Getting Someone Else to Pay For Your Retirement
I'm an older sister with two little brothers.
Like any big sister, I worried about them when they were little and I worry about them now.
I worry about their future, and lately I've been worried most about my oldest little brother.
He is a gifted carpenter.
He used to be a chef and he was very good at that too.
He also can rebuild or repair any type of car.
His skills, patience and attention to detail is all remarkable.
However, this is not true when it comes to how he manages his money.
He's only in his early 30s, so he thinks there's lots of time left for him to continue working and saving.
He makes up for the fact that he practically has nothing saved by using his age as an excuse.
That's why I worry; the government isn't going to take care of us in our old age and pensions are a thing of the past.
If he doesn't save something for his retirement soon, he won't have enough to ever retire.
You might not either.
As his big sister, I decided to help him out by making a plan.
Now then, my brother has three cars, and he doesn't need all three.
I convinced him that one of the cars should be sold.
The money he makes off the sale can be used to start a savings account, and he'll save $500 a month, also for the savings.
He can also make extra money by taking on extra jobs.
These don't need to be full-time jobs, just little side jobs such as kitchen renovations are building fences.
Carpenters make very good handymen.
Even if he only works weekends, he can have enough saved to put down 10% on a $200,000 house in no time at all.
Maybe even a year or less.
Since he is a carpenter, he can even buy handyman's special.
If he lives there while he's fixing it up, he can save even more money.
After a few years he can rent out the house for about $1400 a month.
Now it's time to buy and move into new property.
Fast-forward 25 years, let's see what he has.
If he added $25,000 value to the house by fixing it up, and the property goes up every year at 4% appreciation, then in 25 years time the rental property will be worth almost double what he paid for it.
And the best part is the tenants paid the mortgage.
That's like having someone else contribute $1900 a month to your savings.
If you're wondering where the 4% comes from, historically properties average a 4% increase every year, even with ups and downs.
But even it doesn't go up quite that much, by renting it out; the tenants still have paid off the mortgage over the 25 year time span.
Now that the mortgage is paid, the property makes a positive cash flow for his retirement.
Remember, traditionally rents increase about 4% every year too.
Also in 25 years he will have his real home paid off too.
The two properties should give him about $1 million in equity.
That's a nice little nest egg for his or anyone's retirement! When I told my brother my plan, he got excited and sold one of the cars.
With the money he's making by helping us with one of our properties he's saving up for a fat down payment for a house.
You can do it too! Why wouldn't you?
Like any big sister, I worried about them when they were little and I worry about them now.
I worry about their future, and lately I've been worried most about my oldest little brother.
He is a gifted carpenter.
He used to be a chef and he was very good at that too.
He also can rebuild or repair any type of car.
His skills, patience and attention to detail is all remarkable.
However, this is not true when it comes to how he manages his money.
He's only in his early 30s, so he thinks there's lots of time left for him to continue working and saving.
He makes up for the fact that he practically has nothing saved by using his age as an excuse.
That's why I worry; the government isn't going to take care of us in our old age and pensions are a thing of the past.
If he doesn't save something for his retirement soon, he won't have enough to ever retire.
You might not either.
As his big sister, I decided to help him out by making a plan.
Now then, my brother has three cars, and he doesn't need all three.
I convinced him that one of the cars should be sold.
The money he makes off the sale can be used to start a savings account, and he'll save $500 a month, also for the savings.
He can also make extra money by taking on extra jobs.
These don't need to be full-time jobs, just little side jobs such as kitchen renovations are building fences.
Carpenters make very good handymen.
Even if he only works weekends, he can have enough saved to put down 10% on a $200,000 house in no time at all.
Maybe even a year or less.
Since he is a carpenter, he can even buy handyman's special.
If he lives there while he's fixing it up, he can save even more money.
After a few years he can rent out the house for about $1400 a month.
Now it's time to buy and move into new property.
Fast-forward 25 years, let's see what he has.
If he added $25,000 value to the house by fixing it up, and the property goes up every year at 4% appreciation, then in 25 years time the rental property will be worth almost double what he paid for it.
And the best part is the tenants paid the mortgage.
That's like having someone else contribute $1900 a month to your savings.
If you're wondering where the 4% comes from, historically properties average a 4% increase every year, even with ups and downs.
But even it doesn't go up quite that much, by renting it out; the tenants still have paid off the mortgage over the 25 year time span.
Now that the mortgage is paid, the property makes a positive cash flow for his retirement.
Remember, traditionally rents increase about 4% every year too.
Also in 25 years he will have his real home paid off too.
The two properties should give him about $1 million in equity.
That's a nice little nest egg for his or anyone's retirement! When I told my brother my plan, he got excited and sold one of the cars.
With the money he's making by helping us with one of our properties he's saving up for a fat down payment for a house.
You can do it too! Why wouldn't you?
