Financial advice for future hiking

[blackbird04217]

Well, to say my thru-hike was life changing would be quite an understatement. I've been aiming at paying off my pesky student loans so I can get out and live freely. However it will take at least 5 to 10 years to pay off my loans. (80k of 93k remaining).

Recently I've been seriously contemplating getting a loan for a condo; The last thing I want to do is put myself in more debt, but on the other hand it could prove useful as I have the possibility of seeing some of the money back; where as paying rent is just basically tossing my money aside. I am not living in an area I would want to be living in for my life; but I can't move where I want for lack of jobs in my profession.

So this may not be the most appropriate place, but I figure someone here has some insight that may prove useful.

[fiddlehead]

Good Luck.
What always worked for me was: No debt, no bills.
Make enough during the winter to hike again each summer.
Paid off my house doing just that too (had roommates and let them pay the mortgage)

Seems to me you would have to pay off those loans before you can go in debt for anything else.
Just my 2 cents. I never graduated from college but I learned a bit about compound interest.
Debt sucks.

[Slo-go'en]

Do you really live in Bethel, ME? If so, why would you want to live anywhere else? My advice is to buy a really cheap house somewhere in the area and start to fix it up. Then live there forever

[blackbird04217]

Heh, Bethel is my home town - and exactly where I want to live. However I am currently closer to Boston, MA and while I have a fair paying job to keep paying these loans; I really don't want to do this daily grind that it seems society expects. I don't have that luxury at this time as I owe lots of money.

Likely I will eventually build a nice small house back in Bethel, Maine - but until then I am pondering buying a condo or something for the next 5+ years; so that I can hopefully get some of that money back. As it is now I spend $12k a year for something I will never own, or get money back from. I could lower that to like $8k to 10k if I found roommates but then I'd have to deal with those hassles.

Also @fiddlehead, I do keep bills to the minimum, and the only debt I have currently is my student loans. The only other debt I plan on getting myself into, if actually I need to, is my house. Other than this idea of buying a condo for the time from now until I get my student loans paid off.

My real dilemma is trying to figure out if I should suck it up and keep spending endless amounts of money on rent; OR if I should "get further in debt" on a bill I would have to pay anyways with the possible ability that I get *something* back afterwards. Is it a mistake to be thinking of this, or is it smart? I am blindly thinking it would be the smartest thing I can do; but worry that once I do it I will feel extremely stupid.

[Bobby]

For what it's worth -
Buying a house or condo now that you only plan on living in for the next five years is not a good idea.
Although interest rates are low, property values are projected to decline slightly more and then remain flat for the next few years, I actually believe that there will be an additional crash in the housing market once the govt stops propping it up.

Also when you take a housing loan out, the first ten years or saw a mostly interest that you will be paying - the principal does not decrease much at all initially. There are the added costs that renters don't have - property taxes, insurance, water and sewer and repairs to name a few - condo fees if our talking condos too.

You also need to put down some of your own money when you purchase a property and pay closing costs that can run into the several thousands. At least for now - gone are the days of making a quick buck off of property using borrowed money.

The only exception to this in my mind is a multi-family or an apartment building. They are pretty cheap right now, lots of tax write offs and if you pick the right property, someone else pays your mortgage and perhaps your other expenses too, but there is risk and work involved.

[Leanthree]

So home ownership is a great tax advantaged savings vehicle over the very long term. Historically, the investment has made about 4% per year after upkeep, mortgage, property taxes, etc.

In the short term it can put you in all sorts of trouble if the house value falls, and even if it just stays flat, it takes some time to recuperate the transaction and initial fix-up costs. 5 years is short if you know in advance it will only be 5 years. When calculating how much you will pay for an owned house, 1% of the home value is the rule of thumb for maintenance. Add to that condo fees, mortgage, property taxes and renting doesn't look terrible.

I would look into renting a smaller place for less rent. I used to live in far too big of an apartment before moving to my 251 sq foot 1 br (no joke, the whole thing is 11'x22'+ a 3'x3' foyer) apartment that I share with my girlfriend and it was a revelation similar to when I moved from my 5200 ci pack to a 46 liter pack and went lightweight.

Going in, I thought I would go nuts but it has been such a fantastic way to live. It fits everything I need (my ski gear, my backpacking gear, my clothing, tv, couch, bed, dressers, small kitchen table and not much else) without any of the crap. If something doesnt fit, I throw it out. If I get a new piece of clothing, an old piece goes otherwise my wardrobe wont close. I am no minimalist but I find myself not buying as much stuff because I would have nowhere to put it so I save there a bit as well.

As someone from new york city, which along with Boston are the crazy rent capitals of the country I have many friends and co-workers who make plenty of money but are terribly rent poor because they are spending a whole paycheck a month on rent. No matter how crappy your current place is, for $200 less a month (plus some savings for lower electric/gas bills) you can find a place with less square footage but that serves you well. It is likely you slept in around 30 square feet on your thru, 300 isn't the end of the world.

This is not to say that how I live is best for all, but it certainly saves me a lot of money that goes to lift tickets and excessively lofted down rather than my landlord and the utility companies. $200 a month is $2400 a year or $12,000 over your 5 year time horizon which give or take doubles how fast you are paying them down now.

Sorry for the long post, I hope it helps.

[daddytwosticks]

I would not buy a dwelling, given your curcumstances and age. Suck it up and keep renting. Most talking heads agree we have not reached bottom yet in the real estate market. It would suck to buy something with a mortgage and watch its value decrease.

[Doc Mike]

So home ownership is a great tax advantaged savings vehicle over the very long term. Historically, the investment has made about 4% per year after upkeep, mortgage, property taxes, etc.

In the short term it can put you in all sorts of trouble if the house value falls, and even if it just stays flat, it takes some time to recuperate the transaction and initial fix-up costs. 5 years is short if you know in advance it will only be 5 years. When calculating how much you will pay for an owned house, 1% of the home value is the rule of thumb for maintenance. Add to that condo fees, mortgage, property taxes and renting doesn't look terrible.

I would look into renting a smaller place for less rent. I used to live in far too big of an apartment before moving to my 251 sq foot 1 br (no joke, the whole thing is 11'x22'+ a 3'x3' foyer) apartment that I share with my girlfriend and it was a revelation similar to when I moved from my 5200 ci pack to a 46 liter pack and went lightweight.

Going in, I thought I would go nuts but it has been such a fantastic way to live. It fits everything I need (my ski gear, my backpacking gear, my clothing, tv, couch, bed, dressers, small kitchen table and not much else) without any of the crap. If something doesnt fit, I throw it out. If I get a new piece of clothing, an old piece goes otherwise my wardrobe wont close. I am no minimalist but I find myself not buying as much stuff because I would have nowhere to put it so I save there a bit as well.

As someone from new york city, which along with Boston are the crazy rent capitals of the country I have many friends and co-workers who make plenty of money but are terribly rent poor because they are spending a whole paycheck a month on rent. No matter how crappy your current place is, for $200 less a month (plus some savings for lower electric/gas bills) you can find a place with less square footage but that serves you well. It is likely you slept in around 30 square feet on your thru, 300 isn't the end of the world.

This is not to say that how I live is best for all, but it certainly saves me a lot of money that goes to lift tickets and excessively lofted down rather than my landlord and the utility companies. $200 a month is $2400 a year or $12,000 over your 5 year time horizon which give or take doubles how fast you are paying them down now.

Sorry for the long post, I hope it helps.

Sage advice

[Boliche]

It sounds like you are moving forward towards your goal. You didn't complete your education in zero time. You will not achieve a debt free condition overnight.

If you are working for a reasonable company, you will in all probability receive a raise of some sort each year. When you do, split it into four parts:
1) The Taxman - he will get his share come what may.
2) Increase your retirement savings - small increase, but a large % incremental increase.
3) Increase your debt payment - again a small increase, but a large % incremental increase.
4) The rest is yours - you need to increase your lifestyle a little so it appears that the light at the end of the tunnel is not a freight train.

Do this for 3 or 4 years, and you will find yourself to be a savings fool and living the good life.

[Slo-go'en]

I never saw the value in owning a condo. Not only do you have to pay the morgage on it, you also have to pay the condo fees, which by themself's can be almost as much as rent. Then if any major repairs need to be done, your all hit for even more money to pay for it. Then there are all the rules and regulations you need to live by. You also need to consider what might happen if for some reason you lost your job. Then you'd most likely loose all the money you put into the place.

The advice so far has been spot on. Don't buy until you plan to live there a very long time. In the mean time, save as much as you can so when you do buy, you can do it for cash or with a very large down payment.

Good luck to you and to all of you kids saddled with insane student load debts.

[Catscradle]

I'm no financial expert, but I think now is not a good time for a short term purchase of real estate. I'd say unless you're planning on being there at least 5 years, preferably 10, it is not a good idea. JMHO.

[kayak karl]

in the 70's and early 80's my pay went from 10K to 37K. a lot in those days. we put 50% of every raise i got and my wife got into the credit union. they took it out of pay so i never saw it.
added up real quick and didn't feel the pinch.

[Shutterbug]

Well, to say my thru-hike was life changing would be quite an understatement. I've been aiming at paying off my pesky student loans so I can get out and live freely. However it will take at least 5 to 10 years to pay off my loans. (80k of 93k remaining).

Recently I've been seriously contemplating getting a loan for a condo; The last thing I want to do is put myself in more debt, but on the other hand it could prove useful as I have the possibility of seeing some of the money back; where as paying rent is just basically tossing my money aside. I am not living in an area I would want to be living in for my life; but I can't move where I want for lack of jobs in my profession.

So this may not be the most appropriate place, but I figure someone here has some insight that may prove useful.

I don't volunteer financial advice, but you asked for it. Here is what worked for me.

1. Make as much as you can. A good income when you are young is important.
2. Spend less than you make.
3. Invest what you save in long-term investments. Don't play the market.

When it comes to a place to live, most of the potential gain comes in the purchase. Buy the house or condo below market. It takes a lot of work to find bargains, but the effort is worth it. My housing cost over the past 40 years has been less than zero because I have bought houses at below market prices, fixed them up then sold them. Three have been foreclosures. Two have had serious structural issues. One was just an ugly house because the previous owner had bad taste. I have made significant profits on all but one. The profits on sale have more than covered the monthly cost during the time I lived in them. Based on my experience, I recommend that you buy, but only if you can find a unit that is way below market and you have the skills needed to improve the property.

[max patch]

With the caveat that I don't know anything about the real estate market in Boston -- except that its pricey -- buy a house rather than a condo if your goal is capital appreciation.

[Berserker]

I think fiddlehead, Bobby, Leanthree give excellent advice. Considering your situation renting leaves you unencumbered so that you can pay those loans off, and move as needed. Buying property is risky, and unless you have time to sit on it or know exactly what you are doing you run the risk of losing money. That may be fine considering you're a young guy, however those student loans change the game. So yeah, I gotta agree with the other guys above, and say that if it were me I would keep renting and pay off those loans. Then once you have that taken care of you can move on and purchase property if that's your desire.

[trippclark]

Don't buy now. You are not ready and doing so now, while you already have $80K in debt, would only harm you. Rent as cheaply as you can, and cut your lifestyle as much as you can. Stay out of restaurants, unless you are working there. Attack the student loans with everything that you can throw at them, except for a small buffer of $1000 for emergencies. Try to knock them out in under 5 years. Later, after you have paid off your debts, then you may be in a position to consider buying when owning a home can be a blessing and not a curse.
Read this book for great advice.

Link for book: http://tinyurl.com/6euuxmp

[blackbird04217]

@Leanthree- I have little no concerns with an even smaller apartment than I already in, I am in a studio as it is; probably the smallest apartment I've ever rented and by far the most amazing; I like the single room, for everything, aspect.

I guess I should wait it out; but I can't help but feel like I will end up spending a lot more money in the long run this way, a feeling I don't like very much. I have a decent paying job, that I certainly would not have without the education, but what does that matter in the scheme of things if I no longer feel like working 8hrs a day, 5+ days a week just because that is 'normal'.

Perhaps instead of worrying about buy/rent I should instead focus on paying my loans for 2 years, go for a hike, pay loans for 2 yrs go for hike etc... And just rent in the off-hiking years.

[Catscradle]

...

Perhaps instead of worrying about buy/rent I should instead focus on paying my loans for 2 years, go for a hike, pay loans for 2 yrs go for hike etc... And just rent in the off-hiking years.

I didn't have a "real job" until I was 31 (college, military, college) and wanted a family. Fortunately I had free tuition in MA state schools plus the GI bill because of being in the military at the particular time I was and had no debt to speak of. I enjoyed life and suggest you do too. Just be aware that at this stage in my life I don't really have the money I need to retire properly; I don't regret my choices (except having to do the military which wasn't a choice) and don't mind paying a bit of a price now, but you should be aware that someday you probably won't be making money any more and take that into consideration when making your life choices.

[stranger]

Renting isn't throwing money away, this is a common misconception that society wants you to believe so you spend more money and go into more debt. I've never owned house and have always paid rent. I'm 36, my total debt at the moment is $0.00 and has been that way for the past 6 years. I currently have $19,000 in the bank and am comfortably saving $500/week while paying very high rent. Sydney is one of the most expensive cities in the world now. You are already in a massive hole if you owe upwards of 80 grand - Do not spend any more money you do not have! The greatest asset in the world is being debt free in my opinion. You can't do anything about your current debt, but you can avoid more of it.

[blackbird04217]

Renting isn't throwing money away, this is a common misconception that society wants you to believe so you spend more money and go into more debt.

Sure, buying a house/condo puts me in debt; I may not be using the correct numbers here, so feel free to shove a foot in my mouth, but I envision finding a cheap place; ~$100k; which is why I'd like be stuck going with a condo- A 10yr loan on $80k, ($20k down) is ~$928mo. Which is $100mo less than I pay now; but would probably end up being $1100-1200 with association fees. Sure this includes a fair amount of interest and crap for those who loaned you the money but after 10yrs you are now rent free and have an asset; while you may not get a 1:1 return on the investment; I've have to assume you could get something for your trouble-

Where as with rent; I may have saved $24k over those 10yrs (1200 - 1000 = 200mo * 120 = 24k), I have a hard time imagining I couldn't get at least double that at that time since the place would be paid off. $50k vs $25k? And that isn't nearly a 1:1 return, but to me it sure seems like renting "threw away" some money.

If I appear thick headed, well I don't mean to be, I am just trying to gather as much perspective as I can. Do I particularly enjoy debt, not a bit, but this seems to make sense to me since I have to pay rent regardless; why not pay for something to own/sell later?