100%.
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Yes! Their car costs were really high, I think they were over $20k in debt just in cars. I was amazed they were so resistant to getting cheaper cars considering the situation they are in. The direct tv seemed like a telling item too, not on its own but in context. She pushed back on getting rid of direct tv because she was proud of the rate she got on itâŚwhich makes me think theyâre bleeding money all over the place.
I wonder if the reason Ramit didnât drill down to other costs is because thatâs against his whole dogma. His entire thing is about how small costs donât matter, but I think this is so true:
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@AllHat I totally agree that this couple has had a lack of planning, particularly when the Husband got un-involved from the finances.
If the follow-up can be believed, the husband is back to participating in the finances; the Jeep is gone and their car payment is $200 a month lower, with lower gas costs; Direct TV is gone, and so is gymnastics. They also dropped PMI from their mortgage, which is a counter-argument against what Iâm going to say next.
I agree that they donât need 3200 sf. But I donât see trading houses as an immediate slam-dunk for the following reasons:
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It sounded to me like they bought in the last couple of years. Before I heard they were able to drop PMI, I figured it meant they had very little equity in the house. If they sell and buy a new house, they have to cover the sales commission (about 6%) and closing costs for both transactions. I am skeptical they have either the equity or liquidity to do that, and it puts them in an even bigger immediate crunch.
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If theyâve had this house less than two year, they could face capital gains taxes for a short term sale.
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Mortgage rates have gone up a lot in the last couple of years, it sounds like they bought just before rates started rising. The higher interest rates will add several hundred a month that they arenât paying now in interest (I think they were smart enough to get a fixed rate loan, I hope so).
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Some of you may recall that I wanted to downsize for years. Part of the reason I didnât was that purchasing a home that was half the size of what I was living in would be at least 80% of what I was able to sell for (before commissions, etc.)
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I also suspect, but obviously donât know, that they would end up in something older that has more immediate maintenance needs.
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House prices have gone up dramatically in a lot of places in the last two years, and inventory is tight in many places. Thereâs a lot of stress in trading houses these days.
By the time I factor in all of these things, I see a lot of churn and upheaval and potential cash flow problems to live in a house thatâs less suited to their needs to save maybe $400 - $700 per month, and thatâs after they pay off any financing they needed to cover closing and commission costs. I just donât think itâs worth it. If they were renting and thinking of buying right now, Iâd have a different answer.
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I was curious too and downloaded it a while back. I hope enough formatting carried over for this to be useful.
| Current Spending Plan | ||
|---|---|---|
| NET WORTH | $ | |
| Assets (current value of car, home, property, business) | ||
| Investments (include 401K, non retirement â all investments) | ||
| Savings | ||
| Debt (students loans, credit card debt, mortgage) | ||
| TOTAL NET WORTH | $0 | |
| INCOME | CURRENT MONTHLY $ | |
| Gross monthly income (all income before taxes added up) | ||
| Net monthly income (how much you take home after taxes) | ||
| FIXED COSTS | ||
| Rent / Mortgage | ||
| Utilities (gas, water, electric, internet, cable, etc.) | ||
| Insurance (medical, auto, home / renters, etc.) | ||
| Car Payment / Transportation | ||
| Debt Payments | ||
| Groceries | ||
| Clothes | ||
| Phone | ||
| Subscriptions (Netflix, gym membership, meal services, Amazon, etc.) | ||
| FIXED COSTS TOTAL | $0 | |
| INVESTMENTS | ||
| Post-Tax Retirement Savings | ||
| Stocks | ||
| Add your own here | ||
| INVESTMENTS TOTAL | $0 | |
| SAVINGS GOALS | ||
| Vacations | ||
| Gifts | ||
| Long Term Emergency Fund | ||
| Add your own here | ||
| SAVINGS TOTAL | $0 | |
| EVERYTHING ELSE | ||
| EVERYTHING ELSE (Dining out, movies, anything you want) | $0 | |
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Youâre the best! I feel like youâre our insider mole. Even though none of that is this is that serious and you can access all of this online, haha. Your rationale re: the house makes a lot of sense too.
I think itâs super bizarre to consider subscriptions and clothing fixed- anyone else? Groceries too, really, I mean you have to spend some in that category but itâs highly impactable for most people.
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Yeah subscriptions I could maybe see as fixed because theyâre X amount every month, but thatâs not the case for clothing or groceries. Or flip it to groceries (and maybe clothing) are non-optional expenses so theyâre âfixedâ (required) but then the subscriptions arenât? I dunno.
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If their mortgage/utilities are 25% of gross, then theyâre paying $32,500 a year/$2700 a month. Thatâs ⌠a lot. That was about what we were paying a few years ago on an $800k houseâŚ
Their house must be huge!!! Though if itâs that big maybe their utilities are really high too and thatâs what makes their payments high.
Edited to add - I mustâve missed it - 3200 sq ft!! Thatâs like ⌠2.5x my house size. I canât even imagineâŚ
I agree that they probably canât do much about the house at this point though.
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Thank You! I am definitely boggled by including subscriptions, groceries, and clothes in fixed costs. There is nothing fixed about those unless you are like, locked into a gym membership. In that case it might be a fixed cost but definitely a discretionary cost. I would honestly consider the subscriptions to fall under his âeverything elseâ category.
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Aw, thanks.
I have lost access to the follow-up emails. I canât find them on the site, and I sent an inquiry in to his support team, and I guess they couldnât find them either.
Or maybe itâs because I ultimately unsubscribed from his emails. When he hit three in one day, it was âSee ya!â
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Lmao. Nice
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I have a $485k mortage on a $675k house. My mortgage payment is $2400 per month. If I add in utilities then Iâm at around $2750 total for fixed housing costs. Iâm confused about whether their house is 25% of gross or net income, because he tends to ask people what their monthly gross income is but then he corrected himself and said their fixed costs are 98% of net. So Iâm assuming 25% of net, which would obviously be less than 25% of gross.
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I know Iâm beating a dead horse here, but I think he includes groceries and subscriptions and stuff in fixed costs because it makes the titles of his episodes more click-baity. There have been a lot lately about âThey make $XXX and spend $98% on fixed costs!â
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We will all pitch in to purchase you a ridiculous wig and some novelty glasses. INFILTRATE. RECORD. REPORT.
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The numbers I recall hearing were
$3K per month of housing costs
$133K per year
I also thought I heard $12K per month income which meshed with the 25%.
But obviously that doesnât mesh with the $133.
So if we are guessing this is like a $750K - $800K house and Iowa is a lower cost of living place, I half wonder if someone here with good real estate porn skills could figure out where they live in short order.
Itâs possible they could take $1500 - $1800 a month off of their housing costs and make me eat my words.
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Yeah, thatâs a good point! I guess I think of âfixedâ as âtotally essential and unchangeable for the foreseeable future.â
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I agree, thereâs a lot of stuff in there I wouldnât think of as fixed. He considers any regular expense as âfixed.â
I guess in part itâs because his other category is âGuilt Free Spendingâ and putting things like Clothing and Groceries under there (like you could live completely without them) doesnât seem right either.
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Maybe theyâre in Cedar Rapids. This is a 5 bedroom for $819k
https://www.trulia.com/p/ia/cedar-rapids/1281-kona-cir-cedar-rapids-ia-52411--2571086053
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3178 sf. I bet youâre close.
Yeah I wouldnât want to leave that house either. Itâs gorgeous. love those windows.
ETA again: Est. Mortgage $5,521/mo*
Probably not our folks.
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And hereâs another 5 bedroom in Cedar rapids for $397k.
https://www.trulia.com/p/ia/cedar-rapids/5016-windy-meadow-cir-ne-cedar-rapids-ia-52411--2100757947
1 Like
Iâm nothing if not a creepy internet sleuth.
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