Paige and her fiancé have two autumn 2021 goals: save for a wedding and an emergency fund. There’s one problem: they only have around $200 per month to save. How can they grow the gap when they’ve run out of things to cut and ways to earn more?
Kat’s investor friend connected her with a wholesaler who only deals in cash. How can she find $130,000 to buy her subject property?
“Jon,” an anonymous caller, is renting his grandparent’s property, which he plans to make his forever home. It’s on the older side and needs renovations, but the repairs don’t need to happen immediately. How can he fund these repairs while also avoiding a mortgage payment in his 60s?
Anonymous caller “Chadwick” is planning for financial independence. Given that his employer covers his housing, when should he and his wife look for a house? Now, or in the last year of his job?
Annalis wants to know whose approach to business I prefer: Gary Vee’s, or Cal Newport’s? She also asks: how do you become a good speaker?
My friend and former financial planner Joe Saul-Sehy joins me to answer these five questions today. Enjoy!
Paige asks (at 1:52 minutes):
I’m looking for ideas on how to grow the gap. My fiancé and I net around $4,000 per month combined, but our minimum monthly expenses (including savings) are around $3,700, and that assumes nothing goes wrong. We want to build an emergency fund before I start graduate school this fall, and we also want to save for an October wedding. We estimate that we need to save $5,000 for the wedding. What can we do to meet our financial goals?
I already drive for DoorDash around six hours per week, and my fiancé works part-time while attending school. Neither of us has the bandwidth to take on much more work. Our rent and utilities are 40 percent of our expenses, but we’re tired of moving and our lease doesn’t end for another nine months. There aren’t many other expenses we can cut.
I also have $25,000 in student loan debt (on an income-based repayment plan) which, at the time of this question, is in forbearance until January 2021. We have $2,000 in credit card debt and owe $8,000 on our car.
What’s the best path forward to get us on solid financial footing?
“Chadwick” asks (at 27:24 minutes):
If the market cooperates, my wife and I are on track to be financially independent (FI) in seven years, just by saving 55 percent of our after-tax income and investing in index funds.
There’s a twist, though: my employer pays for our housing, including utilities and maintenance. When I leave my job, we’ll need a place to live, which increases our expenses in FI.
Should I buy the house now and rent it out until we’re ready to move in? Buy in the last year of my work? Or buy a piece of land with the intent to build?
If I buy the house now and rent it out, I assume I’ll need to get an investor mortgage, but if I buy in my last year of work, I worry that the bank won’t give me favorable terms, knowing that I’m quitting soon.
I think we’ll have enough funds to buy a house without a mortgage in our taxable account, but I’d rather not dip into those funds until we reach FI. I’d also prefer to have money in all three of the Roth, Traditional IRA, and taxable buckets while in FI for maximum tax options. Plus, paying for a house in full with our taxable funds would deplete the account dramatically.
What should we do?
“Jon” asks (at 36:48 minutes):
I’m 24 years old and renting my grandparent’s property. Upon their passing, I’ll inherit the property, and I plan to live here forever with the goal of keeping it in the family.
However, the farmhouse was built in the 1860s, and building new seems more sensible than renovating. My plan is to live in the existing house for the next 10 years, and then build new. But I don’t want to begin a 30-year mortgage at age 35.
Instead, I’m thinking of buying a rental property, this way I can start a mortgage now, while having someone else pay it for me. (If required, I can make additional payments on top of their payment.) Once 10 years pass, I’ll either sell it and use the capital towards a mortgage with a shorter term, or I’ll continue to use it as an extra income stream to help pay for the mortgage on the new build.
I have a good paying job with benefits and good growth potential. I have a decent emergency fund and also have $50,000 saved for a downpayment. I could invest this money in my side business, but I think real estate would yield higher returns. Plus, I believe that building capital is an important component of financial freedom.
Are there better options for the $50,000 I have, or is my plan solid?
Kat asks (at 56:45 minutes):
An investor friend of mine connected me with his agent – a wholesaler who only deals in cash. The subject property I’m looking to buy is $130,000, and I’m trying to figure out how to come up with the money.
I was denied a cash-out refi on my condo because of my low outstanding balance; my loan-to-value ratio isn’t high enough.
I have the cash to buy the property, but it’s tied up in a rollover IRA (which is invested in low-cost index funds).
My current portfolio consists of the rollover IRA, a Roth IRA, liquid cash, and a 457b that I just started.
Should I take the tax hit and use up the nest egg in my rollover IRA to buy an investment property? I’ve also heard that some people use credit cards (in a calculated manner) to buy investment properties – what do you think about that?
Annalis asks (at 1:01:52 minutes):
Which school of thought are you in: Gary Vaynerchuk, or Cal Newport?
Gary believes that you should broadcast your life on social media 24/7 to develop a following at all costs. Cal believes the opposite – you can’t afford to be on social media if you want a successful career, and should instead focus on deep work.
As someone who has a successful following, how do you keep that balance?
Also, how did you become such a good speaker?
Resources Mentioned:
- A World Without Email, with Cal Newport | Interview
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