I wonder how many people here on hacker news live paycheck to paycheck? I make significantly more than 250k and spend all of it (single income family of four) and my savings are my equity.
I don't have sympathy for folks making as much as we do who are "broke" or up to their ears in debt. If they're fortunate and privileged enough to get to our positions, they only brought it on themselves.
See this depends. If the following are true:
1) The interest rate on your debt is below inflation
2) The cost to service the debt is a sufficiently low percentage of your monthly take home
Then taking a loan is often MUCH smarter than buying it cash, because your cash can earn interest in excess of the loan interest in most scenarios. I know people with ten houses on 30-year 2.5% notes. They could pay them all off tomorrow but it wouldn't make sense financially.
Remember, when you take a loan you have extremely large banks on the other side of your "great idea" so either they're incredibly stupid, or they can take into account more factors.
Say you have $250k in diversified assets and a $500k note.
In scenario A you put $250k and have no earning power, owing $250k. If you lose your job and foreclose that downpayment is lost.
In scenario B you lose your job but you still have $250k on assets, you can draw on that to pay the $500k note as it comes due. You have options.
I guess I’m wondering if others here follow the same model of spend the dollars and save the stock.
Spend about $65k / year.
The rest goes into 401k / brokerage.
Live in a (relatively) high cost-of-living area (HCOLA), bought large house with an acre in 2016, have 2 cars that are 7-8 years old with relatively low miles on them, paid off 5 years ago.
Compared to the absolute most expensive places in the country (San Fran/NYC) it is not a "high" cost-of-living, but compared to much of the rest of the country it is. Median home price in the U.S. in 2016 was $225k or so, and our home was $390k. (Sales and value estimates now are approaching $600k for the same comparable homes in this area.)
Spoken like someone who doesn't live in a HCOL area
And my house is high-cost compared to the median. Just not compared to the top x% of the country.
Aside from housing and sometimes fuel, almost everything a normal person buys costs about the same everywhere in the country.
Cars, TVs, phones, washing machines, clothing, shoes, tools, and so forth are not selling at different MSRP in different parts of the country.
In truly high cost of living areas, like Silicon Valley, the down payment for a home is enough money to buy a handful of new cars outright -- literally several hundred thousand dollars. If you live in an area like that, and you can afford a home, almost everything else you buy will be very cheap in comparison.
Lots of common grocery items like milk, eggs, meat, and fresh produce have highly regionally variable pricing. (Highly processed dry and frozen foods tend to be more consistent in pricing.)
Why? How do you justify that? Do you have no concept of how to manage money?
You keep saying this without explaining how that can possibly be true
401k, RSUs, capital gains on investments might be another 50K - Saved.
Mortgage: 2280.07 Groceries: 2,279.13 (eat mostly vegetarian/pescetarian... fresh fruits, vegetables, fish/shrimp, beans, tortillas, eggs, cereals, healthy and beauty crap, household supplies) Medication: 22.14 Entertainment: 38.47 Restaurants: 52.94 Fuel: 234.03 Doctor: 334.07 Dentist: 257.00 Electric: 151.31 Garbage: 35 Water/Sewer: 125.77 (includes mandatory city fees for "street maintenance") Internet: 99.99 Phone: 79.89
EDIT: this is for a household of 4