the interesting thing I'm seeing is that many people are looking at the here and now or the short term..the next 10-15yrs. Something like 80% of the Forbes 400 richest people say that building wealth is a long term project..and that the key to building wealth is staying out of debt. A mortgage is debt. without a mortgage, you have more capital. Honestly, the upkeep on a house really isn't that expensive. Sure you'll have to replace your roof at 5K once every 10-15yrs, or your AC may need to be replaced once every 10-15yrs..but if you don't have a mortgage, you'll likely have a significant savings account that you can use to pay for these repairs with cash...then in a few months (because you have no mortgage) you're able to replace the savings.
I come from a very poor family..my grandmother survived on Nothing but Social Security. The only reason she was able to live was because her house was mortgage-free. She had lived in that house since the early 50's. Even with no mortgage, she was barely able to make it. I decided a long time ago, that I didn't want to be poor and make bad financial decisions. Right now we're paying $1200-$1500 a month on my wifes student loans - they are the only debt we have. Hopefully we'll have it paid off in a year or so and then we'll put all of that into savings until we have about 15K in savings. Then we'll save up cash for 2 cars while maxing out our 403B's and begin the kids 529's. We'll have the house paid for by the time our oldest graduates high school. to do this, we currently drive a '98 Saturn, an '03 Oldsmobile, and we haven't gone on a real vacation in a few years. We try not to go out to eat, we watch a CRT TV, and own NO video game systems. My computer is an apple G4 that is 8yrs old and working GREAT - I can still run FCP on it, so there is no need to buy a new one. When we do buy things (we're about to buy a new dresser for my daughter) we save up cash and we don't buy the cheapest - we buy what will last a long time. Keep in mind, that these cost-cutting measures are temporary, only for a few years - then we'll be able to pay cash for a vacation, a new TV, etc.
I think you and I are missing each other. Everything you mentioned above besides maintenance (irregular) and lawncare (that you can really do yourself) is generally included in your note. Unless something major happens, which you will have insurance for in a lot of cases, then your maintenance costs aren't that high. So yes, the monthly payment generally includes most of the big cost factors that you are mentioning. Plenty of people are just fine in their older, outdated house. Why? Because THEY NO LONGER PAY RENT. I will gladly trade an older denent place to live to not have to pay rent anymore. Especially if I have lived there 30 years and have all the memories and other stuff attached to MY home. And you are wrong. Eliminating the highest cost of living for the last 20-30 years of your life is creating wealth. To create wealth you can make more or eliminate costs, and shelter is typically the biggest one.
Or you could start investing those savings now and putting your money to work instead of letting it sit, additionally you could defer those loans and pay them later...
The thing was broken when I tried it, but I make around that amount (a little more) and I'll tell you what I spend it on: Out-of-pocket health care costs. After those costs and taxes I live check to check though I never go on vacation, never buy new clothes (maybe a pair of Levi's every two years or a pair of Converse tennis shoes every three years), very rarely eat out, and spend no money on entertainment other than Netflix and U-Verse (the plays I attend are free; I see about 1 movie every three years and I only go to Rockets games when I'm treated by a friend). No drinks because (apart from maybe 3 wks moderate drinking) I don't drink and haven't in two years. No recreational drugs. I do spend about $20/week on e-cigs and I do shop at Whole Foods (I am vegan) but those are literally my only indulgences. And I have no savings. I also live in Houston where the cost of living is low and I live in a very moderately priced rental home. Still, check to check at age 43. A crappy place to be. All because of the health insurance industry in this country.
we're only talking 2-3 years here. We are putting money into retirement, just not the full amount. We can't defer the loans because we are both working and make a decent salary. However, you have to take into account Risk. If I lose my job, we still can't defer the loans because they're my wifes, not mine. If we have debt - credit cards, student loans, car loans, store loans, and a mortgage..we'd have a tough time paying it all. Instead, if we have no debt, and a substantial savings and either one of us loses our jobs, we're fine - we could easily pay utilities on 1 paycheck without dipping in to our retirement funds - thats the goal - being secure. If you have absolutely no debt and a good savings (in a money-market fund that you can withdraw from with no penalty that draws 5% interest) you have little risk in your financial life. Once your there - then you begin adding more money to IRA's etc after you max out your 401k or 403B. what happens to the renter with debt that loses his job and has no income - he begins taking from his retirement funds and getting hit with the taxes and penalties because he didn't figure in the risk factor.
