Not sure I get it that they are refinancing through the mortgage. What, are they taking out some kind of HELOC to have extra money to pay off their mortgage? I doubt the HELOC interest is lower than the 10 year mortgage, but there’s a whole world of stuff I don’t know out there, so who knows why they would do it that way?
It’s twenty times my income right now and yet I have no debt and save some money every single month.
I’m pretty sure my frugal lifestyle would not be acceptable to many people - home too small, lack of fine wine most of the time, less than constant travel, vehicles too old - but I’m in the black.
Is it common to use “m” to mean thousands where you are from? I don’t think I have ever seen that.
My question is why are they even mortgaging in the first place? Unless they live in San Francisco or Boston, they should be paying cash for every property they purchase. They should have a home to live in and rental properties - shit they could afford to hire a property manager. Caught that mistake right there and didn’t need to read the rest.
I disagree. If you feel the market is going to give you better returns than your mortgage, go for the mortgage and invest the difference. But you have to be disciplined and use the difference in your investments. Depends on your risk tolerance and all that, but I always opt for a low-interest loan vs paying cash if the interest is low enough. (For example, four years ago, I had a 3-year car loan at 1.5%. I could easily have paid for the car in cash. Instead, I got the loan, and invested the rest. The market has done much better than 1.5%, so yay me. Thing is, in that case, with such a short investment horizon, that was a more risky play. But when we’re talking on 20- or 30-year time spans, historically, your investment income will have made more money than what you paid out in the loan and interest And I’m not even taking into account mortgage interest deductions on your taxes.)
The other thing is that the house they’re in cost something like $1.3 million. So they’d either have to pay cash for a smaller house or save until they accumulate $1.3 million. A mortgage (that one can afford) is a reasonable decision. The problem with the hypothetical couple is the idea that each year, they’re paying aggressively towards the mortgage and investing heavily while at the same time adding about $36,000 to the mortgage.
That’s assuming they can save the cash to do a lump sum. Considering their lack of short term planning, their long term is worse.
Me either!
I get what you’re saying, and you’re not wrong if you play your cards right - the math is definitely there, and I won’t argue otherwise. I just don’t like being leveraged to that degree, but that’s admittedly an investment decision (approach) that factors the highly subjective nature of one’s own personal comfort level, as opposed to pure investment/market math. IME, markets change, and they tend to change when we don’t want them to.
From what I remember from economics class, candles basically pay for themselves.
I hate flying, too. On a recent trip, I was miserable the entire three hours in economy. For the return I upgraded, and it was much better. (Plus I didn’t know you only get one carry-on in economy.)
If I had to fly across an ocean, damn right I’d upgrade, and I’m really poor. In fact, I hate flying so much I’d take a freighter.
I think you’re thinking of insulation.
Depends on how much fire insurance you carry.
There have been people who post here who make high six figures and insist everyone who doesn’t is lazy. Then when they lose their jobs and realize they don’t have modern skills they wonder why they can’t just go out and get another high six figure job based on their obsolete reputations.
That was my first take on this, not so much the expenses that could obviously be cut. This isn’t a really extreme case where people gross $500k and don’t save anything. You could probably find such a person though more likely in SF or NY than Kansas.
But right, these people are saving pretty much. Not only the 401k and monthly taxable Vanguard account contribution, but the flip side of the huge mortgage payment is that they will own a $1mil+ house free and clear in less than 10 yrs. Ballpark of $100k/y of the $120k/y mortgage is probably principal reduction and that’s also savings, thus ~$166k or ~1/3 of pre tax income. If you inhabit forums like ‘Bogleheads’ that’s not a super high savings rate, but compared to the general population or even population of people making $500k it’s pretty high savings.
All they have to do is trim the total of non-mortgage spending categories which total $220k/y by around $33k/y 15% to come out even at that level of savings. And various of those categories are obviously bloated some nearly to the point of implausibility. Although I guess $36k/yr for ‘food’ must include restaurants which isn’t noted separately, and combined with $36k in airline flights, so eating out all over the country/world is not that unbelievably high. As somebody else noted $6k/yr for car insurance but no direct car expense listed also must be wrong, maybe that’s total car expense. Anyway spending $220k to live, exclusive of mortgage, is obviously not the most of anyone on the planet. You just have to spend a moderate amount less than that at that income in order to save what they aim to save.
But it’s not really such a bizarre case IMO in the big picture.
Ergo, their laziness prevents them from maintaining a six figure salary?