, then you are spending $60k a year and need $1.8mm to retire.
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Apr 1, 2014 19:55
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It could easily last us for over a year, so I guess it's a pretty big safety net. I'll give it some thought.
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Apr 1, 2014 20:00
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Cicero posted:Just realized who he reminds me of, in terms of writing style: Maddox. You nailed it. I had a nagging feeling that his style sounded familiar.
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Apr 2, 2014 02:07
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baw posted:It could easily last us for over a year, so I guess it's a pretty big safety net. I'll give it some thought. You should also factor the opportunity cost of that money being utilized in a higher yield vehicle. Sitting in your checking account might get a quarter percent if you're lucky. Plowing it into an index fund exposes you to significantly more risk, but it also exposes you to way better than %0.25 yearly yield. You incur that opportunity cost every year that money is sitting in a low yield vehicle. If you can realistically sit a year on $30k, then think about taking $15k, putting it in e.g. your mutual fund, and rely on credit and opportune liquidation to cover you if you end up actually needing more than that $15k.
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Apr 2, 2014 15:13
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I think I'll do that, thanks everyone.  ps ike: have you read the new jean edward smith biography of you? it's really good
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Apr 2, 2014 18:09
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My wife and I have only started thinking frugally with a mind towards early retirement in the past six months, but I'm pretty proud of this.
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Apr 4, 2014 08:38
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Inverse Icarus posted:My wife and I have only started thinking frugally with a mind towards early retirement in the past six months, but I'm pretty proud of this. LOL, mine is always like "You are the absolute worst, what the gently caress is wrong with you" showing a huge tile of color vs. a pixel of my neighbors.
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Apr 4, 2014 14:05
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LorneReams posted:LOL, mine is always like "You are the absolute worst, what the gently caress is wrong with you" showing a huge tile of color vs. a pixel of my neighbors.  That was me too, for most of my adult life. I was paid well, and I lived like an rear end in a top hat money-wise, including having the heat and A/C on all the loving time in San Jose. San Jose. Ugh. I feel horrible just thinking about it now. We installed new, energy-efficient LED recessed lighting throughout the house, and just wore sweaters this winter instead of turning up the heat, and I was astounded at the difference. Inverse Icarus fucked around with this message at 19:27 on Apr 4, 2014 |
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Apr 4, 2014 19:25
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My apartment doesn't have heat control so it is always on. When opening the window isn't enough I gotta turn on the AC and run both.
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Apr 4, 2014 19:28
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It looks like the MMM site has been down for the last two days, anyone know what's going on? The forum seems like it's down too. There was a post about a legal fight a little while ago so I hope the site didn't get taken down.
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Apr 14, 2014 06:24
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rocinante posted:It looks like the MMM site has been down for the last two days, anyone know what's going on? The forum seems like it's down too. There was a post about Twitter says it's just DNS issues.
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Apr 14, 2014 12:57
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So I've been reading about Roth conversions, and since I recently changed jobs, it sounds like it could be a good idea to convert my prior 401k to a trad IRA (the 401k is already with Vanguard so this should be super simple), then convert that at some point to a Roth IRA. From what I understand, the conversion from 401k to trad IRA can happen at any time with no penalty or tax hit. Then converting parts of the trad IRA to a Roth IRA will incur a tax hit of whatever income tax bracket I'm in at the time, with the conversion itself contributing/counting as income. And then five years after each Roth conversion, I can withdraw from the principal I put in tax-free. Does that all sound right? edit: this post has a good summary - http://www.madfientist.com/retire-even-earlier/ Cicero fucked around with this message at 20:47 on Apr 20, 2014 |
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Apr 20, 2014 20:34
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Guinness posted:Given the unknown of future tax rates, for both income and capital gains, I still think it is beneficial to diversify the types of tax-advantaged accounts you hold. Since I max out my traditional 401k contribution that's a lot of investment with deferred taxes, so I choose to max a Roth IRA rather than a trad IRA to diversify the tax structures. Employer matching on Roth 401ks is also done as traditional so that's another way to diversify.
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Apr 21, 2014 01:08
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If I can get a decent job when I leave uni this is something I'd like to look into in the long run (I'm 22 and graduating this year). Most of my financial life is way up in the air right now but are there any basic things I can start doing to make sure that, all going well, I'm placed to start saving properly once I'm in work? I'm in the UK, so some things work differently; I don't need health insurance for one, which is awesome - I genuinely feel bad for people in a position to get their savings wiped out just by getting sick or similar. I just got £15000 in an inheritance; I've got ~10k of it in a cash ISA and my current plan is to save it in case I decide to do an MA in a few years, but I'm only going to do that if it makes sense for employability. So I do have 5k sitting around in a basic savings account (0.75%) that I'm not doing anything with but my instinct is to keep it available to live on in case it takes me a while to find decent work. I have no credit history that I know of - I've never taken out a loan besides Government student loans and never owned a credit card or anything like that. I am engaged to a guy with poor credit history though, am I correct in thinking that his score will affect mine? The other issue is I have bipolar, which incurs some costs in itself (but thankfully a lot less than if we didn't have the NHS) - atm it's ~£100 a year in prescription fees and monthly travel to the shrink's by public transport, but I worry that when I'm in work it could hurt me financially by making me take a lot of sick days and so on. I'm currently living rent-free by grace of the folks and their rental property (I own like 3% of it via another inheritance but totally not enough that they aren't doing me a solid by not charging me rent), so my name is on a mortgage but I don't actually pay it, they do. Come September, though, we'll be moving out, and we live in London - not the cheapest place to live. It's gonna be rental or nothing so that's gonna be a chunk. With any luck though, the rental property will be sold in a few years and it ought to have made money due to being right where Crossrail (a new high-speed commuter trainline) is being built. The folks will be giving me a third of the take once the mortgage is settled which they estimate might be enough for a down payment on a flat - is that the best option? To get a mortgage and work toward owning a place? I am with all the people who said they should have taught this poo poo in school btw.
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May 6, 2014 19:50
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Just google "is owning better than renting" and you'll get a good sampling of the arguments against owning a place. Short answer is: no, owning a place is not a panacea of financial health or independence.
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May 6, 2014 19:59
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I guess my issue was there are loads that say yes and loads that say no, and without knowing much about finance idk who to believe.
loki k zen fucked around with this message at 22:21 on May 6, 2014 |
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May 6, 2014 22:19
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I think in the UK it's a little different. Rents are really high at the moment and interest rates are really low. There's a severe lack of housing and space near a lot of major cities and the population is increasing very quickly. I think if you can afford it and know you are staying put for a few years at least it's a good time to buy. ( I just bought a house and am reassuring myself here). It's a semi detached and the other one is up for rent. If I pay what they are asking for rent into my mortgage I'll own it in 10 years. Obviously there are other costs involved when owning a house but that gives an idea of the cost of renting at the moment.
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May 6, 2014 22:24
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loki k zen posted:I guess my issue was there are loads that say yes and loads that say no, and without knowing much about finance idk who to believe. It's a home, not an investment. If you want to set down and stay somewhere a long time, consider buying a house. If you don't there's nothing wrong with renting and using all the money you save to invest more. They both have their pros and cons.
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May 6, 2014 22:25
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SlightlyMadman posted:It's a home, not an investment. If you want to set down and stay somewhere a long time, consider buying a house. If you don't there's nothing wrong with renting and using all the money you save to invest more. They both have their pros and cons. This is the truth of it. We bought our house to split our drives/buses to work since they were opposite directions. 8 months later my wife changed companies. The next 6 months she worked 8 blocks from my office, her home office is about 5 miles past my office, and starting June 1 she works in Vail Colorado (while I stay in Denver) for the next 30 months. We love our location but it is going to kind of suck for me as basically a bachelor. I also am not going to sell after a year and a half for those reasons though.
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May 6, 2014 22:33
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How do you fellow goons balance striving for early retirement/FI but enjoying your life as you get older? I have such a weird conflicting mindset when it comes to hoarding money for any potential issues that could come up (being pessimistic most of the time), but then I'll drop a grand on a pair of headphones like it's nothing. I'm pretty frugal when it comes to shopping for general stuff like household goods, clothing, and the like, because I know they will need to be replaced quicker than other items in the house. However, I tend to go for the higher-end gadgets as they're "worth it" in my mind and will last a lot longer than some cheaply made item. IE: I'd rather pay a higher price once (like the headphones above) and not need to replace it in the near future, than buy a cheaper initial item and end up upgrading it anyways for more money. Money talk: I do max out my Roth IRA each year since graduation, put in enough in my 401k for employer match, and will continue to do so as long as possible. But then I have the leftovers just sitting there in my bank accounts until something comes up that I want to buy or something that needs to be replaced. I've had upwards of $10,000 in my bank a year after college just sitting there, but I was too scared of spending any of it, as I was always worried about my car needing repairs, the company letting me go, me being out of work due to any number of external circumstances, or whatever occupied my mind at the time. One last thing, I am not religious by any means, but I do find Buddhism interesting and a lot of their beliefs to be what I want (or think I want) out of life. Reading about how a lot of life's dissatisfaction/suffering are due to desires in life resonates with me, maybe I'm just the type of person that will always be dissatisfied no matter what I do?  I'll bow out with a quote: quote:Normally we think our happiness is contingent upon external circumstances and situations, rather than upon our own inner attitude toward things, or toward life in general. The Buddha was saying that dissatisfaction is part of life, even if we are seeking happiness and even if we manage to find temporary happiness. The very fact that it is temporary means that sooner or later the happiness is going to pass. So the Buddha said that unless we understand this and see how pervasive dissatisfaction or duhkha is, it is impossible for us to start looking for real happiness.
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May 6, 2014 23:49
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It's all about doing what you're comfortable with. If that's the lifestyle you want to continue to have, budget your retirement needs as such. Some people give up nearly everything, are happy with it, and retire in like ten years.
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May 6, 2014 23:57
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kloa posted:How do you fellow goons balance striving for early retirement/FI but enjoying your life as you get older? I have such a weird conflicting mindset when it comes to hoarding money for any potential issues that could come up (being pessimistic most of the time), but then I'll drop a grand on a pair of headphones like it's nothing. Check out stoicism. I read A Guide to the Good Life: The Ancient Art of Stoic Joy and it spoke to me as a secular, analytical person. It sounds like you may have a problem conceiving of "enough", though for you it's security.
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May 7, 2014 00:08
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Laterbase posted:I think in the UK it's a little different. Rents are really high at the moment and interest rates are really low. There's a severe lack of housing and space near a lot of major cities and the population is increasing very quickly. I think if you can afford it and know you are staying put for a few years at least it's a good time to buy. ( I just bought a house and am reassuring myself here). It's a semi detached and the other one is up for rent. If I pay what they are asking for rent into my mortgage I'll own it in 10 years. Obviously there are other costs involved when owning a house but that gives an idea of the cost of renting at the moment. That's true. Rent in some of the most reasonable spots (we're thinking Camdenish) is £900 p/m. And we have no plans to need a kid's room or leave London, so prolly worth it when the house sells in like 2016-ish. Hopefully I will know what my job situation is by then so know what we can afford in terms of mortgage. And I know my folks are making profit where I live even collecting 3 rents on a 4-person shared house, over and above mortgage etc. And they could get away with charging more. In fact, looking at some of this stuff I reckon my parents could do early retirement now if they didn't love working and foreign holidays so much, just what they could make from their two rental properties. Buying right by one of the stations they ended up building Crossrail next to was luck, but is likely to turn out very good long term.
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May 7, 2014 00:10
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The one area of "maddening frugality" that makes me sad is when people who make large incomes don't contribute to charity. My job, for instance, will match 100% of charitable donations up to like 6k a person each year. With the salaries most of my coworkers make there is no reason at all that shouldn't be an easy thing to cap out each year, but instead the overwhelming majority don't use it at all. Yes that is putting my retirement date off a bit, but it is still a 100% ROI. In fact it is greater than a 100% ROI because you also get the deduction on your taxes for it. I'm not saying you have to sell all your possessions and live in a box, but something like that is just being kind of morally insensitive.
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May 8, 2014 12:21
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