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Old 06-09-2012, 07:13 PM   #41
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This topic has definitely expanded in a great direction. Being fairly young with a good job and many options to invest my money in. It's great to hear some opinions and discuss them each.
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Old 06-10-2012, 10:53 AM   #43
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I would keep making payment and keep the money for a rainy day. Things may not get better in this country with Europe banks falling apart and our own banks tied in with them. I hope not but if it does crash there going to a world of hurt over here, more then we are seeing now.
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Old 06-10-2012, 11:00 AM   #44
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Quote:
Originally Posted by jandrews View Post
Most of the perks people espouse for home ownership are fallacies.

You don't make money on houses, and you don't throw away money renting. Example:

Someone rents for $5000 annually, another person gets a mortgage for the same. Over 30 years, they're both out $150,000 (to an extent - rentals usually rise a small amount each year, but not enough to really throw the math off significantly. Also, they do drop at times, especially if the housing market is good and it's hard to attract tenants). The homeowner sells the house for $250,000. He made money right?

No, he lost, bigtime. Here's why:
http://146.142.4.24/cgi-bin/cpicalc....980&year2=2012

And that's just on pure buying and selling prices. Let's not forget that every year that homeowner paid:

- Property Tax
- Homeowner's Insurance
- Maintenance Costs
- Put in TIME to perform the maintenance
- Interest on the mortgage.

Inflation and costs of ownership make home ownership IMPOSSIBLE to make money off of in the best circumstances. The ONLY way houses are profitable is as rental properties financed primarily by the tenants.

The guy who rented may be out his 150 grand, but at least he's not out the extra of the listed costs above. In fact, he probably put that shit in some kind of account that EARNED money to at least offset some of the bite inflation puts in your ass. And while the homeowner was mowing the lawn and repairing his deck, Mr. Rental was on vacation, or at the very least enjoying a relaxing evening rather than the Honey-Do list.

Most people don't figure out until way too late in their lives that buying power, not the number on paper, is what matters.

It's slightly more complex than this in actual math (every dollar paid into the mortgage is not a 1980 dollar, so the mortgage technically gets cheaper each year), but the basic concepts hold true even when error is calculated in.

First of all, discount the pension because you won't get that. Those are going the way of the DoDo and it'll get canceled before you ever have a chance to take advantage of it.

401k is a great start. Most people in our age group aren't saving for retirement at all. But you do realize you're gonna pay taxes on the funds when you withdraw them, right? For money that is going to have SO much time to add capital gains, doesn't it make sense for the gains to be tax free? This is why a Roth makes more sense for young savers. As you get older, shift a larger percentage of your retirement savings over to a 401k to take advantage of the company match. Since that later-invested money will have much less time to grow, it's important the contributions are larger to begin with.
I just read this quickly so forgive me if i missed it, but your link to the inflation calculator kind of contradicts what you are saying. When the house is "paid off" at the end of 30 years, you in theory would be able to sell the house for its value (a little simplified but you get the idea), say the house sold for 150 000 in 2042, you may have spent 150 000 today but as your calculator shows, now you have the buying power of 418xxx, whereas the person who rented has lost the buying power of 418xxx.

(Again i know im using inflation of the past 30 years to project the future but it makes the point im getting at)
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Old 06-10-2012, 11:04 AM   #45
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Quote:
Originally Posted by Captarm View Post
I would keep making payment and keep the money for a rainy day. Things may not get better in this country with Europe banks falling apart and our own banks tied in with them. I hope not but if it does crash there going to a world of hurt over here, more then we are seeing now.
Yes, don't be in such a hurry to eliminate your cash on hand. I pondered the same dilemma a short while ago. I chose to just hold the course and sit on a junk of money in my bank. Very nice feeling being liquid. If or when the right deal shows up, (renting or buying) you will always have the option.
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Old 06-10-2012, 11:17 AM   #46
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Hey man I saw your post, Couple things I would do::::>

1. How much do you owe on your RZR Back? Depending on that answer it sounds like you have good credit and I would take out a credit card 0% to pay it off. I like to keep things liquid because you never know what your gonna run into. even if its 0% for 12-18 months do that then get another one and do the same thing. Pay nothing for the loan

2. As far as your savings account I would find something with a better interest rate or play the market a bit in a conservative mutual fund which would still be a higher interest rate of 6-8% better than savings which with some banks is <1%.

Starting a Roth is a great Idea along with a traditional IRA for Tax deduction

Even some banks are paying 3% on your checking account.

You don't have to take my advice but I've been juggling debt for 3 years thanks to student loan debt of over 120k, and I dont even own a house. haha kinda sad. I currently work for one of the biggest Banks in the world. But still looking for something in my field but the stuff I learned has been pretty valuable.

What do you do for work anyway?
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Old 06-10-2012, 11:20 AM   #47
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Interest is money your throwing away. If something costs 10 bucks and you finance it, it cost 15 bucks. Now because of depreciation, you have a 8 dollar item you paid 15 bucks for.

Building credit, is a horrible reason to make payments. You dont NEED credit, and even if you do, your doing plenty to have a good credit score. Cash is always king.

As for home ownership, it is a decision which needs to be well thought out. There absolutely is money to be made in buying real estate ESPECIALLY in this depressed market. However, buying just to own can potentially be a mistake. There is a right and wrong answer but it depends on the circumstances unique to the situation.

401k's, dont get me started. I will just say these are not the gold mines people think they are. If you work for a company that contributes on your behalf, its certainly better but they are still a gamble.

Bottom line, if you have the ability to pay less in interest, do it. You will own the razr outright and if something happened you would still be able to sell it even at a loss to get that cash back if you really needed it. You already have other savings to fallback on anyway.
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Old 06-10-2012, 11:30 AM   #48
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Quote:
Originally Posted by jandrews View Post
Most of the perks people espouse for home ownership are fallacies.

You don't make money on houses, and you don't throw away money renting. Example:

Someone rents for $5000 annually, another person gets a mortgage for the same. Over 30 years, they're both out $150,000 (to an extent - rentals usually rise a small amount each year, but not enough to really throw the math off significantly. Also, they do drop at times, especially if the housing market is good and it's hard to attract tenants). The homeowner sells the house for $250,000. He made money right?

No, he lost, bigtime. Here's why:
http://146.142.4.24/cgi-bin/cpicalc....980&year2=2012

And that's just on pure buying and selling prices. Let's not forget that every year that homeowner paid:

- Property Tax
- Homeowner's Insurance
- Maintenance Costs
- Put in TIME to perform the maintenance
- Interest on the mortgage.

Inflation and costs of ownership make home ownership IMPOSSIBLE to make money off of in the best circumstances. The ONLY way houses are profitable is as rental properties financed primarily by the tenants.

The guy who rented may be out his 150 grand, but at least he's not out the extra of the listed costs above. In fact, he probably put that shit in some kind of account that EARNED money to at least offset some of the bite inflation puts in your ass. And while the homeowner was mowing the lawn and repairing his deck, Mr. Rental was on vacation, or at the very least enjoying a relaxing evening rather than the Honey-Do list.

Most people don't figure out until way too late in their lives that buying power, not the number on paper, is what matters.

It's slightly more complex than this in actual math (every dollar paid into the mortgage is not a 1980 dollar, so the mortgage technically gets cheaper each year), but the basic concepts hold true even when error is calculated in.

First of all, discount the pension because you won't get that. Those are going the way of the DoDo and it'll get canceled before you ever have a chance to take advantage of it.

401k is a great start. Most people in our age group aren't saving for retirement at all. But you do realize you're gonna pay taxes on the funds when you withdraw them, right? For money that is going to have SO much time to add capital gains, doesn't it make sense for the gains to be tax free? This is why a Roth makes more sense for young savers. As you get older, shift a larger percentage of your retirement savings over to a 401k to take advantage of the company match. Since that later-invested money will have much less time to grow, it's important the contributions are larger to begin with.
Dude, you're off your rocker. At the end of thirty years, I'll have a home that nobody can take from me or my family and will only have to pay taxes and upkeep. I will also have a home that I can sell and get some money out of if I need to. At the end of the same thirty years for you (and till the day you die), you're still going to be paying that same rent. Actually more since the inflation will go up. Renting you never own a damn thing and at any time you can be told to leave. My house has a fixed interest rate so my mortgage payment will never go up. Yes, my taxes will, but so will your rent because your landlord's taxes will go up to and he's going to pass that along to you. Whether your rent or buy, you're still paying the mortgage, property taxes, and upkeep. You don't think the person who owns the house you are renting is doing it because you're a nice guy and he wants to help you out do you? Nope, he's taking his cost, marking it up a little and making money off you. Eventually you'll have paid off his house and he'll be in the cat-bird seat and you'll still be renting. At which time, he'll be pocketing that rent from you cause he no longer has to pay a mortgage on the home you're renting from him.

To each their own though.
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Old 06-10-2012, 11:52 AM   #49
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Old 06-10-2012, 11:52 AM   #50
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Old 06-10-2012, 01:10 PM   #51
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Quote:
Originally Posted by tacomatrd99 View Post
Dude, you're off your rocker. At the end of thirty years, I'll have a home that nobody can take from me or my family and will only have to pay taxes and upkeep. I will also have a home that I can sell and get some money out of if I need to. At the end of the same thirty years for you (and till the day you die), you're still going to be paying that same rent. Actually more since the inflation will go up. Renting you never own a damn thing and at any time you can be told to leave. My house has a fixed interest rate so my mortgage payment will never go up. Yes, my taxes will, but so will your rent because your landlord's taxes will go up to and he's going to pass that along to you. Whether your rent or buy, you're still paying the mortgage, property taxes, and upkeep. You don't think the person who owns the house you are renting is doing it because you're a nice guy and he wants to help you out do you? Nope, he's taking his cost, marking it up a little and making money off you. Eventually you'll have paid off his house and he'll be in the cat-bird seat and you'll still be renting. At which time, he'll be pocketing that rent from you cause he no longer has to pay a mortgage on the home you're renting from him.

To each their own though.
it's all about + cash flow. In the end, it's a retirement plan. rent coming in and no mortgage going out. Winning!
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Old 06-10-2012, 10:52 PM   #52
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Instead of quoting everyone I'm just going to summarize what I've read here...

- I feel renting or owning a home is best on a situational basis. For me, living in a 2 BR, 2 bath apt with all utilites paid for is best for being 23 with no kids and no woman. Now obviously when I settle down and start a family, I'll need a house.

-Using a credit card with 0% interest would be better than paying on the current load. But chances are I will have to open up multiple cards back to back to back and I don't like having credit cards. I have 3 already and hate that!

-rsbmg, you spoke my mind well. I am sitting on enough of a cushion that spending my savings to pay off debt won't leave me with no cushion to fall back on. and if times do get rough, i can sell the Rzr, granted I'll take a hit. plus I'll be pumping $500 a month back into savings, so thats a minimum of $6k in a years time not counting any OT I put in it.

-for those who asked, I work for the power company as an equipment operator at our largest coal-fired power plant. eat your heart out tree huggers!

Bottom line, I will be taking the money and paying off the loan shortly. I am not worried about credit, i have tier 1 credit as it is and and two vehicle payments to keep it going. I do hate to lose some savings, but I'll save a ton in interest and with $300 opened up each month, I can look into diversifying my savings options.
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Old 06-11-2012, 08:47 AM   #53
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Good Choice, but don't look at it like losing savings. You would be losing savings if you held on to your cash and paid the loan over time. In fact you would be at face value losing $2500 and more when you factor in inflation depreciation etc... For those that think having 10k in the bank siting there for a rainy day is "safer" consider this. If he needs that money, he has an asset he owns free and clear, that he can sell. However if he held on to the cash and the payment, that payment would still be due regardless of his financial hardship.

Also he said he had a safety net already and worse case you can draw money from your 401k. Your savings account will build itself back up quickly if you keep "making the payment to yourself"

Good luck!
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Old 06-11-2012, 03:13 PM   #54
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Quote:
Originally Posted by rsbmg View Post
Good Choice, but don't look at it like losing savings. You would be losing savings if you held on to your cash and paid the loan over time. In fact you would be at face value losing $2500 and more when you factor in inflation depreciation etc... For those that think having 10k in the bank siting there for a rainy day is "safer" consider this. If he needs that money, he has an asset he owns free and clear, that he can sell. However if he held on to the cash and the payment, that payment would still be due regardless of his financial hardship.

Also he said he had a safety net already and worse case you can draw money from your 401k. Your savings account will build itself back up quickly if you keep "making the payment to yourself"

Good luck!
I here that. But ever needed cash and had to wait till the truck sells to get it? When I need cash, I need it right then. The best deals don't wait around, neither do disasters and emergency's. But I think either way would be just fine as you clearly have your head on straight.
the hard part is to "keep making the payment to yourself". For me, once I have the cash, it's a motherfucker to get me to part with it.
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Old 06-11-2012, 08:28 PM   #55
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As he already said, he has cash above the 10k for emergencies. He also has a 401K and he has credit credit cards.

He has plenty of options for emergency cash. By holding on to the cash and making payments he will lose $2500+ by gambling that he WILL have a financial emergency. So you would be basically buying a $2500 insurance policy which you may never use.

If you like paying more for things than they are actually worth, by all means make payments. If you would rather keep the $2500 for yourself than give it to a finance company pay it off.
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Old 06-11-2012, 09:17 PM   #56
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Originally Posted by spares View Post
I just read this quickly so forgive me if i missed it, but your link to the inflation calculator kind of contradicts what you are saying. When the house is "paid off" at the end of 30 years, you in theory would be able to sell the house for its value (a little simplified but you get the idea), say the house sold for 150 000 in 2042, you may have spent 150 000 today but as your calculator shows, now you have the buying power of 418xxx, whereas the person who rented has lost the buying power of 418xxx.

(Again i know im using inflation of the past 30 years to project the future but it makes the point im getting at)
Your math is off, but I think what you are trying to say is:

If you buy a house for a value now, then it will sell for the inflation-equivalent value in 30 years.

Possibly. If the market is good and you can sell it. And the neighborhood and schools around it don't go to shit. And home values keep price with inflation, which they almost never do unless you make additional improvement investment.

And none of that is accounting for the yearly expenses (property tax, homeowner's insurance, maintenance costs, mortgage interest) that you do not get back, regardless of inflation.

The bottom line is this:

If the rent annually is less than the combined cost of property tax, homeowner's insurance, maintenance costs, and maintenance-time (calculated by, say, giving time you spend doing home maintenance the same rate as your hourly pay at work), the homeowner ends up out more money at the end of the game unless there's a bubble market.


Quote:
Originally Posted by tacomatrd99 View Post
Dude, you're off your rocker. At the end of thirty years, I'll have a home that nobody can take from me or my family
You're certainly dreaming large with that thought.

Quote:
and will only have to pay taxes and upkeep.
Indeed. And in my area, on any decent sized/valued home, annual property tax, homeowner's insurance, and upkeep costs add up to more annually than my rent + renter's insurance.

Quote:
I will also have a home that I can sell and get some money out of if I need to.
Who said you can sell it?


Quote:
At the end of the same thirty years for you (and till the day you die), you're still going to be paying that same rent. Actually more since the inflation will go up.
The same inflation will make your home worth less, and increase the costs of your upkeep, homeowner's insurance.

And you're wrong about the rent levels - they tend to be inverse to home prices. When home prices rise, rent drops (more people buying means landlords need to make prices more attractive to attract tenants). When home prices fall, rent increases (less people buying means more demand for rental properties. That's actually what's going on right now).

Quote:
Renting you never own a damn thing and at any time you can be told to leave.
1 - False. There is a lease agreement in place which is a legal contract. There typically has to be grounds for eviction, unless you're an idiot and sign a shit lease.

2 - So what? Go rent down the street from the landlord/agency that isn't an asshole. That's the nice thing about rentals. You aren't tied down.

Quote:
Yes, my taxes will, but so will your rent because your landlord's taxes will go up to and he's going to pass that along to you.
Only if the market allows. See the above about rental prices vs. home prices and their inverse relationship. Rental property owners aren't stupid - they won't price themselves out of the market.

Your view of real estate pricing and the factors that go into it is a bit simplistic, but at least you're trying.

Quote:
Whether your rent or buy, you're still paying the mortgage, property taxes, and upkeep. You don't think the person who owns the house you are renting is doing it because you're a nice guy and he wants to help you out do you? Nope, he's taking his cost, marking it up a little and making money off you. Eventually you'll have paid off his house and he'll be in the cat-bird seat and you'll still be renting. At which time, he'll be pocketing that rent from you cause he no longer has to pay a mortgage on the home you're renting from him.
And? This only matters if you're worried about whether your landlord is making money or not. I don't mind my landlord making money. He's in business to make money. All businesses are.

He also has to maintain the property, fix anything that breaks, handle the taxes, etc.

I take the time, money, and effort I would've spent doing THAT and do other things. Invest it. Enjoy myself. Some of both. What have you.

Here's the forest you're missing for the trees:

- I'm out about $8400 in rent annually. And another $85 in renter's insurance.

- Most homeowners in this area are going to be out that same amount annually when you combine homeowner's insurance, upkeep costs, time invested in upkeep, mortgage interest, and property tax. Most of this is usually in upkeep costs and time, which people rarely calculate correctly.

So, in the end, we're out of pocket annually about the same amount of money we don't get back.

- The money I didn't pay in mortgage I get to keep and do with as I please; invest, buy stuff, hookers n' blow, whatever.

- The homeowner eventually ends up owning a home. Whether or not this makes more money than renting and investing the difference is a subject of debate. Most of the recent research suggests the renter/investor does better:

http://www.cnbc.com/id/46413058/As_I...ng_100_of_Time

http://www.freemoneyfinance.com/2007...better-to.html

http://www.theamateurfinancier.com/b...ing-vs-buying/

http://www.mint.com/blog/how-to/three-principles/

There's more out there. You can google it.

Basically, the long-espoused idea that homeownership is always better being a no-brainer isn't so much of a no-brainer. However, they DID sucker a ton of people into believing that in the 90s and 00s. That's where we got that awesome bubble and crash from.

Looking forward, the new economy is going to require regular mobility to stay gainfully employed - there are far more laborers than jobs. This will be the case for some time, possibly decades. Home ownership doesn't mix well with frequent moves for obvious reasons.

You can buy if you want to. Just don't say you weren't warned if bites you in the ass in some way.
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Old 06-11-2012, 09:21 PM   #57
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I here that. But ever needed cash and had to wait till the truck sells to get it? When I need cash, I need it right then. The best deals don't wait around, neither do disasters and emergency's. But I think either way would be just fine as you clearly have your head on straight.
the hard part is to "keep making the payment to yourself". For me, once I have the cash, it's a motherfucker to get me to part with it.
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Originally Posted by rsbmg View Post
As he already said, he has cash above the 10k for emergencies. He also has a 401K and he has credit credit cards.

He has plenty of options for emergency cash. By holding on to the cash and making payments he will lose $2500+ by gambling that he WILL have a financial emergency. So you would be basically buying a $2500 insurance policy which you may never use.

If you like paying more for things than they are actually worth, by all means make payments. If you would rather keep the $2500 for yourself than give it to a finance company pay it off.

Moving on to more recent portions of the thread...I'm with rsbmg here. I want my dollars like employees - making money for me.

6 months of living expenses, about 5 to 10 grand in an oh-shit fund gives you plenty of emergency cash. Take the rest and put it in something that will earn.

I personally go with the above system. Also most of my retirement savings at this time is in a Roth IRA, one of the benefits of which is that direct contributions can be withdrawn at any time penalty and tax free. Obviously I'd prefer not to do that, but the point is it's additional pressure-relief should the 6 months + oh-shit not be enough.

Realistically speaking though: I'm in health care, in the second best job field in the country:
http://money.cnn.com/magazines/money...ng-jobs/2.html

I will never be unemployed during my lifetime unless I want to be or become physically disabled (irony).
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Old 06-11-2012, 10:20 PM   #58
slow is smooth, and smooth is fast.
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Quote:
Originally Posted by rsbmg View Post
As he already said, he has cash above the 10k for emergencies. He also has a 401K and he has credit credit cards.

He has plenty of options for emergency cash. By holding on to the cash and making payments he will lose $2500+ by gambling that he WILL have a financial emergency. So you would be basically buying a $2500 insurance policy which you may never use.

If you like paying more for things than they are actually worth, by all means make payments. If you would rather keep the $2500 for yourself than give it to a finance company pay it off.
Yes, he did say that. 5k or so? about 1 month for me. If he needs to sell the rzr, he might get killed on the sale and it may take forever doing it. Yes he will save the interest on the rzr(whatever that is) but he could lose far more than that if things don't continue smoothly for him. He might even make more cash with that 10k if the right deal comes along( yes they do from time to time). He made the choice to finance in the beginning, I would stay the course. $2500 for "Insurance" is a good deal in my book. Overpay each month and it won't be as much and you have options. I just hate to rule out opportunity by liquidating all my capitol. to each, his own I guess
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Old 06-13-2012, 04:41 PM   #59
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Yes, he did say that. 5k or so? about 1 month for me. If he needs to sell the rzr, he might get killed on the sale and it may take forever doing it. Yes he will save the interest on the rzr(whatever that is) but he could lose far more than that if things don't continue smoothly for him. He might even make more cash with that 10k if the right deal comes along( yes they do from time to time). He made the choice to finance in the beginning, I would stay the course. $2500 for "Insurance" is a good deal in my book. Overpay each month and it won't be as much and you have options. I just hate to rule out opportunity by liquidating all my capitol. to each, his own I guess
5 grand in living expenses per month? Sheezus, I'm glad I don't live where you do.

Just did a little research on cost of living in Newton MA while writing this reply. Yeah, fuck that noise. I like my southern towns where my living expenses are less than 1k per month. But I have no doubt pay up there scales appropriately.
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