Don't Delay Investing For Long
Troy and his wife want to know if they should invest while saving for the 100% down plan on a home. Dave thinks that depends on how long it will take to save the money for a home.
QUESTION: Troy in Dallas and his wife want to know if they should invest while saving for the 100% down plan on a home. Dave thinks that depends on how long it will take to save the money for a home.
ANSWER: I guess that would be how long it takes you. If you’re saving over 10 years, then you probably do need to do some investing. If you can put off investing for three to five and you’re really young and you want to pay 100% for a house, that would be a great plan.
You’re on a 12-year plan saving $10,000 a year, but I doubt you’ll be making $36,000 for 12 years. I would guess your income will come up over time. That would shorten the timeframe. The point is, I don’t want you to do no investing until you’re 34 or 36 years old. I wouldn’t want to do that. I think this $36,000 might be temporary. I’m betting on this book and you thinking about your career getting more money. Let’s say at $36,000 you can save $10,000 a year, but you get to $56,000. Now if you can still live on $26,000, which is what you’re proposing, now you can bank $30,000 a year. That’s pretty cool. If you can bank $30,000 a year, now to buy a $120,000 house only takes four years. Yeah, if you want to put off investing from 24 to 28 and pay cash for a $120,000 house, that starts to make sense, but being out of the investment world forever and ever—a long period of time—is not something I’m going to encourage.