Tax Rebate

[retailguy]

You can argue with me all you want, it won't change that. These aren't my principles. I didn't invent them. I just know from personal experience they work. You can add risk, and you might get there quicker, but you might hit the wall too. Why risk it?

OK. Let's assume Partial's dreams come to fruition and he averages a salary of 70k over the next 8 years. He finds a way to take home 60% after taxes and insurance costs. He's bringing home 42k a year, although of course the early years are leaner years.

He invests/saves your recommended minimum 15%. He's got 36k left.

Partial eats. He needs clothes for his fancy job. Partial needs to pay loans at great student loan rates. Partial needs a car. Partial likes to sit in a chair. Partial even likes to see movies. Conservatively He spends about 18k a year on all these things, living lean and mean. Now he's got 18k left per year. Heck, call it 20k because he's dieting and doesn't watch cable anymore.

He's got his house paid for when he's 30, just like he wanted. He's making his 100k just like he wanted. He's ready for his 5 kids, just as planned.

In his $130,000 house.

<sigh> Ok, you probably should have stayed in the Corporate world longer than 6 years, or you should have majored in a business discipline that lends itself to tax advice.

At 70K a year average being single he doesn't get CLOSE to the figures you're talking about. I used my 2006 tax package (I don't have 2007 set up and populated yet) and his federal taxes average about 13% depending on exemptions & deductions. (Obviously this will be lower in early years). Next he's got to have 7.65% for social security/Medicare and then about 5% for state taxes (Wisconsin averages between 4.6% and 6.5% so pick your poison, I don't care). If you've kept up with me on the math, we are now at 25.65%. So, if you think he's going to average 15% of his income per year on insurance at age 22-30 working for a good company, you've lost your mind.... So, those funds now become available.

Next, you're assuming that he's going to live by himself (doubtful), so if he's married there is a LOT more income, even if his spouse doesn't make what he does.

Also, you're assuming he's going to work 40 hours, head home and hit the forum, stay on all night, and then do it again the next day. Maybe, maybe not. If he does, yes it may take longer. That's HIS choice and the answer depends on how much he want to "win".

He could take on a roommate earning a rental income in his condo, he could deliver pizzas a couple nights a week, or sell things on ebay.... Options are limitless and totally dependent upon how fast he wants to win. The choice is his.

It isn't easy, but having no mortgage payments from the time he's 30 and on just MIGHT make it worth it...

Stick to raising kids Skin, it's more suited to your talents. You can't just subject ONE variable to change and hold the rest constant. That works great in Econ class but doesn't do shit in the real world.

Personal finance doesn't work that way. Personal finance is almost totally about behavior. Have you created the lifestyle behaviors that make you win, or not? Trying to make this an intellectual exercise looking at numbers and interest rates doesn't work. It's not a BUSINESS. You cannot treat personal finance as such. This leads to anyalyzing interest rates. Next, you're thinking the annual discover card rebate thing is a great way to make money.... And, it's all downhill from there.

The "average" family makes about $42k per year. That's for a family of FOUR. If you make more than that, yet tailor your lifestyle to that, and don't accumulate debt, you have a good deal of "extra" money available to invest. That takes sacrifice and is not for the faint hearted, nor the cynic, however, that is a valid choice that families can make or NOT make.

My client friend I mentioned earlier, lived in an APARTMENT for 10 years. Cheapest one he could find. All his friends thought he was NUTS. Today, he's grateful for that. At 31 he will NEVER make a mortgage payment again. But it wasn't easy. There is NO free lunch.

[Little Whiskey]

tax refund check?

[packinpatland]

You're not adding the cost of the annual PR game.

You're right. Sorry Partial, you're down to $129,000.

Talk to all of us that didn't live within driving distance......

[Harlan Huckleby]

I intend to spend my tax refund on candy.

[Scott Campbell]

My own thoughts on the matter are more closely aligned with RG, even though I've personally taken a bunch of excessive risks in the past. I've had years where I made 300% on my investments. I've also had days where I've lost more than $100K. I have no tricks to share, as much of my good fortune was probably just dumb luck.

Someone Partial's age with his kind of discipline will not have to take excessive risks to achieve what he wants. Time is on his side, and I think he can afford to be conservative.

Pigs get fat. Hogs get slaughtered.

[retailguy]

tax refund check?

Partial is saving his for a down payment. Nobody else seems to qualify. How about you? Nascar trip? or hunting trip? :P

[retailguy]

That sounds like some pretty good advice RG. My wife and I are getting pretty close to buying a home. We're not super wealthy like you or wealthy like skin's wife. We're pretty average (mostly because I was stupid for the first few years out of high school, but that's another story)

We have the retirement accounts going on. If I get the job I think I'm going to get (govt related and my foots already in the door), my retirement will be secure. I still plan on investing, but my first goal was to pay of a house as soon as possible.

I looked at the interest of a 30 year loan vs a 10 or 15 year loan, and the amount paid in interest is horrible. I'm in the process of talking my wife into maybe buying a little less home than we can afford in exchange for paying it off rapidly. Once it's paid off, if our retirement plan is as good as I hope it to be, I don't mind selling that house and buying a larger one. Life is about living so at some point, I want to enjoy my earnings, but right now I really want to try to get ahead a little.

I'm not looking to only invest in my home because my wife has her 401 and I have a roth and will have something more soon (hopefully a reliable govt pension). Other than that, I want to get out of debt quickly. I guess it's one step at a time. Right now, keep the retirement accounts rolling, then pay down my loans. Other than that, I'll make sure to keep my spluge spending down and always have my money going toward something productive.

I must admit I didn't read this the first time through.

Justin, I think you're on the right track. I was the first one in my family to go to College. Still today, I've got a couple of cousins that went to college but largely my family is blue-collar hardworking farmers and people working in industry that support farming. My parents are divorced and my Mother makes less than $10 a hour working as a clerk in a retail store in the middle of nowhere (and for some strange reason she LOVES it there).

I didn't come from money and still don't think "I'm wealthy". We live comfortably, I invest conservatively and we live a moderate lifestyle. I'm blessed to be able to help my Mother and I do, and give to a lot of other things.

Point of all of that, is to tell you that it'll turn around faster than you can imagine if you stick to the principles you can do. For me, when I gave up using credit cards, paid my bills off, bought cars I could afford without a payment, and then paid off my mortgage, life changed.

Yeah, my income changed during that process too, but I think those things happen naturally when you spend your money wisely.

Bretsky disagrees with me here, but, I think you should save 20% before you buy a house. I did, it took us 5 years to do it, and we rented during that time. My wife's younger sister and her husband bought a house with no money down and 30 year note. They've refinanced once, but today they've got 21 years remaining on their mortgage (should have been 17 or 18 I think), and I have no payments... For me, the long-term was what was important, not the short-term.

did not feel that way when I visited while we were renting, and they are planting flowers in the backyard, and installing a spa, and putting up a fence, and I was calling the landlord to fix the air conditioner....

times are different now. For me, it was worth it. The 20% down enabled me to avoid a 2nd mortgage and also changed my spending/savings habit. It made it easier to pay extra on the mortgage and things just snowballed from there.

PM me if you need other details. (yes, believe it or not I'm serious)

[Bretsky]

Buying a house early on with well under 20% has turned out to be a wonderful decision from me.

That's all I got; I've debated this before and the 60Hr weeks the past month have me too drained to rebuild the argument that there are many many ways to get to where you want and be successful in doing so.

Life is good.

Cheers,
B

[SkinBasket]

Congratulations P. Using RG's revised tax numbers, and assuming you don't like to eat or own anything other than a 1982 Caprice, you can now afford a $195,000 home after 8 years to start your massive family. But you better get crackin' because if you wait another year, you'll be more in the 170k range.

I don't buy the spouse adding significant income. She comes with her own expenses and debts and she may not be quite as fond of the Spartan lifestyle as he is. That's assuming they wed, of course, which I feel uncomfortable commenting on.

Bottom line, I'll believe it when I see it.

Other bottom line: I would listen to friends and family (a bad idea) before someone on an internet forum. That includes me.

Third bottom line: Good luck with the mullet Partial.

[Partial]

I listen to my Dad before anyone else. One smart cookie. Makes over 6 figures at his job and he says he typically makes more in interest than in Comission. I am in line to take over his job.

Recently he purchased an investment that pays 65k profit per year. I will get to take over that as well.

My grandfather worked very hard and started up a successful business and that has trickled down and helped every member of my family when purchasing a house, having a wedding, etc.

[Deputy Nutz]

I listen to my Dad before anyone else. One smart cookie. Makes over 6 figures at his job and he says he typically makes more in interest than in Comission. I am in line to take over his job.

Recently he purchased an investment that pays 65k profit per year. I will get to take over that as well.

My grandfather worked very hard and started up a successful business and that has trickled down and helped every member of my family when purchasing a house, having a wedding, etc.

So all the pieces fall into place. Daddy and Granddad are setting the table for Partial. Way to work hard for everything you earn.

Too bad your dad can't stand your mom. Are you sure you want to inherit his wonderful life?

[Scott Campbell]

Based on what I've read the past couple of years, I don't see Partial sitting on his hands waiting to inherit money. He can't help it if he's a member of the Lucky Sperm Club.

[Deputy Nutz]

Based on what I've read the past couple of years, I don't see Partial sitting on his hands waiting to inherit money. He can't help it if he's a member of the Lucky Sperm Club.

Just to point out, you haven't seen Partial do anything, you read what Partial has been doing. How he has done it all his own worked his way through school pulling himself up by the bootstraps, not having student loans. Sears pays pretty well to afford college without student loans.

[Harlan Huckleby]

this is like a reality tv show. no, this IS a reality tv show. I like partial, he is spunky. I hate Nutz, he is mean.

[Zool]

I like partial spunky Nutz.

Edited