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You are here: Home / Archives for American Dream

June 2, 2011 by Peter Maclennan Leave a Comment

Why Young Professionals Should NOT Buy a House

If you are a young professional with a high paying job, you have many things working in your favor. Lots of disposable income. Lots of freedom. Lots of options.

Here are three reasons you should not buy a house/condo if you are in this stage of life:

Real Estate Ties You Down

You decide to buy a nice little home in Walnut Creek, CA. Your career starts to take off. A headhunter contacts you with your dream job in Boston. You would love to take it, but what do you do with your home? Do you sell it? Can you sell it? Do you rent it? Do you want to be a landlord on a home in California while you are in Boston?

As one radio host said, “Owning real estate is placing a stake in the ground.” It is a financial obligation that can limit your options and limits your freedom.

Your Spouse Won’t Like It

Let’s say you buy that little two bedroom house in Walnut Creek. One day while walking your dog in the Dog Park, you see the most beautiful creature on two legs. Your whirlwind romance leads to a proposal and wedding plans.

As you begin making plans for life after marriage, you are deciding on where to live. Your spouse begins to point out the deficiencies in your first house. It only has two bedrooms, where are you going to put Jack and Jill when they come along? The kitchen is too small. The bathroom only has one sink. Where are the in-laws going to stay when they visit? Why did you paint the kitchen that shade of blue?

Your options are to remodel or to sell your existing house and buy something new. Do you really want this hassle while planning a wedding?

Odds are that the person you marry won’t have the exact tastes that you do. The house you thought was ideal, is not their ideal. It is a much better decision to buy something together that you both enjoy.

It is Not the Wisest Financial Choice

Imagine a young farmer. He just bought his first plot of land. He needs to plant his fields for the harvest and he needs to build his first house. However, he only has enough capital (money) available to do one or the other. Should he buy seed for his fields or buy lumber to build the home? Which would you choose?

Hopefully, you chose the seed. Seed provides more income for the coming years. Seeds will allow the farmer to have a future in the farming business. Lumber may have provided shelter, but it didn’t produce any lasting return to the farmer.

In many ways buying a single family house is like a farmer buying lumber. It provides shelter, but the long-term benefit is mitigated.

There is another answer that makes sense for a young professional. If you would like to hear more about this solution call me at (925) 385-8798.

 

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Filed Under: Contra Costa Real Estate, Real Estate Investing Tagged With: Accumulation Phase, American Dream, Real Estate Investor, Young Professional

April 25, 2009 by Peter Maclennan Leave a Comment

Retirement Freedom Defined

Freedom is something that most of us strive for in many areas of our life.

Merriam-Webster defines “freedom” as:

the quality or state of being free: as a: the absence of necessity, coercion, or constraint in choice or action b: liberation from slavery or restraint or from the power of another : independence c: the quality or state of being exempt or released usually from something onerous <freedom from care> d: ease, facility <spoke the language with freedom> e: the quality of being frank, open, or outspoken <answered with freedom> f: improper familiarity g: boldness of conception or execution h: unrestricted use <gave him the freedom of their home>

As the definition states freedom is the ability to do what you want, when you want to.

Now of course there are wise limits on the nature of freedom. I am not “free” to take another person’s property or life. That would be a violation of their freedom to use their own property.

Retirement Freedom

The American Dream entails the dream of “Retirement”. That time in your life when the necessity of a 9-5 job is gone. You are free of the tyranny of a boss, commute, and cubicle.

A good definition of Retirement Freedom is having the ability to invest your time, efforts, finances, and energy into the activities you choose.

This freedom varies from one person to the next. It could be vacations with your grandkids, that cruise to Europe, a home in the mountains, time to serve at your church, or the time to work in your garden.

This freedom is made possible due to the accumulation of wealth you have made during your working years. Your wealth is now working for YOU!

The years of saving and investing have finally paid off, allowing you to live off of the income your investments provide.

The Math of Retirement Freedom

How much do you need to live the retirement you have hoped for?

If you don’t have the luxury of a corporate pension plan, you will need to live off of your investment income alone.

Assume that your investments provide a conservative 5% return per year (for every $100 invested you get $5 of income per year), you will need about 20 times your expected income to live without putting your retirement at risk.

In order to maintain the same lifestyle you currently have, you will need almost 20 times your current income. Multiply your current income by 20.

Here’s some numbers:

  • If you make $50,000/year you will need approximately $1,000,000 of savings at retirement.
  • If you make $75,000/year you will need approximately $1,500,000 of savings at retirement.
  • If you make $100,000/year you will need approximately $2,000,000 of savings at retirement.
  • If you make $200,000/year you will need approximately $4,000,000 of savings at retirement.

This is just to maintain your current lifestyle. That does not include your trip to the Bahamas, the tour of the Holy Land, or the lake house you wanted.

What did you come up with? How many dollars will it take for you to retire?

The Path to Retirement Freedom

But how will you get that place of wealth?

There’s always the stock market. How is your 401k doing these days? Seems like this route is entirely outside of your control. You have no way to control whether the market goes up one day or down another.

You could rely on the government. How well will Social Security benefits allow you to live out your final days with family and friends? Does that allow you to live out your dreams?

The lottery is a possibility, but not very likely.

You have heard about real estate investing, but don’t know where to begin. Your friend owns some rental homes. The ability to control your own investments is appealing.

If this is the case, give Maclennan Investment Group a call at (925) 324-8626. Let us show you another path to retirement freedom.

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Filed Under: Real Estate Investing, Retirement Freedom Tagged With: American Dream, Investment Income, Retirement, Retirement Freedom

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Maclennan Investment Group, Inc.
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