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Old 10-28-2020, 03:40 PM   #21
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I bought my first house at 25, after graduating college and working for one year. Thanks to govt contracts, my salary engineer position could get paid OT (at straight time rate, but still was nice to take advantage of). So I just worked 10 hours/day, M-F, and still had weekends off for fun. The extra work made for increased learning and experience for me, along with good impression for mgmt of me. I banked all of that OT money, plus what I could from regular salary. Approx one year of saving and I had enough for the 80/10/10 purchase with my 10% down from my saving. That got me on the home ownership wave and real estate appreciation curve.


I did also take on roommate to help with some of the expense. I would have liked to be by myself, but the extra money was good to help replenish some of the savings.
Congratulations to your son for his new job and having some good financial smarts. He will do fine, especially with your guidance and help.


I was not living at home during that first year, but shared a SFH with a friend roommate who was also new grad like me. Your son living at home should be able to save at a good rate, although I would suggest he should pay rent to you as incentive for him to get out on his own.
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Old 10-28-2020, 03:50 PM   #22
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... I think it's more tenant screening and fixing things that would be more a challenge. But he could probably be up to it.
Don't worry about that. If the tenants he chooses are also his housemates in the duplex he will quickly, in just a couple of tenants, learn to screen. He will also have the advantage of being there, so nothing much can go on that he's not aware of. Re fixing, between Home Depot and YouTube he's all set. You get to help, too.

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He did decide to do the 401(k) up to the match, which I think is an excellent choice ...
WADR, I disagree. Now is the time to max the contributions.

First of all this gives the money more years to grow. Second, he is about to receive the biggest income he's probably ever had, so he won't miss the bucks going into the 401K. The only reason to not do this, IMO, is if it is a poor 401K plan that loads administrative fees on the participants. Rare, but it happens. In that case, put the dough into a Roth or a tIRA.
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Old 10-28-2020, 04:03 PM   #23
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Don't worry about that. If the tenants he chooses are also his housemates in the duplex he will quickly, in just a couple of tenants, learn to screen. He will also have the advantage of being there, so nothing much can go on that he's not aware of. Re fixing, between Home Depot and YouTube he's all set. You get to help, too.

WADR, I disagree. Now is the time to max the contributions.

First of all this gives the money more years to grow. Second, he is about to receive the biggest income he's probably ever had, so he won't miss the bucks going into the 401K. The only reason to not do this, IMO, is if it is a poor 401K plan that loads administrative fees on the participants. Rare, but it happens. In that case, put the dough into a Roth or a tIRA.
I dunno he's saving to buy a house, not blowing it on sports car. I don't see a problem with it.
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Old 10-28-2020, 04:33 PM   #24
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Don't worry about that. If the tenants he chooses are also his housemates in the duplex he will quickly, in just a couple of tenants, learn to screen. He will also have the advantage of being there, so nothing much can go on that he's not aware of. Re fixing, between Home Depot and YouTube he's all set. You get to help, too.

WADR, I disagree. Now is the time to max the contributions.

First of all this gives the money more years to grow. Second, he is about to receive the biggest income he's probably ever had, so he won't miss the bucks going into the 401K. The only reason to not do this, IMO, is if it is a poor 401K plan that loads administrative fees on the participants. Rare, but it happens. In that case, put the dough into a Roth or a tIRA.
Thanks for the encouragement on the rental front.

I should clarify that the 401(k) up to the match is only until he buys the house and is to minimize the amount of time until buying. So that will last about a year, and that's a 5% deferral with a 5% match. After he buys the house I'm pretty sure he's already planning on maxxing out his 401(k).

The other aspect to it is that home prices here are probably going up 5-10% a year. So if he were to max the 401(k), that would delay the home purchase by several months, which would (in theory) result in a higher home price by a couple of percentage points. Those percentage points would, under current tax code, likely be tax-free on the back end.

The kid has already maxxed out his Roth IRA a couple of times and already has a taxable account as well. If he ends up with extra somehow I'm 99% sure he'll stick it into his Roth or up his 401(k) sooner - he won't be upping his lifestyle.

@38chevy, yes, I'm planning on him paying me a modest rent. Not to motivate him to move out, but just to make his budget more realistic and get him in the habit of making a monthly payment on the first, and to defray his costs of living here (while in school my kids get to live and eat at home for free).
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Old 10-28-2020, 05:10 PM   #25
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... WADR, I disagree. Now is the time to max the contributions. ...
IMO, that's crazy. The 401k max contribution is $19,500. The average salary for a new graduate is about $51k, so let's assume that the OP's son is a star and is earning $78k. Do you really expect that a 22 yo is going to save 25% of their gross pay?
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Old 10-28-2020, 09:14 PM   #26
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Don't worry about that. If the tenants he chooses are also his housemates in the duplex he will quickly, in just a couple of tenants, learn to screen. He will also have the advantage of being there, so nothing much can go on that he's not aware of. Re fixing, between Home Depot and YouTube he's all set. You get to help, too.
+1
When she was a sophomore, we purchased a four bedroom house about 5 blocks from campus where DD attended college . We put her in charge of running the house--managing and paying expenses and operation as well as finding her roommates who would pay market rents. Most of the time she already knew the gals she rented to but by the time she graduated, she was having to screen and choose from people who heard she had space.
DD probably learned more about life and financial realities than she did from her university program. The house was a decent investment but value of her "learnings", at least match her classroom education---and the tenants paid for it! ;-)
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