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PSA, you will actually pay $1M for your $500k house at today's rates (lemmy.world)
submitted 1 year ago by to c/personalfinance@lemmy.ml
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This might be duh for some people, but if you're like me and considering a mortgage; at today's rates in the US at around 5-6%, over 30yr mortgage you will pay about same in interest as you will for your house price.

Your $500k house will cost you around $1M total over thirty years.

I was surprised.

https://m.mortgagecalculator.org/?q=A1Nzy-8KX

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[–] 5 points 1 year ago* (8 children)

I don't care about my net worth, I want to live and touch grass while working as little as possible. How do I optimise for that instead?

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  • [–] 10 points 1 year ago

    Go back to respec and pick boomer as your birth generation. The earlier the better, since all of the good level up perks were patched out for later players. Also, try to roll for high family wealth, otherwise there's a good chance you end up in the same place all over again.

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  • [–] 3 points 1 year ago (6 children)

    That's fine. This exercise merely helps figure out how to get there most efficiently. If you want to maximize the time you spend not working, you'll want your money to be working for you as soon as possible.

    If I understand "touch grass" as "do inexpensive, enjoyable activities" like hiking, going to the park, etc, then I recommend (assuming you're starting just out of college):

    • rent a place close to your work to minimize commute time - don't buy, since that comes w/ time spent on maintenance
    • get a good paying job that respects your time - dollars per hour are the most important, not total dollars - this is the hardest part
    • cut expenses to the bone aggressively to save every penny - after all, the goal isn't to buy fancy things, but touch grass

    Then once you get $100k or so invested, switch to a lower paying job that you enjoy or takes minimal time, while meeting your basic needs (example: part-time barista job that provides benefits), and let that $100k compound. if you can reach that point by 40, that $100k should grow to $1M by 65, at which point you can probably take Social Security or whatever similar program your country has. In the US, you should be able to get $2k/month or so (today's dollars), and that $1M should provide $40k/year (~$3k/month; future dollars), which in today's dollars would be something like $3k/month, which is a solid $36k/year (plenty of people live on that). If you wait until you're 70, SS would increase a bit (perhaps $2.5-3k/month) and your investments would grow a bit (provide about 70% more income), so you'd end up at $4-4.5k/month, which is very solid.

    If you're comfortable moving to a less expensive place (assuming you live someplace like Europe or the US), you could retire much earlier.

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  • [–] 4 points 1 year ago (5 children)

    Actually that does remind me of a chart I saw about income/cost of living and at a certain point it means you can retire very quickly. The less money you need, the faster you can retire.

    Pretty sure a lot of my savings comes down to not driving, cars cost a lot and that is a large part of why I didn't learn to drive. I didn't have £1000s to spend when I was 17 so I used my bike instead. I am in my 30s now and the only difference is that I finally bought a new bike a couple of years ago. I could afford to now if I desperately wanted to, but I just feel indifferent towards it and I am not spending thousands on something I feel indifferent to.

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  • [–] 4 points 1 year ago* (1 child)

    Might it have been this one?

    MMM saving rate chart

    Setting aside critiques of Mr Money Mustache, this is grounded in hard math and is the result of "having enough". In the developed world, "having enough" is easier than ever, yet the culture insists on trying to achieve even more, having more money, more house, more children, etc. Whereas the general notions of evaluating what brings value or happiness (see Marie Kondo: "ask yourself if it sparks joy") is more in like with "working to live, rather than living to work".

    There's an equivalent maxim in vehicle engineering to that chart, something along the lines of "lightness begats lightness", and refers to how shaving off weight from an automobile allows reducing the engine power or the brake size, which further allows weight reductions, etc. The eventual result is having only the essentials in places that matter (eg unsprung weight, rotational mass) in an optimized harmony. Personal finance can follow the same maxim.

    "Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away" (usually ascribed to Antoine de Saint-Exupery)

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  • [–] 2 points 1 year ago

    Yeah that looks like it. The largest expenses I have is housing and tax which are like 5x everything else combined. Housing would be gone if the mortgage is paid off, though a lot of the tax remains as only income tax would be reduced by working less and the other taxes all remain the same.

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  • [–] 2 points 1 year ago (2 children)

    Yeah, figuring out what you need and what you can live without can make decisions very empowering.

    The other poster mentioned the FIRE chart by MMM, so I'll take another angle on it. This site shows areas by cost of living. If you know how to estimate income generation from investments (~3% is a good rule of thumb before retirement age, 4% thereafter), you can find a place you can retire to if you have a few hundred thousand dollars/euros. If you're fine with a BR apartment, there are options as low as $600/month ($180-240k investments).

    What I mentioned is called "Batista FI", so called because some parttime barista jobs provide medical benefits for even part-time work in the US. The idea is you save enough that you can live comfortably on part-time income and still meet your longer term retirement goals.

    My point is the lower your expectations are for retirement, the earlier you can get there. And knowing you can retire can make working more pleasant because it's a choice instead of a necessity.

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  • [–] 1 point 1 year ago (1 child)

    Oh good point about the medical benefits if you are in the US, I live in the UK so that isn't something you need to think about.

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