Ask HTM - Selling Investments for Medium-Term Goals, Buying a Primary vs Rental Home, & If 15 Year Mortgages are Bad #817
Apr 22, 2024
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Topics discussed include choosing between buying a primary home or a rental property, selling investments for medium-term goals, the impact of 529 contributions on savings rate, and the debate on 15-year mortgages. The episode offers practical financial advice while enjoying a Nut Brown Ale by Samuel Smith.
Decide between buying a primary home or rental property based on your financial goals and preferences.
Consider selling investments for short-term goals by balancing market risk and immediate financial needs.
Include 529 plan contributions in your savings rate based on intended beneficiaries and aligning with personal goals.
Assess the pros and cons of a 15-year mortgage to determine if it fits your long-term financial strategy.
Deep dives
Consider the Total Income Including 401k Match in Savings Rate
Including a 401k match as part of total income and savings rate calculations can boost savings targets, encouraging higher levels of savings. It is essential to aim above bare minimum savings rates for improved financial flexibility and accelerated progress towards financial independence.
Evaluate 529 Plan Contributions in Overall Savings Rate
Considering 529 plan contributions within the overall savings rate hinges on the intended beneficiary. While funds can be reallocated if necessary, the primary aim of these savings often benefits another family member. Evaluating how these contributions align with personal financial goals can guide decisions on including them in the savings rate.
Distinguish Saving for Medium-Term Goals from Other Expenses
Determining what qualifies as saving versus spending involves categorizing funds allocated towards large purchases, holiday gifts, and 529 plan contributions. Focusing on savings for goals benefiting immediate family members or oneself outlines distinctive ways to allocate financial resources. Assessing the purpose and longevity of savings contributions aids in segregating medium-term goals from routine expenses.
Balancing Investment in Market for Potential Future Gains and Withdrawals for Short-Term Goals
Evaluating the decision to keep investments in the market versus withdrawing for short-term goals involves assessing personal risk tolerance and potential market fluctuations. Balancing the potential for market growth over time against the need for funds in the short term can guide decisions on when to sell investments and access the accrued benefits.
Enhancing Financial Flexibility Through Savings and Reduced Borrowing for Major Purchases
Increasing savings rates and reducing borrowing can elevate financial flexibility and reduce reliance on loans, especially for significant purchases. Striving to achieve higher savings levels can mitigate financial strains and minimize debt obligations, thereby fostering greater financial independence.
Advocating for savings rates above minimal thresholds encourages individuals to aim for greater financial stability and independence. Exceeding minimum savings targets can enhance financial resilience, facilitate long-term wealth accumulation, and expedite progress towards financial goals.
Differentiating Short-Term and Medium-Term Savings Goals
When considering savings rates, the podcast highlights the distinction between short-term and medium-term saving goals. While short-term goals like monthly vacations should be budgeted for separately, medium-term goals like planning for a car purchase every 8 to 10 years can be included in the overall savings rate. The podcast emphasizes the personal aspect of financial planning, where individuals tailor their saving strategies based on their specific goals and timelines.
Complexities of Savings Rates and Investing
The podcast delves into the complexities of defining savings and investing within a financial framework. It discusses how saving and investing can be viewed as forms of delayed spending, aiming towards financial independence. By balancing saving for personal goals like vacations alongside long-term retirement investing, individuals navigate the dynamics of managing their savings rates effectively. The conversation expands to include 529 accounts as part of the savings rate, highlighting the interplay between short-term and long-term financial planning strategies.
Let’s dive into the week with some fresh listener questions we have lined up for you! And don't just stand on the sidelines- if you have a question you’d like us to answer, toss your voice memo our way. It only takes about 90 seconds to record and you can find a step by step guide over at HowToMoney.com/ask . Regardless of how random or bizarre you might think it is, we want to hear it!
1 - Should I buy a primary home or a rental property instead?
2 - When do I sell investments for a large financial goal that’s three years away?
3 - Do 529 contributions count towards my savings rate?
4 - What is a mistake to go with a 15 year mortgage?
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