Philip_Marlowe wrote: ↑
Thu Aug 24, 2017 1:48 pm
I've only posted a handful of times but I have found reading Bogleheads over the past few years to be incredibly useful in helping me learn about handling finances and, more importantly, learn to think critically about my financial goals and how to achieve them.
DW and I have been incredibly lucky the last few years. I am currently a second year associate at a biglaw firm and DW works in education. 2017 income is projected at $275k with an anticipated increase to $325k in 2018. We live in a HCOL area but have been lucky to keep our expenses (relatively) low while enjoying a high quality of life.
I actually enjoy biglaw for the most part and don't see myself leaving in the next few years. DW enjoys her job and it's stable.
We're trying to figure out our saving/investing priorities for the next year or two and find ourselves torn. The options we are debating are:
- Pay down debt more aggressively
(pro: more flexibility, guaranteed roi con: debt is at low interest rates and we are already paying fairly aggressively)
- Begin taxable investing
(pro: good long term returns, simplicity con: market at historic highs, not tax efficient, locks up cash)
- Save for downpayment on house
(pro: we like the area and see ourselves here longterm con: housing is INSANE here and we would likely need to spend north of $1.5M to get something we want, that kind of expense terrifies us)
- Save for additional rental properties
(pro: cashflow and long term appreciation, we have enjoyed the experience of being landlords so far con: possible nightmare tenants, time intensive)
Very open to thoughts and suggestions. Thanks to all!
Total Assets: $360k
Total Debts: $-293k
Net Worth: $67k
- Promissory Note: -128 (2.04%, due 6/2026)
- Institutional Student loan: -16 (0%)
- First Republic Student Loan: -149 (1.95%, due 4/2021)
- Cash: 30
- Rental: 178 (at purchase price)
- Other: 3
- Retirement: 149
The first thing is to be careful of killer-blonde dames named Carmen Sternberg
On your current debt interest rates, I would not accelerate retirement of debt. You are repaying fast, you say, and it's cheap money.
It's a hard call on the rest, because you have too many uncertainties.
Max out tax deferred accounts. That's pretty clear.
Build up a cash reserve in ibonds. Sort of a baseline 12 months expenditure if you had to sharply curtail your standard of living e.g. if your law firm went bust or you lost your job. ibonds can be a useful part of this. Remember to include maintenance payments on your student loans in that situation.
I like the idea of a portfolio of rental properties. As another poster points out, by no other route will you be in a position in 10-15 years where you could kick back and stop. However it's also pretty risky-- tying yourself to one area, housing market and risks of tenants, bad buildings etc.
You will need c. 300k for that home. Yes that's terrifying. But those of us who live in HCOL areas (LA, NYC, Boston, Washington DC, London UK etc.) live with that. Other than a brief period in the dot com boom, I have never managed to make housing equity less than half my net worth.
So in this order:
- tax efficient accounts maximized (think you do that already?) for both partners
- cash reserve in ibonds (a long term investment that, as I understand it, can in time serve as a cash reserve)
- cash reserve for further property purchase-- personal or rental (TBD which)
- long term investment in taxable accounts
- debt retirements
You are probably looking to build up $300k of cash (and $150k as a minimum) and that will take 2-3 years?
If we enter a bear market in stocks or houses, you might then bring forward your housing/ taxable account investing decision.