Author: Richard Archer

Did you know that automation threatens to eliminate about half of U.S. jobs?¹ Is your job at risk? Find out here.

In this issue of the Visual Insights Newsletter, we take a look at the top jobs threatened by automation and examine trends across different industries. Click here to check it out.

Automation threatens to eliminate some jobs entirely, but it’s not all bad news. There is a silver lining. Click here to discover the upside. 

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than twenty years of industry experience. He specializes in providing comprehensive financial planning and investment guidance and personalized care and attention to professionals with complex compensation and families pursuing financial freedom. Along with holding a Wharton Bachelor of Science in Economics and a Texas MBA, he is a CERTIFIED FINANCIAL PLANNER™ and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn, Facebook, Twitter or visit www.archerim.com.

It’s hard to deny it: Austin is an awesome place to call Home, Sweet Home. 🏠

But for tech professionals, is it the smartest move to buy a House, Sweet House?

Maybe you’ve just come from selling a house in Cali. It only makes sense to use that money to buy a new house in Austin, right? After all, costs seem low in comparison. The Austin housing market is booming. Real estate here is looking mighty nice right now.

I’m here to advise you to slow your roll. For many people—tech professionals in particular—renting may be the way to go.

Why? Most of the reasons on this list relate to one simple equation:

More Cash = More Freedom

We’ll dig into that in more detail. First, let’s look at some pitfalls to homeownership that sometimes get neglected…

1. SURPRISE! HOUSE COSTS WILL SURPRISE YOU

Buying a house saddles you with much more than a monthly mortgage. There’s property taxes and insurance premiums, and either could go up at any time. There’s furnishing, maintenance and upkeep.And then… there’s the unpredictable.                                                                                                                                                                                              

No matter how ready you think you are, when you face something like tree roots bursting into your sewer line… That literally stinks. And it’s a drain—the financial, physical, and mental kind—you don’t need.

Here are some other eye-opening numbers for you: Research by Zillow and Thumbtack found the average U.S. house faced about $9,400 in hidden costs per year. 

                                                                      For houses in Austin, that number is $12,457.

$9,727 in “necessary” costs (taxes, insurance, and utility bills) plus $2,730 in maintenance costs. That’s the 9th highest of all cities in the study. (1)  

Meanwhile, monthly rents in Austin haven’t risen as sharply as real estate prices have. You can get a lot more house for your money by renting, and you know how much you’ll be paying throughout the year.

Plus, being able to call a landlord to take care of that plumbing disaster? Priceless.

2. RENTING LEAVES YOU MORE CASH FOR MORE FLEXIBILITY

Now let’s talk cash. 💸 Namely, how much more of it you’ll have if you don’t throw it into a down payment for real estate. 
In the tech world, some of the most exciting jobs are in startups. Maybe that’s what brought you to Austin. A hot new business that’s primed to explode, but you have to take a major salary cut now to get in on it.
If you’re counting on that cash for buying a house, you might not be able to afford to take a hit now for the prospect of a big payout down the line.

But if you rent and save that cash, you’ll not only be in a better position to take the equity. You’ll also have the flexibility to be more strategic and profitable with what you do with it.

Here’s one example:If you’ve received stock grants, a Section 83(b) election lets you pay taxes on them now, when the stock is granted to you, rather than years later when the stock is vested—and potentially worth a lot more.
(For details, read my post going into all the nitty-gritty of a Section 83(b) election.)

3. HOUSES HAVE GRAVITY

One thing I’ve learned about tech professionals is they love a challenge. New problems to solve, new mountains to climb. Bring it on.

But that also means you might be drawn to what seems like a dream job at first, only to start feeling bored when things get stale or easy or repetitive. That can mean more job changes—and location changes—than other professions.

And that’s fine! I won’t be offended if you have to leave this great city. I support you in your next challenge. 🙌

But if your new dream job calls out to you from San Fran or Seattle or New York or wherever and you already have a house here in Austin, you may find that house holding you back. It becomes an albatross around your neck, one so big it has its own gravitational pull, keeping you from launching off to the job you really want.

And let’s keep it real: the tech industry can be brutal. Big company-wide layoffs can send you into an escape pod whether you’re ready to leave or not. Having a cash cushion available by not putting it into a house can make a huge difference in easing the stress.

4. MORE FREEDOM FOR JOURNEYING AND LEARNING

The sky’s the limit on what you can do with the extra cash and extra freedom that comes with renting. That’s the best part about freedom!

But here are a couple ways that renting may offer an extra-enticing advantage. One is if you want to literally take to the skies! ✈️

Whether it’s to visit family or just explore the wild world out there, many of the tech professionals I work with love to have a large travel budget! Instead of putting a whole bunch of cash into one very stationary house, you can spend it on roaming the world as you wish.

Plus, you won’t have to worry about what might be happening to your house or yard or plumbing while you’re away.

5. YOU DON’T KNOW HOW YOUR KID WILL GROW UP YET

Not being tied down by a house also gives you valuable freedom in terms of education for your kids. If you’re new to Austin, you might not know where you to settle based your family’s educational priorities. You might not know what schools offer or where their district boundaries are.                                                                                                                                                            And you probably can’t predict what your kids will be like in the future, either. Will they show a knack for certain subjects, interest in certain careers, or talent in certain lucrative sports?  
You may end up wanting to move to a different school system that has the programs and opportunities to best help your future superstars thrive. 📚 If your family is renting, both the decision and the move itself will be much easier on you.

SO… WHAT’S YOUR NEXT MOVE?

Has this helped open your mind to renting instead of buying a house in Austin? That’s just the start. There are a lot of factors to consider, a lot of specific financial strategies that may help in your situation.
Or maybe you’re a tech professional that these reasons don’t apply to. Or maybe you’re not in the tech industry at all, but still find yourself thinking, “I need to start getting my financial life in order and have a second opinion on important decisions like this!”
That’s what we’re here for. Whether you rent or buy, we’re here to help you make the best call for you and your family in all of your financial choices. Schedule a call.

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than twenty years of industry experience. He specializes in providing comprehensive financial planning and investment guidance and personalized care and attention to professionals with complex compensation and families pursuing financial freedom. Along with holding a Wharton Bachelor of Science in Economics and a Texas MBA, he is a CERTIFIED FINANCIAL PLANNER™ and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn, Facebook, Twitter or visit www.archerim.com.

Austin is the cool place to be these days, but the housing market in “the music capital of the world” is triple digits H-O-T!

But stay tuned… because we are going to share some smart ways to calculate “‘how much house can I afford in an in-demand city like Austin?” 🤔

BUT FIRST… A FEW FACTS ABOUT OUR IN-DEMAND MARKET 🔥

Home prices in Austin have spiked nearly 10% in the last year. It’s getting expensive for those who want to put down roots and get their own piece of Austin real estate.

The average home value right now in Austin is just over $360,000, and the median listing price is $379,000. (1)

With our market as hot as it is, it is more important than ever to have a solid grasp of how much house you can really afford before you sign on the dotted line.

Ten years ago we saw what happens when too many people get caught up in the rush and end up in over their heads. 👎🏻

WHY ONLINE CALCULATORS DON’T SHOW THE WHOLE PICTURE 🙈

So, how do you know how much you can really afford in our incredible city? Some people think using an online calculator is a great way to crunch the numbers.

However, a calculator in and of itself is not sufficient. A calculator’s purpose is to determine “how much of a mortgage you may be able to obtain.” But just because a lender is willing to give you a mortgage doesn’t necessarily mean you can afford it or you should get it.

There are a few other critical goals and lifestyle items to consider first…

WHAT ELSE DO YOU WANT BESIDES A HOUSE?

Just because you can technically “afford” a mortgage payment doesn’t mean it’s the best choice for you right now. It’s important to take long-term goals into consideration. Taking on too hefty of a mortgage will limit funds for your other goals, making them harder to achieve.

Do you want your children in a private school? That will reduce how much money you have to put toward a house payment on a monthly basis.

Do you want to retire early or travel often? An online calculator doesn’t know that. Using an online calculator to determine the mortgage size to take on could make it challenging for you to fulfill your dream of becoming financially independent or seeing the world.

While the online calculator is a good starting point, it is an oversimplification. It’s important to look at the big picture of your life to see how owning a home fits into your other goals and priorities.

ARE YOU REALLY SURE YOU WANT TO BUY? 🏠

Owning a home is an important milestone in our American culture. How important is it to you personally, though?

Many young people purchase homes because that’s what’s supposed to come next after starting a real job and getting married, and before the kids start coming. Too many people purchase a home on autopilot and don’t take the time to even consider if it’s what they really want in life.

FINANCIAL COSTS

Contrary to popular belief, owning a home isn’t right for everyone. It isn’t always a good financial move. There are so many expenses that come up when owning a home it’s impossible to list them all.

It goes all the way from big-ticket items like HVAC and a new roof to little things like backflow testing, shower curtains, and tree trimming. Do you know how much it costs to replace outdated brass faucets?

If you look at Zillow’s website, it will tell you that the mortgage for a $375,000 house would be about $1,463 a month. (2) You look at that number, see the picture of the pretty house with all of its curb appeal, and think, “That’s cheaper than my rent. I’m in!”

But that number doesn’t include taxes. And it doesn’t include insurance. It doesn’t include the HOA. Or any of the myriad of expenses mentioned above. Once all of the expenses are laid bare, many people decide that it just makes more financial sense to rent rather than buy.  

LIFESTYLE COSTS

Even if you have the money, owning a home might not fit your lifestyle. Are you sure you want to stay in Austin long term? If you change your mind, it’s much easier (and cheaper!) to pick up and leave if you rent instead of own a home. Homeownership serves as an anchor that many people appreciate while others loathe.

Even if the nomadic lifestyle holds no appeal for you, you may not want to be anchored quite yet. If you’re still building your career, being anchored to a house could keep you from pursuing a promising job opportunity elsewhere.

What happens when you have kids? Will you want to be closer to the grandparents (and free babysitting)? Are you satisfied with the schools in your neighborhood, or will you want to move to a better district? If that’s too far in the future, you may not be ready to make a commitment yet.

YOU DON’T HAVE TO FIGURE THIS OUT ALONE  🙌🏻

When you own a home or are thinking about purchasing one, it’s challenging to anticipate all of the different expenses that will crop up or the different factors that need to be taken into consideration.

You simply don’t know what you don’t know.

I love to come alongside people who are right in your position and give them a leg up. I understand the stress and anxiety that you are facing as you approach making the biggest purchase of your life. It can be daunting.

But, it doesn’t have to be. Partnering with an experienced financial professional can help lift the burden from your shoulders and help lower your stress knowing you are making the right choices for YOUR life and values.

If you’re considering buying a house in Austin, give me a call first.

We can review your goals and priorities, see how home ownership may fit in, and find a price point that will make ALL your dreams possible, not just home ownership!

Schedule a 45-Minute Introductory Call with Me

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than twenty years of industry experience. He specializes in providing comprehensive financial planning and investment guidance and personalized care and attention to executives with complex compensation and families pursuing financial freedom. Along with holding a Wharton Bachelor of Science in Economics and a Texas MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.

In this age of information overload, there’s no lack of answers to our burning financial questions. But finding the answers that will optimize our financial lives isn’t just about muddling through articles and news reports; it’s about asking the right questions of the right person.

Here are 5 questions you should be asking your financial planner:

1. HOW DO I PLAN FOR MY CHILDREN’S COLLEGE EDUCATION WITHOUT BREAKING THE BANK?

Have you looked at college costs lately?

You’re looking at $187,800 for four years at a private college. But with college costs estimated to rise 5% per year, in five years that amount increases to $239,685—almost $60,000 a year! (1)

You have a better choice if you act now.

Start using the power of compound interest to your advantage… now!

Think of it this way…

You have the choice of saving NOW and earning interest, or borrowing LATER and paying interest.

Here’s a sneak peek at power of compound interest in action:

If you invest $4,000 in a market earning an average return of 7%, it would be worth $7,869 in 10 years.

If you saved $4,000 annually for 10 years at this return, your college fund would have $59,134!

There are multiple ways you can save for this significant investment, with 529 tax-advantaged college plans being the most popular. They offer a unique combination of features that no other college savings vehicle can match.

If your kids are heading to college within the next few years, don’t panic about the amount in your savings accounts. There are tried-and-true ways to maximize your financial aid potential and minimize your child’s student debt load. Check those out here and here!

Bottom line: College planning should be a part of your overall financial plan. Cover your bases by talking to your financial planner and getting advice tailored to your situation.

2. I WANT TO BUY A HOUSE. HOW MUCH CAN I AFFORD?

We often rely on our financial planners to help us get to retirement, but they also offer valuable advice and experience that can help us with everyday decisions, like buying a house!

If you are not asking a financial planner about how much house you can afford when buying, YOU SHOULD BE! (We can help!)

You could use an online calculator to get an idea of how much you may be able to spend, however an online calculator does not take into account what your other goals are outside of owning a house!

Goals like:

• Do you want to travel?
• Retire early?
• Be financially independent?
• Fully fund your children’s education?

All of these factors impact how much of your monthly income you can spend on housing costs. A financial planner will be able to look at your big picture and goals and give you a realistic number that will make sure you have money left over for the other dreams you want to finance in your life.

Also, here’s something a smart financial planner may help you see…

Maybe buying a home isn’t the best idea for you.

Renting sometimes gets a bad rap, but it helps you avoid a lot of extra expenses that could affect how much money you can put toward achieving other goals. As home prices rise in many U.S. markets, renting gives you  predictable expenses and allows more flexibility if you decide to move or if an enticing job offer comes your way.

3. SHOULD I COMBINE ACCOUNTS WITH MY SPOUSE?

If you Google this question, you’re going to get a lot of divided answers. There are some people who are happier having separate accounts, and others who prefer the simplicity of joint accounts.

Joint accounts offer convenience and help both parties stay on top of their finances while also preventing legal headaches in the case of a death.

On the other hand, separate accounts give each spouse freedom over how they spend their money. If one or both spouses entered the relationship with debt or unequal accounts, staying separate can avoid resentment in the spouse who has to take on this extra responsibility. And, of course, if the relationship ends, separate accounts are just easier to deal with.

Hiring a quality financial planner can help you answer complicated questions like this.

Your financial planner will know YOU and your life circumstances enough to be able to give you objective guidance that is in your best interest. Unfortunately, most internet searches cannot take your unique circumstances into account.

Financial planners are here to help you with the big and the little, so don’t be afraid to ask any financial questions you have, even if they seem mundane and simple.

4. HOW MUCH DO I NEED TO RETIRE?

This is a big one, and probably at the top of your mind.

There’s a lot of conventional wisdom out there, like saving $1 million or building a nest egg that equals 10 times your current income, but the ideal retirement number is going to be different for everyone.

Here are some factors to consider when determining how much savings is right for you.

First, you’ll need to examine your living expenses and think about what you want your retirement lifestyle to look like.

You will also need to consider your longevity risk—how long you will live and how much your health and long-term care expenses may be affected by your life expectancy.

Even though the current life expectancy for men is 84.3 and 86.7 for women, (2) there is a 43% chance that individuals who are 65 today could live till 95. (3) Your savings needs to last as long as you do.

If you ask a financial planner this particular question, they will look into every area of your life, factor in all the details, and project multiple scenarios to prepare you for this milestone.

You don’t need to crunch numbers alone. Having a financial expert by your side can help make the process less stressful and more reassuring.

5. WHAT COULD HAPPEN TO MY INVESTMENTS IF THE MARKET CRASHES?

Everyone was happy in 2017 when their portfolios were drastically rising and the markets were hitting record highs on the regular.

But when the markets decline… we find out if our investments are allocated properly.

Everyone has their own unique risk number, based on their tolerance for risk and their time horizon. At Archer Investment Management, we walk our clients through an exercise that helps us identify their risk number and create a portfolio that aligns with their risk tolerance.

Based on your risk number, we can project your expected annual return on your investments and explore how much your portfolio might fall in different market scenarios.

You don’t have to wonder or worry about what could happen if the market crashes. We can’t predict perfectly, but we can give you a ballpark idea based on what’s happened in the past.

Setting clear expectations before investing is crucial to staying the course when challenges arise.

STILL HAVE QUESTIONS?

If there’s one thing that’s guaranteed, it’s that you will have plenty of financial questions and concerns as you move through life.

At Archer Investment Management, we want to be an objective resource for you as you seek to make the best financial decisions possible.

We invite you to find out how we can help by scheduling a quick call with us to see if we are the right fit!

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than twenty years of industry experience. He specializes in providing comprehensive financial planning and investment guidance and personalized care and attention to executives with complex compensation and families pursuing financial freedom. Along with holding a Wharton Bachelor of Science in Economics and a Texas MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.

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(1) https://www.northwesternmutual.com/life-and-money/how-much-college-will-cost-in-5-10-and-15-years/

(2) https://www.ssa.gov/planners/lifeexpectancy.html

(3) https://www.aarp.org/work/retirement-planning/info-2015/nest-egg-retirement-amount.html#quest1