Berkeley CSUA MOTD:2007:March:18 Sunday <Saturday, Monday>
Berkeley CSUA MOTD
2007/3/18-20 [Reference/RealEstate, Reference/Tax] UID:46006 Activity:high
3/18    I will soon be graduating after many years of grad school, with
        a job with a reasonable salary lined up. What strategy do you all
        in the "real world" take to save money? I'm planning on taking my
        monthly income, pay out rent/utilities, put a certain amount or
        percentage in my savings, and then keep the rest in my checking
        to play with. Is this reasonable? I know advice like this needs
        to be individualized but I just want to make sure I'm not way off.
        \_ Short GOOG!
        \_ Pay off any high interest debt first, then start maxing
           out your 401k now. Retirement seems like a long ways
           away now, but believe me, you will be happy in 10 years
           that you started saving for it now. Build up a three month
           emergency fund and put it in a short term CD or savings. Then
           figure out what you want next. Is it a home? If so, start
           saving a down payment and put it in something relatively safe,
           like a CD. When you have enough saved up, start thinking
           something with a little more return, like short term Munis.
           If you are looking more for an early retirement, open a brokerage
           account and start investing in the stock market. There are plenty
           of market junkies on soda who can give you advice on stock
           picks. -ausman
           \_ Good advice, but I am not sure I agree with 'maxing out your
              401k'. Yes, invest in your 401k. I don't think putting
              $15K/year into it is all that wise, though, unless you
              are making well over six figures. A 25 year old making $70K out
              of school should probably not be putting 20% of his gross into
              retirement with possible student loans and (as you say)
              saving for a house. I would put 'maxing your 401k' farther
              down the list of priorities. Put as much into your 401k as
              you need to in order to get all of your company's match, but
              I wouldn't start with more than that.
              \_ Owning a house is maybe a better retirement investment than
                 you may think.  Once you own your house your rent/mortgage
                 is gone and all you have is upkeep, tax, and utilities.
                 Once my house is paid off, my biggest single need for income
                 is gone and I can live with much less income.
                 \_ How do property taxes compare with rent?
                    \_ Depends, of course.  For me, property tax is
                       about 12% of the mortgage.
                       \_ Annually? Remaining mortgage or simply value of
                          your home? I pay $1k per month in rent; what value
                          house could I own that would cost me about the same
                          in property taxes?
                          \_ It's percentage of entire mortgage payment.
                             interest and principal.
                             Annually or monthly, what difference does it make?
                             I gave you a percentage.  You could own approx.
                             $1.2M of house and pay $1k/month here (not CA).
                          \_ In CA, property tax rises are capped (Prop 13),
                             so the amount you pay in property tax is
                             dependent on how long you've owned the house.
                             It's also dependent on where you live.  But
                             $1K/month is way, way more than most people
                             pay in property tax.  -tom
                             \_ Good to know. Thank you both.
                             \_ In CA, property tax is about 1% of the
                                purchase price (annually) and is capped
                                at 2% per year raises after that.
                 \_ Homes aren't really that great an investment, the last
                    decade or so notwithstanding. You would actually do
                    better to rent and put the savings in the stock market,
                    if all you want to do is make money. -ausman
                    \_ Only if you ignore the concept of leverage and the
                       tax advantages of real estate. Of course, leverage
                       is a two-edged sword and it can beat you up
                       something fierce in a down market.
                       \_ No, even including the tax advantages. Over the
                          long run, real estate goes up about 1% more than
                          inflation. Pretending that real estate is a risk
                          free investment is stupid. You can leverage your
                          investment in the stock market too, if you don't
                          care about risk. -ausman
                          \_ Tax advantages like $500K tax free, not
                             interest deductions. I never said real estate
                             is not risky as an investment. However, go
                             try to borrow $500K to invest in the stock
                             market with $0 down and see if a bank will
                             make that loan. However, in real estate it is
                             done all of the time.
                             \_ (Rueters)
                                "Countrywide Financial Corp., the largest U.S.
                                mortgage lender, on Friday told its brokers to
                                stop offering borrowers the option of
                                no-money-down home loans, according to a
                                document obtained by Reuters."
                                No one will be doing this for much longer.
           \_ Second that paying off high interest debt (i.e., credit cards &
              student loans that aren't deferable). If your loans are
              deferable, get ready for them by putting the money that would
              have paid towards paying them off in a CD so that you get the
              interest anyway. 401Ks are great, but consider a Roth IRA or
              other such that would allow you to contribute pre-tax and use
              for a house without penalties. Also, check and recheck your
              income tax wthholding; now that you're likely to owe taxes, it's
              a good idea to know what you're going to owe next April 15.
              Whether you feel like loaning the US Gov the amount in advance
              (i.e., max out your withholding) or owing on the date is up to
              you. Good luck. --erikred
              \_ I am kind of assuming that this person lives in the Bay Area,
                 where it can be ten years or more before they can afford
                 a home, so waiting to start saving until the first house
                 is bought would be a mistake. Also, I think you should grab
                 as much of the tax deduction from contribution to your
                 retirement as you can possibly afford. I am not actually
                 expecting this person to max out their 401k, but if they
                 did, that would really give them a leg up. A Roth IRA can
                 have slight tax advantages, but it depends on all sorts of
                 complexities like what your expected tax rate will be in
                 retirement and the difference from a 401k is really slight,
                 so I didn't want to get into that. -ausman
        \_ I also recommend max'ing out your 401K. Also, put 4/5K into a
           Roth IRA every year.  You may also wish to consider max'ing out
           any ESPP program you are eligible to participate in. Most ESPP
           programs give yout 15% below the lowest closing price of the
           opening/closing day price of the stock, so you make an easy 15%
           percent - tax by dumping the day of the purchase.
2007/3/18-20 [Politics/Foreign/MiddleEast/Iraq] UID:46007 Activity:high
        MOST Iraqis believe life is better for them now than it was under
        Saddam Hussein, according to a British opinion poll published today.
        Only 27% think there is a civil war in Iraq, compared with 61% who do
        not, according to the survey carried out last month.
        \_ 49% is not a majority, no matter how hard you warmongers spin it:
           Find those WMD yet?
           \_ The same article says majority (in fact says 2-1) and also says
              49%.  Bad writing or bad numbers? -op
              \_ Bad writing.  They're adding together the 49% who say
                 it's better now with the 16% who say they're equal.  -tom
                 \_ No, it is not bad writing, it is called "lying with
        \_ Funny, the poll done by a non-biased set of news agencies pants
           the exact opposite picture:
2007/3/18-20 [Industry/SiliconValley] UID:46008 Activity:nil
3/16    Was there a green logo on the Google page yesterday?  I didn't see one
        on Friday or today.  Yahoo has one since Friday.
        \_ There was yesterday. You might not have seen it if you didn't
Berkeley CSUA MOTD:2007:March:18 Sunday <Saturday, Monday>