Friday, November 30, 2007

Another non-millionaire...

Another post by the Millionaire in the Making Series, featuring the Magtibay family. This family has a geat income, lives in a low cost of living area, and appear to have the ability to save a lot of money. Currently they have $180k in 401k, $23k in IRA, $14k in 529, $81k home equity, and only $3k cash at 38 and 36 years of age. They make $115k/year and have a mortgage of $252k.

First major problem is the Magtibays have very little cash on hand to overcome any difficulties. They used their entire cash savings to purchase a home. This is a bad idea. If either lost their job or became disabled they have no taxable savings to tap to fall back on.

Second, they don't fully contribute to their Roth IRAs annually. This is a fantastic retirement tool while their incomes still allow them. Also they can easily afford to maximize their 401ks with such a high income and low mortgage, but they don't. Why?

Because of problem three. This couple unfortunately loves new cars. So much so they lease new cars every 5 years. Currently they are leasing a Nissan Altima and Pathfinder for $850/month. Honestly if they would just own and keep a car, that $850/month could easily be diverted into retirement/college savings.

According to Money Magazine, the Magtibay should be millionaires by the time they are 50. However I don't think with the lifestyle they lead this will be nearly enough to cover their spending. They'll have to continually generate income to cover a new car lease. Perhaps this couple with degrees in finance need to reconsider their finances.


Erin/WorkingforFinancialFreedom said...

Where are you reading this series? Is it online? I'd love to read it.

Hopefully they'll wake up soon and realize their car choices haven't been the best. They could do a lot with that $800+ a month instead of throwing it at cars.

I'm 29 and kick myself because we have wasted so many years by having car payments. But at least we are doing something about it now?

he he...although maybe if we'd keep our car payments we'd get featured in a magazine about being millionaires in the making? :)

Living Almost Large said...

Online at Money Magazine under a series millionaires in the making.

minimum wage said...

I've never had a geat income, what does it pay?