Why you need a rainy day fund

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stoptothink
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Re: Why you need a rainy day fund

Post by stoptothink »

FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
It's pretty darn hard to collect data on this specific question, here's about as close as it gets https://porch.com/advice/renters-priced-out-study

"61% of renters across the biggest metropolitan areas are priced out of home ownership, even if they saved up for a down payment..."

Personally, I would bet a ton of money that this (the majority of renters would prefer to own) is the case and I am actually one who may prefer renting even though we own (completely, no mortgage). Of those in my social circle who are renters, pretty certain virtually all of them would prefer to own (all other things equal).
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FreddieFIRE
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Re: Why you need a rainy day fund

Post by FreddieFIRE »

bmelikia wrote: Thu Jun 30, 2022 5:46 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
drk
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Re: Why you need a rainy day fund

Post by drk »

stoptothink wrote: Thu Jun 30, 2022 5:49 pm It's pretty darn hard to collect data on this specific question
The New York Fed's SCE Housing Survey includes exactly that question: "Assuming you had the financial resources to do so, would you like to own instead of rent your primary residence?" Of renters, 69.2% said they prefer owning (51.4% strongly).
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
mnsportsgeek
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Re: Why you need a rainy day fund

Post by mnsportsgeek »

This triggers my anxiety lol.

Homeowner for 2 years and I hate it for those very reasons. Always fixing something. Would love to rent again.
drk
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Re: Why you need a rainy day fund

Post by drk »

For the OP: it's hard to say without knowing how much each of those cost, but they all seem like things I could either put on a credit card then cash-flow out of my paycheck, or tap my HELOC for.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
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FreddieFIRE
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Re: Why you need a rainy day fund

Post by FreddieFIRE »

mnsportsgeek wrote: Thu Jun 30, 2022 6:05 pm This triggers my anxiety lol.

Homeowner for 2 years and I hate it for those very reasons. Always fixing something. Would love to rent again.
:D Yep, that's homeownership for you. You'll likely come out ahead :moneybag , but it ain't "free."
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
bmelikia
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Re: Why you need a rainy day fund

Post by bmelikia »

FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm
bmelikia wrote: Thu Jun 30, 2022 5:46 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
Ok, but I wasn't talking about you in my post - You are perhaps not the "common man" that I was making my assumptions about
"I would rather die with money, than live without it...." - Bogleheads member Ron | | A time to EVALUATE your jitters https://www.bogleheads.org/forum/viewtopic.php?p=1139732#p1139732
barberakb
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Re: Why you need a rainy day fund

Post by barberakb »

FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm
bmelikia wrote: Thu Jun 30, 2022 5:46 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
You are most likely the outlier not the norm...

I rent to a lot of people, most of them talk about wanting to own or even ask me if I will sell to them. Almost all of them don't buy because they can't afford the down payment / recurring costs
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HMSVictory
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Re: Why you need a rainy day fund

Post by HMSVictory »

gavinsiu wrote: Tue Jun 28, 2022 11:06 am So in the span of a year, I had to:

1. Redo the patio since the stairs collapsed and it became a safety issue.
2. Replaced AC central air unit, which suddenly gave out.
3. Replaced the dish washer that suddenly died.
4. Replaced the batteries on the sump pro (batteries are not cheap at $1k).
5. Replace my computer that suddenly died.
6. Fixed a leak that was dumping toilet water into my office.
7. Fixed a leak coming from the outside into the house, which turned out to be on the roof.

In the case of #1, I have been saving up to replace, but all of the others were totally unexpected. The rainy day fund took a hit but is being replenished. This is the importance of having a rainy day fund since when it rains, it sometimes pours.
We don't know when it will rain but we do know that it will at some point! That's why I own an umbrella (emergency fund).

All these posts about investing the emergency fund are just silly. You aren't going to get rich investing the emergency fund and once you reach a certain level of net worth its really irrelevant what the return is.
Stay the course!
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HMSVictory
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Re: Why you need a rainy day fund

Post by HMSVictory »

barberakb wrote: Fri Jul 01, 2022 3:58 pm
FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm
bmelikia wrote: Thu Jun 30, 2022 5:46 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
You are most likely the outlier not the norm...

I rent to a lot of people, most of them talk about wanting to own or even ask me if I will sell to them. Almost all of them don't buy because they can't afford the down payment / recurring costs
My mother is a multi-millionaire and choses to rent..... its a nice place though! I would agree she's an outlier but in the 55+ community renting can have a lot of benefits including living in a nice community.
Stay the course!
Ed 2
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Re: Why you need a rainy day fund

Post by Ed 2 »

gavinsiu wrote: Tue Jun 28, 2022 11:06 am So in the span of a year, I had to:

1. Redo the patio since the stairs collapsed and it became a safety issue.
2. Replaced AC central air unit, which suddenly gave out.
3. Replaced the dish washer that suddenly died.
4. Replaced the batteries on the sump pro (batteries are not cheap at $1k).
5. Replace my computer that suddenly died.
6. Fixed a leak that was dumping toilet water into my office.
7. Fixed a leak coming from the outside into the house, which turned out to be on the roof.

In the case of #1, I have been saving up to replace, but all of the others were totally unexpected. The rainy day fund took a hit but is being replenished. This is the importance of having a rainy day fund since when it rains, it sometimes pours.
Rainy day fund is not for everyone . It’s depends what size of your portfolio. After certain number it ain’t matter. You can sell some of your investments if you need to fund the project or emergency some kind. But only once you’ve got enough;)
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
RetiredAL
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Re: Why you need a rainy day fund

Post by RetiredAL »

My RDF disappeared 2 yrs into retirement when I replaced the our roof. Today, if I need more money, I just withdraw more $ from the retirement accounts.

During my working years, I also had a car sinking fund. After a car was paid off, the same $ amount went to the CU and by the time I bought again, I usually 1/2 or more of the next car in cash.
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gavinsiu
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Re: Why you need a rainy day fund

Post by gavinsiu »

RetiredAL wrote: Fri Jul 01, 2022 4:38 pm My RDF disappeared 2 yrs into retirement when I replaced the our roof. Today, if I need more money, I just withdraw more $ from the retirement accounts.

During my working years, I also had a car sinking fund. After a car was paid off, the same $ amount went to the CU and by the time I bought again, I usually 1/2 or more of the next car in cash.
I sort of do the same thing. A while back, I had to little money and had to do a car loan, but after I paid it off, I continue to set aside that money. The next time I purchase the car, it was cash. The same sort of thing happen. The money used to go to daycare but gets repurpose into college savings, etc. The expenses never ends with kids!

I think there is a difference between retirement and when you are accumulating for retirement. When you are acculumating, you want to try to avoid getting into the habit of raiding your retirement funds. In my case, I was always overly agreesive, so it would not be practical to raid the portfolio for cash. During retirement, a lot of your money will be in short term bonds or cash so you can afford to raid it but then take less out later if you can.
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gavinsiu
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Re: Why you need a rainy day fund

Post by gavinsiu »

HMSVictory wrote: Fri Jul 01, 2022 4:19 pm My mother is a multi-millionaire and choses to rent..... its a nice place though! I would agree she's an outlier but in the 55+ community renting can have a lot of benefits including living in a nice community.
I know of several people who are really well off but choose to rent because they don't want the hassle of dealing with a property.

My mom is not a multimillionaire but lives in a retirement community. She is not renting but the arrangement is very similar to renting. She lives in a co-op that's been paid off, but there is a HOA fee. The HOA takes care of property tax and repairs inside and outside as long as she doesn't make changes. The HOA also includes internet and cable but not phone service, but then she piggy backs off that and uses OOMA for phone for a few dollars per month. The HOA is rather high though, like a bit over $1K a year and rises in price like rent, but it's also in the Bay area, and there is no way to rent for $1K a month in the bay area.
shell921
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Re: Why you need a rainy day fund

Post by shell921 »

Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
stoptothink
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Re: Why you need a rainy day fund

Post by stoptothink »

HMSVictory wrote: Fri Jul 01, 2022 4:19 pm
barberakb wrote: Fri Jul 01, 2022 3:58 pm
FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm
bmelikia wrote: Thu Jun 30, 2022 5:46 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm

I call.... baloney. Can you back that up or did you just make it up?
I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
You are most likely the outlier not the norm...

I rent to a lot of people, most of them talk about wanting to own or even ask me if I will sell to them. Almost all of them don't buy because they can't afford the down payment / recurring costs
My mother is a multi-millionaire and choses to rent..... its a nice place though! I would agree she's an outlier but in the 55+ community renting can have a lot of benefits including living in a nice community.
I'm a multi-millionaire too and would probably prefer to rent (although we own), but I am all but certain your mom and I (and FreddieFire) are outliers.
Northern Flicker
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Re: Why you need a rainy day fund

Post by Northern Flicker »

If you take a rainy day fund in cash and combine with bonds held in a portfolio, you can calculate the duration of the combined portfolio, and just have it invested. Short term expenses and retirement liabilities are not intrinsically different except for timing.
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FreddieFIRE
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Re: Why you need a rainy day fund

Post by FreddieFIRE »

bmelikia wrote: Thu Jun 30, 2022 6:32 pm
FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm
bmelikia wrote: Thu Jun 30, 2022 5:46 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
Ok, but I wasn't talking about you in my post - You are perhaps not the "common man" that I was making my assumptions about
Yeah, I was "mostly" responding the your use of the word "most," which is subject to interpretation. Had you said "the majority" I would have agreed with you. That said, I believe that there are many reasons that some who could afford to buy a house choose instead to rent. 20%? 30%? We'll never really know. :D

I also think that the tides may be shifting. Fifty years ago, you bought a house because that's what everybody did and it was just the "right" thing to do. People also worried about "what will the neighbors/family think?" if I rent. My MIL still can't wrap her head around the fact that we sold our long term house and decided to just downsize and rent. We're over three years into it and I haven't even glanced in the rearview mirror. 8-)
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
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AnnetteLouisan
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Re: Why you need a rainy day fund

Post by AnnetteLouisan »

stoptothink wrote: Fri Jul 01, 2022 8:04 pm
HMSVictory wrote: Fri Jul 01, 2022 4:19 pm
barberakb wrote: Fri Jul 01, 2022 3:58 pm
FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm
bmelikia wrote: Thu Jun 30, 2022 5:46 pm

I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
You are most likely the outlier not the norm...

I rent to a lot of people, most of them talk about wanting to own or even ask me if I will sell to them. Almost all of them don't buy because they can't afford the down payment / recurring costs
My mother is a multi-millionaire and choses to rent..... its a nice place though! I would agree she's an outlier but in the 55+ community renting can have a lot of benefits including living in a nice community.
I'm a multi-millionaire too and would probably prefer to rent (although we own), but I am all but certain your mom and I (and FreddieFire) are outliers.
Ramit Sethi’s podcast this week targeted homeownership in a withering critique. He pointed out that mortgage interest can double the purchase price of a home with no equity being built for 15 years given amortization, plus closing costs, taxes, and repairs. Worth a listen whether or not you agree.
Northern Flicker
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Re: Why you need a rainy day fund

Post by Northern Flicker »

No equity for 15 years? Maybe the podcaster has not heard of 15-year mortgages. The effect of the mortgage should be assessed in real terms. I think most homeowners are paying mortgages with negative real interest rates the last year or two.
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AnnetteLouisan
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Re: Why you need a rainy day fund

Post by AnnetteLouisan »

Northern Flicker wrote: Fri Jul 01, 2022 10:49 pm No equity for 15 years? Maybe the podcaster has not heard of 15-year mortgages. The effect of the mortgage should be assessed in real terms. I think most homeowners are paying mortgages with negative real interest rates the last year or two.
He was discussing 30 year mortgages.
wander
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Re: Why you need a rainy day fund

Post by wander »

My rainy day fund is kept in a brokerage account.
Northern Flicker
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Re: Why you need a rainy day fund

Post by Northern Flicker »

AnnetteLouisan wrote: Fri Jul 01, 2022 10:55 pm
Northern Flicker wrote: Fri Jul 01, 2022 10:49 pm No equity for 15 years? Maybe the podcaster has not heard of 15-year mortgages. The effect of the mortgage should be assessed in real terms. I think most homeowners are paying mortgages with negative real interest rates the last year or two.
He was discussing 30 year mortgages.
Sure. That was a separate point from my point about cost in real terms. In real terms, a 30-year mortgage holder is doing even better than a 15-year mortgagee in the current climate from the longer amortization.
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HMSVictory
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Re: Why you need a rainy day fund

Post by HMSVictory »

shell921 wrote: Fri Jul 01, 2022 6:11 pm Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
CODB!
Stay the course!
shell921
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Re: Why you need a rainy day fund

Post by shell921 »

HMSVictory wrote: Sat Jul 02, 2022 8:02 am
shell921 wrote: Fri Jul 01, 2022 6:11 pm Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
CODB!
What does that mean-CODB ???
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Drew31
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Re: Why you need a rainy day fund

Post by Drew31 »

shell921 wrote: Sat Jul 02, 2022 8:42 am
HMSVictory wrote: Sat Jul 02, 2022 8:02 am
shell921 wrote: Fri Jul 01, 2022 6:11 pm Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
CODB!
What does that mean-CODB ???
Wikipedia is telling me “component-oriented database” or “City of Daytona Beach”

I’m not sure those are right in this context… :?
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Candor
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Re: Why you need a rainy day fund

Post by Candor »

shell921 wrote: Sat Jul 02, 2022 8:42 am
HMSVictory wrote: Sat Jul 02, 2022 8:02 am
shell921 wrote: Fri Jul 01, 2022 6:11 pm Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
CODB!
What does that mean-CODB ???
Probably Cost of Doing Business.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
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HMSVictory
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Re: Why you need a rainy day fund

Post by HMSVictory »

shell921 wrote: Sat Jul 02, 2022 8:42 am
HMSVictory wrote: Sat Jul 02, 2022 8:02 am
shell921 wrote: Fri Jul 01, 2022 6:11 pm Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
CODB!
What does that mean-CODB ???
Cost of Doing Business!
Stay the course!
H-Town
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Re: Why you need a rainy day fund

Post by H-Town »

gavinsiu wrote: Tue Jun 28, 2022 11:06 am So in the span of a year, I had to:

1. Redo the patio since the stairs collapsed and it became a safety issue.
2. Replaced AC central air unit, which suddenly gave out.
3. Replaced the dish washer that suddenly died.
4. Replaced the batteries on the sump pro (batteries are not cheap at $1k).
5. Replace my computer that suddenly died.
6. Fixed a leak that was dumping toilet water into my office.
7. Fixed a leak coming from the outside into the house, which turned out to be on the roof.

In the case of #1, I have been saving up to replace, but all of the others were totally unexpected. The rainy day fund took a hit but is being replenished. This is the importance of having a rainy day fund since when it rains, it sometimes pours.
Look on the bright side, now you have brand new patio, HVAC, dish washer, batteries for the sump pump, laptop, etc. It will be years when you need to replace them again.

Cash is fungible. Doesn’t matter it comes from your paycheck, savings, bonds, or stocks. Some would put it on new credit card to get up to $800 cash back (Chase card). Other cards have at least $200 or $300 cash back. Pay off the card immediately or within the next billing cycle.

I would also learn to fix things myself. Or at least get second and third opinions. I remember 3 years ago, a HVAC tech came out when HVAC was in trouble, and they recommended a new unit for $10k. I got a second company out and they said it can be fixed and keep going. HVAC is still going well now. So you shouldn’t go with the first opinion when they recommend replacing the unit.
Time is the ultimate currency.
international001
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Re: Why you need a rainy day fund

Post by international001 »

cannot find my reference, but once I read that renters were or very low or very reach. If you are poor, you cannot afford down payment and cannot proof steady income. If you are rich, you may be able to find better investment opportunities than your own home.
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gavinsiu
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Re: Why you need a rainy day fund

Post by gavinsiu »

H-Town wrote: Sat Jul 02, 2022 9:45 am Look on the bright side, now you have brand new patio, HVAC, dish washer, batteries for the sump pump, laptop, etc. It will be years when you need to replace them again.

Cash is fungible. Doesn’t matter it comes from your paycheck, savings, bonds, or stocks. Some would put it on new credit card to get up to $800 cash back (Chase card). Other cards have at least $200 or $300 cash back. Pay off the card immediately or within the next billing cycle.

I would also learn to fix things myself. Or at least get second and third opinions. I remember 3 years ago, a HVAC tech came out when HVAC was in trouble, and they recommended a new unit for $10k. I got a second company out and they said it can be fixed and keep going. HVAC is still going well now. So you shouldn’t go with the first opinion when they recommend replacing the unit.
True, the patio is actually paid for by money I intended for the roof, which got replaced by insurance due to a freak hail storm. I usually get second opinions if I can. I do know how to fix stuff myself, but I think a patio is outside of my expertise. However, I often have less time than money, so if it's a one-time thing I am more inclined to just pay the money. If it's something I will do again, I will try to learn it.

It appears the Sumpro is malfunctioning. After replacing the battery, it still does not work. Great.

Keep in mind that one should factor in some degree of replacement rate. I expect to replace a roof roughly every 15-20 years. A sump pump every 10 years, etc. If I add something, I have to think about the maintenance cost. The downside is that my appliances have failed earlier than expected. May be it's because they are more heavily use because I have kids or because appliances aren't made as well as they used to be.
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Watty
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Re: Why you need a rainy day fund

Post by Watty »

It is also important to keep in mind that there can be "good" emergencies too. Here are some examples that I have heard of actually happening.


1) Take a last minute trip. Before we meet my wife had a friend with a nonrefundable prepaid trip to Hawaii with her boyfriend when they broke up. My wife was able to go with her instead for the price of a plane ticket and a week off work. I have bought tickets to Europe and Australia within just a few hours notice when there were fantastic sales for more than half off, these quickly sold out since they were at more than 50% off the normal good price.

2) Buying a great car from a relative for a great but not totally unreasonable price. The word went out that elderly Aunt Bertha was finally willing to stop driving and sell her low mileage car but you needed to get there with a check today before she changed her mind again.

3) I once took a good job in a city that I wanted to move to but they did not pay relocation costs since they had only budgeted for local job candidates so I had to pay for my own move. I was single and just had an apartment but it was still a non-trivial cost.

There are lots and lots of situations where having an emergency fund can allow you to take advantage of opportunities that can come up.
shell921
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Re: Why you need a rainy day fund

Post by shell921 »

Thanks to all who explained that CODB means 'cost of doing business'.

So in the next 3 months I must tackle these :

Master shower grout/repair—$4,500
Wrought iron repaint-$800
Rain gutters cleaned $600
Windows washed $180
Area rugs cleaned - $300
3 new kitchen barstools $1,000
New printer-??? [$800 ?]
New patio furniture for terraces 2 & 3 - [??] -$5,000
New area rug for guest room $800
new iphone-?? $1,000 ??
srt7
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Re: Why you need a rainy day fund

Post by srt7 »

LittleMaggieMae wrote: Tue Jun 28, 2022 11:52 am
MrMadoff wrote: Tue Jun 28, 2022 11:33 am This is why renters don't need as big of a rainy day fund.
And I might add - may have more 'disposable' income because they do not need to PLAN to eventually replace appliances, etc... which they save up for a little at a time out of their monthly income...
Like it's mentioned here every second day ... being a landlord is a business / part time job so with such posts I'm curious if some of you think being a landlord (who the renter's depend on) is a charity. Any landlord worth their salt has pre-built this in to their rent. So yeah while you may not set aside money or feel like you have more "disposable" income that doesn't mean you aren't paying for it.
Taking care of tomorrow while enjoying today.
srt7
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Re: Why you need a rainy day fund

Post by srt7 »

gavinsiu wrote: Tue Jun 28, 2022 11:06 am So in the span of a year, I had to:

1. Redo the patio since the stairs collapsed and it became a safety issue.
2. Replaced AC central air unit, which suddenly gave out.
3. Replaced the dish washer that suddenly died.
4. Replaced the batteries on the sump pro (batteries are not cheap at $1k).
5. Replace my computer that suddenly died.
6. Fixed a leak that was dumping toilet water into my office.
7. Fixed a leak coming from the outside into the house, which turned out to be on the roof.

In the case of #1, I have been saving up to replace, but all of the others were totally unexpected. The rainy day fund took a hit but is being replenished. This is the importance of having a rainy day fund since when it rains, it sometimes pours.
Smart and responsible! Thanks for sharing.
Taking care of tomorrow while enjoying today.
AlwaysLearningMore
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Re: Why you need a rainy day fund

Post by AlwaysLearningMore »

AnnetteLouisan wrote: Fri Jul 01, 2022 9:20 pm
stoptothink wrote: Fri Jul 01, 2022 8:04 pm
HMSVictory wrote: Fri Jul 01, 2022 4:19 pm
barberakb wrote: Fri Jul 01, 2022 3:58 pm
FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm

Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
You are most likely the outlier not the norm...

I rent to a lot of people, most of them talk about wanting to own or even ask me if I will sell to them. Almost all of them don't buy because they can't afford the down payment / recurring costs
My mother is a multi-millionaire and choses to rent..... its a nice place though! I would agree she's an outlier but in the 55+ community renting can have a lot of benefits including living in a nice community.
I'm a multi-millionaire too and would probably prefer to rent (although we own), but I am all but certain your mom and I (and FreddieFire) are outliers.
Ramit Sethi’s podcast this week targeted homeownership in a withering critique. He pointed out that mortgage interest can double the purchase price of a home with no equity being built for 15 years given amortization, plus closing costs, taxes, and repairs. Worth a listen whether or not you agree.
* There are many approaches to paying off a note early: e.g., make 1 extra payment per year (or 1/12th per month). Round up each mortgage payment. https://www.thepennyhoarder.com/debt/on ... nt-a-year/
* The yearly financial benefits of home ownership are attractive to many investors: mortgage interest deduction, property tax deduction,
* Exclusion of $500k from gross income when selling home MFJ ($250k if single). https://www.law.cornell.edu/uscode/text/26/121 (This is a substantial benefit.)
* Home equity can be tapped in retirement (e.g., reverse mortgage)
* Some homeowners view their home as "forced savings" and enjoy the equity they've built up. (Not all investors are regimented to the point of investing after-rent $ into The Market.)
* Home ownership gives greater control over day-to-day accoutrements (e.g., free to choose your own appliances, renovations/improvements, paint color, etc.) A home can be customized to your liking, as opposed to most rental situations.
* A fixed-rate mortgage protects against inflation-related rent increases that can be faced by non-homeowners.
* Generally speaking, home ownership provides more privacy than rental situations.

*Some people feel that renting is a better fit for them, some for the long-term. They like the greater mobility vs home ownership. They understand that their rent provides them a place to live, and in exchange the rent they pay helps cover insurance, taxes, maintenance, any remaining mortgage payments on the property, plus profit for the landlord. The landlord is not running a charity.

* OP should definitely think about a HELOC (interest often tax-deductible) https://www.irs.gov/newsroom/interest-o ... er-new-law
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
finite_difference
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Re: Why you need a rainy day fund

Post by finite_difference »

shell921 wrote: Fri Jul 01, 2022 6:11 pm Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
That must be a nice microwave. Is there something a $1000 model does better than one that costs $100? The rest of the prices seem pretty reasonable. That’s a lot of terrace!
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
shell921
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Re: Why you need a rainy day fund

Post by shell921 »

finite_difference wrote: Sun Jul 03, 2022 12:44 am
shell921 wrote: Fri Jul 01, 2022 6:11 pm Within the last 12 months these were my expenses :

1. New spa cover for swim spa-$1,000
2. Replaced 13 yr old whole house water filter system—$7,000
3. New computer $2400 - I Mac
4. Replaced some irrigation lines and plants-$1,500
5. New microwave-$1,000
6. New patio furniture for one of 3 terraces - $3,000
That must be a nice microwave. Is there something a $1000 model does better than one that costs $100? The rest of the prices seem pretty reasonable. That’s a lot of terrace!
I did not WANT to replace my Viking microwave with yet another Viking microwave but had to since my house is a custom house and microwave and all appliances were 'built in' and the Viking microwave was the only one that would fit the space. I wanted a much cheaper one but it wouldn't fit. The Viking was $900 and the trim kit was $100. Well yes I have 3 terraces but 2 are small. One is off kitchen, one is off living room and one is off the guest room. I like nice patio furniture and umbrellas.
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willthrill81
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Re: Why you need a rainy day fund

Post by willthrill81 »

gavinsiu wrote: Tue Jun 28, 2022 11:06 am So in the span of a year, I had to:

1. Redo the patio since the stairs collapsed and it became a safety issue.
2. Replaced AC central air unit, which suddenly gave out.
3. Replaced the dish washer that suddenly died.
4. Replaced the batteries on the sump pro (batteries are not cheap at $1k).
5. Replace my computer that suddenly died.
6. Fixed a leak that was dumping toilet water into my office.
7. Fixed a leak coming from the outside into the house, which turned out to be on the roof.

In the case of #1, I have been saving up to replace, but all of the others were totally unexpected. The rainy day fund took a hit but is being replenished. This is the importance of having a rainy day fund since when it rains, it sometimes pours.
There are different ways to address this issue. Some have an 'EF' to take of such issues, but I would strongly argue that an appliance dying is not an emergency. Rather, it's something that you should know will happen at some point.

We save monthly into a 'non-monthly and irregular expense' fund, and it's worked exceptionally well for us for nearly a decade now, as discussed here.
The Sensible Steward
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willthrill81
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Re: Why you need a rainy day fund

Post by willthrill81 »

stoptothink wrote: Thu Jun 30, 2022 5:49 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
It's pretty darn hard to collect data on this specific question, here's about as close as it gets https://porch.com/advice/renters-priced-out-study

"61% of renters across the biggest metropolitan areas are priced out of home ownership, even if they saved up for a down payment..."

Personally, I would bet a ton of money that this (the majority of renters would prefer to own) is the case and I am actually one who may prefer renting even though we own (completely, no mortgage). Of those in my social circle who are renters, pretty certain virtually all of them would prefer to own (all other things equal).
I suspect that you're correct that many renters have been essentially priced out of ownership in recent years. In our area, the nominal price of our home has increased by 120% in the last 7 years, but incomes in the area certainly haven't increased by anywhere near that much. All else equal, such drastic increases in prices makes first-time home ownership more difficult.
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drk
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Re: Why you need a rainy day fund

Post by drk »

srt7 wrote: Sat Jul 02, 2022 2:42 pm Like it's mentioned here every second day ... being a landlord is a business / part time job so with such posts I'm curious if some of you think being a landlord (who the renter's depend on) is a charity. Any landlord worth their salt has pre-built this in to their rent. So yeah while you may not set aside money or feel like you have more "disposable" income that doesn't mean you aren't paying for it.
The bolded part is key. There are a lot of amateur landlords out there. It's common for people to ask whether they should rent out their old house even when the market rent barely covers their mortgage (in order to "continue to build equity"), and that's among the few that self-select into asking questions on Bogleheads.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
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Re: Why you need a rainy day fund

Post by Wannaretireearly »

I conveniently invested my rainy day fund, then needed funds to cover tax bill :oops:

Did not want to sell. Found sage advice here to use 2% Wells Fargo card and carry debt for 12+ months at 0% APR. suppose this works for me, as it’s my only debt. Ymmv.
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
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Re: Why you need a rainy day fund

Post by LittleMaggieMae »

srt7 wrote: Sat Jul 02, 2022 2:42 pm
LittleMaggieMae wrote: Tue Jun 28, 2022 11:52 am
MrMadoff wrote: Tue Jun 28, 2022 11:33 am This is why renters don't need as big of a rainy day fund.
And I might add - may have more 'disposable' income because they do not need to PLAN to eventually replace appliances, etc... which they save up for a little at a time out of their monthly income...
Like it's mentioned here every second day ... being a landlord is a business / part time job so with such posts I'm curious if some of you think being a landlord (who the renter's depend on) is a charity. Any landlord worth their salt has pre-built this in to their rent. So yeah while you may not set aside money or feel like you have more "disposable" income that doesn't mean you aren't paying for it.
Yes, being a land lord is a business and the expenses of the landlord are built into the price of rent. There are expenses that homeowners have that renters do not have (and visa versa). If it was less expensive over all to own few people would rent. Generally renting is less expensive than owning.

I believe generally that the monthly Rent paid is often close to the amount of a mortgage (PITI) for a similar property in the same area. It seems to me that when the costs of renting are compared to the cost of owning - it's the amount of rent paid - compared to the mortgage amount (PITI). I have not seen an area where renting (the monthly rent amount) costs dramatically more than owning the same type of property. Generally home ownership over all is MORE expensive than renting.

If someone has enough income to own - but opts to rent and not at the top of their price range - I'm thinking they will have more disposable income over all. (I have some high paid co-workers who are long term renters and are very happy with their choice).

If someone rents but toughs out a less desirable place because of lower cost (for some period of time) so they can "save up" for something better - they will have more disposable income (to save).
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Re: Why you need a rainy day fund

Post by Michael Patrick »

I was standing on my deck, a few years after I bought the place, looking at the roof on a duplex a couple doors down. The shingles were crumbling. I was surprised they hadn’t replaced the roof. Then I looked at mine, and realized I had no idea how old it was, just that it was there when we moved in.

The previous owner had given us a file with a bunch of maintenance info. I found the invoice for the roof, and was chagrined to find out I was in year 20 of a 25-year roof. And that I didn’t have the money to replace it. That was when I started my rainy day fund.
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Re: Why you need a rainy day fund

Post by willthrill81 »

LittleMaggieMae wrote: Sun Jul 03, 2022 5:55 pmGenerally renting is less expensive than owning.
This is generally true in HCOL areas, but in most MCOL and LCOL areas, it is generally false.
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getthatmarshmallow
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Re: Why you need a rainy day fund

Post by getthatmarshmallow »

I would distinguish personally between the everything-all-at-once fund (emergent situations) and the house-must-eat fund (regular maintenance that is distinct from an emergency) and the stuff-I-want-to-fix-or-upgrade (projects.). But in our experience, lbym solves most of it.

Renting is sometimes cheaper but also means putting up with someone else's standard of repairs.
AlwaysLearningMore
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Re: Why you need a rainy day fund

Post by AlwaysLearningMore »

LittleMaggieMae wrote: Sun Jul 03, 2022 5:55 pm ...Yes, being a land lord is a business and the expenses of the landlord are built into the price of rent. There are expenses that homeowners have that renters do not have (and visa versa). If it was less expensive over all to own few people would rent. Generally renting is less expensive than owning.

I believe generally that the monthly Rent paid is often close to the amount of a mortgage (PITI) for a similar property in the same area. It seems to me that when the costs of renting are compared to the cost of owning - it's the amount of rent paid - compared to the mortgage amount (PITI). I have not seen an area where renting (the monthly rent amount) costs dramatically more than owning the same type of property. Generally home ownership over all is MORE expensive than renting.

If someone has enough income to own - but opts to rent and not at the top of their price range - I'm thinking they will have more disposable income over all. (I have some high paid co-workers who are long term renters and are very happy with their choice).

If someone rents but toughs out a less desirable place because of lower cost (for some period of time) so they can "save up" for something better - they will have more disposable income (to save).
Depending on the size and creature comforts desired, it's not always possible to rent a place one desires. Renting an apartment with approximate square footage to a small home is one thing. Renting a small home is another. But renting a 4 bedroom apartment with en suite bathrooms for each bedroom, plus 2 covered parking spaces isn't always an options (but what the homeowner chooses). And in the school district desired.
It's not possible to paint with a broad brush.
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
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Re: Why you need a rainy day fund

Post by srt7 »

LittleMaggieMae wrote: Sun Jul 03, 2022 5:55 pm
srt7 wrote: Sat Jul 02, 2022 2:42 pm
LittleMaggieMae wrote: Tue Jun 28, 2022 11:52 am
MrMadoff wrote: Tue Jun 28, 2022 11:33 am This is why renters don't need as big of a rainy day fund.
And I might add - may have more 'disposable' income because they do not need to PLAN to eventually replace appliances, etc... which they save up for a little at a time out of their monthly income...
Like it's mentioned here every second day ... being a landlord is a business / part time job so with such posts I'm curious if some of you think being a landlord (who the renter's depend on) is a charity. Any landlord worth their salt has pre-built this in to their rent. So yeah while you may not set aside money or feel like you have more "disposable" income that doesn't mean you aren't paying for it.
Yes, being a land lord is a business and the expenses of the landlord are built into the price of rent. There are expenses that homeowners have that renters do not have (and visa versa). If it was less expensive over all to own few people would rent. Generally renting is less expensive than owning.

I believe generally that the monthly Rent paid is often close to the amount of a mortgage (PITI) for a similar property in the same area. It seems to me that when the costs of renting are compared to the cost of owning - it's the amount of rent paid - compared to the mortgage amount (PITI). I have not seen an area where renting (the monthly rent amount) costs dramatically more than owning the same type of property. Generally home ownership over all is MORE expensive than renting.

If someone has enough income to own - but opts to rent and not at the top of their price range - I'm thinking they will have more disposable income over all. (I have some high paid co-workers who are long term renters and are very happy with their choice).

If someone rents but toughs out a less desirable place because of lower cost (for some period of time) so they can "save up" for something better - they will have more disposable income (to save).
Do you own a house? Have you ever? I ask because I've been owning one for 20+ years and now have several properties. There was not a single month (including during the 2008 crash) that any of my properties didn't generate at least 15% cash flow AFTER paying the mortgage (PITI), HOA and setting aside money for the emergencies. Not sure if I'm lucky (or really good at this?) or if you have not been. Either way I'd like to stress again that no one should run a cash flow negative rental. It's just common sense.
Taking care of tomorrow while enjoying today.
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Re: Why you need a rainy day fund

Post by willthrill81 »

FreddieFIRE wrote: Thu Jun 30, 2022 6:01 pm
bmelikia wrote: Thu Jun 30, 2022 5:46 pm
FreddieFIRE wrote: Thu Jun 30, 2022 5:41 pm
bmelikia wrote: Thu Jun 30, 2022 5:39 pm Most renters are renters because it is cost prohibitive for them to be owners, not because they could easily be homeowners but simply choose not to be. . .
I call.... baloney. Can you back that up or did you just make it up?
I have nothing to support that assumption of mine - do you have something that supports your comment of "baloney"?
Not really. Other than the fact that I could easily own but instead choose to rent. I have owned many more years than I have rented. I have owned a fully paid off house for many years. Now, I rent. Life is getting shorter by the day and while I have time to deal with home ownership, I choose not to. 8-)
With a paucity of data on the specific issue, I won't say much with confidence, but it does seem that at least a big proportion of renters are so because they cannot afford to own. I have little doubt that this is at least true in our area, where property values have gone up in recent years far more so than rents. Heck, our own little 3/2, 1,200 sq. ft. home in a nice neighborhood is now worth $500k, and our area is (or at least was 8 years ago) MCOL. Even if we stretch the adage about only buying a home worth 2x your annual income to 3x, that equates to a buyer needing $167k of income to afford this small home.

That said, there is certainly a chunk of renters who could afford to own but don't for any number of reasons (e.g., lifestyle, desire to be flexible).
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LittleMaggieMae
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Re: Why you need a rainy day fund

Post by LittleMaggieMae »

srt7 wrote: Thu Jul 07, 2022 9:25 am
LittleMaggieMae wrote: Sun Jul 03, 2022 5:55 pm
srt7 wrote: Sat Jul 02, 2022 2:42 pm
LittleMaggieMae wrote: Tue Jun 28, 2022 11:52 am
MrMadoff wrote: Tue Jun 28, 2022 11:33 am This is why renters don't need as big of a rainy day fund.
And I might add - may have more 'disposable' income because they do not need to PLAN to eventually replace appliances, etc... which they save up for a little at a time out of their monthly income...
Like it's mentioned here every second day ... being a landlord is a business / part time job so with such posts I'm curious if some of you think being a landlord (who the renter's depend on) is a charity. Any landlord worth their salt has pre-built this in to their rent. So yeah while you may not set aside money or feel like you have more "disposable" income that doesn't mean you aren't paying for it.
Yes, being a land lord is a business and the expenses of the landlord are built into the price of rent. There are expenses that homeowners have that renters do not have (and visa versa). If it was less expensive over all to own few people would rent. Generally renting is less expensive than owning.
I will try one more time:

I believe generally that the monthly Rent paid is often close to the amount of a mortgage (PITI) for a similar property in the same area. It seems to me that when the costs of renting are compared to the cost of owning - it's the amount of rent paid - compared to the mortgage amount (PITI). I have not seen an area where renting (the monthly rent amount) costs dramatically more than owning the same type of property. Generally home ownership over all is MORE expensive than renting.

If someone has enough income to own - but opts to rent and not at the top of their price range - I'm thinking they will have more disposable income over all. (I have some high paid co-workers who are long term renters and are very happy with their choice).

If someone rents but toughs out a less desirable place because of lower cost (for some period of time) so they can "save up" for something better - they will have more disposable income (to save).
Do you own a house? Have you ever? I ask because I've been owning one for 20+ years and now have several properties. There was not a single month (including during the 2008 crash) that any of my properties didn't generate at least 15% cash flow AFTER paying the mortgage (PITI), HOA and setting aside money for the emergencies. Not sure if I'm lucky (or really good at this?) or if you have not been. Either way I'd like to stress again that no one should run a cash flow negative rental. It's just common sense.
::sigh:: I seem to be misunderstood and I can't figure out a way to clarify what it is I want to convey.

I do own a house and rental properties - I do have positive cash flow on my all of my rentals and have since the first tenant signed a lease and made their first rent payment.

I have a 2b/2b townhouse rental. rentals in the subdivision rent for a little bit less than the cost of PITI and HOA fees on a newly purchased unit. There are a couple of townhouse units purchased recently at the "top of the market", updated and offered for rent based on the expenses of the new landlord (the new mortgage PITI plus HOA fees plus what the landlord needs to cover the cost of the updates, and then future maintenance/whatever) and the units aren't being rented - 2 have been available for 3 months with decreases in rent each month... the current market where my rentals are will not support a rent HIGHER than it costs to own.

Perhaps my rule of thumb that the reason the majority of renters rent is because it costs less than owning is wrong...

Maybe this is a class distinction and/or an income level issue?
Last edited by LittleMaggieMae on Thu Jul 07, 2022 10:20 am, edited 3 times in total.
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