Originally Posted by meteoraman2514
Curious to know why you are against buying a house. I must say, I've rented for 2 years now and I love it, but owning a house still seems to have its perks for me.
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:
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.
I have taken my annual raises (usually 2-3%) and rolled em into my 401k. I am up to 13% contribution, the most you can do pre tax is 15%. Was thinking once i max it out, I'll open an IRA and start rolling my % based raises into it. I have my 401k and the company guaranteed retirement pension.
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.