Analyze my situation - net worth, saving for wedding, buying a home

[nyliguy]

Just thought I'd add my mindset here for you to consider.

If you have $40k cash, you can also "afford" to buy 40,000 items from the dollar menu at McDonalds. That's a lot of fries!

My point is, just because you can "afford" to do something doesn't necessarily mean it's a good idea.


This makes absolutely no sense to me.

It's like saying:
"Well, if I took $100k and used half of it to pay off all my debts, and half for an European vacation, my payments would be lower by $500/month and I'd be able to build my net worth faster. Therefore, spending $50k on a European vacation is a good idea financially."

What??

No. Paying off the debts is a good idea and helps you build your net worth over time. Going to Europe burns through your net worth, and does not help you build your net worth over time. The two are unrelated.

For your situation, using cash to pay off debts may be a good idea (depending on the interest rates), but how does that make paying $40k for a wedding a good idea? The two are unrelated. Have you considered what else you could do with the $40k?


I agree that paying cash for a $40k wedding is better than borrowing for a $40k wedding, but that does not mean a $40k wedding is a good idea.

Financially the situation is not best, but as I said I'm already in the situation I'm in so if I took my cash and paid off the wedding and my debts I'd be at zero liabilities and could than start piling away cash since none of my income would be going towards debt payments. More of a mental tactic than a 'best financial move'.

I often evaluate all my purchases with what else I could do with the money. Considering I worked an extra job, sacrificed vacations and such to spent the $40k I rationalize it as I would be in a much worse place if I didn't sacrific or I might have been in the same place but just spending $3k on a backyard wedding.

[red92s]

I just mentioned narrow minded people, because people are offended when they hear it's normal for people to give cash wedding gifts and normal to be expecting it. They also can't understand that some cultures it's even more prevelant for relatives to fund the wedding.

Pointing out that you are looking forward to a large cash wedding gift from your parents, while simutaniously stating that "kids should be financailly funding their own choices" does not make me narrow minded. It makes me an observant reader.

[nyliguy]

Pointing out that you are looking forward to a large cash wedding gift from your parents, while simutaniously stating that "kids should be financailly funding their own choices" does not make me narrow minded. It makes me an observant reader.

I paid for college, my own wedding, funded my own choices in life, I would expect my kids to do the same.

A gift from parents is just that, a gift and not funding. My choices are not determined by their gift. I have not been told what they will gift me, I just go off what I hear from my siblings. They all paid their own wedding as well and my parents gave them a generous gift. You can argue that it's the same as paying their way but I see otherwise since I'm not slacking counting on it.

If I worked full time at college and went to school at night and paid cash for most of my tuition, and than at my graduation my parents surprised me with a big graduation gift of cash would you call that funding my choices or a gift?

There's a thin line, and maybe we just have different opinions.

[bjl584]

OP, what is your action plan/timeline for everything to fall into place? After the wedding you will need to save up an emergency fund and a house down payment fund. You will also want to (I assume) pay off all of your debts before buying a house. So, what do you think a reasonable timeline for you and your wife is for all of this to happen?

I'm trying to get a better understanding of how you are planning all of this to go. Are you and your wife to be on the same page with all of this? Is she ok with you draining your savings to pay for the wedding? Has it been discussed?

[witchkizzle]

If I worked full time at college and went to school at night and paid cash for most of my tuition, and than at my graduation my parents surprised me with a big graduation gift of cash would you call that funding my choices or a gift?

There's a thin line, and maybe we just have different opinions.

This makes sense.

I would call that a gift.

What about if you knew the gift was coming? Does that change anything?

Im not trying to stir the pot, I just thought that both points made were valid and it was an interesting viewpoint difference.

[nyliguy]

OP, what is your action plan/timeline for everything to fall into place? After the wedding you will need to save up an emergency fund and a house down payment fund. You will also want to (I assume) pay off all of your debts before buying a house. So, what do you think a reasonable timeline for you and your wife is for all of this to happen?

I'm trying to get a better understanding of how you are planning all of this to go. Are you and your wife to be on the same page with all of this? Is she ok with you draining your savings to pay for the wedding? Has it been discussed?

- She knows we are paying this much, but feels we will be fine paying it as we go with our incomes and might not realize I will have to use a signifgant amount of my cash. We talk but sometimes she might not realize the wedding will set us back sometime for home purchase.

- Wedding in a year. We'll pay as we approach the date, with year end bonus and tax returns and just disposable monthly income. If not fully paid off than will use my cash to pay it off.

- Assume guests and parents gift for wedding would get min $20k back ( I know, I know you all hate me 'banking' on this)

- assuming we should have $40k in savings by next year after the wedding, cars almost paid off but still have the student loans.

- live in our apartment for another year after the wedding while continuing to put away another $30-$40k (with bonus, raises we should get there if no unexpected interupts i.e job loss)

- end of 2014 have our car loans paid off and just be left with student loan balances

- end of 2014 would have $60-$80k cash for down payment for home.

- look to purcahse home with basement, or upstairs apartment to rent out, or build one over time as a side project to eventually take it side income.

Call it not financially responsible, but my while saving to have a CASH emergency fund I'm comfortable having my ROTH IRA, HELOC, 0% interest credit cards as emergency funds.

I work out the numbers through my budget/scenerio model and it's tight and not as much contributed to retirement as most of you but that should change if I'm able to get a renter in the house.

- after student loans are gone it frees up a lot of monthly income.

This scenero is very tight as a home mortgage on a $400k home with $11k year taxes would be a payment of $2,800 month. Currently our take home after taxes and contributing the match to 401k our income is $8,000 which only leaves $5,200 month for fixed expense, variable expenses and savings.

[red92s]

Call it not financially responsible, but my while saving to have a CASH emergency fund I'm comfortable having my ROTH IRA, HELOC, 0% interest credit cards as emergency funds.

Taking on debt (HELOCs or cards) to finance an emergency is the opposite of what you want to do. Soooooo many people got burned in the recent downturn when they lost an income, and had to live of credit cards. That's a worst case scenario, but it's reality for a lot of people. It takes a long time to dig yourself out of that hole. You may get lucky and have it work out for you, but a lot of people that didn't understand this important distinction have ended up in crisis mode over the last 5 years: Access to credit lines is not the same thing as an emergency fund. If you are comfortable having that as your parachute, make sure you fully understand the implications a large unexpected expense or income loss would create.

Regarding the HELOC option: You are saving up for a large downpayment specifically because you want to have equity in the home from day one. Where is the sense in giving that equity back by using a credit line aginst it in case of emergencies? That is essentially the same as buying the home with a smaller downpayment to begin with. You may as well just go in with a smaller downpayment and cash reserves at that point. The end result isn't too much different.

[treezie]

Hmm, NYC wedding with 250 guests...40k sounds about right. If you are assuming that you will get 50% of the money spent on the wedding back, you will only probably have to spend 10k on the wedding (assuming your fiance pays half). After the wedding, I would concentrate on paying off the credit cards as soon as possible. If your fiance has a car, you can try selling your car...or she can try selling her car...whichever one has more equity on it and get some money from that to put down on a house. Try managing getting around with one car for a few months.

[LivingAlmostLarge]

Are you saving 15% to retirement? 5% for extras? I paid for college and my DH, and I would LOVE to afford to give my kids a head start and more than I had. We paid for our home down payment ourselves at age 25 and 27 (20% = $120k DP for a townhouse with no garage or basement so yes we live in an pretty HCOLA)

We saved every penny for retirement ourselves and paid for all three cars we've bought and driven ourselves period. We've traveled to Europe, Asia, and family a lot. But why should my kids scrimp and save if I happen to have saved it?

But everything in time. I wouldn't bank on everything being perfect. Life happens. I have recently had friends who had testicular cancer at 31. He's fine but it did wipe out a lot of their savings.

I think you should point out that you have to rent till 2014 and even then maybe longer. If you aren't saving for retirement already (we max out everything and have since it was available) then perhaps it's something to consider.

I'd show the fiancee the timeline. Show her the future projected budget. Show her that she might need to work to afford the $400k home. Perhaps different choices might be made.

How much do you have for retirement? How much do you project on saving?

[nyliguy]

Are you saving 15% to retirement? 5% for extras? I paid for college and my DH, and I would LOVE to afford to give my kids a head start and more than I had. We paid for our home down payment ourselves at age 25 and 27 (20% = $120k DP for a townhouse with no garage or basement so yes we live in an pretty HCOLA)

We saved every penny for retirement ourselves and paid for all three cars we've bought and driven ourselves period. We've traveled to Europe, Asia, and family a lot. But why should my kids scrimp and save if I happen to have saved it?

But everything in time. I wouldn't bank on everything being perfect. Life happens. I have recently had friends who had testicular cancer at 31. He's fine but it did wipe out a lot of their savings.

I think you should point out that you have to rent till 2014 and even then maybe longer. If you aren't saving for retirement already (we max out everything and have since it was available) then perhaps it's something to consider.

I'd show the fiancee the timeline. Show her the future projected budget. Show her that she might need to work to afford the $400k home. Perhaps different choices might be made.

How much do you have for retirement? How much do you project on saving?

Assuming you have a lot of disposable income that you can afford not to sacrific and have the money to fund your kids choices in life. If you scimped on vacations, lived in a poor crime neighborhood, deprived yourself of living to the most enjoyable way possible during your youth in order to fund your bank accounts so your kids could have it easier than that to me is not a choice I would make personally. There's nothing wrong with hard work, sacrific to get the choices you want in life yourself and not on your parents to do so. If you have the means to help them, than so be it.

Yes she knows she will need to work to afford the home, we are both in good careers and have potential for a lot of future increased earnings.

We fund retirement for the match of 6% right now, as we're saving for wedding and home. Later on down the road, when our incomes are higher and in a home with a renter tenant we can fund our retirement more.

I get what you're saying about unexpected events.

[zaphodX]

Not to throw stones, but I think you are counting that things won't change between you as couple after marriage. Attitudes and expectations change, so don't dig a hole before making sure you have enough to fill that hole..

Another note: Your plan seems like is a BEST-CASE scenario, and in this economy, I think you should plan for the worst and count your blessings if things work out in your favor.

[LivingAlmostLarge]

I forgot to mention that you said you'll be making $150k but only save 5% now for retirement. As soon as the wedding is done you'll jack it up to 15% right? Then save for a home from there? And you'll still make it to 2014? Or will you continue to save a lower rate for retirement until the home?

I think that's a mistake because then you'll be buying a home being used to saving less for retirement. To make it easier, I'd save the 15% for retirement, then pretend to live on a budget for a $400k and then use the difference between the house and rent as savings for the down payment.

That will give you a taste of what life is life before you bite the bullet.