Keep the cheap rent and invest the savings
DEAR BRUCE: I am 27, and my wife is 24. We currently live in a home owned by my mother, and we are paying her $350 a month, which is inexpensive by any standard. The home meets our needs now ‘ and even when we have children in the future.
I am concerned, however, with paying rent that could be applied to a mortgage on our own place. We feel that we can handle a mortgage in the $800-a-month range. Would we be better off in the long run to pay the low rent and invest the money, or buy a house and have little to invest? I can’t make a competent decision. ‘ Reader, via e-mail
DEAR READER: It wouldn’t be hard for me to make a decision on this matter. If you buy a house, you’re looking at a $5,000-a-year increase in the cost of shelter. On top of the mortgage payment, you will likely have insurance and taxes that must be folded into the $800. At the end of a 10-year period, you could invest the difference of $50,000-plus, which might easily grow in excess of $100,000.
On an $800-a-month mortgage payment, there is no way that your equity would grow to anywhere near $100,000 ‘ even taking into account a reasonable expectation of an increase in the home’s value. You’re comfortable where you are, and you are getting a HUGE bargain. If it ain’t broke, don’t fix it!
DEAR BRUCE: I have a new-car fund of approximately $20,000 that I plan to use in three years. Where is the best or most profitable place for me to stash this money ‘ money-market funds, stocks, CDs, etc.? ‘ P.H., Unionville, Pa.
DEAR P.H.: There is no ‘best’ or ‘most profitable’ place. Unhappily, these are the things that you discover at the end of the investment, not the beginning. If you are prepared to take a degree of risk, mutual funds are a better choice than money-market funds that pay relatively modest interest. Stocks, of course, entail some risk, but there is always the reasonable expectation that stocks are chosen prudently for growth. CDs are quite safe but earn only a small amount of interest. Decide the degree of risk, pick the investment vehicle and then pay the money.
DEAR BRUCE: When my mother passed away, she left me a bunch of silver dollars, ranging in dates from the 1920s to the 1970s, some silver certificates and a lot of foreign money. Can you tell me where I can get an accurate assessment of these? ‘ Reader, via e-mail
DEAR READER: You might take a look at www.collectors.com. It is a comprehensive Web site that should point you in the right direction.
You can get an approximate value, but recognize that condition is an important factor when determining the numismatic worth of coins. You can also take it to a local coin dealer and pay him for an estimate of the value.
Interested in buying or selling a house? Let Bruce Williams’ ‘House Smart’ be your guide. Price: $14.95, plus shipping and handling. Call: (800) 337-2346.
Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: [email protected].