Sunday, November 18, 2007

Bergmans...millionaire?

This article is about millionaires in the making, featuring the Bergmans. Unfortunately I don't think money got this at all right. This couple is young 25 and 28 years old. However only due to an inheritance were they able to have any money saved. They make approximately $60k/year.

They have $9300 in a TSP (military 401k), $4500 in a Roth IRA, $8500 in a 529, Mutual Funds $15,200, and $2300 cash. What's the problem?

Two years ago they inherited $50k and yet they have no savings. They also sold a house and made a $25k profit, and again there isn't much savings. Instead they paid off CC debt (great move) about $15k. And they invested $10k in mutual funds.

However they put $21k down on a Honda Odessey. They still pay $440/month on the van and $230/month on a new Toyota Corolla. Because of this they spend about $800/month on car related expenses, which is about 16% a month of gross income on cars.

I don't think they are really used to saving. They spend more on cars than they do on saving. This is for a family living on base with minimal expenses.

According to the article they should hit millionaire status in their 50s and at 41 when Micheal retires from the military they should have $300k. Honestly I think it should be substantially more if they had used the inheritance more wisely and instead of buying a car invested it.

What do you think?

7 comments:

I'm Grace. said...

The comments at the end of the article were interesting, as well. I don't know that the $21,000 for a minivan was such a bad idea--it's far from a luxury car and they have two kids. But reading between the lines, they had a significant amount of debt acquired in the early years of their marriage, which they paid off due to the inheritance. A couple has only so many parents who (a) die; and (b)leave money behind. I hope they've learned some financial lessons

Boomie said...

I think Money Mag is running out of people with ANY money.

The car loans were very bad ideas. For $21,000 they could have paid cash for the same car, just one year older. Rather than $21,000 PLUS an additional loan @$400 a month and they have another 7 months to go. Sounds stupid and dumb to me. Then they have another car loan? You don't take out loans and buy a depreciating item, like a car.

As I said, Money is probably having a tough time finding anyone right now that has money.

Using the inheritance money to pay off debts, taught them nothing. Plan on them racking up more debt in the future. Duh? Like those cars.

Living Almost Large said...

I don't think they learned a lesson. Honestly what I would have done is not have paid off the Credit Cards or bought a car. The money $50k should have just been invested as an extra bonus.

Then they should have paid off their credit cards themselves, this way they would learn how to become debt free instead of in one fell swoop. It made it too easy.

Shadox said...

I agree - these guys hardly seem like millionairres in the making to me. Well, I guess it depends on your definitions of "millionaires" and "in the making"...

Andrea said...

I think they just wanted to profile a young couple, to give ppl hope.

Myself said...

Personally, I don't see why anyone with 2 kids would buy a minivan.
I would think that a mid-size or large-size car would be quite enough, and be better for them (unless they have more kids like the article mentioned they wanted).

I think that the article is doing a great disservice in not mentioning that costs for having the children will rise as they get older. Especially girls, since they spend a lot more on hair cuts, primping, etc. (typically, although not always).
And who has ever had children that didn't mention that the kids start eating the parents out of house/home when they get close to teenage years?

Now, on the plus side, it did say they didn't carry any credit card debt (anymore). And he is saving 10% of his salary.

Living Almost Large said...

I don't know about the minivan, no kids. But a childless couple I grew up with (my dad's secretary) had a minivan because they cared for her parents and in-laws. And her MIL and mother were wheelchair bound so it was easier and more convient for them to have a minivan with the transportation aspects.

They never had kids. I know another couple recently who have only one child but their parents live with them so they are usually a family of 4 adults and 1 kid.

But 10% of the salary is not enough. Nor is paying of debt using an inheritance.