Need some guidance

[honydonk]

Hi,

I have been reading these forums from 1 week and now i am really tensed about our retirement and other financial aspects.

DW and myself have saved about 150k in taxable and around 70k in various tax defered accounts. I am self employed and hence 401k is less and taxable income is more.

I am 28 yrs and DW is 25 yrs old.

We have a mortgage on our house which we bought last year in the 500k range. Nowdays that is the norm. I am not sure when we will have a positive networth bcs its going to be a long time to have one with the current market.

How did other ppl manage to get a positive networth before 33 if someone graduates in the 25 yrs range . I cant seem to understand that and that is keeping me awake big time.

thanks
honkydonk

 

[brewer12345]

Unless your house is worth zero or you have some kind of massive non-mortgage debt you arent telling us about, it sounds like you already have positive net worth (and have done very well). The mortgage amount is offset by what the house is worth in the calculation of net worth.

 

[honydonk]

Hi,

Thanks for replying. The issue i am having is that the house was bought in the last 2 years and as we now know the house prices are decreasing rather than increasing so there is no equity built except for the 25% that has been put down. I am not sure how i have a positive nw unless i am missing something.

 

[SecondCor521]

honydonk,

If we assume your house was worth $500K when you bought it and is still worth $500K and you put down 25%, your net worth would look like this:

Assets

House -- $500K
Taxable savings -- $150K
Tax-deferred savings -- $70K

Total Assets --- $720K

Liabilities

Mortgage -- $375K

Total liabilities -- $375K

Net worth ---- $345K

which is actually a fabulous position to be in at your age.

2Cor521

 

[honydonk]

thanks for explaining

Hi,

Thanks for explaining this. I didnt know how to compute networth and since right now if I sell the house i wouldnt make a dime i didnt consider it part of my networth.

Atleast now i can concentrate on getting to a better position faster.

thanks
amit

*** lets get to dublin faster than others

 

[maddythebeagle]

How did other ppl manage to get a positive networth before 33 if someone graduates in the 25 yrs range . I cant seem to understand that and that is keeping me awake big time.

Your housing situation is regrettable...your other savings are quite good...My impression is that many here dont consider home equity of much value in net worth calculations (and many have argued that point due to the situation that you are now in) and the value comes more from having it paid off....

On the issue of age, there are a lot of engineers, computer science, etc. folks on these boards...I am an engineer and certainly graduated with a degree before age 25....I am also in the midwest where housing is considerable cheaper and 150-200k gets a pretty decent place...

 

[DblDoc]

Your doing fine. Keep doing whatever you have been to save what you have so far and the 25% downpayment and you will be in great shape at age 33 or beyond.

DD

 

[samclem]

Hi,

I am self employed and hence 401k is less and taxable income is more.

honkydonk

Are you eligible to use a Solo 401K? That can allow you to stash a way quite a bit money before taxes, but you have to have no other employees (except for a spouse).

 

[RunningBum]

It is tough to get ahead in the first few years but as has been pointed out, you are doing well. Hopefully the house will bounce back and you'll have some positive equity in that soon.

Also keep in mind that presumably your income will increase through the years, usually faster than your expenses go up especially with a fixed rate mortgage assuming you don't keep upgrading homes and mortgages. Any time you make more money (salary increase for us who are not self-employed), put a lot of that towards your investments. Finished paying off a car? Put the car payment amount away in savings, so when you replace that car you can put a considerable amount of cash down on it and eventually don't even need to take out car loans. And of course keep credit card debt away.

If you keep add it, in another 5-10 years you will find yourself in a lot better shape, as you have less debt, are saving more, and your home and investments appreciate. Right now you want to position yourself for this.

 

[mickeyd]

If you have over $200K already saved, you are way ahead of your peers.

My advice is to live below your means for the next few decades and continue to increase your savings in both taxable and nontaxable accounts as you see fit and you and DW will be in fine shape and ready for ER in a timely manner.

 

[JDARNELL]

If you have over $200K already saved, you are way ahead of your peers.

My advice is to live below your means for the next few decades and continue to increase your savings in both taxable and nontaxable accounts as you see fit and you and DW will be in fine shape and ready for ER in a timely manner.

I agree. Seems like you are doing fine. Just remember the 8th wonder of the world. "Compounding"

It will sneak up on you.

Tomcat98

 

[honydonk]

thanks for encouragement

Hi,

Wanted to thank everybody here for the support and kind words. I jumped into the housing market at the wrong time but i am sure everything will work out in time. Lot of commercial buildings coming near by so when the market recovers i am expecting a lot but lets c.

I am aiming to save a lot more and we LBYM , DW doesnt like it but if we need enjoy later we need to struggle now.

I am looking to reach the 200k mark by year end and that is definitely doable I hope.

We dont have any other debt .

thanks
honydonk

 

[donheff]

Heck, if you are even thinking about this stuff at 28 you are ahead of your peers.

 

[FinanceDude]

Heck, if you are even thinking about this stuff at 28 you are ahead of your peers.

Amen to that........

 

[Fred333]

Very true. Kids in their twenties are a generation of spenders with no looking into the future. I wonder what their retirements will look like?

 

[honydonk]

kind words

Hi,

Wanted to thank for the kind words and encouragement. Can someone show me a calculator that based on a retirement figure and a return of 7% how much of principal do we need to putting into the market . That would give a very good figure to aim for and based on the market condition we may need to increase the principal.

thanks

 

[Breitling]

I love playing with this calc: Retirement savings calculator -- How much money can I save in my 401(k) plan?

Congrats on the savings so far, you have time on your side, you may be surprised to see the numbers that the above calculator will toss out. It makes LBYM all that more enjoyable!

 

[travelover]

Hi,
..... Can someone show me a calculator that based on a retirement figure and a return of 7% how much of principal do we need to putting into the market . ....

I like the Fidelity free calculators, but they are one of many (search Google "retirement calculator ")