Personal Finance Flowchart by Frum Finance

[avromie7]

Take a survey in your neighborhood. Do people look at the guy who got a new Tesla as
1) potentially a poor guy who deserves a major tuition scholarship or
2) a guy who must be doing ok for himself
Then get back to DDF with the result. You may be in for a surprise.

The former and it's not even close. I live in a neighborhood with less than 100 houses (plus basements) and more than a dozen Teslas. No one thinks people who have Teslas are well off. Anyone who does, doesn't realize it's not the same as 5 years ago when the only cars they made were $80k. If people in your neighborhood think a Tesla is an expensive car, it's because they're stuck with the old mindset and it's rapidly changing.

The financial savings are even more extreme when someone has a significant commute of 100-200 miles per day, they save money every month vs a much less comfortable corolla.

[Sammy82]

The former and it's not even close. I live in a neighborhood with less than 100 houses (plus basements) and more than a dozen Teslas. No one thinks people who have Teslas are well off. Anyone who does, doesn't realize it's not the same as 5 years ago when the only cars they made were $80k. If people in your neighborhood think a Tesla is an expensive car, it's because they're stuck with the old mindset and it's rapidly changing.

The financial savings are even more extreme when someone has a significant commute of 100-200 miles per day, they save money every month vs a much less comfortable corolla.

The fact that they're driving a brand new car itself may be a 'flag' for the tuition committee, regardless if it's a Tesla or Camry.

[mevinyavin]

The former and it's not even close. I live in a neighborhood with less than 100 houses (plus basements) and more than a dozen Teslas. No one thinks people who have Teslas are well off. Anyone who does, doesn't realize it's not the same as 5 years ago when the only cars they made were $80k. If people in your neighborhood think a Tesla is an expensive car, it's because they're stuck with the old mindset and it's rapidly changing.

The financial savings are even more extreme when someone has a significant commute of 100-200 miles per day, they save money every month vs a much less comfortable corolla.

Even understanding that this is (lechora) the metzius, it may not change the mindset of the ones who make the decisions. It is unfortunate, but one has to account for the biases of others even if they are wrong. This is the Olam Hasheker, after all - it goes both ways.

[niebloomj]

You also failed to mention the limitations of a Tesla

If you are up for it, I would love to publish a counter article from you!

[niebloomj]

I see nobody answered the complaints against those who don't get life insurance for themselves, and I don't understand why.

We don't account for all chances, it's as simple as that. People don't get life insurance because they can't afford it when they are young, and/or in Kollel. They don't think they will die young,a nd they have a point. The chances of any individual dying young enough to need life insurance is quite low.

If such a person does die, and their family is poor, the Torah tells you to give them Tzedaka. Considering them to have 'relied on you without asking' is your perspective, not the truth.

I think this is dangerously wrong. No one thinks they are going to die young. By this logic, no one should have life insurance. We have an achriyus to protect our family. I don't think I'll convince you on a dans deals forum but I hope frum.finance can make a big enough impact that eventually almost no one would think these things.

[aygart]

I see nobody answered the complaints against those who don't get life insurance for themselves, and I don't understand why.

We don't account for all chances, it's as simple as that. People don't get life insurance because they can't afford it when they are young, and/or in Kollel. They don't think they will die young,a nd they have a point. The chances of any individual dying young enough to need life insurance is quite low.

If such a person does die, and their family is poor, the Torah tells you to give them Tzedaka. Considering them to have 'relied on you without asking' is your perspective, not the truth.

One thing I can tell you from my involvement in a number of cases is that I've heard from families who benefited from life insurance that had they needed to collect for them the pain would have been similar to the loved one's death. Those are strong words but not mine

[niebloomj]

One thing I can tell you from my involvement in a number of cases is that I've heard from families who benefited from life insurance that had they needed to collect for them the pain would have been similar to the loved one's death. Those are strong words but not mine

Exactly what I hear from people. But its the concept in general of insurance, you are only glad you have it when you end up needing it. Until then, people can pray on you to get you to no longer want it and put your money elsewhere.

[mevinyavin]

The only thing that matters according to the Chazon Ish brand of hishtadlus is: Is life insurance standard hishtadlus or is it excessive?
Frum finance is saying that it is the former and they don't want to deal with anyone that isn't doing standard hishtadlus (because they have enough work with those that are).

[Joe4007]

--NJ average price per Kwh, residential: 18.02 cents per https://www.energybot.com/electricity-rates/new-jersey/#:~:text=Last%20updated%20December%202023,higher%20than%20the%20national%20average).

Is that for supply only? If so, it's probably double that when including delivery charges.

[avromie7]

Is that for supply only? If so, it's probably double that when including delivery charges.

No, and NJ rates are lower than that right now. JCP&L is around 13.5 cents for delivery and supply.

[aygart]

No, and NJ rates are lower than that right now. JCP&L is around 13.5 cents for delivery and supply.

But makes sense for PSEG all-in.

[jye]

It'll probably take quite a few years to be passed.

Might be a lot sooner than you think.
https://www.njspotlightnews.org/2023/12/renewing-nj-transportation-trust-fund-raises-fee-question-electric-vehicles/

[niebloomj]

Should you prioritize buying a house before retirement planning?
https://frum.finance/finance/house-or-retirement/

[David61]

Should you prioritize buying a house before retirement planning?
https://frum.finance/finance/house-or-retirement/

There are plenty of scenarios where spending on a house ought to be discouraged because of affordability, or to save up for an emergency fund, etc. . ..
And most people need to balance spending on housing with other expenses including investing in retirement savings (and other future needs).

But I have a hard time imaging a scenario in which a home would provide improvement in quality of life, and it would still be advisable to continue "renting" over "buying" in order to invest the difference for retirement.

Owning a home is usually more of a need and brings more pleasure/joy/utility, than a cushier retirement.

After all the incremental cost of home ownership (over renting) usually offers a decent ROI, (even if returns may be less attractive than capital markets), forces savings (monthly principle repayment) which is a significant positive factor, and usually offers meaningful improvement in quality of life.

This seems more hypothetical than practical.

[niebloomj]

There are plenty of scenarios where spending on a house ought to be discouraged because of affordability, or to save up for an emergency fund, etc. . ..
Owning a home is usually more of a need and brings more pleasure/joy/utility, than a cushier retirement.

I think you might not realize where the majority of the community is holding. This isn't about a "cushier" retirement. Many people have 0 plans for retirement. They need a plan. If the plan is to have a house now and have less retirement savings, at least that is a plan. A lot better than what many are doing.

To quote my article, "This may result in a financial plan that has you buying a house now and starting to save for retirement later, but now you will have already properly planned for retirement before taking on that obligation."

[aygart]

I think you might not realize where the majority of the community is holding. This isn't about a "cushier" retirement. Many people have 0 plans for retirement. They need a plan. If the plan is to have a house now and have less retirement savings, at least that is a plan. A lot better than what many are doing.

To quote my article, "This may result in a financial plan that has you buying a house now and starting to save for retirement later, but now you will have already properly planned for retirement before taking on that obligation."

Buying a house can be a great retirement fund

[jye]

There are plenty of scenarios where spending on a house ought to be discouraged because of affordability, or to save up for an emergency fund, etc. . ..
And most people need to balance spending on housing with other expenses including investing in retirement savings (and other future needs).

But I have a hard time imaging a scenario in which a home would provide improvement in quality of life, and it would still be advisable to continue "renting" over "buying" in order to invest the difference for retirement.

Owning a home is usually more of a need and brings more pleasure/joy/utility, than a cushier retirement.

After all the incremental cost of home ownership (over renting) usually offers a decent ROI, (even if returns may be less attractive than capital markets), forces savings (monthly principle repayment) which is a significant positive factor, and usually offers meaningful improvement in quality of life.

This seems more hypothetical than practical.

Sometimes the markets are inefficient and the numbers just don’t make sense. Take your typical duplex in Lakewood right now. The purchase price will be around 1.25 million with a finished basement. Figure a 20% down payment, and mortgage plus taxes comes out to over $8000 a month or $96,000 a year plus maintenance and repairs. Rent out the basement for $2000 a month (hopefully) and you are still at around $70,000 a year. Also have to figure in significant maintenance and repairs as the rental ages and there is turnover.

You can rent the same duplex apartment for around $4000 a month for a savings of over 22k a year.
Invest the 200k down payment and the 22k a year savings in a dollar cost average low risk fund and at a conservative 7% return you will have over 700k in 10 years. That’s a hefty chunk of money. Purchasing the house does get you 140,000 in principal payments in 10 years plus some price appreciation (minus any unexpected repairs and maintenance) but unless rent prices steeply rise, or house prices appreciate steeply, renting seems to be the better financial decision right now.

[MoYS]

There are only two undeniable benefits to homeownership 1: if someone ch"v loses there income they will still have a home 2: it frees up income.

Neither of these apply to "buying a home" and paying a mortgage, usually much larger than renting due to high RE prices in frum areas.

Buying a home ≠ home ownership

The question presumes that buying a home will come with a mortgage to be held at the very least for 30 years and probably more with multiple refi's.

So if buying a home gives you neither security in having a residence nor frees up income it is definitely not a given to buy. In a scenario that rent would be the same as a mortgage then it would still make sense to buy but only because you build equity. But in frum areas I do not believe that the math will ever favor the mortgage payer over the renter. What happens after 30 years, when the mortgage payer paid an extra $2000 minimum a month and the renter did not, the home buyer becomes an owner and the renter if he had the money to pay a mortgage he could also have invested and be similarly financially secure, but if he could not make the payments he had no choice.

It seems that the only dilema occurs when someone can save but doesn't, in which case he will lose out immensely by not buying a home, but its not the lack of home buying that did him in, its the lack of savings.

So, to answer @niebloomj s question, assuming you will keep the mortgage around for at least 30 years, it's really just a matter of prefrence in how to save

[MiInvstr]

Sometimes the markets are inefficient and the numbers just don’t make sense. Take your typical duplex in Lakewood right now. The purchase price will be around 1.25 million with a finished basement. Figure a 20% down payment, and mortgage plus taxes comes out to over $8000 a month or $96,000 a year plus maintenance and repairs. Rent out the basement for $2000 a month (hopefully) and you are still at around $70,000 a year. Also have to figure in significant maintenance and repairs as the rental ages and there is turnover.

You can rent the same duplex apartment for around $4000 a month for a savings of over 22k a year.
Invest the 200k down payment and the 22k a year savings in a dollar cost average low risk fund and at a conservative 7% return you will have over 700k in 10 years. That’s a hefty chunk of money. Purchasing the house does get you 140,000 in principal payments in 10 years plus some price appreciation (minus any unexpected repairs and maintenance) but unless rent prices steeply rise, or house prices appreciate steeply, renting seems to be the better financial decision right now.

A huge benefit of a mortgage is that the price doesn’t go up. (Besides for insurance and taxes). You pretty much ignored that in your calculation. If you’re calculating that the stock market is rising on average 7%, then you must assume that rents will also rise in that same timeframe, so you would have to crunch the numbers very differently.

[jye]

A huge benefit of a mortgage is that the price doesn’t go up. (Besides for insurance and taxes). You pretty much ignored that in your calculation. If you’re calculating that the stock market is rising on average 7%, then you must assume that rents will also rise in that same timeframe, so you would have to crunch the numbers very differently.

There’s no question that buying several years ago locked in lower fixed mortgage payments while homes appreciated to boot, while tenants saw their rent nearly double but that was an aberration. Both rent and housing prices tend to increase at just a bit over the pace of inflation over the long term. They have been vastly outpacing inflation over the last few years. Odds are pretty decent that both housing and rent prices will come under some pressure in the near term before recovering. So yes, rents will likely be higher 10 years from now as will home prices. However paying a massive premium when buying vs renting today banking on steep increase over the next decade is really going out on a limb.

Keep in mind that if and when the rent vs mortgage number narrows so the latter is no longer double the former, the decision can always be made to purchase then. Using the investment account that has built up until then will mitigate the higher purchase price.