I'm 22, single with no kids. I have worked at the same company for the past five years and have worked my way up to a management position. I currently save approximately $1000 per month even after I deduct 15% for my 401(k). The balance on my 401(k) is almost $20,000 and I have about $15,000 in my saving account. Everyone says that I should buy a house to save on taxes, but is there any other way? I’m really not excited about the idea of being tied to the responsibility of a mortgage, plus all the added expenses. I’m not even sure where I want to put down my roots. Still, it hurts to see a third of my check go the government and the $1,100 rent a month down the drain for my house. I know I’m more or less on the right track, I just feel pressured right now to make the right decision before my lease expires. If I don’t buy, where should I invest my money? I’m really stressed out about this.
2007-03-26 17:25:07 · 5 answers · asked by Red 2 in Business & Finance ➔ Investing
Do not buy a house "to save on taxes". Buy a house because the implied value of ownership is better than renting (it is cheaper to own vs. rent). The tax benefit may help make ownership more competitive, but it doesn't make it a no-brainer.
As far as investments goes, it depends on what type of monetary requirements and risk tolerance you have. Is there any reason you would need to dip into your savings account? Can you accept volatility in returns (losses - realized or unrealized) in the short, perhaps even intermediate term. If you can take the risk, I would invest in a diversified portfolio of stocks. If not, there is nothing wrong with locking up a decent return in a 6 month or 1 year CD from a bank.
2007-03-26 17:48:38 · answer #1 · answered by gls_merch 5 · 1⤊ 0⤋
People are so foolish on houses saving on taxes. Let's say you are in the 28% fed bracket - likely from what I see. You only get 28% if the interest you pay back as a deduction and actually less than that, Govt gives you $5100 standard deduction. Say you have $3000 in other deductions on sched A + $10,000 in interest to deduct. That total is $13,000. That is only $7,900 more than the govt would give you with no house. you only deduct $2212 of the $10,000 in taxes. People have no idea how finance and taxes work so ignore them. Too much in savings acct is issue. Way too much. I hope the 401k is all in stocks - no cds, bonds, guranteed income, etc at your age. Will be working a long time if your $$ isn't. Should open acct @ schwab.com. ADX a great 1st holding - large cap us fund at a discount with low expense. If insist on income here is 4.9% tax free (currently) payable monthly. FPT http://www.etfconnect.com/select/fundpages/muni.asp?MFID=105323 A step forward for you. No need to stress & no need for house or big research. Easy step by step moves that are reasonably safe exist. feel free to contact me at vegas_iwish@yahoo.com Been doing it a long time & glad to help for free.
2007-03-27 02:27:35 · answer #2 · answered by vegas_iwish 5 · 1⤊ 0⤋
Buying a house is a very good thing, if you want to build equity in an investment that usually appreciates, and right now houses are in a buyers market. loan rates are favorable, and you have the satisfaction of knowing the place you live in, is yours. The tax savings are not as great as people think. you might save a few percent overall . If you feel you are ready, this is a good time to buy a house. If not don't .
2007-03-27 01:19:17 · answer #3 · answered by redd headd 7 · 0⤊ 1⤋
Think of it this way:
You can sign another 1 year lease. This will obligate you for at least a year, true?
Or...
In today's market, you may be able to committ to a house for only a couple years and make a good bit of money. If you decide to move, just sell.
Research the housing market in your area over the last couple of years. This will give you a vague idea of how the market is performing in your area. In the US, it's forcasted to slow a bit this year, but a home is good solid investment.
Oh, and to reduce 'added expenses', consider a condo.
2007-03-27 00:36:41 · answer #4 · answered by lola_falula 2 · 0⤊ 1⤋
well its def cheaper to buy a house. i know my house payments are 600.00 a month this includes taxes and insurance and i have a ranch house built in the late 80s. really nice. for what your renting in my town could get you a 180,000 house for 1100 a month and 2,000sq foot. Thats big i think.. I know it took me years to fig out i were throwing out my money. My hub is in the army and they give us a housing allowance based on your rank. Our rank we get 1,000 a month for housing. So basically the army is buying our house and not paying someone elses morgage. Time my hubbyy gets out of the army in 6 yrs are house will be payed off.. Then we can rent it make money off of it or just live here the rest of our lives. But I agree with your friends I def go for buying and later on you can rent it out if you decide you dont want to live there .. But always when you rent a house out to hire a realter. My parents learned the hard way.
2007-03-27 00:46:10 · answer #5 · answered by she_ferr30 w 2 · 0⤊ 1⤋