After finishing high school, my wife and I decided to pay off the debt before buying a house or anything for that matter.
We have been renting at low prices for the past three years, and live as if I were still a very poor graduate student. During this time, we paid off all our debts and even saved about $ 350,000 in cash.
My wife is 30, I’m 34 years old, and we’re ready to take the next step. We now have two children under the age of two with more than $ 20,000 and growing with each of the 529 years old. We both have ample term life insurance, and I have a separate occupational injury policy. I make about $ 250,000 per year.
I am very fortunate that my employer contributes approximately $ 40,000 to my 401 (k) while I contribute to the remaining Internal Revenue Service a maximum of $ 57,000 per year. Our family HSA contribution is maximized and increased each year.
My wife and I are now at home with their children. We have a combined retirement portfolio of around $ 325,000. At this point, should we offer to buy a house with cash or take out a loan and invest the difference? Our 30s no mortgage looks great.
In contrast, investments can yield greater long-term returns.
At an intersection
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Congratulations, paying off that debt and making positive savings is a pretty big achievement, and that’s something few people your age can do.
The clue is often in the question. You are closer to the house. As a rule, you should put all your money in one place. So if I propose anything – and that is just a NO recommendation – you can also divide the difference and pay 25% to 50% for a new home, and keep the rest for investment, savings and rainy days. Everything is in moderation, and even the savings are hard to find.
Of course, you get to live in a house of your choice in the neighborhood of your choice, and you can enjoy it every day, so do your kids. Having children can also affect how much you are willing to spend on a home and where you are prepared to live based on the schools and facilities in that district. It’s not just an investment, but a qualifying life option, perhaps one of the most important choices besides choosing a mate.
MarketWatch Retirement columnist and CPA Riley Adams recently handle your question a lot, analyze the pros / cons of both. The downside of stocks: “Stocks have liquidity. Proven successful record. Earn dividends. Easily diversify your portfolio ”. The flip side of the stock: “An emotional roller coaster. Short-term volatility. Capital income tax. “It depends on your and your wife’s ability to take risks, and how much time you are willing and able to spend investing in.
The flip side of real estate, as Adams advised: “A hedge against market volatility. Tax advantage. Cash flow. “And, as I said, you enjoy it every day. Cons:” Real estate requires time and money. Your money is tied up. Tons of fees. It’s not easy to diversify. “And, if you are paying a mortgage, you also pay interest on the principal, which is tax deductible. Ditto property tax. But paying that interest allows you to release your extra cash.” that is redundant.
Real, a recent study from the Federal Reserve Bank of New York look at consumers’ preference for homeownership and how their attitudes changed during the COVID-19 pandemic. Respondents were asked to rate what was a better investment – a home or financial asset like stocks – and what factors contributed to their choice. About 90% of respondents said that they prefer owning their primary residence rather than investing in the market.
Sit down with your wife and a financial advisor and review your options. The counselor, like a good therapist, should ask you questions and you should keep all the answers.
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