Millennials: Avocados or homes?

[indes]

I never really thought of buying my house as an investment, since I want to live in it for the rest of my life. I was just looking for the best way to live on the cheap when I'm older. By the time I'm 50 my only bills will be utilities (300$/month), property tax (1100/year) and food/gas/beer. So while I may not have a huge nest egg or great dividends coming in, I'll be able to live comfortably for next to nothing per month.

There's definitely a bunch of different ways to do it though.

I believe.

[CroFlames]

Originally Posted by indes

I never really thought of buying my house as an investment, since I want to live in it for the rest of my life. I was just looking for the best way to live on the cheap when I'm older. By the time I'm 50 my only bills will be utilities (300$/month), property tax (1100/year) and food/gas/beer. So while I may not have a huge nest egg or great dividends coming in, I'll be able to live comfortably for next to nothing per month.

There's definitely a bunch of different ways to do it though.

I believe.

Brew your own beer. Great way to save money in Canada with the amazing sin tax on alcohol. Save yourself at least a few hundred a year or more, depending on how degenerate you are.

[Winsor_Pilates]

Originally Posted by I_H8_Crawford

Not sure if this has been posted already, but I'll leave this here:

http://www.millennial-revolution.com

My wife and i are of similar mindset to them, just we will be financially independent a bit older than they are

I have no problem with what they've done, but think they're exaggerating their financial independence and retirement.
They're clearly running an online business with that website, which is hardly retirement.

[Jason14h]

Originally Posted by Fuzz

Bare minimum, your math should be interest + inflation <= appreciation if you want to say you are ahead.

Inflation doesn't play into this example per se, as the mortgage rate should already take into effect macro inflation drivers. So as inflation increases do would the marginal interest rate, and so would the house price.

(Yes a total generalization)

If I buy a 600k house instead of a 300k house at 3% I am paying real dollars in interest per year that are unaffected by inflation in terms of real dollars. As long as the rate of real estate increases at 3% it is a net wash in terms of real net worth. Sure the value of the end point of net worth is less in purchase power, but that's the same whether I got a 300k house or a 600k house.

You are correct when evaluating whether to rent, buy a 300k , or buy a 600k house inflation matters for what is the best way to maximize/increase net worth.

But when people look at total interest over the years and say "you are going to pay 100$k in extra interest over the lifetime of this mortgage" it is irrelevant if at the end the home is worth $100k more, it is a real dollar wash. Sure you could use hat money for something else, and get any rate of return, which is the rent va buy small vs buy big argument. But you are not worst off having to pay more interest as long as real estate prices increase at your mortgage rate.

[Regorium]

Originally Posted by Winsor_Pilates

I have no problem with what they've done, but think they're exaggerating their financial independence and retirement.
They're clearly running an online business with that website, which is hardly retirement.

Pretty standard. Sells a great story but is complete BS underneath. Money mustache is another one of these.

[DoubleF]

Originally Posted by Regorium

Pretty standard. Sells a great story but is complete BS underneath. Money mustache is another one of these.

I wouldn't say it's BS. Definitely exaggerated as Winsor_Pilates mentioned though.

That couple essentially says they saved up 1 million and decided to travel the world. Their main keys were making sure they didn't have too much debt due to a house as well as schooling and being diligent in saving their money vs spending it. They aren't selling a "retire by 30s" story, they're saying, "Being eyeballs deep in debt and stressed sucks. Don't feel bad in contemplating this alternative." (Less debt and less stress). I don't agree with some of their examples and exaggerating, but their ideas of net worth preservation by not taking on debt seems reasonable to me.


MMM is much more BS though. He sells early retirement but pulls the wool over people's eyes by ignoring the fact he has a major money making website. He tries to claim all of his success is purely due to his frugality while working and frugality in general.

[Fuzz]

Originally Posted by DoubleF

I wouldn't say it's BS. Definitely exaggerated as Winsor_Pilates mentioned though.

That couple essentially says they saved up 1 million and decided to travel the world. Their main keys were making sure they didn't have too much debt due to a house as well as schooling and being diligent in saving their money vs spending it. They aren't selling a "retire by 30s" story, they're saying, "Being eyeballs deep in debt and stressed sucks. Don't feel bad in contemplating this alternative." (Less debt and less stress). I don't agree with some of their examples and exaggerating, but their ideas of net worth preservation by not taking on debt seems reasonable to me.


MMM is much more BS though. He sells early retirement but pulls the wool over people's eyes by ignoring the fact he has a major money making website. He tries to claim all of his success is purely due to his frugality while working and frugality in general.

Oh, crap? Is that all I have to do? Save up a million? Well I've been doing this all wrong, I should have just saved the million that showed up on my door one day rather than paying for things like food and shelter.

[Kybosh]

Most of those retire young stories are either entirely BS or sorta BS. It usually relies upon somehow starting out with a very high salary, which is far beyond the average Canadian. It's great that you're frugal and cut expenses but doing that with a $200k/year salary is completely different from the average experience where no matter what you do, saving $1M is basically impossible for young retirement.

[DoubleF]

Originally Posted by Fuzz

Oh, crap? Is that all I have to do? Save up a million? Well I've been doing this all wrong, I should have just saved the million that showed up on my door one day rather than paying for things like food and shelter.

http://www.millennial-revolution.com...ndy-back-then/

If you read this section of the website, they essentially explain how they did it. They saved 1 million over 9 years. Part of it was shaving away waste, but if you really dig into what they're writing, they don't lie about the fact they make Started at about $60k after tax income to about $150k in after tax income. They go from 53% wage savings to 81% wage savings.

Hopefully, I’ve managed to convey the fact that we are not that special, we didn’t do anything magical to get here, and we didn’t sit in our basement clipping coupons and eating cans of beans like hobos. All we did was:

Not buy an overpriced house
Walked or took public transit rather than buy a car
Kept track of where our money went
Found an honest, independent financial advisor who helped us invest
Got that? Becoming a millionaire is not about hitting a home run picking stocks. It’s about not shooting yourself in the foot. If you’re reading this thinking “Hey, that doesn’t sound so hard! Can I do it too?”

The answer is: Yup.

IMO, those are reasonable points to follow and are points many others have been repeating in the thread. But as mentioned, it is exaggerated. Most of us won't be hitting 1 million combined net worth 8 years out of school. But the fundamentals of how they did it do seem sound. Savings/investments tallying up to over $100k a year average is pretty obscene though.

My wife and I chatted about having a combined net worth of $400k our 10 year relationship goal (paid off home plus savings) and 1 million net worth by our late 40s. We don't make the type of money these guys make (probably half of that) but things are looking good towards us meeting our goal. Watching the spending and not taking on excessive debt is a huge part of achieving this.

[Fuzz]

So their combined income after 1 year is $125 000 after tax? So I'd guess, what $200k before? $100k each one year out of school? I guess that's the CP bare minimum, right? It's a lot easier when you make big bucks and the economy doesn't tank around you.

Hey, read our blog! You can do this too, if you have no student loan debt, and really good jobs out of University!

These guys are the outliers, starting with a big leg up.

[OMG!WTF!]

Originally Posted by Kybosh

Most of those retire young stories are either entirely BS or sorta BS. It usually relies upon somehow starting out with a very high salary, which is far beyond the average Canadian. It's great that you're frugal and cut expenses but doing that with a $200k/year salary is completely different from the average experience where no matter what you do, saving $1M is basically impossible for young retirement.

A good real estate boom like Calgary in the mid 2000's helps. A million really doesn't amount to much now anyway. Just gives you enough to lose.

[blankall]

Originally Posted by Fuzz

So their combined income after 1 year is $125 000 after tax? So I'd guess, what $200k before? $100k each one year out of school? I guess that's the CP bare minimum, right? It's a lot easier when you make big bucks and the economy doesn't tank around you.

Hey, read our blog! You can do this too, if you have no student loan debt, and really good jobs out of University!

These guys are the outliers, starting with a big leg up.

It's possible to make that 1-2 years out of school, but usually requires a high end graduate or professional degree. Which means 7+ years of school. For many people that would mean at least a six figure debt too, as professional schools typically aren't cheap.

It sounds like this couple was probably supported by their parents heavily. Probably to the tune of $200k each over the course of their education. Pretty great article on successful young entrepreneurs and how most are heavily supported by safety nets. Basically, it's a lot easier overall to be successful if you can invest money and time into your business and don't have to worry about supporting yourself:

https://qz.com/455109/entrepreneurs-...es-with-money/

[Regorium]

Originally Posted by DoubleF

IMO, those are reasonable points to follow and are points many others have been repeating in the thread. But as mentioned, it is exaggerated. Most of us won't be hitting 1 million combined net worth 8 years out of school. But the fundamentals of how they did it do seem sound. Savings/investments tallying up to over $100k a year average is pretty obscene though.

My wife and I chatted about having a combined net worth of $400k our 10 year relationship goal (paid off home plus savings) and 1 million net worth by our late 40s. We don't make the type of money these guys make (probably half of that) but things are looking good towards us meeting our goal. Watching the spending and not taking on excessive debt is a huge part of achieving this.

The only part that matters about their stories are the fact that they are making $167k after tax (in 2010 even).

With that much money, they could've bought 3 houses back in 2010. Their decision not to buy an "overpriced house" and rent instead cost them at least half a million dollars if not more than that (especially if they bought in "overpriced 2010 vancouver" or "overpriced 2010 toronto").

Saving is great, but everything is predicated on income. As I wrote in the OP, nobody ever got rich by saving. This couple get rich by earning more money - and that's what both Money moustache (MMM had 250k USD income back in 2002 or something like that) and this millennial revolution couple did. IMO THAT is the key to financial independence, not the "rent vs. buy" decision (only the latter is highlighted on their site though).

[blankall]

Originally Posted by Regorium

The only part that matters about their stories are the fact that they are making $167k after tax (in 2010 even).

With that much money, they could've bought 3 houses back in 2010. Their decision not to buy an "overpriced house" and rent instead cost them at least half a million dollars if not more than that (especially if they bought in "overpriced 2010 vancouver" or "overpriced 2010 toronto").

Saving is great, but everything is predicated on income. As I wrote in the OP, nobody ever got rich by saving. This couple get rich by earning more money - and that's what both Money moustache (MMM had 250k USD income back in 2002 or something like that) and this millennial revolution couple did. IMO THAT is the key to financial independence, not the "rent vs. buy" decision (only the latter is highlighted on their site though).

Lol...that's a great point. If they'd bought a house in Toronto in 2010, they could have easily paid the mortgage with their salaries. The house would cost around 500-600k and be worth around 1.5 million now.....

So basically these people are just giving bad advice.

[blankall]

Another reason to buy:

The ever increasing cost of rent. Over time, your mortgage principle will decrease. Rents will always increase. You need to factor the rent you'll be paying in 30 years into your decision to buy/rent.

[Fuzz]

Originally Posted by blankall

Another reason to buy:

The ever increasing cost of rent. Over time, your mortgage principle will decrease. Rents will always increase. You need to factor the rent you'll be paying in 30 years into your decision to buy/rent.

Crazy how their rent went from $800 to $850 once after 7 years. What is this mythical world they live in?

[nik-]

They also made massive investments at the best possible time, during the crash, which subsequently blew up

They saved well, obviously, but were also incredibly fortunate.

[DoubleF]

Originally Posted by Fuzz

So their combined income after 1 year is $125 000 after tax? So I'd guess, what $200k before? $100k each one year out of school? I guess that's the CP bare minimum, right? It's a lot easier when you make big bucks and the economy doesn't tank around you.

Hey, read our blog! You can do this too, if you have no student loan debt, and really good jobs out of University!

These guys are the outliers, starting with a big leg up.

Well, duh. They retired at 31 with a million net worth. But I never got the idea from their website that they were advertising everyone could retire at 31 with a million in investments. It was a personal anecdote discussing financial awareness with a heavy handed mention of "don't buy a home".

I don't get why I'm putting myself in the front lines for this couple. I don't know them, don't fully agree with their advice and I think it's sensationalized.

Originally Posted by Regorium

The only part that matters about their stories are the fact that they are making $167k after tax (in 2010 even).

With that much money, they could've bought 3 houses back in 2010. Their decision not to buy an "overpriced house" and rent instead cost them at least half a million dollars if not more than that (especially if they bought in "overpriced 2010 vancouver" or "overpriced 2010 toronto").

Saving is great, but everything is predicated on income. As I wrote in the OP, nobody ever got rich by saving. This couple get rich by earning more money - and that's what both Money moustache (MMM had 250k USD income back in 2002 or something like that) and this millennial revolution couple did. IMO THAT is the key to financial independence, not the "rent vs. buy" decision (only the latter is highlighted on their site though).

Fair.

I will agree that what they're trying to say is really messing and confusing at times. It goes all over the place. No debt and ridiculous wages do help a lot.

But I also will say, it's hard to feel comfortable financially if you're using money as fast as you can earn it. Lastly, what is being rich? IMO, the goal posts are always moving. Set your own posts and when you achieve it celebrate. Don't constantly reset the goal posts based on what people think. It's your life, not theirs.

[Locke]

Originally Posted by nik-

They also made massive investments at the best possible time, during the crash, which subsequently blew up

They saved well, obviously, but were also incredibly fortunate.

Its funny how people tend to gloss over this.

I've got a number of clients that are struggling to adapt their businesses right now.

People who fancied themselves as top-notch business people all of a sudden coming to the realization that what they built for themselves has more to do with the enormous energy boom and less to do with their skills. Especially in construction.

"Why dont people just hand me money anymore?"

[Muta]

Originally Posted by Locke

"Why dont people just hand me money anymore?"

Bingo.