On the Money Rehab with Nicole Lapin podcast, a listener seeks guidance on achieving their financial goal of purchasing a $750,000 home for their family within the next five years. Nicole Lapin evaluates the listener's current financial situation, including income, expenses, savings, and debt.
She then outlines a comprehensive budgeting and savings plan to accumulate the necessary down payment funds. Lapin also discusses investment strategies to build long-term wealth and supplement the down payment savings. The episode provides practical steps for creating a targeted financial roadmap and balancing present needs with future goals.
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The assessment begins with analyzing the caller's $6,000 monthly income and expenses like $5,000 on rent, utilities, debt payments, and essentials - making up 79% of income. The caller also has $10,000 in savings, $60,000 in a retirement plan, and $20,000 in student debt with $380 monthly payments.
The caller's goal is purchasing a $750,000 4-bedroom home outside the city for their family of 5 within 5-10 years. This requires balancing current lifestyle with saving for the home and potentially starting a business. A 20% down payment of $150,000 is considered, or a lower down payment with a larger mortgage amount.
To save $150,000 in 5-6 years, the caller needs to save $28,000 annually. Nicole Lapin suggests lowering housing costs by relocating, and potentially increasing income via a raise or side hustle. Creating a targeted savings plan within the 50-30-20 budgeting rule could refocus funds towards this goal.
Lapin advises a diversified approach with safe principal-protected investments like CDs and Treasury bonds, alongside riskier stock market investments. She recommends leveraging investment yields to supplement down payment savings. While preparing for the future, Lapin notes balancing present quality of life remains important.
1-Page Summary
An assessment of the current financial situation includes examining monthly income, expenses, spending habits, financial goals, and understanding available resources and constraints.
To understand the current financial picture, the analysis begins with a look at take-home pay and regular expenses.
The caller earns a monthly take-home pay of about $6,000. Fixed monthly expenses include roughly $300 for utilities like electricity, internet, and phone, and about $5 a day for commuting to work via public transportation, totaling around $100 a month. There's also a monthly obligation of $380 toward student loan debt. The rent is the most significant expense and consumes more than half of the take-home pay. Including rent, the total monthly expenses average about $5,000, with essential costs such as rent, utilities, and groceries amounting to $4,780. This spending rate on essentials, which is about 79% of the take-home pay, is higher than the 50% suggested by the traditional 50-30-20 budgeting rule, indicating that the caller's burn rate on essentials each month is notably high.
The caller expresses the desire to set financial goals such as starting a marketing firm, purchasing a home, getting married ...
Assessing Current Financial Situation
The discussion focuses on a caller who has set clear financial targets for the future, aiming to purchase a home within five years.
The caller has a specific goal to buy a home that would comfortably accommodate their family of five. They envision purchasing a 4-bedroom home valued at around $750,000, located outside of the city, in line with their family’s needs and lifestyle preferences.
The aspiring homeowner aims to carefully balance their desire for a comfortable current lifestyle and the future goal of owning a home. The caller understands that to achieve this goal, there may need to be strategic adjustments in their spending habits now to ensure they can afford their ideal home and potentially own a business in the future.
Defining Future Financial Goals
Formulating a reliable budget and savings strategy is essential for achieving financial goals such as making a significant purchase. The caller is aiming to accumulate a $150,000 down payment in five to six years, necessitating clear steps and dedication.
To begin, it’s important for the caller to understand their current spending patterns. One approach is the 50-30-20 budgeting rule. This rule suggests allocating 50% of income to essentials, 30% to discretionary spending, and 20% to long-term savings. Adhering to or adjusting this rule based on the caller’s specific circumstances could yield opportunities to redirect funds into their savings.
The caller will need to save approximately $28,000 annually to reach their $150,000 down payment within the five- to six-year timeframe. Creating a targeted savings plan will involve setting aside this amount each year specifically for the down payment.
To boost savings, financial expert Nicole Lapin suggests that the caller could consider lowering their housing expenses, the largest typically monthly cost, by moving to a more affordable location. The caller acknowledges they live in an expensive part of Brooklyn and is open to relocating to save on ren ...
Developing a Comprehensive Budgeting and Savings Plan
Nicole Lapin provides guidance for building wealth by suggesting ways to diversify investments and leverage compound growth to achieve financial goals.
Lapin stresses the importance of having a diversified approach to investing, which involves balancing safer investment options with those that offer higher rewards despite higher risks.
She recommends principal-protected offerings like Treasury bonds and certificates of deposit (CDs) for those looking for safer investment avenues. Treasury bonds, in particular, are backed by the US government and are one of the safest investments. On the other hand, the stock market, while more volatile, historically returns about 8% per annum. Lapin personalizes her advice by sharing her own strategy of investing in both the stock market and in safer investments like CDs and Treasury bonds. Bank of America is noted for having CD options that are insured up to $250,000. A specific CD from Bank of America offering up to 4.35% yield is highlighted, although it's indicated that yields may vary by locality.
Investment yields can be a game-changer when it comes to building wealth, especially considering long-term financial goals.
Investing and Building Wealth for the Future
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