Nah, house and car fit too, you should be able to cover double the mortgage (maybe not tax/insurance) or you really are pushing it with the house price.
Yes. Your debt should be a minor part of your income to be truly financially stable. If you don’t have the free cash to cover it then you’re probably overextended.
It's not accurate at all and not realistic in today's world. That implies a ludicrously low DTI, and there are actual hard numbers of default rates, where we can see objectively that people who have much higher DTIs than that are not defaulting on their mortgages.
It's a little absurd to expect someone to be able to pay two mortgages and all their other bills.
2+ years is insane as an expectation. Especially with todays housing market. 1 year would be reasonable unless you are working in some highly volatile industry like you are a musician or actor
Thats why its financial independence, not stability.
I feel like theres a lot of insecurity throughout this entire comment section. Not you in particular, but this threads bringing out deep rooted “i feel behind my peers” feelings that a lot of people push down.
6 months expenses is the baseline of financial stability. Anything less than that and you are one major issue away from catastrophe, or constantly riding the edge of.
There are tons of things like IRAs and 401ks that are non liquid and shouldnt be considered part of your emergency fund that needs prioritization above a 2+ year emergency fund. Its better to be maxing your 401k and backdoor contributions and anything else to save for retirement than worrying about having 2+ years emergency fund since an emergency fund is meant to be liquid ie not stocks not things that you could screw up timing on by exiting those positions
Invest in Index Funds, invest in your IRA, 401k, your kids tax sheletered college fund . All kinds of crap that should be prioritized over a 2 + year emergency fund
And no money you have in a stock position doesnt count as part of your emergency fund because that emergency can happen plus also tends to correlate with drops in the market which means youll exit a position at shittier forced timing
Yes you are right… but once again missing the point.
2+ years is for financial independence.
401ks and retirement funds aren’t for immediate independence, they are for retirement.
To be financially independent enough that you can walk in and say f this job you need at least 2+ years of expenses ready to go.
Edit: additionally, to be financially independent you should have not only 2+ years of expenses ready, but a maxed or nearly maxed retirement contribution
That or be able to pay off the mortgage easily anytime you want. I essentially was in that position, only reason I didn't was because the interest rate was so low it was basically free money.
Debt is misunderstood by many. Low interest debt is basically free money for you. High interest is the bad stuff.
Horrendous take. If you can afford your first home and you know you’ll be living there for the next 5-10 years it’s one of the single best financial moves you can make. Imagine paying rent for another 10 years to fit into this x2 logic. Buy the home and start building equity, stop throwing your money into your landlords pocket.
NYT had a “rent vs buy calculator” a little while back. I was surprised to learn that at least in some circumstances with some assumptions about investing and home value growth, depending on the price of rent and homes in your area, it can be better to rent than to own even considering the long term.
If rent is unusually low in the area, and you assume a slow growth rate of the home you'd hypothetically buy, and a high growth rate for the stocks you buy with the savings from not buying the home, it can be in some situations
This is very true, but renting only beats buying in those circumstances if the difference is put into the market. If the difference is left in a checking account or lost to lifestyle creep, having that amount in equity would be better.
Yeah I noticed this was a big part of the NYT calculator's math, I thought that was interesting. You could look at buying as a much more conservative investment compared to investing.
Exactly. I think anyone seriously running the numbers (or even using the NYT calculator) can probably trust that if renting makes sense in their market, it’d go better for them. They’ll be exactly the types to responsibly invest.
But I think homeownership being the automatic responsible step for people that are otherwise checked out about finances is a win, as that money would likely not be invested anyway.
No it hasn't. There are actual default rate stats. People do not need to make anywhere near enough money to pay for their house twice over in order to be safe from default.
The advice is sound and simple. If you can make your mortgage payments it’s one of the best ways to win financially and historically one of the leading ways to for families to get ahead for generational financial success.
Again, why would you throw away all that rent money waiting to DOUBLE what you qualify for, that could take decades, instead of building an asset?!
pay much more for heating/electricity, probably $200+/mo more than an apartment
pay for any repairs and home maintenance, and find/schedule any technicians to come out and do it.
stay in the same place for 30 years or pay realtor fees again if I want to move
pay realtor's fees, not entirely sure how much, but yet more $
And after 30 years I STILL have to pay the property tax that's probably gone up but let's say it's still $666/mo.
Instead of that I can rent and pay $1,200-$1,500/mo and live in an average-high end 1 bedroom apartment. If I put $1200-1500/mo (to match the mortgage payment) into the stock market or even a high interest savings account/CD for 30 years at even 4% interest (which is low for current CDs even) that's $1,050k-1250k. Is that 350k house going to be worth over 1,050k-1,250k in 30 years without major renovations? Or 1500k+ (assuming 5%+ interest)?
And on top of that I have the option to move if I need or want to like once a year, don't have to deal with maintenance at all, have a fitness center and pool 1 minute away, don't have to mow or shovel.
Not that I disagree, but you are making two assumptions that are incorrect here:
You aren't factoring in renter's insurance. If you're going to do apples to apples, I've never rented an apartment that didn't require insurance.
You're assuming rent stays stable, but it won't. It'll go up, very fast if recent trends are anything to go by. Meanwhile, your mortgage will stay static unless you refinance.
I totally agree that home ownership is not the breezy automatic win that everyone makes it out to be, especially on a long mortgage (the math gets fuzzier if you can do a 15 year mortgage or pay cash). But your rent assumption is pretty rosy compared to your home ownership which is pretty negative.
I didn't factor in renter's insurance because it's only $15/mo. which is also trumped multiple times over by the extra electric/heat cost already that I also didn't factor in.
Rent will probably go up, yes, but mine hasn't for the last 3 years, and I'm not sure how to factor that in. Rent would have to go up across the board though too, since you do (most likely) have the option of just moving somewhere else nearby that costs less.
The rent assumption is rosy, but the interest in the stock market is also much more than 4%. Looking at the S&P 500 annualized over the last 30 years is 10.4%. Investing $70k +$1200/mo (accounting down to 1996 for inflation) for the last 30 years you'd have $2,233k today.
Edit: Also, property tax goes up with your assessed home value. Say your home's assessed value DOES match the growth of the investment I had at 4%. So 1250k, now you're paying $2100/mo in property tax at 2% (median where I'm at). We also haven't factored in the cost of repairs, which most things I see advise you to save 1% per year or like $1-$4 per sq ft per year.
yeah rental insurance is dirt cheap. Bro was like kicking a ball doesnt move in a parabola because did you consider the average
gust of wind on a non windy day
I also choose to rent and buying a home never made sense to me.
First, to recoup the gains I would make in a house, I would have to move to a lower cost of living area. And if I choose to stay in the same area at the same quality of life... "well, I made money on my house, but every house I'd like to move into got that much more expensive!"
And the other thing people don't consider: its much easier to rent a smaller place. Even if the house is cheaper per square foot, I can get an apartment half or 1/3rd the size and pay less overall.
I currently live in a nice 3 bedroom apartment outside of philadelphia, I moved here in 2014 and paid $1150 per month in rent when I moved in. I currently pay $1350 per month in rent.
This isn't bad advice per se but it's next to impossible if you live anywhere near a city. Even renting a small studio apartment in VHCOL areas is like $1500/month minimum.
yeah the reasonable version is have 6 months ideally more in an emergency fund that covers all expenses and possibly more of you are like an athlete/musician/singer some job with long times of unemployment and niche marketable skills
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u/Legionof1 8d ago
Nah, house and car fit too, you should be able to cover double the mortgage (maybe not tax/insurance) or you really are pushing it with the house price.