US
citizens are allowed to own their homes and the land it sits on. Typically,
young US citizens may rent until they realize that monthly home mortgage
payments are less than their rent payments.
Home
ownership allows us to avoid paying rent. We can pay off our mortgages in 15 to
30 years and lower our expense for shelter after that. This is critical to becoming self-supporting,
especially after retirement and accumulating assets that appreciate in value to
establish our net worth. See below.
US Net
Worth of Homeowners v Renters
Age Homeowner Renter
-35 $10,200 $5,044
35-44 $68,400
$25,080
45-54 $110,600
$39,740
55-64 $168,500 $65,100
65-69 $233,300
$86,630
70-74 $211,700
$58,370
65+ $209,300 $64,370
75+ $200,700
$50,840
Inflation
Beating Strategies
Buying a
single-family home allows home owners to buy an asset that will appreciate in
value and can be paid off in 15 years. The mortgage interest paid is off-set by
the mortgage tax deduction and the appreciation in value.
In
Periods of Low Inflation, the best 401k investments are in the Vanguard 500
Index.
In
Periods of High Inflation the best 401K investments are in fixed income tied to
inflation.
My
strategy for beating inflation from 1965 to 1975 was to buy a single-family
home in the growing exurbs and work multiple jobs. In 1971, I elected a fixed
interest investment account. This account appreciated during high inflation
years from 1965 to 1975 and continued to rise to 2015. I changed jobs 3 times for bigger jobs at higher
salaries.
In 1975,
I moved out-of-state and bought a larger single-family home and was eligible
for a profit-sharing plan that generated 10% of salary per year. I changed jobs
1 time for a higher salary.
In 1983,
I moved out-of-state and bought an even larger single-family home and was
eligible for stock. When inflation got under control after 1985, I invested in
a 401K. I changed jobs 1 time for a better job.
In 1993 I
was recruited by 6 electronics companies to open a Private Consulting Practice.
I transferred my 401K to a Vanguard 500 Index SEP and went to all stocks. I ran
this consulting practice until 2017 and retired at age 74.
My
financial plan was to keep my income ahead of inflation and my spending low. To
build net worth I bought homes that appreciated in value and invested in fixed
interest during high inflation years from to and in stocks during the lower
inflation years after 1993.
I bought
my first 2000 square foot home on a 1 acre lot in 1966 for $16,000 and sold it
in 1975 for $36,000. I had paid $1800 per year in mortgage payments for 10
years that totaled $18,000. My house appreciated by $20,000. It was a savings
plan. Owning my house ended up costing nothing. I recovered all of my house
payments using asset appreciation.
I bought
my second 3000 square foot home in 1975 for $55,000 and sold it in 1983 for
$85,000. I had paid $3600 per year in mortgage payments for 8 years that
totaled $28,800. My house appreciated by $30,000, covering my $20,000
down-payment.
I bought
my third 4000 square foot home in 1983 for $135,000 and paid it off in 2000. I
had paid $16,800 per year in mortgage payments for 17 years that totaled
$285,600. I spent another $100,000 on upgrades and with a $30,000 down-payment
I have $415,600 invested. I still live in this house and comparable homes in
this subdivision are selling for $700,000.
My job
changes were actually based on my quest to become a “hands-on” expert and
leader. I was “accomplishment motivated”, productivity oriented and process
focused. I was an “impact player”, internal consultant and turnaround manager.
It typically took 3 to 4 years to accomplish what I came to these companies to
do. When I was done, I moved on to learn more. I worked 28 years for 7
manufacturing corporations and 1 university from 1965 to 1993. I was
self-employed 24 years in my private consulting practice to serve 40
electronics manufacturing companies in Atlanta.
I retired at age 74 in 2017.
My wife
had been a “stay at home” mom from 1965 to 1986, but got her Dental Hygiene
degree in 1986, worked 21 years and retired in 2017. Her added income allowed
us to accomplish our financial goals. We had 6 children and have 14
grandchildren and 4 great grandchildren and continue to have a really good
time.
Norb
Leahy, Dunwoody GA Tea Party Leader
No comments:
Post a Comment