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Reduce your spending and you'll need less to retire. Everyone likes to think that they're going to spend money like crazy once they're retired, but that is generally not the case. It is well documented that people spend less money once they retire, which makes perfect sense. A lot of the money people spend every year is a result of having to work in the first place.
There's the risk. The longer you wait to collect the chances of diminished loot in the box increases.Quote:
Originally Posted by 20X11
If you're investing in a something that only pays interest, you'll likely never make it with interest rates these days. True investments will likely grow significantly over time. Mutual funds, etc.Quote:
Originally Posted by Irving
This is very true.Quote:
Originally Posted by Irving
My Mom is quite elderly. She spends very little money these days.
I think one of the key factors for a comfortable retirement is doing everything you can to have the house paid off and zero debt.
I also strongly agree with starting as young as possible. I had a few dollars in a savings account when I was 26 years old. That particular year, I had more income than I had planned for and was going to need to write a check to the IRS on April 15th. Instead, I took the money from my savings account and put it in an IRA. What started as $1500 in 1994 is now worth about $9000. I haven't added any money along the way and I haven't actively managed the Janus account where I stashed the money. If you do the math, I'm averaging about a 15.5% return over the last 22 years. The other thing is that the penalties for raiding a retirement account have kept me from spending the money on toys along the way.
I've also made a pretty decent return on different houses I've owned over the years. The key to making money in real estate is never having to sell except when YOU decide. I would've lost money on most of them at one point or another if I was forced to sell at an inopertune time.
Now... I just save as much as I can and hope for the best! Not counting on Social Security. Planning to downsize my house when I retire and buy whatever I can afford for cash with the equity from my existing house.
I LOVE talking about finances and generating income. I don't give financial advice, but I do love to motivate people and help them understand the reality of money compared to the way society fools us throughout life. With that said, I'll provide another little tidbit of encouragement.
A lot (most?) people are suckered into these dumb ideas that they need millions of dollars before they can comfortably retire. A LOT of that is because everyone thinks they should be spending ungodly amounts on education (college) for their kids. The other part is because people think that their level of spending will be the same when they retire as it is now. A financial adviser is likely to tell you that a safe withdraw rate to live off of your saved money is 4%. This isn't false, I'm just laying the ground work here. If you tell that to someone who is middle aged and has a family, they start adding up their current monthly expenses...
Mortgage: $2,000
Car loans: $1,000
Utilities: $200
Cable/Internet: $150
Family cell phone plan: $300
Groceries: $1,000
Day care: $1,500
Credit card debt: $500
Student loans: $500
Just that "basic" stuff already lands you at $7,150 a month.
To find out the amount you need to save in order to withdraw 4% to provide your current monthly expenses, you multiply your monthly expenses by 300.
$7,150 x 300 = $2,145,000
You explain that to someone who is 35 and above and only has maybe $100,000 in a 401k from having worked for 20 years already and they're likely to have a heart attack.
It would take over 21 years of making $100,000 a year at a 100% savings rate to make 2.145 million dollars. Most people in the US may not ever even make 2.1 million dollars in their lifetime, let alone have 2.1 million dollars just from the extra amount of money they've saved here and there over their working career.
Back to what NFA guy said. If you can manage to eliminate your consumer debt (credit cards, auto loans, student loans), and be mortgage free by the time you retire you'll be in good shape.
Let's go back to that over simplified list of monthly expenses I provided earlier. Now you're whatever retirement age (completely up to you) and your kids are grown and out of the house. You made some important life choices and made sure that you paid off your mortgage, car loans, and student loans. The kids are out of the house, they have their own cell phone plan, you aren't paying for day care, and are only feeding and heating two people. Now the list looks like this.
Mortgage: $0
Car loans: $0
Utilities: $200
Cable/Internet: $150
Family cell phone plan: $100
Groceries: $500
Day care: $0
Credit card debt: $0
Student loans: $0
Monthly - $950
$950 x 300 = $285,000
This example is simplified, but not at all extreme. Even if you're 50 right now, you can figure out a way to get your hands on $285,000. It might not be easy, or intuitive, or even fun, but you can do it. It gets easier to get to that number the younger you are when you start. If you can't, even a part time job will be able to tackle $950 a month.
The financial literacy of people (in this country and around the world) is very sad. Retirement hits some people like a freight train, and that's too bad because it's a train that everyone has had most of their lives to figure out a plan to step off the tracks before it arrived.
Thanks for that Irv, very encouraging!Quote:
Originally Posted by Irving
I don't want to sound preachy here, but the other thing I see all the time is folks bitching about 'the man' keeping them down. A very VERY small percentage of the population retires comfortably just because they inherited sufficient wealth to do so. The vast majority of retirement success stories start with planning, hard work, sacrifice, delayed gratification, etc.
I get sick of listening to people who claim they don't make enough money to save for retirement and then in the next breath show me their boat, atv, pics from a week-long vacation, etc. They also spend big bucks on cell phones and cell phone plans, internet, satellite TV, new cars (usually leased) and so on.
Some of this is ignorance--which goes along with what Irving said, but much of it is greed and immaturity. Everybody thinks they *deserve* to live their version of the high life. They wanna keep up with the Joneses. What they don't know is that the Joneses are frequently flat-ass broke!
I end up listening to the Dave Ramsey show because it's on when I'm taking my evening shower. I like what he has to say for the most part, but even if you don't like him, the message from most any of these financial self-help gurus is similar:
1. Take responsibility for where you're at.
2. Commit to living on less than you earn
3. Figure out some way to make extra money to pay off your debt faster.
4. Save for retirement because you can't count on anyone else to do it for you.
Surrendering my soapbox now...
It's often much easier to eliminate expenses (in the short term) than it is to make more money. Sometimes it takes a different frame of reference to tackle something that otherwise seems insurmountable.
*Assuming you (Hurley) were being serious and not sarcastic. ;)
To add to that, while Dave Ramsey has a good thing going, him and Suze Orman are for beginners. They aren't wrong at all, but people can get out of debt and progress in life MUCH faster. National voices like theirs have to tailor to their audience who are almost completely financially illiterate and would immediately change the channel if someone dared suggest saving 20% of their savings, let alone 50%+.Quote:
Originally Posted by NFATrustGuy
One of the biggest obstacles for getting people to understand how to manage money is that people assume that if they lower their expenses, even to spend below what they make!, that their standard of living will drop off the map. I've personally done it and can tell you that is the completely opposite of the truth. I think Dave Ramsey has some plan called the Seven Steps or something and that is a pretty good thing to dive into.
On a side note, as many of you know, I drive around a significant portion of the day. I usually spend that time listening to (or reading when I'm parked) different personal finance resources. There is a LOT out there and a lot of it will blow your mind. If anyone is interested in something, but doesn't know where to start, let me know and I'll find some where to point you that may be a good fit.
The three things that people talk most about are stocks/investing, real estate, and entrepreneurship. Just framed in that context, one might think to themselves, "The stock market terrifies me, I don't want to be a landlord, and I'm not some 19 year-old programming genius, so what exists out there to improve my situation that fits ME?!" I'm here to tell you that there is something that will interest you, no matter who you are. In addition, you have to know that stocks/investing doesn't mean you have to be a shark day trader, real estate doesn't mean you have to take calls about clogged toilets at 2am, or even have tenants, and being an entrepreneur doesn't mean you have to come up with a new idea.
Oh no, not sarcastic at all.Quote:
Originally Posted by Irving
We made a very tough decision about a year ago, to have the wife stay at home with the boys. Between both of us commuting across town, and paying for daycare, along with my ever changing schedule due to the new job, it just made more sense.
We did lose some money, and have had to endure some financial stress living on one income, but in the long run I feel it's going to be for the best.
With my salary comes a pretty decent retirement, so your post was quite encouraging, as I haven't had much room to think about retirement.
I've been thinking a lot about this lately . . . approaching 50. We paid off the house 2 years ago and we have no debt at all. I have a 401k at work and have built up a decent chunk (I think) to this point and we've socked away a good amount in savings and in my Etrade account (after the company I work for was acquired and all my stock and ESPP shares vested and cashed out last year). But we have WAY too much tied up in cash at this point and I really want to get that money working for us now that we're at a more comfortable point and can get some additional investments going while still having enough in cash for whatever comes up.
My wife's job ended at the end of 2016 and so we're going to go single income again until the kids go to college in the next 3 years . . . then she'll look for work to help pay for that. But I'm getting a little weary of the rat race at this point. Would like to retire in the next 10 - 15 years if possible. We'll see how it goes.
I'm going through some end of life situations with a few family members right now and I'll add this, plan on having about $100k (2016 dollars) set aside for medical reasons at the end. My great-uncle recently passed at 93 and he was still going Jeeping and fishing up until about 3 years ago. He slowly declined until this past year when he needed around the clock care at the house before ultimately moving into a hospice for his last month. Thankfully he had more than enough saved in his estate for those costs.
My grandmother is another story, she is limited to VA survivor benefits and social security, right now she gets just enough to leave her with about $200 a month for miscellaneous expenses. She's living in a retirement community that provides very basic medical assistance and includes three meals a day. If and when her health declines further the financial burden will come down on the rest of the family.
Would you agree that living on one income is easier than you first thought because of the savings of your wife not working full time? No day care, less places to go, less miles on a second vehicle, easier to cook at home, more time to coupon, less stress of who can pick the kids up after school, etc?Quote:
Originally Posted by hurley842002
They need a better financial planner. $2mil leveraged into real estate can get you close to $300k+ / year plus increase equity at the same time.Quote:
Originally Posted by Irving
$600k could get you around $100k / year if you self manage the property.
All depending on the market and rental environment. Some markets you might get more for your money cash flow wise, but resale value wont be much of an increase.
Living below your means is always going to be easier than making more money.
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Absolutely, the biggest part being trying to figure out how to get the boys picked up, that was beyond stressful. Financially it's been a bit tougher, especially with rent going up, but it's been worth it to not have to worry about my schedule.Quote:
Originally Posted by Irving
Firehaus or anyone else: what financial planners do you use? What is a good way to find and select one?
Are you interested in helping me with real estate questions if I have them? I recently came across what I thought could be a good deal on a rental on my local Nextdoor site (3 bed 1.5 bath condo in Thornton for $125,000), but after looking into it and driving by the property I don't think the numbers would work in my favor. I've owned multi-family before, and while I learned a lot, one property didn't make me an expert and I like to chat with active investors to keep me in line.Quote:
Originally Posted by Firehaus
Excellent! I'm glad to hear it (even though I lost my contact at the only bank that would talk to me about the business I started. ;) )Quote:
Originally Posted by hurley842002
I'm currently working my way through Radical Personal Finance (guy used to be a financial advisor and quit to do his pod cast) and one of his sponsors is http://www.paladinregistry.com/Quote:
Originally Posted by Erni
It sounds like it's a search tool to help you find a financial adviser that fits you.
*The other sponsor of that pod cast is YNAB (www.youneedabudget.com) for those who are familiar.
Im just not a fan of single family rentals. Prefer multi-family, less risk I think. From tenant damage to appraisal on the sale end, I think multifamily wins.Quote:
Originally Posted by Irving
But with anything, the deal is mainly won on the buy side. Buying right makes it so much easier to come out ahead. Some have been burned in multifamily by not either knowing what they were buying or having a bad broker shoe horn them inti a bad deal to get a commission.
Right now its not tough to sell, it very hard to find something to buy. Im selling my current place soon. At close to a 7% cap, it should go fast when I'm seeing 5.5%-6% caps on recent sales.
Pm me anytime.
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I can, and will, highly recommend Jordan Fuerst in Brighton.Quote:
Originally Posted by Erni
He's done very well with my retirement account.
https://fuerstfinancial.website.raym.../jordan-fuerst
Fuerst Financial
36 S 18th Ave
Unit A
Brighton, CO 80601
T: 720.383.7780
I used to work with him in a different industry (wireless, he was a senior software engineer, I was the firmware test engineer), and he is very smart and driven.
Thats a hard question for me to answer since I do my own. I feel like anyone really good isn't going to be working with lower net worth people. Maybe someone else will have a better outlook and some suggestions.Quote:
Originally Posted by Erni
If you're looking for real estate, that I can point you in a direction.
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Just out of curiosity what kind of annual percentage gains is he averaging for you?Quote:
Originally Posted by Grant H.
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That's one of the reasons I like Joshua Sheets from the Radical Personal Finance podcast. He often talks about how financial planners naturally target people with high net worth, when the people that he wanted to help (and have just as much use for a financial planner) are those who are just starting to build net worth.Quote:
Originally Posted by Firehaus
Ill have to check him out.Quote:
Originally Posted by Irving
For a lot of people, having their life savings in a 401k in the market = no big deal. Even though when it tanks, you could literally wake up and be worth half as much.
Trying to talk to them about having the same life savings into a real estate investment and they freak out. Even though the property is insured and the odds it will be worthless when you wake up one day is very low. The return can also be better.
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Every time I think that real estate sounds like a good idea, I meet someone who is renting properties and they are miserable and wish they never got involved. My neighbor has several properties and he seems like he's barely treading water on them . . . and the mental drain of dealing with idiots, people who trash the properties, contractors who screw him, etc really wears on him. I dunno . . . but I've met far more people who are landlords and hate it than the ones who are thriving with it.Quote:
Originally Posted by Firehaus
We have talked a few times about considering buying property wherever the kids end up going to college. Rent it to them and then hold onto it for a bit after. We'll see.
I feel having a larger unit property makes things easier. BUT, having some trusted people to work on it is a must.Quote:
Originally Posted by Ramsker
Also, most people barely fix stuff to save money, while really costing them money in the long run. Toilet repairs can add up to be more expensive than just putting a new one in that has a better flush rating and uses less water. Stuff like that adds up.
Trying to time when a hot water heater is going to finally die, instead of fixing it on their own schedule before it happens. When they go, its in the middle of the night, in an upstairs unit, while leaking into the closet underneath it for a few months causing damage to the hvac unit in the other unit.
Spend the money up front to fix the things that can cause an emergency call that costs emergency rates and emergency headaches.
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A while ago I was trying to think of the worst possible scenario with real estate, and I think I determined that meth use condemning the property, or an act of war or riot (something not covered by insurance) would be the worst. However, I recently heard an interview with a lady on RPF where her and her husband over leveraged themselves on real estate and personally guarantying loans in 2007. When the market crashed in '08 people were giving properties back to them that weren't worth near what was owed. They declared bankruptcy and were divorced by 2009.Quote:
Originally Posted by Firehaus
Ramsker, no matter what topic you are interested in, you can find horror stories about it. Just keep the context of the conversation in mind and who you're talking with. It's the same thing as watching Youtube videos of bad cops or exploding Glocks. Yes that stuff happens, and when it does everyone talks about it and makes a big deal, but no one is watching YouTube videos of the thousands of times police are professional, Glocks aren't exploding, and rental properties providing hundreds of dollars of cash flow each month for years and years with no problems. I'm often on the fence about rental properties myself, but then I remember how many rentals my dad has (3 currently) that I don't hear about for years at a time. My dad isn't some property investing wizard or anything special, but he's had at least 5 rentals (that I know of) that have mostly not had any issues at all. Not to mention that there are a lot of ways to be involved in "real estate" that don't involve tenants at all.
Agreed. We lucked into a great property manager that handled all the little stuff (lock-outs, clogged toilets, boarding up the door when the police kicked it down, etc) with no issue. When someone would move out (or be evicted) we'd come in and rehab the unit and make sure it was ready for the next tenant. We had the mind set to always improve the property when we could rather than be slum lords (new gutters, new windows each time someone moved, new boiler, new paint in common area, etc). We only held the property for a year and didn't get to experience the full benefit of improving the property (we planned to hold for five years at the start), but even with all the extra money we spent making improvements in anticipation of reduced costs in the future, we were still able to cash flow every month and make money on the property.Quote:
Originally Posted by Firehaus
Just to touch on over leveraging, look at the worst historical vacancy rate, make sure you can pay the property's bills and your personal bills if it gets worse than that. Im actually very extreme when it comes to estimating worse case scenarios and if i will be okay or not if it happens. If your property will make you an extra $50k/year at full occupancy, and you live at that or beyond your means, your screwed when you only get $25k / year.
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I only brought that up to point out that one can screw up any sort of investing/business/financial strategy. Just do as much research as you can handle before jumping in with both feet. Your Money Or Your Life, right?
Last year was 8.6%, which with my risk tolerance is pretty darn good.Quote:
Originally Posted by Firehaus
I should probably have higher risk tolerance in my accounts right now, given my age, but that's just not how my mind works.
Agreed. Research is key.Quote:
Originally Posted by Irving
Not only on the property your looking at, but also the area, the city, and the future rental demographic trends and forecasts.
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Thats not too bad for lower risk on stocks/funds. I like to have as minimal risk as well. I started with nothing and never want to have nothing again. :)Quote:
Originally Posted by Grant H.
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At a minimum... that's what we strive for on top of my retirement plan through work- which is nice, but we won't live comfortably off of it in 30-40 years when/if we do retire.Quote:
Originally Posted by Irving
I agree. I hear stories from people I know involved in real estate, not the exception, not just the worst case scenario.Quote:
Originally Posted by Ramsker
Look at that through the lens of every one you know who is employed though. You don't talk about how wonderful your job is over drinks at happy hour, usually. People are always talking about some work bummer or another, but that's not talking most people out of a job altogether.Quote:
Originally Posted by kidicarus13
If you can find me an easier way to legally make 12-20% cash on cash annually while almost doubling, to more than doubling my initial cash investment on the sale of the property I'm interested.Quote:
Originally Posted by kidicarus13
This market isn't going to last forever, but the generational demographic trends are forecasting a strong rental market for the next 10-20 years. Not crazy like we've been seeing in regards to rent increases, but still decent to strong demand.
Nothing worth while is ever easy in my experience. Always some sacrifices to be made.
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Real estate can do a lot of good for you. You just have to be ready for what you're getting into, IMO. I did the landlord thing for 3 years. It's not my cup of tea for now. I wouldn't be opposed to it later on and I'd be sure to have a good chunk put aside for "emergencies" I.E. tenant damage, house maintenance, floating the mortgage between tenants, etc.
I think too many people jump into the landlord thing assuming it'll be cake and instant flow of fortune. Such is the case with many business's that people feel should be "easy money". But alas, there is no such thing (99% of the time).
In 2008 when single family home properties fell by up to 60%, I think that rental prices dropped by about 10%. Significant difference there.
I have friends who have been on both sides of the landlord coin. The ones that make good profit and do well with it have the perfect combination of good tenants, a good area, and the husband is a stay-at-home dad/property manager/superintendent- meaning he fixes the stuff that goes wrong with their rental houses. The others, sank tons of money into fixing issues, had bad tenants, and ended up having to go through court and lose even more money. It can go either way. We contemplated renting out our condo when we bought our house, but decided to sell instead of dealing with the headache that comes with being a landlord. That and the laws are heavily in favor of the tenant.Quote:
Originally Posted by Dave_L