Financial planning and aviation

flyingcheesehead

flyingcheesehead

Taxi to Parking
Joined
Feb 23, 2005
Messages
28,184
Location
UQACY, WI
Display Name
iMooniac
Home Airfield
KUES/KMKE
Ugh...

There's a ton of sites out there that let you plug in how much you make and a bunch of other variables and they tell you "you can afford this much house!" However, they don't say what else you can afford.

In the next 6 or 7 years, I'd like to have a house, two kids, and an airplane. The house is likely going to come first, but I don't want to spend so much on the house that I can't afford the airplane, especially since the kids are kind of hard to return. ;)

I guess the banks have settled on something around 36% of your gross income being the number that's allowable for a house payment. But what's realistic in terms of an airplane? How much do kids cost?

Thanks for any insights!
 
If you want something instead of kids (but will fulfill the basic kid functions like being loud and stinky) I would reccomend a goat. They are much cheaper, AND you can eat them if you had too. I mean, you could eat a kid too, but a goat would be more generally accepted.
 
flyingcheesehead said:
How much do kids cost?
Click to expand...


DavidWhite said:
If you want something instead of kids (but will fulfill the basic kid functions like being loud and stinky) I would reccomend a goat. They are much cheaper, AND you can eat them if you had too. I mean, you could eat a kid too, but a goat would be more generally accepted.
Click to expand...

You do realize that you're saying the same thing...right???:D
 
If not yet born, those kids are going to cost you around $500,000 each to get through college. The house will eat you alive financially: insurance, taxes, maintenance, lawn work and care, electricity, water, sewer, gas or other heating expense, and kid wear out clothes so fast you won't believe it.

Stay single. Rent an apartment. Get an airplane. No other way unless you want to wait till the kids are gone, the wife is fat and no longer needs/want you. Then, maybe, there will be enough money for a cheap airplane.
 
flyingcheesehead said:
Ugh...

There's a ton of sites out there that let you plug in how much you make and a bunch of other variables and they tell you "you can afford this much house!" However, they don't say what else you can afford.

In the next 6 or 7 years, I'd like to have a house, two kids, and an airplane. The house is likely going to come first, but I don't want to spend so much on the house that I can't afford the airplane, especially since the kids are kind of hard to return. ;)

I guess the banks have settled on something around 36% of your gross income being the number that's allowable for a house payment. But what's realistic in terms of an airplane? How much do kids cost?

Thanks for any insights!
Click to expand...

a serious answer before this thread degrades.

our monthly mortgage payment is about 25% of net income. that or less is probably a good number to aim for if you aren't interested in being a complete slave to your job for the next 30 years thanks to your mortgage/car payment/kids/college and still trying to scrape up a little extra to go flying once a month.

the problem is that its a lot easier to say "well i just won't be able to fly this month" than it is to say "i just won't pay the mortgage this month" or "i just won't feed Kent Jr. this month" or "Kent Jr. doesn't REALLY need to go to college"
 
How much does a kid cost?

It's a person, a good place to start is how much do YOU cost.

Then factor in the fact that for the better part of a decade you will not be able to leave it alone at all, budget for paid help in that department.

Shall we go on?
 
Get the airplane first(before both the house and kids) or by the sounds of it you will not get an airplane for 30 years, if at all.
 
flyingcheesehead said:
Ugh...

There's a ton of sites out there that let you plug in how much you make and a bunch of other variables and they tell you "you can afford this much house!" However, they don't say what else you can afford.

In the next 6 or 7 years, I'd like to have a house, two kids, and an airplane. The house is likely going to come first, but I don't want to spend so much on the house that I can't afford the airplane, especially since the kids are kind of hard to return. ;)

I guess the banks have settled on something around 36% of your gross income being the number that's allowable for a house payment. But what's realistic in terms of an airplane? How much do kids cost?

Thanks for any insights!
Click to expand...

36% max is about right for the house payment alone (Principal, Interest, Taxes, Insurance). It used to be lower than that.

You should be able to figure out the airplane operating costs with the Mooney you're flying. Annuals will be less with a fixed gear, but that would be slower and less efficient. Acquisition cost you estimate from the current cost of planes in the market. You may be much better off in a club or renting for a while.

Someone else will have to tell you about kids, but they're not cheap.
 
flyingcheesehead said:
How much do kids cost?

Thanks for any insights!
Click to expand...

Not an easy question to answer, everyone will be different. What is your goal for them (singular or plural). Do you plan to give them the "toys" of childhood, good elementary/high school, vacations to see some of the world, cars, a paid for college education such that they start life even with no debt? They ain't cheap, but seems to me well worth the expense. Rough round number, current cost - $300,000/ea. - start to age 21 with all the above thrown in. YMMV and I'm sure many could do better. :D

It all depends on how you want to do it.

A Cherokee is cheaper!

Gary
 
FWIW house payment is about 40% of MY income and officially I am the sole owner. Gives you an idea of what you CAN get approved for.

Not that I recommend it, with Angie's employment being variable as she gets her career going the months where she doesn't bring much in really hurt, but we can make it on only my income. No flying during those times, and I don't pay for storage of the plane either.
 
DavidWhite said:
If you want something instead of kids (but will fulfill the basic kid functions like being loud and stinky) I would reccomend a goat. They are much cheaper, AND you can eat them if you had too. I mean, you could eat a kid too, but a goat would be more generally accepted.
Click to expand...

Well, plus you can use them in Santeria rituals as well - at least the goat heads.
 
What you have working in your favor is that you're in an area with reasonable property values and cost of living. Buy the house first, pay it down. Better yet, pay it off. I don't know what you want in a house, but you will use your house a lot. Buy one you'll enjoy. I've found a house isn't too bad expense wise, but I don't like buying fixer-upper houses. If you do all the repairs yourself, you'll save a lot of money, even if you do home improvements. What is expensive with a house is the kajillion things you buy for it - ladders, grill, power washer. Maybe you already own most of those, and they are more or less one-time costs.

Kids also don't have to cost as much as many people spend on them (but aren't cheap). We bought most of our baby clothes at yard sales, and you'll get gifts from friends. Don't forget hand-me-downs for kid 2. Cloth diapers save a ton of money - we estimate around $2,000. Plus they're better for the baby. Yes, you've got college and other expenses, but everyone saves for those differently.

As far as a plane, my question is why wouldn't you just keep on renting for now given what a good club you have? Pay off your house quickly, then save up money and buy a plane with cash if you really want. I believe with used planes like what we fly if you can't afford to buy it with cash, you typically can't afford it.
 
If I were handy with a graphics program, I would draw you a Kid Cost Curve that would be fairly flat for about the first ten years and start to slowly go up. Until 16 at which point it would rocket up. Actually, that would be the Boy Kid Cost Curve. I don't know abou the Girl Cost Curve yet -- she's only 8. But I have a feeling that she is going to age me!

Seriously though, like many things in life, the cost will really depend on your approach. For every jungle-themed bedroom, Disney World-annually, private school attending child, there's a "we just put him in a drawer instead of a crib" child and they both seem to turn out ok.

As far as the cost of owning a home, consider that someone owns your current dwelling and is making money renting it to you.
 
The question and idea of a percentage of income for the mortgage is flawed. If you're making $10K a year, no percentage works to own an aircraft. If you're making $1M a year, the percentage can be pretty high. ;)

Income is the critical variable. The bank's calculator is a sales tool trying to max you out, guaranteed.

You also forgot to add a large percentage to a retirement fund. The chances your generation and mine will see much from Social Security are low. The chances government will keep their deal on tax-free withdrawals on Roth investments are also low. The chances tax rates will be the same for 401K and regular IRA investments, also low. One ultra-conservative method for dealing with this is to assume the investments will make 0% and take their income as gravy.

You're a spreadsheet guy... Toss some what-ifs (as wild or conservative as you like) into one, and start playing with the income and outflow numbers. Start it with real-world numbers today for your situation and keep that copy, or link it to the dream versions, and adjust and track annually. It won't take you more than an evening to arrive at reasonable numbers.
 
tonycondon said:
a serious answer before this thread degrades.

our monthly mortgage payment is about 25% of net income. that or less is probably a good number to aim for if you aren't interested in being a complete slave to your job for the next 30 years thanks to your mortgage/car payment/kids/college and still trying to scrape up a little extra to go flying once a month.

the problem is that its a lot easier to say "well i just won't be able to fly this month" than it is to say "i just won't pay the mortgage this month" or "i just won't feed Kent Jr. this month" or "Kent Jr. doesn't REALLY need to go to college"
Click to expand...

Still renting, but I've also heard 25% or less is a good target, and then apply Baby Step 4 (aka Dave Ramsey) about paying off the home as soon as possible. They myth that you lose the income tax deduction doesn't hold water compared to the results when the home is paid for early, and the house payment money goes into your retirement funds.

And Dave Ramsey has gotten some knocks from this crowd, but his philosophy and methods work for many. So review and apply his information as you start moving forward.
 
I will tell you if your mortgage is 36% of your gross monthly income, you won't have an airplane unless it's a rubber band model!
$100,000 annual salary, $8300.00 per month gross, less deductions, health care tax, fica, state income tax, federal income tax etc, etc, leaves you MAYBE $6000.00 subtract $2900.00 (36%) of gross for mortgage, that leaves roughly $3000.00 for cars, gas, insurance, diapers, school supplies, food, clothes, house and car repairs, did I mention college savings or just a regular savings account?
My point is don't buy all the house the bank will let you have, buy as much as you feel comfortable, even if you miss a couple days of work one week, you won't be stressing on how to make the payment.:D
 
I don't know what our kids 'cost' to raise. Never kept track. I know that college was about $10,000/yr/kid, but that was over 10 years ago. Resident tuition in a state university helps there. Then there was the wedding for our daughter. I don't know what that cost, all I know is that it made a year of college look CHEAP.

I don't own a plane. I belong to a club. The house will be paid off in just over 4 years. Once that happens retirement is just a matter of how much longer can I deal with going to work each day instead of doing the things I want (or my wife wants me to do :rolleyes: ). Less than 5 years, in any case (assuming the market doesn't tank and I have to work forever).

Only you know what your income is and what your other expenses are. Spend less on the house and you have more for the plane. Or the other way around.

Good luck, whatever you do.
 
flyingcheesehead said:
Ugh...

There's a ton of sites out there that let you plug in how much you make and a bunch of other variables and they tell you "you can afford this much house!" However, they don't say what else you can afford.

In the next 6 or 7 years, I'd like to have a house, two kids, and an airplane. The house is likely going to come first, but I don't want to spend so much on the house that I can't afford the airplane, especially since the kids are kind of hard to return. ;)

I guess the banks have settled on something around 36% of your gross income being the number that's allowable for a house payment. But what's realistic in terms of an airplane? How much do kids cost?

Thanks for any insights!
Click to expand...
I personally think 36% is way too high. 20% has always been the *max* I'd even consider.
 
denverpilot said:
You're a spreadsheet guy... Toss some what-ifs (as wild or conservative as you like) into one, and start playing with the income and outflow numbers. Start it with real-world numbers today for your situation and keep that copy, or link it to the dream versions, and adjust and track annually. It won't take you more than an evening to arrive at reasonable numbers.
Click to expand...

Then toss all that stuff out the window. It starts looking good and you talk yourself into it, but there's always unforseen expenses. Plan for those and then double your cushion.

Listen carefully to the below advice. Read it thrice, then come back to this thread and read it again.
N747JB said:
I will tell you if your mortgage is 36% of your gross monthly income, you won't have an airplane unless it's a rubber band model!
$100,000 annual salary, $8300.00 per month gross, less deductions, health care tax, fica, state income tax, federal income tax etc, etc, leaves you MAYBE $6000.00 subtract $2900.00 (36%) of gross for mortgage, that leaves roughly $3000.00 for cars, gas, insurance, diapers, school supplies, food, clothes, house and car repairs, did I mention college savings or just a regular savings account?
My point is don't buy all the house the bank will let you have, buy as much as you feel comfortable, even if you miss a couple days of work one week, you won't be stressing on how to make the payment.:D
Click to expand...

I like!
 
AggieMike88 said:
Still renting, but I've also heard 25% or less is a good target, and then apply Baby Step 4 (aka Dave Ramsey) about paying off the home as soon as possible.
Click to expand...

Baby Step 4 is actually saving 15% of your income for retirement. Paying off your house early is Baby Step 6, just after saving for the kids college

25% is a great number for house payment, however, it's not always possible in major metro areas
 
Dave Ramsey preaches sound financial methods for all of us. I follow his advice and am much better off because of it. ZERO debt enables a lot of things such as aircraft ownership when in your 50's. Those who don't like Dave are just fine but I won't listen to their advice. More that 25% of your yearly income towards a mortgage is not good for long term financial planning.

I own my home and have no debt. You can follow the financial advice of whomever you want but what I've done has given me total financial freedom. Read Dave's "Total Money Makeover" and check out page 42. It can be done!
 
jesse said:
I personally think 36% is way too high. 20% has always been the *max* I'd even consider.
Click to expand...

My max was 25% PITI for first house out of college, knowing that income would rise fairly quickly over the first few years. When I sold the house 5 years later, it was below 20% (and the house appreciated 50%).

Now that I'm older and make a better income (albeit with flatter growth potential) I won't do more than about 15% of gross. The challenge has been *telling* the real estate agent that I would *not* exceed a certain price - they pushed very hard to get me to max out against what the bank would lend. I "fired" one who insisted that I spend more than my personal budget & tried to tell me why I wouldn't like certain neighborhoods. Agent is incented to get you to spend more.
 
Jaybird180 said:
Then toss all that stuff out the window. It starts looking good and you talk yourself into it, but there's always unforseen expenses. Plan for those and then double your cushion.
Click to expand...

I told him to start with real numbers.

Of course, he doesn't have real numbers for the ankle-biters yet, but he could see how much left over he has at the end of the month today.

As far as unforeseen expenses, yes... An emergency fund is also one of the required monthly payments to oneself, until it's at a level you are comfortable with.

Kent, I recommend reading up at dinklife.com ... and studying this set of rear window stickers...

http://xkcd.com/946/

Or these...

http://www.mandatory.com/2012/05/30/if-family-car-stickers-were-honest/
 
I second this...a baby goat is called a kid too! Therefore you can say you have a kid and it wouldn't sound so bad if you had to eat your kid:lol:.

Sorry, couldn't pass up that opportunity. :rofl:

DavidWhite said:
If you want something instead of kids (but will fulfill the basic kid functions like being loud and stinky) I would reccomend a goat. They are much cheaper, AND you can eat them if you had too. I mean, you could eat a kid too, but a goat would be more generally accepted.
Click to expand...
 
I had big dogs for 15 years before a kid. Still have a big dog too. Dog have the benefit you can lock them in a cage and no one reports you to child services.
 
bluee said:
I had big dogs for 15 years before a kid. Still have a big dog too. Dog have the benefit you can lock them in a cage and no one reports you to child services.
Click to expand...

My dogs are better behaved than any kid I've ever known as well!
 
Boats, airplanes, motorcycles, and girlfriends all fall into the same category. You don't NEED any of them, but they sure can be fun. You just figure out a way to do it so you are comfortable finically and make sure you know what your goals are.
 
Just my .02, but the main mistake I see young people making when getting into a house is buying way more house than they need. This is encouraged by real estate agents working on commission and by developers who build McMansions which are slightly more expensive to build because of inferior materials but garner wider profit margins. Being house poor is starting out in a hole. Philosophically, it is a waste of materials and resources to build and maintain as well.
Kids are a huge investment but one whose value cannot, and should not, be measured monetarily. My advice is to get a good financial advisor, map out realistic goals based on prioritized targets and stick to your plan. You'll get there barring major calamity.

Of you can follow my lead, and find an incredibly talented woman skilled in an arcane branch of international contract law who has a penchant for picking sub-standard husbands!!. :yes:
 
What repercussions should the spouse of such a woman expect when she finally realizes her mistake?

Threefingeredjack said:
Just my .02, but the main mistake I see young people making when getting into a house is buying way more house than they need. This is encouraged by real estate agents working on commission and by developers who build McMansions which are slightly more expensive to build because of inferior materials but garner wider profit margins. Being house poor is starting out in a hole. Philosophically, it is a waste of materials and resources to build and maintain as well.
Kids are a huge investment but one whose value cannot, and should not, be measured monetarily. My advice is to get a good financial advisor, map out realistic goals based on prioritized targets and stick to your plan. You'll get there barring major calamity.

Of you can follow my lead, and find an incredibly talented woman skilled in an arcane branch of international contract law who has a penchant for picking sub-standard husbands!!. :yes:
Click to expand...
 
Do not finance airplanes if you can avoid it. It's such a buyers market these days you stand a good chance of the asset dropping like a rock in value. In the good old days before 2006 it used to be aircraft could even appreciate. And anything you put in in them - new engines, new avionics - you got back come selling day. Not anymore. Anything you add will at best give 50 cents on the dollar today. At the very best. On the other hand, you can get lots of great bargains for not very much money.
 
You absolutely forget about aviation. Get the house, keep Captain Winkie under wraps, don't travel, don't go out to eat, don't do the movies, don't do cable, screw the iPhone with the rape and scrape plan, don't buy any new cars, and dump every last cent into getting the house paid off.

You're going to have two incomes. I'm going assume that by your ages, you have both cars paid off and have 20% for a down payment. In the Midwest, you find a $125k house, and mortgage 100k of it. That saves you on PMI, escrow, mortgage insurance and all that other crap that is a waste of money.

If between the two of you, the income is $100k you should be bringing home about $6500/month. You've got your cars paid off, or should. So, you need what to survive?

Food, clothing, shelter - and all the extra goes into the shelter, after a 6 month emergency cushion. The two of you can eat for $400/month no problem. I eat for half of that, and I don't even bother to coupon clip.

6500
-400 Food
6100

Unless both of you are growing or shrinking, you shouldn't need any clothes. But, one of you is female, so...
-6100 Clothes
$0 remaining. Sorry Kent, you are hosed.

Just kidding.
-$200 and I'm being WAY over generous for clothing.

5900 remaining.

I have no clue how far you drive, so lets say you each use 4 gallons of gas per day to commute, at $4/gallon that's $32/day * 20ish work days - call it $700.

-$700
$5200 remaining.

Utilities - like I said, screw the cable, screw the internet, screw the $100/month phone plans. Get a barebones phone plan for $30/mo each and figure on average another $140/month for heat and electric on average. More in the winter, less in the summer. ( I base this on my usage) Don't buy a place in the city, and you don't have to worry about sewer and water bills.

-$200
$5000 remaining

You gotta pay taxes on the place, and that varies depending on where you are, but even if you figure $300/month on taxes - which is way high on a 125k house that leaves you with

-$300
$4700/month remaining.

Figure another $200 a month in miscellaneous crap that pops up, or a push mower, or whatnot and you're left with

-$200
$4500/month

I don't know what the current mortgage rate is, but if it's in the 4.25% you're looking at a $500/month house payment.

That leaves $4000/month leftover. For the first year dump $2000/month into the house, and $2000 into an emergency fund. After the first year, make it $3000 house and $1000 emergency fund.

Year 3, all $4000 extra into the house. Which will only be for 8 months.

You have a house paid off in 2 years and 8 months. Can you sacrifice for that long? Oh and your emergency fund will be $36,000.


I didn't have the second income and did it in 7ish years.
 
Last edited:
wabower said:
What repercussions should the spouse of such a woman expect when she finally realizes her mistake?
Click to expand...

Considering that one of her closest friends has a thriving family law (read divorce) practice in LA, and has a reputation that causes grown men to move their bowels when she enters the courtroom, I have lived in constant fear of that epiphany for 33 years now. :D
 
Threefingeredjack said:
Just my .02, but the main mistake I see young people making when getting into a house is buying way more house than they need. This is encouraged by real estate agents working on commission and by developers who build McMansions which are slightly more expensive to build because of inferior materials but garner wider profit margins. Being house poor is starting out in a hole. Philosophically, it is a waste of materials and resources to build and maintain as well.
Kids are a huge investment but one whose value cannot, and should not, be measured monetarily. My advice is to get a good financial advisor, map out realistic goals based on prioritized targets and stick to your plan. You'll get there barring major calamity.

Of you can follow my lead, and find an incredibly talented woman skilled in an arcane branch of international contract law who has a penchant for picking sub-standard husbands!!. :yes:
Click to expand...

You aren't kidding. When I was looking, I set a cap of $120k, even though in theory they were trying to say I could afford a $400k house. No way, Jose.
 
Congratulations on both your sense of priorities and your ability to create vivid mental imagery. Hope you make 33 more. :D

Threefingeredjack said:
Considering that one of her closest friends has a thriving family law (read divorce) practice in LA, and has a reputation that causes grown men to move their bowels when she enters the courtroom, I have lived in constant fear of that epiphany for 33 years now. :D
Click to expand...
 
Another aspect about all of this planning...

15-year fixed notes... And there are some good deals for these if you shop hard enough...

Then get extra busy to pay it off in less than 8-9.

The 30-year note is one item that got too many folks into too much trouble. They were out to get too much house on as low of a payment as possible, and the lenders let them, many with 30 year notes that didn't get enough equity into the deal fast enough.

Someone once told me that the optimum thing is to find the right amount of house and no more, do a 15 year note that you do a 25-35% down payment on, and the result will be a PITI amount that is similar to many folk's rent. Then you work hard adding to the top of the budget and squeezing the bottom of the budget.

End result: You own your house free and clear sooner than most folks pay off their cars.

Then you're in a paid for home, with paid for cars in the garage, and nearly all that extra money that isn't paying for some banker's bonus is piling up in your retirement account.
 
AggieMike88 said:
Another aspect about all of this planning...

15-year fixed notes... And there are some good deals for these if you shop hard enough...

Then get extra busy to pay it off in less than 8-9.

The 30-year note is one item that got too many folks into too much trouble. They were out to get too much house on as low of a payment as possible, and the lenders let them, many with 30 year notes that didn't get enough equity into the deal fast enough.

Someone once told me that the optimum thing is to find the right amount of house and no more, do a 15 year note that you do a 25-35% down payment on, and the result will be a PITI amount that is similar to many folk's rent. Then you work hard adding to the top of the budget and squeezing the bottom of the budget.

End result: You own your house free and clear sooner than most folks pay off their cars.

Then you're in a paid for home, with paid for cars in the garage, and nearly all that extra money that isn't paying for some banker's bonus is piling up in your retirement account.
Click to expand...

Doesn't matter what the length of the note is (assuming the same interest rate). If you have a 30 year note, but pay it off at 10 or 15 year payment levels it will be paid off in 10 or 15 years.
 
EdFred said:
You aren't kidding. When I was looking, I set a cap of $120k, even though in theory they were trying to say I could afford a $400k house. No way, Jose.
Click to expand...

Sounds like my granddad's comments about buying expensive cars with more options. He was quite happy with manual everything since it was fewer stuff to break, and if it did, it was a lower cost of repair.
 
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