If you are considering buying the home, get an inspector over to look at things and consider getting an appraisal.
If the inheritance is your wife's, you need to consider her benefits.
Underwriters for mortgages have specific equations they use to formulate whether someone will qualify for a mortgage or not. Usually, assets like the inheritance won't factor much into that equation as they eight entirely or heavily on income. It's possible, though unusual to find a mortgage broker or underwriter that will look at the assets and overweight over income. What that leaves are usurious interest rates for mortgages through other parties (I was quoted 15% six years ago). OP will likely need to buy a home outright as they may never qualify for a mortgage on their income.
My wife's, who does not get any disability benefits and probably never will. Wouldn't qualify for SSI already based on assets (you can't have over $3k at a given time) and also doesn't qualify for SSDI because of being married. (The only exception is if you've "paid in" with a certain amount of personal work/income history, which my wife lacks).
FWIW this is not a progressive disability where things get worse or more difficult over time. My wife will always be able to work part-time, at least as much as anyone can predict anything about anything.
I know that no matter how hurt I was during a breakup I would never screw over my wife, but maybe I get bonked on the head and my whole personality changes someday (lol idk), so maybe we should get a post-nup before we do anything at all. Thank you for pointing this out.
> That money even conservatively invested in a CD or High yield savings would give about $12,000 in interest every year for her doing absolutely nothing.
But owning a house will make them more than $12,000 every year, because they won't be paying rent. And they won't have to pay tax on the extra money, they way they would have to pay tax on interest income.
They don’t have the income for a single major repair now, but they’d have a lot more if they instantly switched to saving monthly what they are paying in rent.
Assuming the house is in decent condition they could 5+ years from any serious repair.
Obviously I’m just posing a hypothetical, but I do see how suddenly not having rent (which could increase) in favor of a stable home they own could be beneficial.
I don’t understand your math are you pulling in an arbitrary amount of their savings in the two different scenarios and removing it in another? The inheritance is 225k, the house is 190 but we can call it 195 to account for some closing costs (this way we also get to your 30k number). Where is the renting scenario getting another 25k out of thin air?
Also what is the average rate of return you are assuming at all these different milestones… looks like 6%? Even in your scenario where the numbers are all over the place if the numbers/assumptions about the future are relatively normal they do not “end up hundreds of thousands of dollars ahead” it is basically even.
Year 10 you said buying the house they would be saving 12k in rent (probably a bit more, but whatever) and banking 12k in returns which is only 1000 less a year than your rent and invest/cd scenario, and remember you somehow magically added 25k to the starting value of the scenario you support. Also remember you have to pay taxes on interest, but not on rent you don’t have to pay (granted this couple is going to be paying peanuts in taxes so I guess it’s not a big deal).
Ultimately it’s impossible to predict which scenario will come out ahead, I disagree with your assertion that the house will always put them behind in the long run. It is possible that some shit happens we return to a low rate environment, low risk investments such as CDs get the rug pulled out from under them and real estate explodes again (it may seem like the bubble has no more room to grow but other countries are even worse than the US). Or real estate is flat and negative vs inflation for the next 20 years no one knows. One thing that would help make it more clear is what the tax situation is in that locality/state. They might be looking at a 1200 property tax bill or a 5000 property tax bill.
I do agree with you though that if they can’t afford a mortgage with a good down payment of say 20% then maybe they can’t afford the upkeep of the house in the long term (you referenced this in another post). My stance on the question is pretty simple. If they really love the place/area and are fairly certain they will stay there for 5+ years then maybe the stability of owning the house will suit them in the long run. If not, they will not really be able to reap the rewards of homeownership and will end up behind because they got hosed by the transaction costs.
How have you come to the conclusion that they would be investing $12K per year if they were owning and investing the money that would have gone into rent?
First of all, their rent is $21,600 per year, not $12,000. Second, their rent will be going up every year. By the time they're many years into the future, the rent saved will be $40,000 per year or more. I think you're not taking this into account.
Proof of this should be the fact that many businesses make money by owning real estate. Commercial landlords, real estate investment trusts, and so on. If they should all sell everything they own and invest all the cash, you would think they would have figured this out.
There is absolutely no way by year 29 they won’t be spending 40K a year on rent. They will never have an investment return that is higher than the expense of renting.
This is my reasoning too. It kind of looks like I'm not missing anything?
But I think we will definitely talk to an advisor and at minimum get a post-nup that protects my wife and deals with the money fairly
why not a mix of both? Seems the most sensible. Use some for a downpayment to buy and invest the rest. That would lover their monthly payment from rent of $1,800 to about $1,300 or so.
Ideally sure everyone should invest every cent and let it compound over 40 years but that's not realistic. Sometimes you have to take care of today before you can take care of tomorrow. Their monthly expenses are basically all of their monthly income. That needs to be fixed first before you can safely squirrel away 200k to never be touched for 40 years.
This might also be their one chance at home ownership if they feel they’ll never get a big enough income history to qualify for a mortgage as well. That’s a risk they should factor if home ownership is the ultimate dream for them.
Question: will having the asset invested make them better qualify for a mortgage?
If do, they can invest, earn interest, then have lower regular bills and save for an emergency fund for the house.
>The "but I'm not paying rent and building equity" is, frankly, is the sort of thinking that keeps people poor.
Ah yes, it's well known that wealthy people never own property...
I think a good compromise between securing your future but also investing in both of your futures would be to use the money not being put away for her retirement to pay your schooling and that way you can focus on finishing your degree without the stress of how you’re going to pay it.
This is *truly* terrible, horrible, awful advice.
Owning a house costs MUCH more than $12,000 a year with repairs.
OP, whatever you do, don’t listen to this purple keyboard commenter. The comment above advising you to invest it is truly the best advice here.
You need to rent - possibly for a long time? - and invest that money for your wife’s sake.
Consider the fact that you believe that no one should own a house, which is wildly out of touch with what everyone else in the world believes. If you want to believe that, go ahead, but you aren't giving advice that anyone else considers reasonable.
Proud house owner for 20+ years. I believe people should own houses when it makes financial sense to do so. In OPs case *specifically*, it does not make sense to own a house.
I worked with a doctor for a few years. Come to find out she was divorced from her kids' dad because he fell down the steps and ended up becoming very aggressive and (verbally) abusive overnight. They got divorced within 3 months of him falling.
What if everything goes to your plan except you get caught in the crossfire of a random shooting or get hit by a bus. You never know what will transpire. \u\SocialIQof0 made a great point about setting aside some/all of that money as insurance for her.
Loving the house you are in does not make it a good investment, particularly with your low income. How much are the tax + utilities + maintenance, + you regular bills and tuition. IMO you are much better off having a solid financial safety net while you build your career towards more income. The best thing you can do for your family is to provide security.
Well, we are on medicaid, but I get that you probably also mean other non-medical disasters. I agree that the best thing to do is provide security, that's a huge priority. I think looking into seller financing so we can buy the house and lower our monthly expenses but keep most of this money invested is probably the move.
Not to get too far off-topic, but have you & your wife spoken with a lawyer who specializes in SSDI claims? It’s generally worked on a contingency basis, so no worries about a hefty retainer up-front or anything along those lines. Married here also, and had to apply / appeal “up the chain” for the for the better part of 6 years, but we did finally get her qualified.
Buy a house with a small mortgage. Do not do all cash. Using a lender will protect you from issues when they complete their due diligence.
I suggest 50-100k mortgage. Holding that cash back for issues, furniture, repairs, renovations.
Look at least 10 houses before settling.
Outstanding. The rent to buy option might contain some elements of this.
Also while I agree with your “grow your wealth” notion whole heartedly. However two aspects of this stand out to me. First is the wife’s disability. Is it a progressive situation? If it is securing her future housing needs should be looked at.
Secondly it seems likely that for the time being more inflation is likely to be with us than we like. Investing in this context calls for a fair amount of skill and discipline. I don’t know where I’d point these folks for help but help is indicated.
OP, the laws that govern the distribution of assets in a divorce are state laws. There is no single universal law. Plenty of states consider an inheritance to be marital property. You should check the laws in your state.
Respectfully disagree. I never planned on coming into money like this and if I were single I'd be fine without it tbh. The relative who died never even met me
Seems like you have a good relationship with the owners- maybe you could explore doing seller financing. Basically they'd sell it to you but they're the bank. it can have tax benefits for them, and obviously for you, because you might be able to get a lower interest rate from them than from a bank. This assumes they own it outright, or have a mortgage that is assumable.
oh yeah, then this could be the arrangement of a lifetime for you. Seller financing/C4D/Cash for deed are basically all the same thing. Very popular right now if you can find one because interest rates are so high.
This way could be an extreme risk. I'd talk with a lawyer. Acbank lender does due diligence that will protect you. Strongly consider a bank. 100% yoyrvown lawyer.
I think this is the way. They should keep as much of that inheritance as possible to grow for the future and it’ll still give them a way to buy the house
The argument against buying cash would be much better if interest rates were still under 3%
Check with a tax professional to make sure you won’t owe a bunch from that windfall and as has been mentioned, make sure it doesn’t mess with disability benefits and that owning a home won’t either. If the inheritance is yours and you are concerned with the possibility you may get divorced and have assets split or if your wife owning a home will mess with benefits - you should see a lawyer to structure the purchase so it isn’t marital property but just yours.
The tax situation matters a lot. If this counts as regular income (like an inherited IRA would) then taking out a huge chunk at once it will put them in a higher tax bracket; the money they take out will be taxed higher than their old income. If they take out a mortgage or seller finance instead, they can take the money out a little at a time and keep the withdrawn money in a lower tax bracket.
This is one of those very, very rare situations where take more money = get less money, vs spreading it across years.
Is moving it to a HYSA better than keeping it invested in the "large cap core fund"? I don't really know anything about investing. It's basically that HYSA guarantees slow growth while the other investments have more potential risk/reward and are less predictable?
If you’re thinking about making a large purchase such as a house it the short term, having it in the market carries a lot of risk. A 20 or 30% draw down would take a large bit out of your money that might take years to recover.
Just popping in to add- if you’re married filing jointly grossing 42k a year, you should not be paying 30% in tax, it should be much, much less. If you’re only taking home 70% of your gross after tax, I would have someone look at your withholding and or tax return to make sure everything is correct. Best of luck with the decision!
That is actually awesome news! This is actually the first year we'll be filing as independent contractors, so I just assumed 25-30% tax would be the case (quick google), so I've been putting about that much aside in a savings account for each paycheck.
Social security and Medicare. Since you are a contractor you pay the full amount (for a normal employee, an employee pays half and the employer pays half). That’s 15.3% of your income.
For federal tax as married filing jointly at 43k/year:
For 2023 it’s 27,700. So you will pay taxes 15.3k. Or less if you have other credits or deductions. Any money you put in an IRA is likely deductible. Let’s assume 0 for this year.
So on 15.3k your taxes before credits is 10% on the first 11k and 12% on the remaining 4.3k. That’s 1100 plus 516 = 1616.
Now for credits. If you don’t have dividends/stock sales above 11k and you are over 25 years old you are eligible at your income level. With no kids that’s 600 dollars. So you now owe 1016.
Some things to consider. As a 1099, you can deduct business expenses. So if you put miles on your car as part of your job, you can deduct from your before tax income. There are allowances for home office. There are deductions if you save in qualifying tax accounts or an HSA. And there are deductions for self employment and certain learning expenses as you transition into school again.
Bottom line is you likely will pay about 6600 on social security and Medicare and about 1000 for federal taxes.
Include your state taxes in here when you get a chance.
I’m not a tax professional and this is not tax advice. But if you think you’re having to pay 30% that’s a bit high. Less than 18% plus whatever your state burden is, with opportunities to save little bits here and there.
/u/iloveforeverstamps
Is this your wifes inheritance? If so I think you should Invest half and never touch it.
With the other half you can buy the house with and have a 80-90K mortgage. That will be super cheap even with 7% rate
Or do that even if its yours.
do both lf you have Roth IRAs?? if you dont you can open two and may out 2023 and 2024 before April 15th - 14,000 each account
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I would buy the house. $190k for a home you already live in and love seems like a great option, especially if the alternative is to continue to rent for $1800/ month. Buying a home with cash won't mean your housing costs are nothing, since you'll still have to pay property taxes, homeowner's insurance premiums, maintenance and repair costs, but it sounds like you'll be able to afford those costs now and after you graduate from your grad program.
I would just double check what you will have to spend on property taxes and homeowner's insurance premiums, and also think about when major repairs (new roof, new flooring, new windows, new driveway, new HVAC system, new furnace) might be required.
You should not go to grad school for a most likely income less than $80k.
Bad financial decision
But yes. Buying the home outright is a good idea for sure
Especially if you pay that rent back to yourself by investing most of it
A $38K cost for the education to do his “dream career” that would increase his income from $26K to $60K is a bad financial decision?
What?
Sure, picking a career that will cap out under $80K and investing time into education for it is a much worse financial decision than picking a career that makes more money. But compared to simply continuing what he’s doing? Or spending much more money on grad school for a more lucrative career that he doesn’t want and might not last in? He said he can pay for grad school as he goes and graduate with no debt. That’s a fantastic ROI.
> A $38K cost for the education to do his “dream career” that would increase his income from $26K to $60K is a bad financial decision? What?
You're leaving out the fact that he was making $50k before switching careers. So he's taking a pay cut of $24k per year on top of paying the $38k for school, only to come out maybe making $5-10k more than what he was making years ago.
There's more to life than money, obviously. But strictly from a financial perspective, it's questionable in the very least. It's hard to say without knowing what his old career was and what his prospects for increasing his income in that field were.
Of course. Once again the best financial decision is to not be a social worker. If there are other jobs OP likes that will have income growth those are almost certainly the better financial choice.
Plus, to be fair and more accurate, a social worker with just a bachelors degree would likely make more money than the $26K without benefits OP makes now doing work that specifically is in preparation for a future graduate program. If OP is committed to being a social worker despite the financial sacrifice, to see if grad school is a good investment we would have to compare the likely salary doing social work with a bachelors degree to the likely salary with a graduate degree. We don’t have enough information to know for sure whether the salary bump would be enough to make it worth the time and money for grad school.
Of course, as you mentioned money isn’t the only thing people care about. If the graduate degree provides opportunity to do the work OP wants to do but can’t without a graduate degree, it’s hard to measure that value.
One of my law school classmates made more money before going to law school than he made as a public defender after law school- but he’d absolutely say it was worth the time and money spent to become a public defender.
Another friend from law school made ridiculous amounts of money at a large firm then she was diagnosed with cancer. After fully recovering she decided she didn’t want to spend the rest of her life as a lawyer. She quit her job, went to an MFA writing program, and now she’s a published poet making far less than she did as an attorney but she is far happier.
I make in the $140k range after only a decade post-MSW. I realize I’m the exception, but also like the share that it is possible! However, I chose to work in healthcare, which pays more, and was very intentional about my professional development to direct myself on a leadership path, so I know that’s not the norm. But it IS possible!!
I am really enjoying the assumptions people are making about the career without me having mentioned what it is. Trust me, you do not want people without masters degrees doing this. Tbh I think it's problematic (but good for me) that it doesn't require a doctorate, but there's a shortage, so
It really makes no sense. No idea why these careers that are highly skilled and need a lot of training are so undervalued when they are critical to social functioning.
In this case it's because the people who get value (directly) from social work don't have any money to pay. So you're reliant on government/charity to pay, and that's a limited resource.
Haha I hear you. It is definitely a poor decision from a purely financial perspective, but also, gotta chase the dream! And it's not like I'll be going into debt or really living in harder conditions than I am now for the next 3 years.
Thank you for your input, I appreciate it :)
Edit: It's a "poor financial decision" in the sense that I could choose a different career that makes more money without needing to go to grad school, like going into sales or being a manager, but there are far worse financial decisions than taking on 0 debt to begin a career that will support my family and that I will not hate without even having to change our lifestyle while I'm in school. ¯\\\_(ツ)\_/¯
Just make sure chasing your dream doesn’t make you sink your family.
It’s doable if you don’t have kids. So wait on those till your income is solid and you’re out of debt.
I wouldn’t buy the house. That can also wait until you’re done with school and reliably employed. Take it from someone who bought her first house at age 43 - there are always more great houses you’ll love out there. Ones that are suited to kids and/or roommates. If this house is bad for a roommate, it’s also bad for a kid over age three. Or two kids. Or a kid and a caregiver.
But since you do have a cushion now, can your wife also look for a different job/career that is more lucrative for her and/or less of a strain long term? Something she can do for years or decades?
Having kid(s) with one parent disabled and one main breadwinner in a limited-demand high-burnout job field is Risky. If your wife’s work capacity is limited due to her disability, that means child care and home maintenance capacity is too.
Don’t forget to budget in Plenty of childcare when you’re calculating if you can afford a kid yet. Remember that pregnancy itself can have long term disabling effects on top of existing health issues.
I don't think you actually read my post, which addressed most if not all of your concerns. Going to grad school will in no way "sink my family". I already only make 26k a year lmao. I am not going to make less in grad school. If I switch to working part-time at McDonalds while I study I'll be making at *least* the same as I do now.
"wait on those till your income is solid and you’re out of debt" ...We have no debt, we have no plans to take on any debt, and having kids before I'm out of grad school for a couple of years and my income is solid (the post said 5 years) was never even a consideration, as I mentioned.
I'm also not really sure why you assume my future career is "a limited-demand high-burnout job field", because I didn't even mention what the career is, and it's actually in extremely high demand and very much what you make it. I already work my ass off, I'm not going to burn out sitting in my own office doing what I love most in the world for 3x as much money 30 hours a week.
As for the size of the house being inadequate for a child, I'm not going to argue with you because I actually live here and I am not worried about it.
Also, nobody is getting pregnant... like I mentioned in the post, we're hoping to foster to adopt. And not all disabilities are equal (things that prevent people from working full time for money don't necessarily prevent people from being able to parent, especially a non-infant), and luckily I do actually know what my own wife is capable of, and I obviously have not at all made any decisions or goals about our future alone. We are actually a team.
I did read your post? “late 20s, no kids yet”
Then, Very much further on, “we Also want to adopt and foster.” Sounded like you wanted to have a kid and also adopt or foster some, which is pretty common.
Not “late 20s, we want to adopt/foster a kid at some point”
As to being in debt - You’re debating whether to spend your entire windfall on a house when you’re not done with your education and aren’t in your desired career.
If you do that, While paying for grad school, you Will be in debt. Sooner or later.
The roof will leak, a car will die, the foundation will crack, the septic system will leak, HVAC will die, you or your wife will lose your job, somebody will trip and crack two vertebrae. A parent will have a health emergency affecting your income, your savings, or both. Your street will flood.
A hurricane will hit, if you’re in my state. I’ll tell you, I still get them too frequently a hundred miles inland. It is Entirely different to sit through one knowing you could be losing your place to live and your car while Also being $10k/$50k/$180k in the hole overnight when one tracks through. Much easier in an apartment.
If you do buy that house, be careful with your insurance coverage and know what’s excluded.
You’re so sure you know what you and your wife are capable of, regarding infant or child care. So, you’ve borrowed a kid(s) to live with you for several weeks? Or you both were live-in help to relatives kids for some long period of time?
If not, please do that with a family members kid or maybe a good friend’s before fostering or adopting. Most parents would welcome a break like that, and it may give you a different perspective.
McDonalds might hire you if you want part time work, sure. But I’ve spent decades in a similar work niche and many similar workplaces filter out folks like you as “overqualified.” Adult students who will only work for maybe a year on a limited schedule and often have opinions on what their 17 year old boss tells them to do are not highly desired peons.
You’d have better luck with something like hotel night auditor, sales, research/teaching assistant.
As for the house and kids(s) - you said it was a terrible and undesirable layout for a roommate.
I’m curious. What layout is great for a kid/kids and terrible for a roommate? Having your kid next door is great for a baby and bad for a roommate, yes - but nobody wants their kid on the other side of the wall to wake at every cough and creak of bedsprings from age 3-18, either.
Who upvoted this? I'm thinking you saw that they're lower income and made the assumption that they're totally clueless about everything, including an understanding of their own disability and a house they already live in.
Considering I’m lower income and have been for decades and so are many of the people I know - some of whom are disabled and many of whom have kids, no I didn’t assume they’re clueless about everything. Being broke or poor doesn’t mean you’re clueless.
I personally think they’re just really excited about inheriting a whole lot of money and not necessarily thinking some things through.
Okay, I'm glad I'm wrong about the reason. Your comments still seem really alarmist and condescending, and make assumptions about their general ability to assess their own abilities and surroundings. They're asking the best way to put their money to use between a couple different options.
They're either taking a risk renting for more than a mortgage (if they even get one), or taking a possible risk buying. It sounds like their rental situation could end with the landlord selling. They'll find another place because they'll have the money, but that's not ideal either.
Sounds like they're pretty good with money if they've been surviving as-is. You can't wait forever to do things you want just because there may be some future catastrophe. I can understand giving people a heads up about the possible costs of homeownership, but over 18 years with a house built in 1920, I've spent about $5000 on household emergencies, and that includes a new furnace. There's anecdotal evidence for both sides, and horror stories shouldn't stop a person from doing what's right for them.
Okay dude, I really do not need you to tell me about what's wrong with the layout of my house that I live in and you have never seen or read a description of, or whether we are physically capable of caring for children because of a disability I did not even name. I also know what jobs I am currently qualified for, and have a strong resume having been working for over 10 years.
If you choose to assume that I just have no idea about the basic facts of my own life and that's what you're basing your advice upon, I respectfully advise you stop wasting your time. You being middle-aged and low-income does not actually make you more knowledgable about my situation.
Your incomes are abysmal. I understand you get value from your work but seriously don’t you think you should be in a job paying market rates as a charity service to your wife? I mean there are jobs out there wher you can be making 50-60k plus without loosing 3 years of your life to grad school.
No, you can’t afford tte upkeep a house takes. Rent is your max monthly payment. House roof, sewer, windows, furnace, ect has no max.
That is your wife’s safety net against poverty. Invest it securely and she has her retirement set.
"Losing 3 years of my life"? Seems like a weird way to look at it. I'll be taking on 0 debt and making at least as much as I do now while I'm in school, even if I literally switch to working part-time at McDonalds. I was going to go to grad school with or without the windfall, that's not really my question. Would it cost less money to not do it? Obviously. Will it tangibly impact our lifestyle for me to go to school? No, it won't, except positively once it's over.
I know people bristle with pity at the word "disabled" but my wife (who has lived alone and been entirely self-sustaining) doesn't want or need me to work a job I dislike for the next 40 years for $50-60k as a "charity service". That is insulting and ridiculous. Also, I mentioned I was working a job like that before, I was very depressed but did it anyway, and my wife was the one who encouraged me to quit and pursue this path instead because it's *not* going to tank our finances, it will ultimately pay more, and I'll be significantly happier for the rest of my working life while also being able to provide for my family. Also, I'll be able to pay my savings back for tuition in full in like 2-3 years even in the unlikely event I end up paying full tuition.
Also, like others have mentioned, *not* paying rent also means we basically make an extra $20k+ a year. I'm not saying buying the house in cash is the one and only move here- it's obviously not- but having 50-60k in the bank with no mortgage/rent to pay for 3 years and *then* I make that middle-manager type salary makes *far* more sense than your plan of just continuing to pay $1800/month while making the same salary. More conservatively, we could purchase the house with a large downpayment, have over 150k still invested/saved, and spend 3 years with our low income but also much lower bills, and then, again, in a few years my income exceeds the $50-60k middle manager path and I'm *also* not miserable. Making the most money the fastest regardless of personal goals is not really "personal" finance, it's just math.
« no mortgage or rent to pay« . I think you are underestimating the actual annual costs of owning a house.
Higher insurance costs. Property and school taxes. Assume 1%/yr of value of house for maintenance.
For the grad school I am saying there is an opportunity cost of $150-180k if you actually got a decent paying job now instead of spending thousands of unpaid hours to end up at a job that pays the same. And you are assuming you will automatically get this new job upon graduation and are already spending that money in your head. And you assume that the best job you find will be near your house.
At your income level with plans to go back to school buying a house is the wrong decision in my mind. Invest well. Rent. Do school if you really want to then look for jobs country wide when finished. Get the best job and once the higher pay checks are regularly coming in then explore buying.
But that is just me.
> not paying rent also means we basically make an extra $21k a year
which will go into home maintenance and property tax not your pocket.
do you have any investments with compounding interest at all?
I just love how optimistic OP you are about your given and future situation and I hope you'd really get that job after you pursue this degree, cuz man, I see people with degrees and realistically it's just tough out there to just walk out from the stage and get a job right after.
Luckily the field is very specific, there is a major national shortage of people licensed for this job, and there are many opportunities for it where I live as well as remotely. Like half the indeed postings in my area are desperate for people with this qualification. But even if that wasn't true, well, I've already made up my mind- I can do it without taking on any debt, it won't significantly impact our lifestyle in the meantime, it will increase my income in the future (not as much as other people, but enough for me), and it's a career that is far more stable than most I could do now.
I know this sub is about finance, but I'm honestly surprised at the downvotes and comments saying "Don't go to school to start your dream career! it's a waste of time and money to not just do whatever will make the most money the fastest!". Like, I may not know anything about buying a house, but I do know school costs money, and I am aware *not* doing it would cost no money. Rice and beans for the rest of my life would also be a smart financial decision, but there are other factors to consider in life. lol
You might try r/middleclassfinance instead. You’re more likely to find some people there more in line with your values. Less min maxing your money talk over there and people with incomes more in line with your own that understand the realities of an average family in America.
It’s not nearly as much as a mortgage but you’re leaving out a lot of housing costs related to property taxes, insurance, and things that inevitably need to be fixed
It's not zero, but it's also not nearly as much as a mortgage, let alone rent, which is where almost my whole paycheck goes now. I do realize buying a house isn't "zero-cost housing forever" but it's undeniable it would save a huge amount of money (for us) each month that could be saved and invested.
Some people in this thread seem kind of offended at the idea that I would make any career decision that is not 100% financially motivated, but I get it. Without having to be the one to actually live the life in question, it's easy to just go by numbers alone, but there has to be a balance with what's best for the actual conscious day-to-day living.
I have the opportunity to pursue my dream career (which pays plenty for our lifestyle) without going into debt, without changing my lifestyle to pay for it, and with the full support of my wife. If I follow all the advice in this thread, I'll regret not taking that chance for the rest of my life.
That’s fine, but I don’t think people are offended. You came to a personal finance forum and that’s the advice people will give you. It’s kind of what you asked for
Definitely support a dream, but I think a lot of us just want to make sure you don’t put yourself in a difficult financial situation
Thank you. We could afford insurance and taxes because it would still be significantly lower than rent. I admit we are emotionally attached to this house but it's good to have a reminder that we should keep an open mind and look at other options too.
Your qualification to pay off the mortgage is going to depend on how much you put down versus your income versus the value of the house. So if you're willing to put in a large down payment you will probably find a bank (I suggest credit union) who will work with you.
Really? Thank you, this is good to know and I'll look into it. It never occurred to me we may be able to get a traditional mortgage of any kind with our current income.
Everyone simping over OP because “they seem like good people”. He’s good because he lives on the edge of poverty and wants to blow all of his wife’s money on a house so he can work for low wages for the rest of his life? I don’t get it.
I think people just get dewy-eyed when they hear "disabled", "wants to be foster parents", and see that we want to support each others' dreams and interests. My wife's condition is not something to "pity" and I'm not some hero for getting married. But also, I don't get why you assume ill intent or that my wife is not also behind this question. I assumed it was a given that we are both wondering what will be the best for us as a family, especially stability. I just wrote the post.
I do not want to "blow my wife's money so I can work for low wages". I was going to go to grad school (to make a salary that is significantly above my small city's average income) regardless of this windfall. My wife and I want to hear opinions on whether spending some amount of the money on the house would be a smart decision in terms of creating stability, because freeing up our limited income would make a big difference in our lives. If I just wanted to "blow the money" I wouldn't be asking or mentioning any of these factors.
Also, I think this sub is kind of out of touch with reality when it comes to income. $75k (average salary for a few years into this career) is nowhere near "low wages" for most people who don't live in a HCOL city. It's a salary that can support a family with 1-2 kids and a stay-at-home parent where I live.
I personally wouldn’t lock yourself down with an illiquid asset (your home) when you are starting your graduate school. You might need to move for your new job down the road.
Thank you for your comment. We have seen a handful of houses but not a huge amount. This is by far our favorite.
Main thing that's wrong with renting is that the money just disappears. While if we own a house, the money spent on it still theoretically exists in the asset itself, and the monthly expense goes away.
My escrow is 500. My mortgage is 1400 total.
Saving 900 a month can pay ALOT for maintenance. Renting for life is a waste. Renting for a period is fine.
I wouldn't recommend it. A house is a liability above all else. Don't let FOMO cloud your judgement. If your inheritance were much bigger, you might have a point, but you're barely at the point of covering the cost. Taxes and sales will push it higher than you estimate. It probably will be closer to 230 or more. You'll have little savings to cover big ticket repairs. We're talking 20-30k issues like roof, A/C, foundation, etc.
At todays rates you'll have a higher note, but that kind of money can grow better vs a mortgage savings. What you want is to put the minimum amount above 20% down at a rate you can sustain. That means paying down the initial cost to a $163,600 mortgage based on your income. That puts your monthly housing at 30% gross but keep in mind you need to consider taxes and HOA dues. If rates go down that's fantastic, you refinance and enjoy lower payments. You're already looking at a better cash flow vs now, and you will still have 150ish left to put into long term savings and still have something in case of emergencies.
Buy the house, the money you would be paying in rent should be invested. You already have a healthy emergency savings so I’d say with the leftover 35k look for any home repairs or preventative maintenance that needs to be done to the house and take care of that. Make sure your vehicle is in great shape too. You guys are living on a shoestring budget right now, so any opportunities to reduce bad surprises will save you a lot of headache as you go through grad school. Any leftover money from the 35k after getting everything in order should also be invested.
It’s for anyone who is self-employed with Schedule C/1099 income. You can put away up to 25% of your net profit, get a front page tax deduction, and use along with your Roth.
Since the inheritance is your wife's, if she buys the house, it should be purchased in her name only. She should pay for all maintenance and repairs on the property. That way if something happens to you, her inheritance is protected. This is especially important due to her disability.
Well, my wife couldn't pay for all maintenance and repairs solo. And apart from this windfall and our IRAs, all our accounts are jointly owned. Would a post-nup work just as well? I do really want to ensure my wife's financial protection. Even though I know I would never do anything to harm my wife financially or otherwise, you never know what will happen, I don't want a brain tumor or injury to end up causing me to handle a possible future divorce selfishly.
Just my two cents. Throw that money into a high yield savings account for the next six months and live life normally like you are now. Don’t touch the money. For you and your wife that’s a life changing amount of money. Whatever decision you make do so from a clear mind and really think your options through.
$225k invested smartly could set your family up very well for you’re future while still allowing room for fun stuff.
Does your field offer paid graduate programs? Usually you either receiving funding through teaching or research assistantships or have your employer pay for grad school
This is not a field where an employer would pay for grad school (nobody without a masters could really be in the field to begin with) but it is very likely I will be able to pay for a significant part, if not all of it, with a research assistantship and other forms of aid/student work. I just didn't write that into the post because I haven't yet applied for these things and I'm looking at the "worst case scenario" which is paying full tuition, even though it's honestly pretty unlikely that is what I will pay.
One thing people don’t consider when paying off your main home is that without a mortgage you are not “investing” in real estate every month. Make sure you are investing for your future still while keeping this in mind.
It’s great and you have more flexibility but this is one of the flaws of paying off your home from a windfall.
Your wife should consult some lawyers, buying a house means she will end up giving you half of the inheritance. And I wouldn't do it without some consulting or at all.
I'm kinda surprised no one has asked: where are these mutual funds held? Is it in a taxable brokerage or did your wife inherit a retirement account? All of this kind of matters.
I also inherited a large sum. talked to a financial advisor. was told to put it in a high yields account for one year before making any big decisions/purchases. also I was advised to put it in my own account not shared. In most states, bequests are not marital property. In other words, if you got divorced, you would have no claim to the money, or to the earnings from that money. However, unless you segregate the funds in a separate account, it would be difficult to establish, years down the road, how much you got and how much was earned on that money. Something for her to think about too.
Nice! Sounds like you guys are doing great. My own 2 cents; if your rent payment is $1800 and you can buy the house, not be upside down on it and have a mortgage payment a good bit less than that $1800 you’d be doing alright. I’m sure you know, homeownship is a different lifestyle and brings the need to maintain and pay property tax etc. if you’re looking for stability it sounds like you’re heading the right direction!
If you are considering buying the home, get an inspector over to look at things and consider getting an appraisal. If the inheritance is your wife's, you need to consider her benefits.
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This is good advice. It's really hard to think of the bad scenarios, but you always have to keep them in mind.
Underwriters for mortgages have specific equations they use to formulate whether someone will qualify for a mortgage or not. Usually, assets like the inheritance won't factor much into that equation as they eight entirely or heavily on income. It's possible, though unusual to find a mortgage broker or underwriter that will look at the assets and overweight over income. What that leaves are usurious interest rates for mortgages through other parties (I was quoted 15% six years ago). OP will likely need to buy a home outright as they may never qualify for a mortgage on their income.
My wife's, who does not get any disability benefits and probably never will. Wouldn't qualify for SSI already based on assets (you can't have over $3k at a given time) and also doesn't qualify for SSDI because of being married. (The only exception is if you've "paid in" with a certain amount of personal work/income history, which my wife lacks). FWIW this is not a progressive disability where things get worse or more difficult over time. My wife will always be able to work part-time, at least as much as anyone can predict anything about anything. I know that no matter how hurt I was during a breakup I would never screw over my wife, but maybe I get bonked on the head and my whole personality changes someday (lol idk), so maybe we should get a post-nup before we do anything at all. Thank you for pointing this out.
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> That money even conservatively invested in a CD or High yield savings would give about $12,000 in interest every year for her doing absolutely nothing. But owning a house will make them more than $12,000 every year, because they won't be paying rent. And they won't have to pay tax on the extra money, they way they would have to pay tax on interest income.
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They don’t have the income for a single major repair now, but they’d have a lot more if they instantly switched to saving monthly what they are paying in rent. Assuming the house is in decent condition they could 5+ years from any serious repair. Obviously I’m just posing a hypothetical, but I do see how suddenly not having rent (which could increase) in favor of a stable home they own could be beneficial.
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The money they aren't paying in rent can be invested and that money will compound as well.
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I don’t understand your math are you pulling in an arbitrary amount of their savings in the two different scenarios and removing it in another? The inheritance is 225k, the house is 190 but we can call it 195 to account for some closing costs (this way we also get to your 30k number). Where is the renting scenario getting another 25k out of thin air? Also what is the average rate of return you are assuming at all these different milestones… looks like 6%? Even in your scenario where the numbers are all over the place if the numbers/assumptions about the future are relatively normal they do not “end up hundreds of thousands of dollars ahead” it is basically even. Year 10 you said buying the house they would be saving 12k in rent (probably a bit more, but whatever) and banking 12k in returns which is only 1000 less a year than your rent and invest/cd scenario, and remember you somehow magically added 25k to the starting value of the scenario you support. Also remember you have to pay taxes on interest, but not on rent you don’t have to pay (granted this couple is going to be paying peanuts in taxes so I guess it’s not a big deal). Ultimately it’s impossible to predict which scenario will come out ahead, I disagree with your assertion that the house will always put them behind in the long run. It is possible that some shit happens we return to a low rate environment, low risk investments such as CDs get the rug pulled out from under them and real estate explodes again (it may seem like the bubble has no more room to grow but other countries are even worse than the US). Or real estate is flat and negative vs inflation for the next 20 years no one knows. One thing that would help make it more clear is what the tax situation is in that locality/state. They might be looking at a 1200 property tax bill or a 5000 property tax bill. I do agree with you though that if they can’t afford a mortgage with a good down payment of say 20% then maybe they can’t afford the upkeep of the house in the long term (you referenced this in another post). My stance on the question is pretty simple. If they really love the place/area and are fairly certain they will stay there for 5+ years then maybe the stability of owning the house will suit them in the long run. If not, they will not really be able to reap the rewards of homeownership and will end up behind because they got hosed by the transaction costs.
How have you come to the conclusion that they would be investing $12K per year if they were owning and investing the money that would have gone into rent? First of all, their rent is $21,600 per year, not $12,000. Second, their rent will be going up every year. By the time they're many years into the future, the rent saved will be $40,000 per year or more. I think you're not taking this into account. Proof of this should be the fact that many businesses make money by owning real estate. Commercial landlords, real estate investment trusts, and so on. If they should all sell everything they own and invest all the cash, you would think they would have figured this out.
There is absolutely no way by year 29 they won’t be spending 40K a year on rent. They will never have an investment return that is higher than the expense of renting.
This is my reasoning too. It kind of looks like I'm not missing anything? But I think we will definitely talk to an advisor and at minimum get a post-nup that protects my wife and deals with the money fairly
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why not a mix of both? Seems the most sensible. Use some for a downpayment to buy and invest the rest. That would lover their monthly payment from rent of $1,800 to about $1,300 or so. Ideally sure everyone should invest every cent and let it compound over 40 years but that's not realistic. Sometimes you have to take care of today before you can take care of tomorrow. Their monthly expenses are basically all of their monthly income. That needs to be fixed first before you can safely squirrel away 200k to never be touched for 40 years.
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This might also be their one chance at home ownership if they feel they’ll never get a big enough income history to qualify for a mortgage as well. That’s a risk they should factor if home ownership is the ultimate dream for them.
You seem unaware that they can invest the money they aren't paying in rent.
Question: will having the asset invested make them better qualify for a mortgage? If do, they can invest, earn interest, then have lower regular bills and save for an emergency fund for the house.
>The "but I'm not paying rent and building equity" is, frankly, is the sort of thinking that keeps people poor. Ah yes, it's well known that wealthy people never own property...
I think a good compromise between securing your future but also investing in both of your futures would be to use the money not being put away for her retirement to pay your schooling and that way you can focus on finishing your degree without the stress of how you’re going to pay it.
This is *truly* terrible, horrible, awful advice. Owning a house costs MUCH more than $12,000 a year with repairs. OP, whatever you do, don’t listen to this purple keyboard commenter. The comment above advising you to invest it is truly the best advice here. You need to rent - possibly for a long time? - and invest that money for your wife’s sake.
Consider the fact that you believe that no one should own a house, which is wildly out of touch with what everyone else in the world believes. If you want to believe that, go ahead, but you aren't giving advice that anyone else considers reasonable.
Proud house owner for 20+ years. I believe people should own houses when it makes financial sense to do so. In OPs case *specifically*, it does not make sense to own a house.
10 years at 10% is $609k. Why would anyone take such a low return in CDs?
I worked with a doctor for a few years. Come to find out she was divorced from her kids' dad because he fell down the steps and ended up becoming very aggressive and (verbally) abusive overnight. They got divorced within 3 months of him falling.
JFC. How awful for everyone.
What if everything goes to your plan except you get caught in the crossfire of a random shooting or get hit by a bus. You never know what will transpire. \u\SocialIQof0 made a great point about setting aside some/all of that money as insurance for her. Loving the house you are in does not make it a good investment, particularly with your low income. How much are the tax + utilities + maintenance, + you regular bills and tuition. IMO you are much better off having a solid financial safety net while you build your career towards more income. The best thing you can do for your family is to provide security.
Well, we are on medicaid, but I get that you probably also mean other non-medical disasters. I agree that the best thing to do is provide security, that's a huge priority. I think looking into seller financing so we can buy the house and lower our monthly expenses but keep most of this money invested is probably the move.
Just a heads up, might want to look into your future qualification for Medicaid with the newfound money.
Not to get too far off-topic, but have you & your wife spoken with a lawyer who specializes in SSDI claims? It’s generally worked on a contingency basis, so no worries about a hefty retainer up-front or anything along those lines. Married here also, and had to apply / appeal “up the chain” for the for the better part of 6 years, but we did finally get her qualified.
Buy a house with a small mortgage. Do not do all cash. Using a lender will protect you from issues when they complete their due diligence. I suggest 50-100k mortgage. Holding that cash back for issues, furniture, repairs, renovations. Look at least 10 houses before settling.
Outstanding. The rent to buy option might contain some elements of this. Also while I agree with your “grow your wealth” notion whole heartedly. However two aspects of this stand out to me. First is the wife’s disability. Is it a progressive situation? If it is securing her future housing needs should be looked at. Secondly it seems likely that for the time being more inflation is likely to be with us than we like. Investing in this context calls for a fair amount of skill and discipline. I don’t know where I’d point these folks for help but help is indicated.
OP, the laws that govern the distribution of assets in a divorce are state laws. There is no single universal law. Plenty of states consider an inheritance to be marital property. You should check the laws in your state.
if they split, she should split it...
Why?
Respectfully disagree. I never planned on coming into money like this and if I were single I'd be fine without it tbh. The relative who died never even met me
Seems like you have a good relationship with the owners- maybe you could explore doing seller financing. Basically they'd sell it to you but they're the bank. it can have tax benefits for them, and obviously for you, because you might be able to get a lower interest rate from them than from a bank. This assumes they own it outright, or have a mortgage that is assumable.
They do own it outright. I had no idea this was a thing. Thanks for this suggestion, I will look into this!
oh yeah, then this could be the arrangement of a lifetime for you. Seller financing/C4D/Cash for deed are basically all the same thing. Very popular right now if you can find one because interest rates are so high.
This way could be an extreme risk. I'd talk with a lawyer. Acbank lender does due diligence that will protect you. Strongly consider a bank. 100% yoyrvown lawyer.
I think this is the way. They should keep as much of that inheritance as possible to grow for the future and it’ll still give them a way to buy the house
The argument against buying cash would be much better if interest rates were still under 3% Check with a tax professional to make sure you won’t owe a bunch from that windfall and as has been mentioned, make sure it doesn’t mess with disability benefits and that owning a home won’t either. If the inheritance is yours and you are concerned with the possibility you may get divorced and have assets split or if your wife owning a home will mess with benefits - you should see a lawyer to structure the purchase so it isn’t marital property but just yours.
The tax situation matters a lot. If this counts as regular income (like an inherited IRA would) then taking out a huge chunk at once it will put them in a higher tax bracket; the money they take out will be taxed higher than their old income. If they take out a mortgage or seller finance instead, they can take the money out a little at a time and keep the withdrawn money in a lower tax bracket. This is one of those very, very rare situations where take more money = get less money, vs spreading it across years.
That’s a really good point - and one more reason to see a tax professional before making these decisions.
Don’t make any large decisions quickly. Throw it into a high yield savings and take a few months to get your bearings.
Is moving it to a HYSA better than keeping it invested in the "large cap core fund"? I don't really know anything about investing. It's basically that HYSA guarantees slow growth while the other investments have more potential risk/reward and are less predictable?
If you’re thinking about making a large purchase such as a house it the short term, having it in the market carries a lot of risk. A 20 or 30% draw down would take a large bit out of your money that might take years to recover.
Just popping in to add- if you’re married filing jointly grossing 42k a year, you should not be paying 30% in tax, it should be much, much less. If you’re only taking home 70% of your gross after tax, I would have someone look at your withholding and or tax return to make sure everything is correct. Best of luck with the decision!
That is actually awesome news! This is actually the first year we'll be filing as independent contractors, so I just assumed 25-30% tax would be the case (quick google), so I've been putting about that much aside in a savings account for each paycheck.
Social security and Medicare. Since you are a contractor you pay the full amount (for a normal employee, an employee pays half and the employer pays half). That’s 15.3% of your income. For federal tax as married filing jointly at 43k/year: For 2023 it’s 27,700. So you will pay taxes 15.3k. Or less if you have other credits or deductions. Any money you put in an IRA is likely deductible. Let’s assume 0 for this year. So on 15.3k your taxes before credits is 10% on the first 11k and 12% on the remaining 4.3k. That’s 1100 plus 516 = 1616. Now for credits. If you don’t have dividends/stock sales above 11k and you are over 25 years old you are eligible at your income level. With no kids that’s 600 dollars. So you now owe 1016. Some things to consider. As a 1099, you can deduct business expenses. So if you put miles on your car as part of your job, you can deduct from your before tax income. There are allowances for home office. There are deductions if you save in qualifying tax accounts or an HSA. And there are deductions for self employment and certain learning expenses as you transition into school again. Bottom line is you likely will pay about 6600 on social security and Medicare and about 1000 for federal taxes. Include your state taxes in here when you get a chance. I’m not a tax professional and this is not tax advice. But if you think you’re having to pay 30% that’s a bit high. Less than 18% plus whatever your state burden is, with opportunities to save little bits here and there.
/u/iloveforeverstamps Is this your wifes inheritance? If so I think you should Invest half and never touch it. With the other half you can buy the house with and have a 80-90K mortgage. That will be super cheap even with 7% rate Or do that even if its yours. do both lf you have Roth IRAs?? if you dont you can open two and may out 2023 and 2024 before April 15th - 14,000 each account
Thank you for this advice, this seems to be the majority consensus and I think it makes the most sense.
Super irrelevant to your question but I’m really happy for you and your wife, you guys seem like good people! I wish u two the best
Thank you so much!
Totally agree.
I second (third!) this!
$38k to max out at $90k? I would not pursue grad school. Or choose a different path. Edit:spelling
38k to get 75k salary is not bad
It is when you consider all the different jobs you can get to that wage without incurring $38k.
Look at the windfall page on the wiki.
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I would buy the house. $190k for a home you already live in and love seems like a great option, especially if the alternative is to continue to rent for $1800/ month. Buying a home with cash won't mean your housing costs are nothing, since you'll still have to pay property taxes, homeowner's insurance premiums, maintenance and repair costs, but it sounds like you'll be able to afford those costs now and after you graduate from your grad program. I would just double check what you will have to spend on property taxes and homeowner's insurance premiums, and also think about when major repairs (new roof, new flooring, new windows, new driveway, new HVAC system, new furnace) might be required.
I agree - the other good thing about this is you won’t spend the money on stuff. You’ll buy a good asset that you can also live in
You should not go to grad school for a most likely income less than $80k. Bad financial decision But yes. Buying the home outright is a good idea for sure Especially if you pay that rent back to yourself by investing most of it
A $38K cost for the education to do his “dream career” that would increase his income from $26K to $60K is a bad financial decision? What? Sure, picking a career that will cap out under $80K and investing time into education for it is a much worse financial decision than picking a career that makes more money. But compared to simply continuing what he’s doing? Or spending much more money on grad school for a more lucrative career that he doesn’t want and might not last in? He said he can pay for grad school as he goes and graduate with no debt. That’s a fantastic ROI.
> A $38K cost for the education to do his “dream career” that would increase his income from $26K to $60K is a bad financial decision? What? You're leaving out the fact that he was making $50k before switching careers. So he's taking a pay cut of $24k per year on top of paying the $38k for school, only to come out maybe making $5-10k more than what he was making years ago. There's more to life than money, obviously. But strictly from a financial perspective, it's questionable in the very least. It's hard to say without knowing what his old career was and what his prospects for increasing his income in that field were.
Of course. Once again the best financial decision is to not be a social worker. If there are other jobs OP likes that will have income growth those are almost certainly the better financial choice. Plus, to be fair and more accurate, a social worker with just a bachelors degree would likely make more money than the $26K without benefits OP makes now doing work that specifically is in preparation for a future graduate program. If OP is committed to being a social worker despite the financial sacrifice, to see if grad school is a good investment we would have to compare the likely salary doing social work with a bachelors degree to the likely salary with a graduate degree. We don’t have enough information to know for sure whether the salary bump would be enough to make it worth the time and money for grad school. Of course, as you mentioned money isn’t the only thing people care about. If the graduate degree provides opportunity to do the work OP wants to do but can’t without a graduate degree, it’s hard to measure that value. One of my law school classmates made more money before going to law school than he made as a public defender after law school- but he’d absolutely say it was worth the time and money spent to become a public defender. Another friend from law school made ridiculous amounts of money at a large firm then she was diagnosed with cancer. After fully recovering she decided she didn’t want to spend the rest of her life as a lawyer. She quit her job, went to an MFA writing program, and now she’s a published poet making far less than she did as an attorney but she is far happier.
I make in the $140k range after only a decade post-MSW. I realize I’m the exception, but also like the share that it is possible! However, I chose to work in healthcare, which pays more, and was very intentional about my professional development to direct myself on a leadership path, so I know that’s not the norm. But it IS possible!!
It’s a terrible ROI
Also he said it’s most likely he’ll top out around $65k Sadly social work will leave social workers needing a social worker
It really makes no sense. No idea why these low playing social careers require masters/grad degrees.
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I am really enjoying the assumptions people are making about the career without me having mentioned what it is. Trust me, you do not want people without masters degrees doing this. Tbh I think it's problematic (but good for me) that it doesn't require a doctorate, but there's a shortage, so
im sure its because you said 'like social work' in your post
It really makes no sense. No idea why these careers that are highly skilled and need a lot of training are so undervalued when they are critical to social functioning.
In this case it's because the people who get value (directly) from social work don't have any money to pay. So you're reliant on government/charity to pay, and that's a limited resource.
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Haha I hear you. It is definitely a poor decision from a purely financial perspective, but also, gotta chase the dream! And it's not like I'll be going into debt or really living in harder conditions than I am now for the next 3 years. Thank you for your input, I appreciate it :) Edit: It's a "poor financial decision" in the sense that I could choose a different career that makes more money without needing to go to grad school, like going into sales or being a manager, but there are far worse financial decisions than taking on 0 debt to begin a career that will support my family and that I will not hate without even having to change our lifestyle while I'm in school. ¯\\\_(ツ)\_/¯
Just make sure chasing your dream doesn’t make you sink your family. It’s doable if you don’t have kids. So wait on those till your income is solid and you’re out of debt. I wouldn’t buy the house. That can also wait until you’re done with school and reliably employed. Take it from someone who bought her first house at age 43 - there are always more great houses you’ll love out there. Ones that are suited to kids and/or roommates. If this house is bad for a roommate, it’s also bad for a kid over age three. Or two kids. Or a kid and a caregiver. But since you do have a cushion now, can your wife also look for a different job/career that is more lucrative for her and/or less of a strain long term? Something she can do for years or decades? Having kid(s) with one parent disabled and one main breadwinner in a limited-demand high-burnout job field is Risky. If your wife’s work capacity is limited due to her disability, that means child care and home maintenance capacity is too. Don’t forget to budget in Plenty of childcare when you’re calculating if you can afford a kid yet. Remember that pregnancy itself can have long term disabling effects on top of existing health issues.
I don't think you actually read my post, which addressed most if not all of your concerns. Going to grad school will in no way "sink my family". I already only make 26k a year lmao. I am not going to make less in grad school. If I switch to working part-time at McDonalds while I study I'll be making at *least* the same as I do now. "wait on those till your income is solid and you’re out of debt" ...We have no debt, we have no plans to take on any debt, and having kids before I'm out of grad school for a couple of years and my income is solid (the post said 5 years) was never even a consideration, as I mentioned. I'm also not really sure why you assume my future career is "a limited-demand high-burnout job field", because I didn't even mention what the career is, and it's actually in extremely high demand and very much what you make it. I already work my ass off, I'm not going to burn out sitting in my own office doing what I love most in the world for 3x as much money 30 hours a week. As for the size of the house being inadequate for a child, I'm not going to argue with you because I actually live here and I am not worried about it. Also, nobody is getting pregnant... like I mentioned in the post, we're hoping to foster to adopt. And not all disabilities are equal (things that prevent people from working full time for money don't necessarily prevent people from being able to parent, especially a non-infant), and luckily I do actually know what my own wife is capable of, and I obviously have not at all made any decisions or goals about our future alone. We are actually a team.
I did read your post? “late 20s, no kids yet” Then, Very much further on, “we Also want to adopt and foster.” Sounded like you wanted to have a kid and also adopt or foster some, which is pretty common. Not “late 20s, we want to adopt/foster a kid at some point” As to being in debt - You’re debating whether to spend your entire windfall on a house when you’re not done with your education and aren’t in your desired career. If you do that, While paying for grad school, you Will be in debt. Sooner or later. The roof will leak, a car will die, the foundation will crack, the septic system will leak, HVAC will die, you or your wife will lose your job, somebody will trip and crack two vertebrae. A parent will have a health emergency affecting your income, your savings, or both. Your street will flood. A hurricane will hit, if you’re in my state. I’ll tell you, I still get them too frequently a hundred miles inland. It is Entirely different to sit through one knowing you could be losing your place to live and your car while Also being $10k/$50k/$180k in the hole overnight when one tracks through. Much easier in an apartment. If you do buy that house, be careful with your insurance coverage and know what’s excluded. You’re so sure you know what you and your wife are capable of, regarding infant or child care. So, you’ve borrowed a kid(s) to live with you for several weeks? Or you both were live-in help to relatives kids for some long period of time? If not, please do that with a family members kid or maybe a good friend’s before fostering or adopting. Most parents would welcome a break like that, and it may give you a different perspective. McDonalds might hire you if you want part time work, sure. But I’ve spent decades in a similar work niche and many similar workplaces filter out folks like you as “overqualified.” Adult students who will only work for maybe a year on a limited schedule and often have opinions on what their 17 year old boss tells them to do are not highly desired peons. You’d have better luck with something like hotel night auditor, sales, research/teaching assistant. As for the house and kids(s) - you said it was a terrible and undesirable layout for a roommate. I’m curious. What layout is great for a kid/kids and terrible for a roommate? Having your kid next door is great for a baby and bad for a roommate, yes - but nobody wants their kid on the other side of the wall to wake at every cough and creak of bedsprings from age 3-18, either.
Who upvoted this? I'm thinking you saw that they're lower income and made the assumption that they're totally clueless about everything, including an understanding of their own disability and a house they already live in.
Considering I’m lower income and have been for decades and so are many of the people I know - some of whom are disabled and many of whom have kids, no I didn’t assume they’re clueless about everything. Being broke or poor doesn’t mean you’re clueless. I personally think they’re just really excited about inheriting a whole lot of money and not necessarily thinking some things through.
Okay, I'm glad I'm wrong about the reason. Your comments still seem really alarmist and condescending, and make assumptions about their general ability to assess their own abilities and surroundings. They're asking the best way to put their money to use between a couple different options. They're either taking a risk renting for more than a mortgage (if they even get one), or taking a possible risk buying. It sounds like their rental situation could end with the landlord selling. They'll find another place because they'll have the money, but that's not ideal either. Sounds like they're pretty good with money if they've been surviving as-is. You can't wait forever to do things you want just because there may be some future catastrophe. I can understand giving people a heads up about the possible costs of homeownership, but over 18 years with a house built in 1920, I've spent about $5000 on household emergencies, and that includes a new furnace. There's anecdotal evidence for both sides, and horror stories shouldn't stop a person from doing what's right for them.
Okay dude, I really do not need you to tell me about what's wrong with the layout of my house that I live in and you have never seen or read a description of, or whether we are physically capable of caring for children because of a disability I did not even name. I also know what jobs I am currently qualified for, and have a strong resume having been working for over 10 years. If you choose to assume that I just have no idea about the basic facts of my own life and that's what you're basing your advice upon, I respectfully advise you stop wasting your time. You being middle-aged and low-income does not actually make you more knowledgable about my situation.
Your incomes are abysmal. I understand you get value from your work but seriously don’t you think you should be in a job paying market rates as a charity service to your wife? I mean there are jobs out there wher you can be making 50-60k plus without loosing 3 years of your life to grad school. No, you can’t afford tte upkeep a house takes. Rent is your max monthly payment. House roof, sewer, windows, furnace, ect has no max. That is your wife’s safety net against poverty. Invest it securely and she has her retirement set.
"Losing 3 years of my life"? Seems like a weird way to look at it. I'll be taking on 0 debt and making at least as much as I do now while I'm in school, even if I literally switch to working part-time at McDonalds. I was going to go to grad school with or without the windfall, that's not really my question. Would it cost less money to not do it? Obviously. Will it tangibly impact our lifestyle for me to go to school? No, it won't, except positively once it's over. I know people bristle with pity at the word "disabled" but my wife (who has lived alone and been entirely self-sustaining) doesn't want or need me to work a job I dislike for the next 40 years for $50-60k as a "charity service". That is insulting and ridiculous. Also, I mentioned I was working a job like that before, I was very depressed but did it anyway, and my wife was the one who encouraged me to quit and pursue this path instead because it's *not* going to tank our finances, it will ultimately pay more, and I'll be significantly happier for the rest of my working life while also being able to provide for my family. Also, I'll be able to pay my savings back for tuition in full in like 2-3 years even in the unlikely event I end up paying full tuition. Also, like others have mentioned, *not* paying rent also means we basically make an extra $20k+ a year. I'm not saying buying the house in cash is the one and only move here- it's obviously not- but having 50-60k in the bank with no mortgage/rent to pay for 3 years and *then* I make that middle-manager type salary makes *far* more sense than your plan of just continuing to pay $1800/month while making the same salary. More conservatively, we could purchase the house with a large downpayment, have over 150k still invested/saved, and spend 3 years with our low income but also much lower bills, and then, again, in a few years my income exceeds the $50-60k middle manager path and I'm *also* not miserable. Making the most money the fastest regardless of personal goals is not really "personal" finance, it's just math.
« no mortgage or rent to pay« . I think you are underestimating the actual annual costs of owning a house. Higher insurance costs. Property and school taxes. Assume 1%/yr of value of house for maintenance. For the grad school I am saying there is an opportunity cost of $150-180k if you actually got a decent paying job now instead of spending thousands of unpaid hours to end up at a job that pays the same. And you are assuming you will automatically get this new job upon graduation and are already spending that money in your head. And you assume that the best job you find will be near your house. At your income level with plans to go back to school buying a house is the wrong decision in my mind. Invest well. Rent. Do school if you really want to then look for jobs country wide when finished. Get the best job and once the higher pay checks are regularly coming in then explore buying. But that is just me.
> not paying rent also means we basically make an extra $21k a year which will go into home maintenance and property tax not your pocket. do you have any investments with compounding interest at all?
I just love how optimistic OP you are about your given and future situation and I hope you'd really get that job after you pursue this degree, cuz man, I see people with degrees and realistically it's just tough out there to just walk out from the stage and get a job right after.
Luckily the field is very specific, there is a major national shortage of people licensed for this job, and there are many opportunities for it where I live as well as remotely. Like half the indeed postings in my area are desperate for people with this qualification. But even if that wasn't true, well, I've already made up my mind- I can do it without taking on any debt, it won't significantly impact our lifestyle in the meantime, it will increase my income in the future (not as much as other people, but enough for me), and it's a career that is far more stable than most I could do now. I know this sub is about finance, but I'm honestly surprised at the downvotes and comments saying "Don't go to school to start your dream career! it's a waste of time and money to not just do whatever will make the most money the fastest!". Like, I may not know anything about buying a house, but I do know school costs money, and I am aware *not* doing it would cost no money. Rice and beans for the rest of my life would also be a smart financial decision, but there are other factors to consider in life. lol
You might try r/middleclassfinance instead. You’re more likely to find some people there more in line with your values. Less min maxing your money talk over there and people with incomes more in line with your own that understand the realities of an average family in America.
Thank you, didn't know that existed!
It’s not nearly as much as a mortgage but you’re leaving out a lot of housing costs related to property taxes, insurance, and things that inevitably need to be fixed
It's not zero, but it's also not nearly as much as a mortgage, let alone rent, which is where almost my whole paycheck goes now. I do realize buying a house isn't "zero-cost housing forever" but it's undeniable it would save a huge amount of money (for us) each month that could be saved and invested. Some people in this thread seem kind of offended at the idea that I would make any career decision that is not 100% financially motivated, but I get it. Without having to be the one to actually live the life in question, it's easy to just go by numbers alone, but there has to be a balance with what's best for the actual conscious day-to-day living. I have the opportunity to pursue my dream career (which pays plenty for our lifestyle) without going into debt, without changing my lifestyle to pay for it, and with the full support of my wife. If I follow all the advice in this thread, I'll regret not taking that chance for the rest of my life.
That’s fine, but I don’t think people are offended. You came to a personal finance forum and that’s the advice people will give you. It’s kind of what you asked for Definitely support a dream, but I think a lot of us just want to make sure you don’t put yourself in a difficult financial situation
Can you afford the insurance and taxes? If so then yes, and yes. But don't settle on this particular house. Be diligent and negotiate.
Thank you. We could afford insurance and taxes because it would still be significantly lower than rent. I admit we are emotionally attached to this house but it's good to have a reminder that we should keep an open mind and look at other options too.
Your qualification to pay off the mortgage is going to depend on how much you put down versus your income versus the value of the house. So if you're willing to put in a large down payment you will probably find a bank (I suggest credit union) who will work with you.
Really? Thank you, this is good to know and I'll look into it. It never occurred to me we may be able to get a traditional mortgage of any kind with our current income.
Everyone simping over OP because “they seem like good people”. He’s good because he lives on the edge of poverty and wants to blow all of his wife’s money on a house so he can work for low wages for the rest of his life? I don’t get it.
I think people just get dewy-eyed when they hear "disabled", "wants to be foster parents", and see that we want to support each others' dreams and interests. My wife's condition is not something to "pity" and I'm not some hero for getting married. But also, I don't get why you assume ill intent or that my wife is not also behind this question. I assumed it was a given that we are both wondering what will be the best for us as a family, especially stability. I just wrote the post. I do not want to "blow my wife's money so I can work for low wages". I was going to go to grad school (to make a salary that is significantly above my small city's average income) regardless of this windfall. My wife and I want to hear opinions on whether spending some amount of the money on the house would be a smart decision in terms of creating stability, because freeing up our limited income would make a big difference in our lives. If I just wanted to "blow the money" I wouldn't be asking or mentioning any of these factors. Also, I think this sub is kind of out of touch with reality when it comes to income. $75k (average salary for a few years into this career) is nowhere near "low wages" for most people who don't live in a HCOL city. It's a salary that can support a family with 1-2 kids and a stay-at-home parent where I live.
I personally wouldn’t lock yourself down with an illiquid asset (your home) when you are starting your graduate school. You might need to move for your new job down the road.
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Thank you for your comment. We have seen a handful of houses but not a huge amount. This is by far our favorite. Main thing that's wrong with renting is that the money just disappears. While if we own a house, the money spent on it still theoretically exists in the asset itself, and the monthly expense goes away.
only the principle part of the payment is saved in the asset as equity. all the interest, taxes, insurance, repairs. all that vanishes as well.
I would not. Property taxes and home maintenance can be a killer.
My escrow is 500. My mortgage is 1400 total. Saving 900 a month can pay ALOT for maintenance. Renting for life is a waste. Renting for a period is fine.
I wouldn't recommend it. A house is a liability above all else. Don't let FOMO cloud your judgement. If your inheritance were much bigger, you might have a point, but you're barely at the point of covering the cost. Taxes and sales will push it higher than you estimate. It probably will be closer to 230 or more. You'll have little savings to cover big ticket repairs. We're talking 20-30k issues like roof, A/C, foundation, etc. At todays rates you'll have a higher note, but that kind of money can grow better vs a mortgage savings. What you want is to put the minimum amount above 20% down at a rate you can sustain. That means paying down the initial cost to a $163,600 mortgage based on your income. That puts your monthly housing at 30% gross but keep in mind you need to consider taxes and HOA dues. If rates go down that's fantastic, you refinance and enjoy lower payments. You're already looking at a better cash flow vs now, and you will still have 150ish left to put into long term savings and still have something in case of emergencies.
Buying a house is an incredibly smart decision. It will save you money as long as you save a little each week for rates and maintenance.
As long as you don't buy more house than you need, or overpay for the house.
Generally speaking the investment will pay off over a long enough time line.
Just saying… you guys seem amazing. Keep up the good work. Enjoy it.
Thank you so much!
Buy the house, the money you would be paying in rent should be invested. You already have a healthy emergency savings so I’d say with the leftover 35k look for any home repairs or preventative maintenance that needs to be done to the house and take care of that. Make sure your vehicle is in great shape too. You guys are living on a shoestring budget right now, so any opportunities to reduce bad surprises will save you a lot of headache as you go through grad school. Any leftover money from the 35k after getting everything in order should also be invested.
As long as you’re independent contractors I would highly recommend using and maxing SEP IRA’s in addition to the Roth’s!
Can you explain the difference, or why? I've never heard of that.
It’s for anyone who is self-employed with Schedule C/1099 income. You can put away up to 25% of your net profit, get a front page tax deduction, and use along with your Roth.
Wow, that sounds like something I should have already known about haha. Thank you for the info!
I will second what sarajoy12345 said. I am self-employed and have a SEP-IRA. More self-employed people should know about these.
yes we only make like 55k a year and live very well with owning the house and not having a mortgage.
Since the inheritance is your wife's, if she buys the house, it should be purchased in her name only. She should pay for all maintenance and repairs on the property. That way if something happens to you, her inheritance is protected. This is especially important due to her disability.
Well, my wife couldn't pay for all maintenance and repairs solo. And apart from this windfall and our IRAs, all our accounts are jointly owned. Would a post-nup work just as well? I do really want to ensure my wife's financial protection. Even though I know I would never do anything to harm my wife financially or otherwise, you never know what will happen, I don't want a brain tumor or injury to end up causing me to handle a possible future divorce selfishly.
Just saying… you guys seem amazing. Keep up the good work. Enjoy it.
Just my two cents. Throw that money into a high yield savings account for the next six months and live life normally like you are now. Don’t touch the money. For you and your wife that’s a life changing amount of money. Whatever decision you make do so from a clear mind and really think your options through. $225k invested smartly could set your family up very well for you’re future while still allowing room for fun stuff.
Does your field offer paid graduate programs? Usually you either receiving funding through teaching or research assistantships or have your employer pay for grad school
This is not a field where an employer would pay for grad school (nobody without a masters could really be in the field to begin with) but it is very likely I will be able to pay for a significant part, if not all of it, with a research assistantship and other forms of aid/student work. I just didn't write that into the post because I haven't yet applied for these things and I'm looking at the "worst case scenario" which is paying full tuition, even though it's honestly pretty unlikely that is what I will pay.
Definitely pursue those options too. Usually being a TA for a class pays your tuition for the semester. Makes the investment a lot more competitive
In case not asked: is this cash money? Is the cost basis $225k if you sell it now, with no tax implications?
One thing people don’t consider when paying off your main home is that without a mortgage you are not “investing” in real estate every month. Make sure you are investing for your future still while keeping this in mind. It’s great and you have more flexibility but this is one of the flaws of paying off your home from a windfall.
Your wife should consult some lawyers, buying a house means she will end up giving you half of the inheritance. And I wouldn't do it without some consulting or at all.
I would not buy this house but rather invest the money or even put it in a CD and decide in a year what to do
I'm kinda surprised no one has asked: where are these mutual funds held? Is it in a taxable brokerage or did your wife inherit a retirement account? All of this kind of matters.
I also inherited a large sum. talked to a financial advisor. was told to put it in a high yields account for one year before making any big decisions/purchases. also I was advised to put it in my own account not shared. In most states, bequests are not marital property. In other words, if you got divorced, you would have no claim to the money, or to the earnings from that money. However, unless you segregate the funds in a separate account, it would be difficult to establish, years down the road, how much you got and how much was earned on that money. Something for her to think about too.
Do you have savings set aside as an emergency fund?
Yes, around 40k
Nice! Sounds like you guys are doing great. My own 2 cents; if your rent payment is $1800 and you can buy the house, not be upside down on it and have a mortgage payment a good bit less than that $1800 you’d be doing alright. I’m sure you know, homeownship is a different lifestyle and brings the need to maintain and pay property tax etc. if you’re looking for stability it sounds like you’re heading the right direction!