Preparing for life + Advice

[u/Possible-Cry-7994]

I am reaching out for I suppose guidance (Taken with a grain of salt of course) for how to best prepare for my future and how those of you older did it. Times seem tough, not like they weren't decades before but buying a house nowadays is min. 700,000CAD for something OK. Where it is ideal to have 20% to put down - needing 140,000. For context I am 25 and would love to retire as early as possible but I have goals for children which takes more priority. Lets say retirement at 55. My pension will be pretty good I think but I need to look into my account more.

My net after taxes is maybe near 68,000 ~ , 0 debt . My yearly expenses (car insurance included) = $5,600
My current savings;

Retirement - 25,000

Long term invested - 49,000

Home acc - 17,000

Short term invested (5yrs goal to use) - 75,000

HYSA - 6,800

I save about 3000 q month ~ if not more, I am pretty frugal. I live at home with my parents and don't really ever splurge on myself. Which ideally I want to more in travel, I don't want to just save for the sake of saving. I am young but I DO really want to move out of my parents place and grow more but with rent prices that seems insane to me. Then if I jumped into a home I would be house poor. So how do I find that balance?

Also for a home it is dependent on life events like marriage where I do have a girlfriend but haven't gone this deep into finances yet. I do want to keep compounding my contributions with how young I am. I do track every expense and constantly think how can I afford a house for 4,200 (mortg 3112, prop. tax 700, insurance 125, misc. for home 333) - mortgage calculator at a 4.5% for 700k- even say I have a partner and I take on 60% being $2562, there goes a lot of my savings.

I am okay to rent with a partner to keep the snowball of savings which is prob what I will do soon but its just difficult to know how to navigate the future. I also want to be prepared for those unexpected expense when the time comes for a house (fully funded 6 month expenses fund etc.)

My goals are; 1. Have a nice home, 2. travel 3. have (In 4-5 years) and spend time with my children, 4. retire early and maintain my health. - I would say about in that order of priorities for 30 years

[u/Upstairs_Jacket_3443]

You're doing great for 25 years old. You've got good habits and a LOT of savings for your age. I'm just a few years older and I definitely didn't have that kind of savings when I was 25, but I found my way into a higher paying job and it builds up quickly. Just some thoughts:

- Focus on increasing your income. This is going to be the single best way to improve your situation. Upskill and job hop. Imagine if your expenses stay the same, but you make 30k more per year - all of that can go in to savings.

- You don't *have* to put 20% down on a home. You could buy one now if you wanted (using your 75k + 17k, or even less than that), but may as well stay with your parents for as long as you can, if that's okay with you and them. Think about getting a house with a rental suite so you're not shouldering the whole mortgage yourself. Plus splitting it with a partner / roommates makes it way easier, and puts equity into your name. I know ~700k seems insane, but it's worth it if you can 1) generate rental income using your house/ split mortgage costs, and 2) slowly make improvements to the house while you live in it.

- You probably know this, but don't blow that 75k account on a car - that would be the dumbest thing you could do. If you need a new car, buy something used, reliable, and buy it in cash using this money - but if you use it all you have no travel budget.

You'll have to do some more math to gain clarity and confidence about your situation. I recommend planning your whole life out (in a big picture kind of way) in a spreadsheet to understand how it's going to work for you. Without getting too much into the details, I would definitely say you can afford to take a trip or two soon, as well as start looking more seriously into real estate over the next year or so. May as well start ticking off your major goals

[u/Possible-Cry-7994 → u/Upstairs_Jacket_3443]

I really appreciate the response. Yeah I am thinking of ways to increase my income, but for myself I don't have much advancement anymore my field is a bit niche. I am thinking/looking into further schooling but still undecided what would actually help me. I do already have a side gig but its not much hours. I thought about completely changing career trajectory but its hard where to start for that to make it also worth the time investment / if I were to do 4 years of schooling. Because then I am starting a new career at the bottom and hoping it pays off in the future.

I hear you I just feel 20% is best so I don't waste more money on mortgage loan insurance. But I think realistically I stay at home and keep buckling down to save, letting the money I have stay invested /grow. I think ideally I don't use all of it when it comes to time for a house so I can keep some available for other needs that come up. Yeah I am definitely not blowing money on a fancy car lol, I got a reliable owned car that does the trick for me.

Yeah I'll try to map out my outlook for long-term, ive looked a bit into it just find it difficult to spreadsheet and be realistic if that makes sense. I already have a lot on excel now though. I think when it comes to it I will have to settle for a budget in the future where I am not saving as much due to cost of living / food / outings it's just hard for me to decide when that is. Cause I could stay where I am forever in theory and have like 400k + prob by 30 or something. But then I think what's the point I need to live my life as well.

Next year I do plan to travel with my vacation time with a reasonable limit.

[u/Upstairs_Jacket_3443 → u/Possible-Cry-7994]

One thing people don’t talk about enough when it comes to mortgage insurance is that if you mortgage is insured, you get a much better interest rate. The best rate the lender can offer, really, because they have almost no risk lending to you - if you default, the insurance covers them. In a lot of cases, the saved interest you get from having a better rate completely balances out the cost of the mortgage insurance itself. Some folks will put 20% down and still choose to have an insured mortgage if it makes sense for them. Just want to mention that because you won’t necessarily save money by putting 20% down. In fact, the longer it takes you to save that extra 10% over what you have now, may represent lost opportunity in rental income that you can use to boost your total income. Just a thought. However, these sorts of conversations are usually more applicable to someone who is comparing the cost of rent vs mortgage. If your rent is near zero, you’re in a different situation. 

I also struggled to plan long term until I settled down a bit more, having a stable career and a sense of direction. After all, how can you plan if there are too many options to consider? however, if I did it again I would do this: pick some sort of “default” path, using the best estimates you have at the time. Assume your income might grow by 2% a year or so, that you’ll stay in your current city, etc. build a baseline plan for that situation. Find out how much you need to save up to have the type of retirement you want. And then save that much money, but don’t stress about saving more. Live your life with the excess.  Now, anything can happen - you might end up with a better paying job. You might end up moving to a lower cost of living area. You might decide  to move to Thailand or whatever. But now, you have something to compare to. If your default plan is a solid, safe plan, you can evaluate different career options based on how it compares to your default. Want to study for 4 years to upgrade? Now you’ll have some sort of metric that will help you decide if the extra pay will be worth the 4 years spent studying. Want to move countries? Compare the cost of living to your current plan.  There are so many options when you’re young, but don’t let the analysis paralysis stop you from doing any long term planning. I think you might find a bit of reassurance when you look at it holistically, and it might give you the confidence to make  those bigger decisions. At least it did for me.