Afford $1.8M on 300K?
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Anonymous
OP here - you are right - $9K would eliminate our positive savings cash flow. Certainly we could reduce it to $8K and have $1K monthly positive savings cash flow. We have enough savings and equity in our current house to put 20% down on a new house (so $300-$400K). And accumulate about $90K in cash savings each year. I don't know why we would put more than 20% - though - PMI is done for, and I don't see why getting a smaller mortgage just for the sake of having a small mortgage is better (besides the positive cash flow issue). Waiting as year to reduce the principal by $90K doesn't make sense to me if I am able to borrow at <5% (and possibly refinance if the rate drops below 3%). Suppose I had $2M in cash. I don't think I would buy the house in all cash (and have a $0 PITI). I think the right (income maximizing) thing to do is put pay exactly $400K down on a house (to eliminate PMI) and do something else with the remaining $1.6M that garners returns greater than my expected borrowing rate. or am I being financially illiterate here? |
Anonymous
| Saving $1k a month at that income isn’t really enough. One replacement of the roof, air conditioning, a few appliances- that’s gone. |
Anonymous
| OP, I know people who have your income and bought 1.8 house done this but with low 2% mortgage. It was a stretch and the feeling of living in the neighborhood/public school where most people are way wealthier than you is a daily struggle. If you insist on doing it, let hope your income increase substantially and the interest rate come down quickly. |
Anonymous
| Maintaining a $1.8 million, 4000 square foot house will be very expensive. $1,000 per month in savings won’t cover it. The property taxes will be much higher than what you’ve been paying. It just seems too high. |
Anonymous
We are 360k HHI, and our take home pay after maxing 401k, healthcare, 529 etc is lower than yours. Are you sure you are maxing and taking care of your necessities? |
Anonymous
+1. My take home on $310k is $11k per month. |
Anonymous
OP here. I do find it wierd that net pay varies so widely across DCUM. I would say that we have really low medical insurance (<$200 per month, excl HSA). Other than that, I would think 401K ($38K/yr), Federal (24% marginal rate), State (5%), FICA and medicare ($22K) should be similar for everyone making 300Kish in Fairfax (county)? I would also say that our 529 contributions are only $4K per year since that's the tax-deductible limit. When we bought our current house at $800K, we made <$200K and thought 4X HHI was crazy. My guess is the our lifestyle has not crept up at the same rate as our income, so we're still living like we make $200K. Folks make good points about increase utility expenditures. That might bump our living expenses. |
Anonymous
| Everything gets more expensive as your kids get older. Plus, you will need to furnish that big house and you won’t want to furnish a $2 million house at Ikea. Just bc you have the extra $6,000 per month doesn’t mean you have to spend it. And there are certainly other options between a savings account and a new house you likely can’t afford. We make over $500,000 and I would never consider a house in that price range. When we were younger and made less, we coveted a larger, flashier house. Now that we are older and make more, we realize that the big house isn’t as important. The extra cash gives us flexibility - which is the most important thing. If one of us wants to cut back (bc of illness or burnout or whatever reason), we can pay our expenses on one income or savings or our non-retirement investments. We have also put money into our smaller house to make it exactly how we want it. It will be paid off in 6 or 7 years and that will give us peace of mind as we get to thinking about retirement. Again, I’m at a different stage than you but I would be a nervous wreck with that kind of liability. |
Anonymous
| 18:37 here. You may be underfunded for college if you are only putting in 4K a year. Remember that the earnings in a 529 grow tax free. There is a benefit beyond the state tax deduction. Depending on how many more years you have, you may have to cash flow some of it. Education was a priority for us and we wanted our kids to be able to go wherever they wanted, within reason. There are also lots of other expenses that come up during college besides room and board. |
Anonymous
Thanks - you make great points. |
Anonymous
| you could probably do 1.2-1.4 (if your jobs are secure). but do you mostly like your current home? start buying non-retirement stocks and invest in 529 beyond the tax deduction, maybe take some nice vacations, and understand that unplanned expenses can come out of nowhere |
Anonymous
| The 529 tax deduction is 4K per account per year. So if you and your partner each have an account, that's 4K x 2 for 1 child. |
Anonymous
+1. That’s basically my only thought about this post. |
Anonymous
Isn’t it 4k per beneficiary? |
Anonymous
No- the account holder |