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Old 08-24-2014, 09:33 AM
 
Location: Brooklyn, NY
122 posts, read 192,361 times
Reputation: 46

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Hey guys,

I was wondering if anyone could give me an idea what would be the best plan for the future for me and my girlfriend.

We are from NYC and both currently live with our parents. I currently make 53K/year and my girlfriend makes just around 20K and we're hoping to raise our salaries to 100K combined in the near future. This year I started to contribute to 401K up to my company's match and maximized the ROTH IRA yearly contribution. While I help my parents with rent and bills my yearly savings are about 15K and I'm hoping that in 4 years time I should have about 60K in my savings account. My girlfriend is looking for a better job but currently doesn't have that much as far as savings and doesn't yet contribute toward retirement. I am 30 and she is 28.

I really want to move from NY to a more affordable city and own an apartment or a house but I'm not sure if this is at all realistic. Should I give up on the idea of owning a place and rent instead while contributing more money into 401K instead of saving up for a downpayment?
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Old 08-24-2014, 09:43 AM
 
12,404 posts, read 9,209,597 times
Reputation: 8863
Quote:
Originally Posted by loss4words View Post
Hey guys,

I was wondering if anyone could give me an idea what would be the best plan for the future for me and my girlfriend.

We are from NYC and both currently live with our parents. I currently make 53K/year and my girlfriend makes just around 20K and we're hoping to raise our salaries to 100K combined in the near future. This year I started to contribute to 401K up to my company's match and maximized the ROTH IRA yearly contribution. While I help my parents with rent and bills my yearly savings are about 15K and I'm hoping that in 4 years time I should have about 60K in my savings account. My girlfriend is looking for a better job but currently doesn't have that much as far as savings and doesn't yet contribute toward retirement. I am 30 and she is 28.

I really want to move from NY to a more affordable city and own an apartment or a house but I'm not sure if this is at all realistic. Should I give up on the idea of owning a place and rent instead while contributing more money into 401K instead of saving up for a downpayment?
Roth IRA allows you to remove principal without penalty or tax, so your money isn't really unavailable for a down payment.

401K to the match, Roth afterward.
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Old 08-24-2014, 11:32 AM
 
7,387 posts, read 4,436,440 times
Reputation: 8334
This is more a lifestyle question than a financial question. What is important to you? To your GF? Do you want to stay in your current location, where your family is, in one of the most vibrant cities in the world? Do you want to move away from family, to a less vibrant city, to enjoy a lower cost of living?

There is no right or wrong, there is only your personal priorities.
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Old 08-24-2014, 11:42 AM
 
12,404 posts, read 9,209,597 times
Reputation: 8863
Quote:
Originally Posted by loss4words View Post
Hey guys,

I was wondering if anyone could give me an idea what would be the best plan for the future for me and my girlfriend.

We are from NYC and both currently live with our parents. I currently make 53K/year and my girlfriend makes just around 20K and we're hoping to raise our salaries to 100K combined in the near future. This year I started to contribute to 401K up to my company's match and maximized the ROTH IRA yearly contribution. While I help my parents with rent and bills my yearly savings are about 15K and I'm hoping that in 4 years time I should have about 60K in my savings account. My girlfriend is looking for a better job but currently doesn't have that much as far as savings and doesn't yet contribute toward retirement. I am 30 and she is 28.

I really want to move from NY to a more affordable city and own an apartment or a house but I'm not sure if this is at all realistic. Should I give up on the idea of owning a place and rent instead while contributing more money into 401K instead of saving up for a downpayment?
I'd also add, DO NOT buy a home together until you are legally married. To do so is a recipe for disaster!
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Old 08-24-2014, 12:02 PM
 
Location: Sandpoint, Idaho
2,880 posts, read 5,074,884 times
Reputation: 3020
Quote:
Originally Posted by loss4words View Post
Hey guys,

I was wondering if anyone could give me an idea what would be the best plan for the future for me and my girlfriend.

We are from NYC and both currently live with our parents. I currently make 53K/year and my girlfriend makes just around 20K and we're hoping to raise our salaries to 100K combined in the near future. This year I started to contribute to 401K up to my company's match and maximized the ROTH IRA yearly contribution. While I help my parents with rent and bills my yearly savings are about 15K and I'm hoping that in 4 years time I should have about 60K in my savings account. My girlfriend is looking for a better job but currently doesn't have that much as far as savings and doesn't yet contribute toward retirement. I am 30 and she is 28.

I really want to move from NY to a more affordable city and own an apartment or a house but I'm not sure if this is at all realistic. Should I give up on the idea of owning a place and rent instead while contributing more money into 401K instead of saving up for a downpayment?
First note that you have to make 33% more to reach $100K. Be realistic as to what near future truly entails.

Second, note that $100K gross in NYC is perhaps $50k net in terms of cash flow needed to finance purchases. Why? You face federal, state and city income taxes. Also, you face the other taxes we all pay. At $50K I am being generous.

Third, if you are savings $15k/year and helping parents (I will assume $5k a year). That means $30K free to live in one of America's most expensive cities and to finance a real estate purchase two years after the market bottomed and prices have been soaring. This leaves about $1000-$1500/mo for PITI plus expenses. If my ball park numbers are wrong, I doubt you can have more than $1500-$2000/mo for PITI plus expenses. What is left for the basic P&I? I will leave that for you.

Four, she is your girlfriend and not a spouse. If you are purchasing a TV, no big deal. If financed, it is paid off in months. a 30 year FRM is 360 months of maintenance, administration and financing. In no way shape or form should you do a joint purchase of a house until there is real blood commitment. Financially, you are better off buying a home with a friend--guy or girl--based solely on the exercise as a business transaction. Or you can buy with your parents or siblings.

Five, you are making 70% of the income and 100% of savings and retirement. Do yourself a favor. When you reach the point of buying a house, buy it with your money only and put it in your name only.

Six, you like in NYC. If you buy a flat in NY, you will need to pay maintenance fees that are borderline extortion, almost akin to paying HOA fees for condos in Hawaii. If you go into the neighboring states, you will face outrageously high property taxes. In some places up to 3% of property values.

Seven, it sounds like you are doing great in terms of saving for the downpayment on home. I have little doubt you can save enough for a decent downpayment. Try for 20% down just to remind you that a house is a serious financial commitment.

Good Luck. I hope you get to $100K/yr on your own sooner than expected. Keep that savings rate at 25-30%. Use the time to do your due diligence on places that have lower taxes and insurance rates and can generate decent ROI. And please make the decision as a business decision especially if there is no skin in the game.

As to your girlfriend. If she can get an executive secretarial job at a big firm or govt, that can bring $40K+/year and benefits to the family. That is huge. It can bring you the stability to push your job ambitions higher and demonstrate this is a joint venture. Do not given into the temptation that you are the provider and she is to be taken care of. Great for a few years but not to sustain the marriage-family enterprise over the life of a mortgage.

S.
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Old 08-24-2014, 03:17 PM
 
178 posts, read 189,448 times
Reputation: 112
Investing in NYC real estate long term? Very risky proposition. It's a speculative market. Driven among other things by foreign investors parking illegally gotten gains. The fundamentals are not there to support $1000-2000+ sq/ft prices.

20 years ago most properties you'd be looking at sold for a tiny fraction of their current sale price. Will your biggest purchase in life retain value? Far from guaranteed. Would a typical house anywhere else where the price is mostly made up of materials and labour retain its value? The odds are very high that it will.
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Old 08-24-2014, 03:57 PM
 
Location: N/A
849 posts, read 1,500,649 times
Reputation: 920
Quote:
Originally Posted by Leon2014 View Post
Investing in NYC real estate long term? Very risky proposition. It's a speculative market. Driven among other things by foreign investors parking illegally gotten gains. The fundamentals are not there to support $1000-2000+ sq/ft prices.

20 years ago most properties you'd be looking at sold for a tiny fraction of their current sale price. Will your biggest purchase in life retain value? Far from guaranteed. Would a typical house anywhere else where the price is mostly made up of materials and labour retain its value? The odds are very high that it will.
That's a little grim and short sighted. Are they producing more land in NYC? The first, second, and third rule of real estate is....LOCATION, LOCATION, LOCATION.

With enough research, money, and time, one would be just fine purchasing something that the city has to offer. This is true in every city.

When you are in a hurry is when you could get into trouble.
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Old 08-24-2014, 04:18 PM
 
Location: Brooklyn, NY
122 posts, read 192,361 times
Reputation: 46
Thank you guys for all the replies!!!

We are both in agreement that we want to move out from NY around year 2020 giving us around 5 years to save up. The cost of living in NY is just too much for us and in the next couple of years we want to decide where we to move.

She is educated with at least 10 years of working experience but unfortunately mostly working very low salary jobs. With some luck I think she could find a job paying $40K or more but it's been tough. If she can land a decent job we will try to both contribute to retirement and divide our monthly expenses between the two of us. My 53K is also not the the ceiling for me and I'm hoping in the near future to attain a job with an even better salary, but this is all wishful thinking at this point.

In the event that our financial situation doesn't change and I only have 60K (plus 25-30K that I could withdraw sitting in ROTH IRA) saved up I'm afraid we won't have enough to buy a property even in a city with lower housing costs with let's say a 300K price tag and will be forced to rent.

Thank you for the suggestion that if we are buying and I'm making a lot more income than her that it should be with my money only and under my name. Would you be able to elaborate on that? Is this for my personal protection in case we are married and decide to separate?
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Old 08-24-2014, 04:24 PM
 
Location: N/A
849 posts, read 1,500,649 times
Reputation: 920
Quote:
Originally Posted by loss4words View Post
Thank you guys for all the replies!!!

We are both in agreement that we want to move out from NY around year 2020 giving us around 5 years to save up. The cost of living in NY is just too much for us and in the next couple of years we want to decide where we to move.

She is educated with at least 10 years of working experience but unfortunately mostly working very low salary jobs. With some luck I think she could find a job paying $40K or more but it's been tough. If she can land a decent job we will try to both contribute to retirement and divide our monthly expenses between the two of us. My 53K is also not the the ceiling for me and I'm hoping in the near future to attain a job with an even better salary, but this is all wishful thinking at this point.

In the event that our financial situation doesn't change and I only have 60K (plus 25-30K that I could withdraw sitting in ROTH IRA) saved up I'm afraid we won't have enough to buy a property even in a city with lower housing costs with let's say a 300K price tag and will be forced to rent.

Thank you for the suggestion that if we are buying and I'm making a lot more income than her that it should be with my money only and under my name. Would you be able to elaborate on that? Is this for my personal protection in case we are married and decide to separate?
google "commingle"

as a non married person, you do not want to commingle funds. Because when you do, legally you only give half...so if you put in $1m dollars and she put in $10k dollars...you only get $505k.

I was just in NYC for 5 days. Every night I visited the food truck outside my hotel in Midtown Manhattan...that guy makes about $75k a year serving $4.99 Gyros (Hala...they are so good). So there are jobs to be had.
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Old 08-24-2014, 04:41 PM
 
178 posts, read 189,448 times
Reputation: 112
Quote:
Originally Posted by midwestlaxer View Post
Are they producing more land in NYC?
Do you understand what a fundamental value of an asset means? Or what speculative value means?
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