Home > the long view (2009-10)

the long view (2009-10)

December 30th, 2008 at 06:04 am

Saving log - $2 tip box
Spending log - $0

Don't get too excited about the no spend day - yesterday I bought a couple of bottles of prosecco for New Year's Eve. ($30)

I've seen other bloggers post up their goals for 2009. A beginning of the year goal/resolution then see at the end of the year whether I achieved it doesn't particularly work well for me. And its a rare person who is inspired or motivated in January...

I do have two long term goals:

1. Be wiser in general with my money, which means adjust appropriately to the situation.

This year I realized in April that to pay less in tax, I should put more in the 403B and see if I can take the drop in the paycheck. My expectation was that interest would be high(er) and my stocks would go up. Didn't happen, but since stocks went down, the Roth conversion made sense.

I was pleased at how my original 60% bond and cash/40% stock held up. New 403B money is now allocated at 90% stock/ 10% bond. The new stuff added to the old stuff is working well, I've nearly caught up to my August high.

I do have to make money decisions a bit faster. I shouldn't have waited for t-bills to go to 0% before I finally moved them out. Oh well, better to make a good decision a bit slow than to compound rash decisions.

2. Buy a house in a couple of years.

I rent, but I am interested in buying on my terms. My general plan is to use 80K as a downpayment and get a 120K mortgage, which is about 2.5x my salary.

Yes, I know that there is no way (yet) that I will get a 200K house in North Seattle. I plan, unfortunately, on a severe recession in 2009 - 2010 to depress prices. I have the basic plan, the credit score, the location ... now its patience. In the meantime, I plan to be an observer at open houses, collect internet resources and become a total expert of the neighborhood. Watch and learn.

Buying a house might not ever happen, at $925/month rent for us is pretty sweet and a lot hinges on my success - keeping a job, the misery of others. Light years away, maybe, but its a star to sail to.

7 Responses to “the long view (2009-10)”

  1. fern Says:

    It'z interesting that your house-buying plan is very close to what mine was. In 1995, i put $95K down with a $114,900 mortgage. From everything i hear, Seattle and the pacific northwest is a beautiful place to live, with my kind of people, but yeah, expensive.

    the only thing is. i think you do want to be more mindful of current market conditions, and perhaps make your move a bit sooner than "a few years." Even a modest uptick in prices would make things more difficult. But i think that anytime in 2009 would be a good time. Maybe you could start looking in the fall/winter of 09?

  2. merch Says:

    "I do have to make money decisions a bit faster." The hardest decisions are your exit startegies. I know you are more of an investor then trader even with you short term investments. But, it might help to think of exit startegies on your investments.

    I saw a 2 year treasury with a coupon of 0.875% and thought of you. What's the real rate on that after inflation?

    But use this time to look at your risk tolerance and then develop your investment startegies including exit startegies, allocations, and rebalancing. Just a thought.

  3. scfr Says:

    The Seattle area is definitely behind the curve compared to the rest of the country when it comes to the real estate downturn. We still watch the market in our old neighborhood, and just now are we starting to see bank-owned properties and short sales with any regularity. On the other hand, sellers have been making deep and drastic price reductions, and OLPs (original listing prices) in many cases are much below what we would have imagined a couple years ago. So, my gut feeling is that while the Seattle area (or at least our old neighborhood) is behind the curve, the curve is steeper and it is catching up with the rest of the country.

  4. monkeymama Says:

    I agree with scfr. Merch may be right, but I think he misses the point that you don't want to buy at these prices. & I think that is wise.

    I think scfr nails it on the head though.

  5. jIM_Ohio Says:

    I would compare the mortgage amount to your rent.

    If you rent for $1500/mo and the mortgage would be $2000/mo, the costs are actually the same once taxes are factored in. (you would get about $1800*12*25% back in taxes which is $5k+ per year).

    Trying to time the purchase of real estate could be fools gold. You could be missing tax savings sooner which could help improve your overall financial picture.

    Values dropping is only on paper (if you find a place you like and would not move, who cares what the property is worth?).

  6. gamecock43 Says:

    patience patience. I just bought a house, after saving for 3 years...but I think if I waited a year we might have been better off. My problem was I LOST my patience, and then when we found "the one" I was too frightened the house would not last on the market long enough to wait. So DONT GO HOUSE HUNTING before you think the time to buy has come!

  7. scfr Says:

    I wouldn't necessarily count on any tax savings. Standard deduction for a married couple in 2009 will be $11,400. Even with a house, you may still be in standard deduction territory.

    Interest on a $120K 30-yr mortgage would be (depending on interest rate) aound $7K, and property tax on a $200K house in King County would be in the $3K ballpark. Unless you have a couple thousand in other deductions, you may not see any tax savings at all (or only very little).

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