[quote=esmith]I absolutely doubt that a single-income engineer with two kids will HAVE TO spend more than 4 grand / month in addition to housing. Based on my personal experience. I wouldn’t call myself all that frugal, but our monthly expenses stay under $2000/month. Granted, I don’t have $600 car payments because the BMW and the minivan are paid off, and I don’t spend $300/month on gas and maintenance. My kids aren’t old enough to need braces, but they are young enough to need diapers, and we just got the twins off the formula. (Now they drink milk like there’s no tomorrow – we usually buy 4 gallons at a time – but it’s a lot cheaper)
But that’s not even the point. The point is, like I said repeatedly, whether you rent or buy, you’ll keep nearly the same amount of money in your pocket. Even ignoring future appreciation, raises, and rent hikes. It is quite feasible for a family with 130K income to buy in 4S today. [/quote]
$4k/month in addition to housing, where housing includes no electricity and maintenance?
Future appreciation, raises and rent hikes are out, together with layoffs (more common than appreciation these days)
Anyway, your point was affordability. You introduced rent-vs-own late in the discussion. Look, your rent-to-own argument is that $2.7K is a break-even point for $650K housing unit with $4.5K/year in MR and $100/month HOA. So, the unit in question ‘cash flows’ at about 260 x rent with 20% down. Does that make sense to you?
According to your numbers take home pay in buy scenario, which is the only one I care to debate, is $8.4K
Basic housing cost: $4.2K.
Even if you have paid of your cars you need to factor in replacement cost and $600/month is not high for two entry level vehicles (let’s say $15K sedan and $25K minivan).
$300/month for gas will buy 1000 gallons of gas in a year. If you average 22mpg you will get 22,000 miles/year between two vehicles. You need to add maintenance (regular stuff, fluids, tires, breaks… nothing fancy). Insurance on the two would be $100/month or so.
Transportation cost: $1000 ($600 + $300 + $100)
Basic utilities – electricity, water, trash…: $300/month
Phone, cell phone, Internet, TV: $200
Food: $500
Preschool/school supplies/baby formula/diapers (no worries, there is always something in that column): $400 (two half-day 3 days/week parent-participation kids in a ‘public’ preschool will cost you $500 alone)
Misc home supplies (toilet paper, detergent, soap, tooth brushes): $200
So far we have $6.8K in expenses. If something happens you can defer some of the expenses, but not really avoid them altogether.
You threw no birthday party for your kids, you went to no birthday party yourself, you did not dine out, you did not take you wife to a theater, you put no money in your wife’s IRA, you did not take your kids to Wild Animal Park, you sent no money to your aging parents , you paid no co-pay, your employer covers 100% medical, you took no vacation, you bought no computer, no furniture, no TV … you have $1.6K/month to do so. And then you save whatever is left to recover from the recent $130K down expense and make sure you have enough to mitigate the most severe risk.
Good luck.
