Ok .. so i got a job back in April. First one out of college and making some decent money ($50k/yr). Now i still live at home and have no debts but my school loans. as i understand it, come the end of tax year i'm going to get killed big time!

now i hear form random people that i need to own something to write off (ie. house). Now personally i'm saving for a downpayment on a house to purchase end of next year (~Sept. '06).

What advice do you guys have? should i be putting my money into something to write off .. keep throwing it in the bank .. or what?

Thanks!

 

IRA's. Max your 401K (if you have one). Pay off the student loans.

 

Have something just to have a write-off is .

Look at it this way. Your write-off will be mortgage interest and property tax.

So you give the mortgage guys and your nice local government 10k next year.
Lets say you are in the 30% bracket, that will get you back $3,000 on your 1040.

Wouldn't you have rather put that 10k somewhere and made 5-10%? 10,500>3000.

Hindsight would say buying a home 5 years ago would have netted you a nice profit today, but one can't keep hoping for market appreciation like we got in recent years.

 

I agree.

The "write off" is a often misunderstood idea and a term thrown about by people who want your money. A tax write off means that whatever the value of the object that you are "writing off" is taken off your income for tax calculation. So if you made $100,000 but donated a car / stock / clothes, or whatever worth $10,000. You made only $90,000 as far as the government is concerned but remember you also lost (donated) whatever was worth $10,000. So if your tax bracket is 40% (including federal and state), then your tax bill went from $40,000 to $36,000 and your net income went from $60,000 to $54,000. That's all that is. It's only good if you write off something worthless to you but can be valued high.

When people talk about mortgage and property tax being a write off, that just means that the interest (NOT the principal) and the tax you pay for your house can be deleted from your income. The only thing that does is help reduce the overall cost of your interest and property tax rate by 40%. It's should be a consideration and a factor in your decision, but not the reason for your decision to buy a house.

It's good that you are saving and thinking about what to do with it. I'd recommend NOT putting it in the bank at whatever low interest rate you are getting. Remember, inflation is 3-4% (historical average) and if you aren't getting at least that much, you are in fact losing real purchase power of your money.

Since you are living at home, I'd push for saving enough to buy a house. NOT for the write off but for the investment and the freedom of being able to run around naken eating a popsicle at midnight with your girlfriend doing the same. Or something like that.

Don't know what the Buffalo market is like but remember that people get hurt buying a home with one of the following ways.

1. Buys with a floating rate loan that goes up and they can't cover the mortgage payments and must sell or foreclose.
2. Loses job and can't cover the mortgage payments and must sell or foreclose.
3. Stupidly forgets or doesn't plan for the property taxes being a part of living expenses, doesn't pay them and gets house taken by government (happens more than you'd think).

Market going down and losing value isn't that bad of a problem as long as you can keep making the payments and there's a good prospect of values going back up in the future.

 

Yea thats why i am looking to get out. investment is the route i'm looking down. Buy a decent fixer-upper, and sell it down the road and move into bigger better things.



I know i dont have to worry about #2. #3 i cannot see happening either. I think things through WAY too much and will take every penny into account before signing anything. And when the time comes i hope that loan rates will be at a nice place again and be more stable and not have to get a crazy floating loan.




Later in the week i'm meeting with a financial advisor to get some professional advice. I just was wondering how everyone on here has done thier finances after thier college years.

thanks!

 

I would start by maxing 401K, even investing in a Roth IRA.
Keep a portion in the back while investing it some stock that are pretty aggresive.
Now is the time you can take risks, once you have a family and/or property, then you have to be conservative in the way you invest.

 

I think real estate is a much better tax benefit investment for retirement than even the venerable 401k. You get up to $250,000 for equity increase in your primary home ($500,000 for married couple) tax free. That's crazy good stuff thanks to the government. Take advantage of it now before they repeal it.

 

Yes. But in today's real estate market you'll be lucky to first, get a place without selling your organs, and second, you'll be even more lucky if the value for your recently bought property will go that high. You cannot relay on the real estate market for your retirement. Then again, what can you relay on? Nothing is risk free. So it's your judgment call on what to invest in.

 

Best advice you're going to get. The dollar you put in a Roth or 401k in your early to mid twenties is worth about eight times the dollar you save in your forties. You won't miss a few hundred or even a couple thousand very much now if you make a point of always setting your standard of living 10-15% lower than it could be.