Posted on 09/02/2009 5:27:12 AM PDT by Kaslin
I graduated from college in May, and I already have a job in my field. It was a part-time position that went full time, so I already have $15,000 in an IRA and about $23,000 in savings. I’m also debt-free, because scholarships paid for my education. Am I ready to buy a house? --Zack
Dear Zack,
You are the man! This is an awesome position you’re in right now!
Financially, you’re okay to buy a house. I do have one slight hesitation, though. There are going to be lots and lots of things happening in your world during the next few years, and there’s a possibility you’ll end up moving—maybe for a girl, or even another job—during this time period. It’s going to be a time of transition, and having a piece of real estate tied around your neck could be a huge pain. But if you’re sure that’s where you want to be for a while, then it’s not such a big deal.
Keep in mind that there’s a word for real estate that sells quickly, and that word is cheap! Lots of times, the only way to get out from under something like that fast is to practically give it away. It’s a great time now to buy a home, though. It’s like they’re on sale. Interest rates are low, too.
Don’t use the entire $23,000 as a down payment on a place, and keep an emergency fund of three to six months of expenses set aside. Make sure you get a 15-year, fixed-rate mortgage, too. If you play this right, Zack, you’re going to be sitting pretty! -—Dave
Then your complaint is with the government, not with this borrower.
Agreed: My complaint IS with the governement, which has been and currently is supporting this no-money-down we-bail-you-out school of thought and action.
I agree, a 15 year note offers better rates, but there’s the obligation to pay within that time frame.
A few minutes with a mortgage calculator and applying “extra” payment amounts shows the interest paid can be cut dramatically, but still allowing for flexibility.
An interesting question - our mortgage is paid up to 2016, with a resulting LTV of ~70 per cent. If we _had_ to, what’s the problem with stopping payment, as a thought exercise? (we’d be thinking about it in a van, down by the river??)
Must be one hell of a job the kid landed. Just 4 months after graduation he's accumulated a total of $38,000 (IRA & savings) for an average of $9,500 per month.
His $9,500 monthly savings alone amount to $114,000 annually. Either he's one of the very few or he's blowing smoke up someone's tailpipe.
Agreed. That’d be very impressive indeed if he just has a bachelor’s degree.
Did you miss that scholarships paid for his education?
I really like listening now and then, though I've never read his books and have never been in the kind of financial trouble his callers are.
This business of tempting young and inexperienced people with too much credit is a recent phenom. When I was young, credit cards were hard to get and status symbols. Now they hand them out to college students like coupons.
I'm not so quick to condemn young folks for falling into this temptation. Older folks did not sound enough warning about how it can ruin your life for years...
Got a link? I've been trying to figure out the breakpoint for converting my 401k into TIPS in a hurry if Obamanomics goes Weimar.
BTW, I just paid off my wife's car THIS MORNING. A four year loan paid off in 2.5 years - no other debt except for the mortgage. If you'll permit me: FREEDOM!!!
I’m pinging this for later reading. Some interesting strategies, some of which I’ve never heard of before.
No I didn't, just like I didn't miss that he's been in the workforce after graduation for only 4 months , part of which was part time.
In what way is he making money off people in trouble? Yes, I know there might be a cost for some of the material, but do you think he should do this all pro-bono? I suspect a lot of people that are not in trouble also appreciate his advice, and willingly pay a small fee to receive it.
Let's face it... if you're $40,000 in debt, what's another few bucks for a Dave Ramsey class to get some advice on digging out? I suspect he would gladly comp the fee for someone in that situation.
Agree, as long as there is not too much difference in the interest rates between 15 and 30. A little speadsheet work will easily tell you how to pay off the 30-yr mortgage in 15 (or fewer) years. Having the flexibility to curtail your extra payments if circumstances change is a good thing.
Certainly. http://www.treasurydirect.gov
Of course you’ll need some information to get started, such as social security number, TIN, bank routing number for sending and receiving funds. Too, one can convert paper securities (like EE and I savings bonds) into the Treasury Direct account. But, once set up it’s very easy to use and convenient, and secure. In a couple of weeks you should receive an access card that contains authentication devices and codes which ensures that you are both at the correct website, and unauthorized activity is prohibited.
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