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Hello,

Here is my entire backstory since I feel it is at least partially necessary to understand the situation:

29 years 5 months, currently working at Allstate making 39k a year in CA. UCLA degree in stats. Didn't finish until I was 26, long story. Current financial situation is:

Renting for $600 a month
12k student loans to one company, 17k to another. Total 29k, anywhere from 2.1% to 5.8%. $130 min payment for first, $210 for second
8.5k lien to Toyota for my 11 Yaris with 55k miles, should last a good while. 1.9% interest. $190 min payment
3.3k balance on a 4.8k limit with something absurd like 15% interest. $72 minimum payment
Car insurance + phone = $180 a month
Gas = roughly $75 a month
Food = varies

Other than that, I don't have many expenses. I go out with my girlfriend of 11 months, sometimes we eat out, or go into San Francisco (I'm currently in Pleasanton), go shopping, buy jigsaw puzzles, etc

Doing the math on the salary, after taxes and health insurance I pocket around $1200 every 2 weeks = $31.2k net a year

My plan, up through last week, was to pay off that 40k debt ASAP and then save for a house, with the aim of only ever purchasing one house in an area I really wanted. At that point I would be married, still single, whatever

At work we had a financial planner come, and he looked over everything and told me I was wrong.

Being good at math and logical thinking, he explained it to me this way:

Instead of paying off your 40k debt asap, you can make minimum payments and open up a savings account with the sole purpose of putting away money each paycheck for real estate. This money is not a 'savings account', it's just named that. This is not my money. I can't go take out 6k in a year when my car dies and I need it. This is another debt, and we can think of it as 'Jeff's future home purchase'.

This is where a part local to me comes in: Livermore, CA supposedly has a buyer program where you only need 3% down. 300k average condo prices, that's 9k. 200 a paycheck for 2 years is about 10k. I would then purchase a condo, mortgage the rest, and continue to do that while paying my minimum debt payments for a few years while the value hopefully goes up. Being that Livermore is a good, growing town in the Bay Area, the odds of this are strong. I would then sell, take the extra money and use it as a down payment on a bigger property, and continue this until I eventually have an actual 2k square foot, 3-4 bedroom house.

He said 'this is how you get wealthy and provide for your family. You can't not take any risks or else you won't own anything until you're 40'

My questions are this:

Supposedly, you can't get a mortgage for more than 34-40% of your total income after debts. The mortgage on that property would be something like $1800, which means I would need a salary of $60k. I can see a few raises within a few years which would put me between $45 and $50, but not $60.

Also, if this program is cancelled or changes, I can't afford it and interest on my other debts are accruing

I always thought you wanted 20% down to avoid PMI, but he says you don't. You need to get in a property you own immediately and start building equity.

My credit is fairly good, I don't know the actual # but I'm pretty sure I will be at least 730, which I understand is the cutoff for the best loans.

If I were to open a savings account for this reason, where should I go and why?

Is this guy right? I just don't see how I'm supposed to be able to afford an $1800 + mortgage, $500 + in other debts, and other expenses when my current monthly take home is ~ $2,500. And even if I got to a point where that was say $3,000, and my debts + mortage would be $2,300, I COULD live off $700, easily. But a bank wouldn't give me a loan because my debt to income isn't high enough

He's worked at this company for 20 years, he's well-trusted, Allstate is a big company and wouldn't have somebody giving this kind of advice if it weren't true or beneficial

I just don't see how it can work

Thanks
 

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Dear Fatwallet,

You people are terrible.  I came here expecting you to agree with me as my financial adviser is smarter t... (more)

superdrew (May. 20, 2014 @ 7:25a) |

This thread makes me laugh at the same time I am crying.

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OP, I'm not sure why, but I didn't see this mentioned, so…. here goes, you mentioned a girlfriend, pics?

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jesrf (May. 22, 2014 @ 12:24a) |

OP wants to buy a home and can't afford it.
OP got bad advice from a financial advisor.
OP is bad at summarizing key points.
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Your post seems like a setup to debunk the financial planning industry.

SyZpuzzler said:   Hello,

Here is my entire backstory since I feel it is at least partially necessary to understand the situation:

29 years 5 months, currently working at Allstate making 39k a year in CA. UCLA degree in stats. Didn't finish until I was 26, long story. Current financial situation is:

Renting for $600 a month
12k student loans to one company, 17k to another. Total 29k, anywhere from 2.1% to 5.8%. $130 min payment for first, $210 for second
8.5k lien to Toyota for my 11 Yaris with 55k miles, should last a good while. 1.9% interest. $190 min payment
3.3k balance on a 4.8k limit with something absurd like 15% interest. $72 minimum payment
Car insurance + phone = $180 a month
Gas = roughly $75 a month
Food = varies

Other than that, I don't have many expenses. I go out with my girlfriend of 11 months, sometimes we eat out, or go into San Francisco (I'm currently in Pleasanton), go shopping, buy jigsaw puzzles, etc

Doing the math on the salary, after taxes and health insurance I pocket around $1200 every 2 weeks = $31.2k net a year

My plan, up through last week, was to pay off that 40k debt ASAP and then save for a house, with the aim of only ever purchasing one house in an area I really wanted. At that point I would be married, still single, whatever

At work we had a financial planner come, and he looked over everything and told me I was wrong.

Being good at math and logical thinking, he explained it to me this way:

Instead of paying off your 40k debt asap, you can make minimum payments and open up a savings account with the sole purpose of putting away money each paycheck for real estate. This money is not a 'savings account', it's just named that. This is not my money. I can't go take out 6k in a year when my car dies and I need it. This is another debt, and we can think of it as 'Jeff's future home purchase'.

This is where a part local to me comes in: Livermore, CA supposedly has a buyer program where you only need 3% down. 300k average condo prices, that's 9k. 200 a paycheck for 2 years is about 10k. I would then purchase a condo, mortgage the rest, and continue to do that while paying my minimum debt payments for a few years while the value hopefully goes up. Being that Livermore is a good, growing town in the Bay Area, the odds of this are strong. I would then sell, take the extra money and use it as a down payment on a bigger property, and continue this until I eventually have an actual 2k square foot, 3-4 bedroom house.

He said 'this is how you get wealthy and provide for your family. You can't not take any risks or else you won't own anything until you're 40'

My questions are this:

Supposedly, you can't get a mortgage for more than 34-40% of your total income after debts. The mortgage on that property would be something like $1800, which means I would need a salary of $60k. I can see a few raises within a few years which would put me between $45 and $50, but not $60.

Also, if this program is cancelled or changes, I can't afford it and interest on my other debts are accruing

I always thought you wanted 20% down to avoid PMI, but he says you don't. You need to get in a property you own immediately and start building equity.

My credit is fairly good, I don't know the actual # but I'm pretty sure I will be at least 730, which I understand is the cutoff for the best loans.

If I were to open a savings account for this reason, where should I go and why?

Is this guy right? I just don't see how I'm supposed to be able to afford an $1800 + mortgage, $500 + in other debts, and other expenses when my current monthly take home is ~ $2,500. And even if I got to a point where that was say $3,000, and my debts + mortage would be $2,300, I COULD live off $700, easily. But a bank wouldn't give me a loan because my debt to income isn't high enough

He's worked at this company for 20 years, he's well-trusted, Allstate is a big company and wouldn't have somebody giving this kind of advice if it weren't true or beneficial

I just don't see how it can work

Thanks

  if you aren't comfortable with it, don't let some random stranger talk u into something.  It sounds great what he's saying, but if it really worked like that everyone would be rich off of it.

Is this financial advisor also a real estate agent?
You have a $600 monthl rent. Keep renting, payoff the CC debt (15% APR) aggresively. Then save for a emergency fund (6-12 months of expenses). Then think of savings for a home down payment.

fwuser12 said:   Is this financial advisor also a real estate agent?
You have a $600 monthl rent. Keep renting, payoff the CC debt (15% APR) aggresively. Then save for a emergency fund (6-12 months of expenses). Then think of savings for a home down payment.

  
That was my plan, and he said doing that I won't be in a home for at least 6 + years compared to 2-3 if I do what he's saying

Your plan is to speculate on condos that you can't afford using lending guidelines. You don't actually want to live in these places. but you intend to use leverage and flip them. Some greater fool(who also probably doesn't actually want to live in that condo) is going to come along and pay an ever higher price  until you profit enough to buy a house that you actually want to live in, thus achieving instant gratification?

It's brilliant... I don't foresee any problems.

Truth of the matter is, you can't but I know a subprime mortgage place that can loan you 400k.

SyZpuzzler said:   
fwuser12 said:   Is this financial advisor also a real estate agent?
You have a $600 monthl rent. Keep renting, payoff the CC debt (15% APR) aggresively. Then save for a emergency fund (6-12 months of expenses). Then think of savings for a home down payment.

  
That was my plan, and he said doing that I won't be in a home for at least 6 + years compared to 2-3 if I do what he's saying

  What exactly is the hurry to be in your home (assuming you can afford it). $600 in rent is a steal in the Bay area; keep renting. And there is no guarantee your condo will appreciate in value. Even if it does, RE transaction costs will eat up a lot of the appreciation in the short term.
 

I'm not sure you would be able to afford a home in that market without being extremely aggressive about increasing your income or adding another wage earner.

I'd move to a lower cost area if your priority is owning.

But if my rent was $600 in an area with a min 300k purchase I'd keep renting.

You is po'

SyZpuzzler said:   <snip> Being good at math and logical thinking, he explained it to me this way:

Instead of paying off your 40k debt asap, you can make minimum payments <snip>

  
So in the plan that your financial adviser has come with, when exactly are you supposed to pay off your already existing debt?
Making only minimum payments while you are saving up every cent for that down payment/mortgage payment will make your existing debt grow to one big, scary number.

You have a college degree in a STEM field. In my opinion, you should be investing not in real estate or stock market at this point but in yourself. Find a different job that takes advantage of your math background that pays more. If necessary, relocate to get it. If you cannot do that, further your education. Will your company pay for you to get a Master's in Accounting? Can you commit to studying for the actuarial exams? Do you have any affinity for computer science?
39k is a very low wage in CA, even more so in the Bay Area. I know you realize that. But unless you can fix that, you won't be able to achieve such financial goals as home ownership.

 

LaCrosse said:   
SyZpuzzler said:   <snip> Being good at math and logical thinking, he explained it to me this way:

Instead of paying off your 40k debt asap, you can make minimum payments <snip>

  
So in the plan that your financial adviser has come with, when exactly are you supposed to pay off your already existing debt?
Making only minimum payments while you are saving up every cent for that down payment/mortgage payment will make your existing debt grow to one big, scary number.

You have a college degree in a STEM field. In my opinion, you should be investing not in real estate or stock market at this point but in yourself. Find a different job that takes advantage of your math background that pays more. If necessary, relocate to get it. If you cannot do that, further your education. Will your company pay for you to get a Master's in Accounting? Can you commit to studying for the actuarial exams? Do you have any affinity for computer science?
39k is a very low wage in CA, even more so in the Bay Area. I know you realize that. But unless you can fix that, you won't be able to achieve such financial goals as home ownership.

 

His plan is to essentially take any additional money I would have used over the minimums each month, and instead put it into a real estate account. I would just continue to pay the minimums until the debts are gone. While this is going on, I should be monitoring how much the actual debt is going down each month to see what the % is. (Ie If I pay $200 on a student loan and it goes down $100, I would then figure out how long until it's 100% gone. Funny how I had a 3.8 in stats at a good college, and can't remember basic algebra to do this myself. I also can't find a calculator online that basically says 'how much is your loan for and what's the interest rate? We'll tell you what the total amount to pay is if you pay the minimum each month')

With this, I would then figure out the total cost of interest I lose if I pay the minimums, versus if I pay it down immediately (ie, maybe I pay 31k on those 29k loans if I pay down immediately, versus 40k if I don't. His thinking is then that the 9k difference is in my real estate, which is beneficial because 1) I'm not tossing out $600 a month, even if it's a good deal, and 2) this again facilitates the whole 'compounding' concept of "the sooner you start owning, the sooner you'll start seeing returns'

And I have no issues moving into a condo that's mine, I don't know where I gave the impression I didn't want that ... ? I live 5 miles from Livermore, it's basically the same as Pleasanton, and my job is in Livermore

I'm currently a Claims Adjuster for auto. I have a stats degree, and my manager knows I might potentially be interested in actuarial work. But moving from 8-430 relatively low stress to 8-7 nothing but crunching #s in a back office somewhere doesn't seem that appealing to me. I also haven't passed any actuarial exams. There are places to go in this company and I'm nowhere near my salary cap, but at this point I don't know if I can just randomly look around for a stats job. I'll be 30 in October, I only have a B.S., and I have zero job experience using the degree. Allstate would potentially pay for graduate schooling to advance into something, but in terms of moving around in the claims department to other positions the opportunities are pretty good. I've been here 4.5 months and there have been 7 direct openings in my office of only 82 people



 

I'm usually all for home ownership but.... I'm in Southern California and how are you going to qualify for a $400k condo with a $39/yr salary? And by paying the minimum amounts on your debt, you do realize that it'll take 30 years, or some other hideously long period of time, to pay everything off?

Your debt load is high and your salary is low. Those are not the ingredients for a high credit score. I would definitely get your free credit score from all 3 agencies and see what your scores really are so you truly know where you stand. I think.... you need to have more savings and fewer debts before owning would be realistic. Without PMI, the monthly mortgage payment on a 30 year loan on $400,000 is about $2,030/month. Then you need to add in PMI, taxes, insurance, maintenance fund, utilities, HOA, etc. Do you really think you can realistically go from paying $600/month to ... maybe $2,800/month? Heck, even with twice your income, that would be a lot to manage. You'd be more than house poor. Food might become optional.

Edit: Wait a sec, food would be out completely. You said you clear about $1,200 every 2 weeks. That's not going to be enough to cover your basic housing costs, never mind have ANY money left over to pay off any debts. Or anything else.

Here's an online debt calculator that calculates how long it will take to pay off your debts: http://www.bankrate.com/calculators/credit-cards/debt-calculator.aspx 
Here's a link to all sorts of debt calculators: http://www.bankrate.com/calculators.aspx

Realistically, if you want a $400k house you just need to find a way to make more money and increase your income.     Both your orig plan (assuming you really want a 400k house) and the financially planner's leverage-yourself-to-the-hilt plan aren't that great.

Seriously.

I like your original plan far better than his.

Wow, $600/mo for rent...can you let me in on this secret? Pleasanton is a great city, I'd recommend sticking with this ultra-low rent, unless there are some major issues.

When I first started working, I stretched and bought a condo I could barely afford (10% down, PMI, etc.).
I was able to sell the condo for about what I bought it for. Considering all the interest, transaction costs, etc. I regret my decision. In hindsight, I would have preferred to wait until I had 20% down and a mortgage that was less than 30% of my gross income.

Just two comments:

After the age of 16 its best to inform people of your age in whole years.
As stated, Who is going to qualify you for $300k+ mortgage. Esp with your debt.

SyZpuzzler said:   
fwuser12 said:   Is this financial advisor also a real estate agent?
You have a $600 monthl rent. Keep renting, payoff the CC debt (15% APR) aggresively. Then save for a emergency fund (6-12 months of expenses). Then think of savings for a home down payment.

  
That was my plan, and he said doing that I won't be in a home for at least 6 + years compared to 2-3 if I do what he's saying

  you're a statistician and you haven't put together a simple spreadsheet yet to figure out that this statement is bogus?
your current take home is ~2400/mo. Your listed expenses, not including food, are 1450. I'll propose $800 in food a month. 
If you do what this guy suggests you will have added $14,400 in savings in two years which does not include accrued interest on three loans. 
Youre paying somewhere in the neighborhood of $1800 in interest a year which brings your "savings" down to $12,600 in two years. 
How does that out you in a house? You will still have $30k in debt. 
pay off your debts starting with the 15%. 
 

You have a degree in statistics and make 36k? The solution: find a new job. Stats majors, on average, make more than that out of the gate. I would have assumed a much higher salary in CA.

Your plan is much better than than that of your "planner." His plan setss you up for "the American dream" of being in debt forever and house poor.

SyZpuzzler said:   making 39k a year
300k average condo prices

No way.

SyZpuzzler said:   
With this, I would then figure out the total cost of interest I lose if I pay the minimums, versus if I pay it down immediately (ie, maybe I pay 31k on those 29k loans if I pay down immediately, versus 40k if I don't. His thinking is then that the 9k difference is in my real estate, which is beneficial because 1) I'm not tossing out $600 a month, even if it's a good deal, and 2) this again facilitates the whole 'compounding' concept of "the sooner you start owning, the sooner you'll start seeing returns'

 

  You're going to be wasting hundreds per month on property taxes and HOA fees. Rent is not waste.

SyZpuzzler said:   His plan is to essentially take any additional money I would have used over the minimums each month, and instead put it into a real estate account. I would just continue to pay the minimums until the debts are gone. While this is going on, I should be monitoring how much the actual debt is going down each month to see what the % is. (Ie If I pay $200 on a student loan and it goes down $100, I would then figure out how long until it's 100% gone. Funny how I had a 3.8 in stats at a good college, and can't remember basic algebra to do this myself. I also can't find a calculator online that basically says 'how much is your loan for and what's the interest rate? We'll tell you what the total amount to pay is if you pay the minimum each month')
 

  The math is simple. 15% on a CC debt vs. "investing in real estate". I will take the guaranteed 15% return by paying off the CC any day.

Dont get caught up in the house prices always goes up or that renting is throwing away money. Both are false.
Dont get me wrong. There are good reasons to own your place but you are not there yet. 

SyZpuzzler said:   I just don't see how it can work.
 And you're right, because you are not a gambler.

Your financial "advisor" is a gambler.  He is sure that the current Bay Area housing boom is going to make you wealthy. But if you look at the Shiller home price index for the Bay Area, the longer you own your home, the closer to a less than 6% return on equity you're going to get. According to Shiller index, if you bought a Bay Area house in 1996 and rode the boom to its current height, you made about 6% per year.

Now, if you get a 4% 30 year loan (not likely with your finances), a 1% PMI, and add in thousands in maintenance fees, property taxes, home maintenance costs; unpaid student loans, credit card, and auto loan, debt, you're going to be a loser for a long time.

SyZpuzzler said:   
LaCrosse said:   
SyZpuzzler said:   <snip> Being good at math and logical thinking, he explained it to me this way:

Instead of paying off your 40k debt asap, you can make minimum payments <snip>

  
So in the plan that your financial adviser has come with, when exactly are you supposed to pay off your already existing debt?
Making only minimum payments while you are saving up every cent for that down payment/mortgage payment will make your existing debt grow to one big, scary number.

You have a college degree in a STEM field. In my opinion, you should be investing not in real estate or stock market at this point but in yourself. Find a different job that takes advantage of your math background that pays more. If necessary, relocate to get it. If you cannot do that, further your education. Will your company pay for you to get a Master's in Accounting? Can you commit to studying for the actuarial exams? Do you have any affinity for computer science?
39k is a very low wage in CA, even more so in the Bay Area. I know you realize that. But unless you can fix that, you won't be able to achieve such financial goals as home ownership.

 

His plan is to essentially take any additional money I would have used over the minimums each month, and instead put it into a real estate account. I would just continue to pay the minimums until the debts are gone. While this is going on, I should be monitoring how much the actual debt is going down each month to see what the % is. (Ie If I pay $200 on a student loan and it goes down $100, I would then figure out how long until it's 100% gone. Funny how I had a 3.8 in stats at a good college, and can't remember basic algebra to do this myself. I also can't find a calculator online that basically says 'how much is your loan for and what's the interest rate? We'll tell you what the total amount to pay is if you pay the minimum each month')
...

 

  
Yeah, that is funny 3.8 in stats, and can't use google?  Try this:  http://www.timevalue.com/products/tcalc-financial-calculators/cr...   

You have enough education, and presumably, intelligence to figure this out on your own.  Props for at least asking here.  Run the math, figure it out, stop listening to financial advisers that tell you ignorant blanket statements.  

Here's what I'd do, in this order:  (although you've said nothing of assets or retirement)

Keep renting, even if you move to a different rental at some point.  Renting != throwing away money.
Pay down the credit card balance.  
Pay minimums on everything else.  Consider paying down the highest rate student loans at some point.  But might not be worth it.
Build emergency fund.
Save for house, or keep renting, and save for retirement.  

SyZpuzzler said:   
29 years 5 months, currently working at Allstate making 39k a year in CA. UCLA degree in stats. Didn't finish until I was 26, long story. At work we had a financial planner come, and he looked over everything and told me I was wrong.

Being good at math and logical thinking, he explained it to me this way:
 

  If you're buying a condo, is the $1800 include condo fee? I don't know the real estate market in CA that well, but for some parts of country, condo fee typically goes about $600/month as what you're paying right now for rent.
Unless you can make that "financial advisor" to take on the mortgage for you, or marry a "richer than you" wife who makes $80k+, or else the math is going no where.  Plus in three years, assuming the housing market keeps rising, are these condos going to be at $300K still?  What if it's $400K by that time, then you'll need $12K instead of $9....I live in a low cost living area in Virginia, and the same position that you have pay around $36K/year here, so I think they're paying you too low, hopefully they'll give you a decent raise once you get a little bit more experience.

Scrap all of the above plan.

Get your masters in statistics without going into too much further debt. That is where you need to come up with ideas.

Once you have your masters, find an employer willing to pay you $90k+, which is the minimum I would expect to earn with a masters in statistics in California

SyZpuzzler said:   
His thinking is then that the 9k difference is in my real estate, which is beneficial because 1) I'm not tossing out $600 a month, even if it's a good deal, and 2) this again facilitates the whole 'compounding' concept of "the sooner you start owning, the sooner you'll start seeing returns'

...

I'm currently a Claims Adjuster for auto. I have a stats degree, and my manager knows I might potentially be interested in actuarial work. But moving from 8-430 relatively low stress to 8-7 nothing but crunching #s in a back office somewhere doesn't seem that appealing to me. I also haven't passed any actuarial exams. There are places to go in this company and I'm nowhere near my salary cap, but at this point I don't know if I can just randomly look around for a stats job. I'll be 30 in October, I only have a B.S., and I have zero job experience using the degree. Allstate would potentially pay for graduate schooling to advance into something, but in terms of moving around in the claims department to other positions the opportunities are pretty good. I've been here 4.5 months and there have been 7 direct openings in my office of only 82 people



 

  
First, it kind of makes me mad on your behalf that you're being fed the line, "the sooner you start owning, the sooner you'll start seeing returns".  It sounds fine on the surface, but think about it... Real estate goes up and down, we've seen that dramatically in the last few years.  I bought my home (first home, condo) in 2008... today (6 years later), it's STILL worth less than what I paid for it.  At one point, condos in my complex were selling for less than HALF of what I paid.  When I bought, prices were already on their way down... had I bought earlier, I actually would have lost more.

Additionally, as others have said, you have tons of other costs in a home (or condo) that you don't have in your apartment.  You have to pay property taxes, insurance, and fix anything that breaks.  How handy are you?  Do you have tools already?  Some things you can't fix yourself (my refrigerator died the first year I was here), some things you may not want to or be able to.  You may have additional services you need to pay for as well - I have alarm monitoring, pest control, and an HOA fee - all new costs that I didn't pay in my apartment.  With a house/condo, you end up with alot more that you have to spend on, and need to make sure you have emergency savings for things like break and you may not be able to live without (i.e. I'm in the south, so A/C is important - I'd want it fixed ASAP if it went out.)

Also, with a house, you lose some degree of freedom.  If my neighbors suck, or someone decides to build an all night honky tonk bar across the street, or the majority of houses on my street go into foreclosure and become crack hangouts... it's harder to just pickup and move (you'll want to find someone to buy the house... and that might be harder).  In an apartment, you can just leave.  That's especially helpful if you might want to take a better paying job in another state at some point.

At any rate, my advice is as others have said - stay in your cheap apartment, pay down your debts, make sure you've got something tucked away for emergencies, and focus on what you want out of your career.  Do you enjoy statistics/math (it didn't sound like it when you commented about being stuck in the back all day doing math)?  Do you enjoy computer work or have you taken any programming classes?  What DO you enjoy doing, and what do you want to do for your day-to-day work?  What do you like about your current job - is it just that it's low stress and you don't have to put in extra hours (that's a valid answer, and I feel the same way).  Are you SURE that the actuary folks in your office are stuck in the back for 11 hours doing nothing but number-crunching?  If you haven't already, could you maybe chat a few of them up to find out what their job entails, what THEY like about it, and what the hours are like?  There can also be big differences between companies (even between teams/departments at different companies)... I've been at quite a few jobs where the company considers itself "family friendly" and it's NOT the norm to work crazy long hours.  Everyone starts/leaves at a sane hour...

Best of luck to you!

 

Save what you can after paying off the high interest debt but really you need to focus your efforts on increasing your income more than anything else especially since you are in high cost of living area with income on the lower side.

how can you only make 39K with a college degree in California? Even clerks make more than that. I'm calling shenanigans.

"But moving from 8-430 relatively low stress to 8-7 nothing but crunching #s in a back office somewhere doesn't seem that appealing to me."

This is why OP makes $39k. I am embarrassed by the millenal generation.

Sounds like a bad idea.

Rent until you can actually afford to buy.  For example:

We are the same age.  I also live in a high cost of living area.  My wife and I make 4x your income and have no CC debt, no car payments, and much less student loan debt.  We rented until we were able to afford a home.  We bought a $230k home rather than the $400k we were "qualified" to buy. 

I would enjoy that $600/mo rent (mine was $1300 and we thought we got a deal).  Pay down the CC first, then the 5.9% student loan.  When those are gone start saving up a down payment.  Buy a cheaper house.  PS--owning a home is not all it's cracked out to be.

DPG said:   "But moving from 8-430 relatively low stress to 8-7 nothing but crunching #s in a back office somewhere doesn't seem that appealing to me."

This is why OP makes $39k. I am embarrassed by the millenal generation.

It's called work/life balance. OP just needs to adjust his expectations downward in terms of which properties he can afford to buy.

jayK said:   
DPG said:   "But moving from 8-430 relatively low stress to 8-7 nothing but crunching #s in a back office somewhere doesn't seem that appealing to me."

This is why OP makes $39k. I am embarrassed by the millenal generation.

It's called work/life balance. OP just needs to adjust his expectations downward in terms of which properties he can afford to buy.

  
That balance needs be shifted more towards work when you are new to the workforce. It will pay off in the long run.

DPG said:   
jayK said:   
DPG said:   "But moving from 8-430 relatively low stress to 8-7 nothing but crunching #s in a back office somewhere doesn't seem that appealing to me."

This is why OP makes $39k. I am embarrassed by the millenal generation.

It's called work/life balance. OP just needs to adjust his expectations downward in terms of which properties he can afford to buy.

  
That balance needs be shifted more towards work when you are new to the workforce. It will pay off in the long run.

That's a good strategy if you are planning on ramping up your consumption, but if you make a habit of living below your means then it is unnecessary. Live to work vs. work to live.

How are you only making $39k/yr with a Stats degree from UCLA in CALIFORINA?! That is one of the most in-demand skill sets available. Here's what you need to do in order to escape poverty:

1) Learn Python
2) Learn R
3) Learn SQL

Once you have done the following, change your Linkedin job title to 'Data Scientist' and start applying. You will double or triple your salary.

jayK said:   
DPG said:   
jayK said:   
DPG said:   "But moving from 8-430 relatively low stress to 8-7 nothing but crunching #s in a back office somewhere doesn't seem that appealing to me."

This is why OP makes $39k. I am embarrassed by the millenal generation.

It's called work/life balance. OP just needs to adjust his expectations downward in terms of which properties he can afford to buy.

  
That balance needs be shifted more towards work when you are new to the workforce. It will pay off in the long run.

That's a good strategy if you are planning on ramping up your consumption, but if you make a habit of living below your means then it is unnecessary. Live to work vs. work to live.

OP wants to spend well beyond his current means. He only has two options, earn more or spend less.

$39K in the Bay area is going to give OP all kinds of budget issues in the long run.

Ever plan on having kids?

stanolshefski said:   OP wants to spend well beyond his current means. He only has two options, earn more or spend less.

That's exactly what I've been saying...the "spend less" path will take some changes in OP's thinking (which is why I said "OP just needs to adjust his expectations downward in terms of which properties he can afford to buy", in fact you quoted it) but it is no less valid than the "earn more" path.

SyZpuzzler said:   Hello,

Here is my entire backstory since I feel it is at least partially necessary to understand the situation:

29 years 5 months, currently working at Allstate making 39k a year in CA. UCLA degree in stats. Didn't finish until I was 26, long story. Current financial situation is:

Renting for $600 a month
12k student loans to one company, 17k to another. Total 29k, anywhere from 2.1% to 5.8%. $130 min payment for first, $210 for second
8.5k lien to Toyota for my 11 Yaris with 55k miles, should last a good while. 1.9% interest. $190 min payment
3.3k balance on a 4.8k limit with something absurd like 15% interest. $72 minimum payment
Car insurance + phone = $180 a month
Gas = roughly $75 a month
Food = varies

Other than that, I don't have many expenses. I go out with my girlfriend of 11 months, sometimes we eat out, or go into San Francisco (I'm currently in Pleasanton), go shopping, buy jigsaw puzzles, etc

Doing the math on the salary, after taxes and health insurance I pocket around $1200 every 2 weeks = $31.2k net a year

My plan, up through last week, was to pay off that 40k debt ASAP and then save for a house, with the aim of only ever purchasing one house in an area I really wanted. At that point I would be married, still single, whatever

At work we had a financial planner come, and he looked over everything and told me I was wrong.

Being good at math and logical thinking, he explained it to me this way:

Instead of paying off your 40k debt asap, you can make minimum payments and open up a savings account with the sole purpose of putting away money each paycheck for real estate. This money is not a 'savings account', it's just named that. This is not my money. I can't go take out 6k in a year when my car dies and I need it. This is another debt, and we can think of it as 'Jeff's future home purchase'.

This is where a part local to me comes in: Livermore, CA supposedly has a buyer program where you only need 3% down. 300k average condo prices, that's 9k. 200 a paycheck for 2 years is about 10k. I would then purchase a condo, mortgage the rest, and continue to do that while paying my minimum debt payments for a few years while the value hopefully goes up. Being that Livermore is a good, growing town in the Bay Area, the odds of this are strong. I would then sell, take the extra money and use it as a down payment on a bigger property, and continue this until I eventually have an actual 2k square foot, 3-4 bedroom house.

He said 'this is how you get wealthy and provide for your family. You can't not take any risks or else you won't own anything until you're 40'

My questions are this:

Supposedly, you can't get a mortgage for more than 34-40% of your total income after debts. The mortgage on that property would be something like $1800, which means I would need a salary of $60k. I can see a few raises within a few years which would put me between $45 and $50, but not $60.

Also, if this program is cancelled or changes, I can't afford it and interest on my other debts are accruing

I always thought you wanted 20% down to avoid PMI, but he says you don't. You need to get in a property you own immediately and start building equity.

My credit is fairly good, I don't know the actual # but I'm pretty sure I will be at least 730, which I understand is the cutoff for the best loans.

If I were to open a savings account for this reason, where should I go and why?

Is this guy right? I just don't see how I'm supposed to be able to afford an $1800 + mortgage, $500 + in other debts, and other expenses when my current monthly take home is ~ $2,500. And even if I got to a point where that was say $3,000, and my debts + mortage would be $2,300, I COULD live off $700, easily. But a bank wouldn't give me a loan because my debt to income isn't high enough

He's worked at this company for 20 years, he's well-trusted, Allstate is a big company and wouldn't have somebody giving this kind of advice if it weren't true or beneficial

I just don't see how it can work

Thanks

  This sounds like a crappy thing to say, but if you don't make 100k in the bay area, you are better off moving to a city like phoenix where 40k does go a long way.  You would probably make about the same there.

Skipping 58 Messages...
OP, I'm not sure why, but I didn't see this mentioned, so…. here goes, you mentioned a girlfriend, pics?

Seriously, 39k, in Southern Calif?? WTF. You can't buy jack squat with your expenses. You need to increase your earning power, or marry into money….



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