My H is a hoarder... of cash. (long!)

[vanillahip]

Any advice for convincing him to part with some of it?

Background: he grew up in the projects and is hell bent on never being broke again. Our cash savings is currently the equivalent of 23 months of "expenses" with no cutbacks from our current spending. I also have a large 401k where a good chunk of my paycheck goes, because if he gets his hands on it he'll *need* to leave it in a low-interest savings account... No thank you.

The obnoxious part- he has spent quite a bit of it over the past year on equipment (he does freelance videography/editing) but always in small chunks that can be replaced quickly. So now we're house hunting for our 2nd home. And he's flipping out about DP & closing costs b/c if we spend all that money we'll only have 12 months of expenses!!! Oy. He has certain needs for our next home (as do I) that puts us in a price range that's just way beyond his comfort level in terms of cash for closing. But would still leave us with more than 6 months of expenses in case of an emergency (and I'm talking 6 months with both homes, assuming that I'll never be rid of our current starter lol)

Soooo..... I'm banging my head against a wall. I've tried the "look at what you've spent this year, my turn" approach, I've shown him multiple budgets that illustrate just how it'll work out, I've tried reasoning with him and sending him links. He DOES want a new house, he's just afraid of parting with such a huge chunk of cash at once.

Any advice? Anyone deal with another cash hoarder? Generally I'm ok with it, whatever makes him comfortable will just have to work, but he's just not being realistic right now and I am fed up!

[dr.girlfriend]

Hmmm...I have to say, my DH grew up really poor, and it still affects him to this day in ways that can be puzzling to me. For him it was kind of the opposite, though -- he had never had money, so he had no idea what to do with it. When I met him he had $14 in his bank account, and he thought he was doing pretty great.

Sometimes I get frustrated with him, but when I think about how much he's had to learn so fast, it boggles my mind. He had never even been to a restaurant that took reservations before I met him...we were running late and he was getting all edgy and I couldn't figure out what he was freaking out about, and it was that he really just didn't know what would happen if you were late for a restaurant reservation!

So, I guess part of what I would say is to talk with him a little more about what the money represents, and why it's security when it's in a savings account and not, for example, a Roth IRA. But, to be honest, with a freelance job and a big home purchase, I would hang on to my nest egg as well.

I would look at ways to meet in the middle. Can you sell with a contingency, so that he knows the other place is sold before you buy the new one? That sort of thing. And maybe come up with some ideas for what he's worried might happen and designate savings for that. Like, is he worried he might have to cover some expense for his mom? Worried he might end up out on the street? That sort of thing.

[vanillahip]

May 18, 2012 11:36:40 GMT -5 dr.girlfriend said:

But, to be honest, with a freelance job and a big home purchase, I would hang on to my nest egg as well.

Ha, that'd be a freelance SECOND job (usually he just rents the equipment) He has a fantastic, well paying job as a finishing editor at a company that just loves him, where he's been shooting up the ranks thanks to his work ethic and talent. I'm so proud of him, but also sort of want to strangle him for being so neurotic about our savings LOL!

(and yeah, we help his sister out pretty often, and there's always the possibility of his mom needing help. My family is our safety net but we've never needed that so it's hard for him to really understand that my mother would always always help in a pinch)

[SJ]

This would especially bother me if you A) have debt or B) aren't taking advantage of all available retirement options.

If that is the case, you can show him the math of how it doesn't make sense to carry interest-bearing debt while earning 0% in a savings account.

I'm glad to hear you have a healthy 401K. Does he have access to any employer plans? IRA's? How about a SEP IRA for his self-employment work?

If you don't have any debt and retirement is solid, then I think it's less of a problem to have so much cash. I do think buying a home is a good use of the cash, and maybe it would help to show him how quickly the savings will build back up? Does he have anything he'd like to spend the money on or does he just save it to save it?

[vanillahip]

May 18, 2012 11:56:33 GMT -5 SJ said:

If you don't have any debt and retirement is solid, then I think it's less of a problem to have so much cash. I do think buying a home is a good use of the cash, and maybe it would help to show him how quickly the savings will build back up? Does he have anything he'd like to spend the money on or does he just save it to save it?

We don't have much debt- a couple thousand left on my car that'll be paid off in about 4 months which is about 18 months ahead of schedule, and our current (verrrry small) mortgage. If/when we buy we'll be buying extremely cheap again (we always live well below our means, we just have cheap tastes I guess? Lol) and keeping the first home- renting to a friend. (a trust worthy, respectful friend with stable income!)

He definitely saves just to save. He makes relatively large purchases every once in a while but replaces the money immediately, and has no specific plan for the money at any given point.

For now I'm just saving (hoarding ha) my money in my checking acct (ours are separate) and I'm actually considering lowering my retirement contributions for the summer, just so I won't have to try convincing him anymore! Blargh.

[SJ]

May 18, 2012 12:21:10 GMT -5 vanillahip said:

I'm actually considering lowering my retirement contributions for the summer, just so I won't have to try convincing him anymore! Blargh.

I really would NOT recommend this! If he is saving so much already, why do you need to add to it? Does he have a "magic number" in his head that he wants to see before buying the house?

If anything you should put MORE into retirement & investments, not less.

[dr.girlfriend]

May 18, 2012 12:21:10 GMT -5 vanillahip said:

For now I'm just saving (hoarding ha) my money in my checking acct (ours are separate) and I'm actually considering lowering my retirement contributions for the summer, just so I won't have to try convincing him anymore! Blargh.

Nah, you guys definitely need to talk about this if it's going to affect your retirement contributions. It sounds like with moderate expenses and good income you guys have a lot of savings potential...what is his "happy number"? As long as it doesn't keep increasing over time, I would go with it, reach it, and then earmark extra funds for specific things you want to spend on. I know the new home purchase is the biggest thing...but I don't know how to make it better without talking to him. Maybe show him how you guys could take out a HELOC if you needed the down payment money "back"? I don't know too much about that stuff.

[vanillahip]

I don't know what HELOC means but I'll be googling that- thanks!

His magic number increases every year. Another smacking my head against the wall issue there.

I was (mostly) kidding about the retirement thing.... I definitely see how that's a really shitty idea, I'm just so frustrated

[partiallysunny]

May 18, 2012 11:36:40 GMT -5 dr.girlfriend said:

So, I guess part of what I would say is to talk with him a little more about what the money represents, and why it's security when it's in a savings account and not, for example, a Roth IRA. But, to be honest, with a freelance job and a big home purchase, I would hang on to my nest egg as well.

I would look at ways to meet in the middle. Can you sell with a contingency, so that he knows the other place is sold before you buy the new one? That sort of thing. And maybe come up with some ideas for what he's worried might happen and designate savings for that. Like, is he worried he might have to cover some expense for his mom? Worried he might end up out on the street? That sort of thing.

This. I'm with your H on this one, honestly.

[dexteroni]

I wouldn't want to own two homes and only have 6 months' worth of expenses in savings. If you were moving some of that to investments, not spend it all on a house. Let me make sure I have this clear - you want to spend nearly 17 months' worth of expenses on just a down payment and closing costs? Are you in a HCOL area? If not, then that seems super high.

[livinitup]

Did you loose money on your current house, break even or get ahead? Because it might be worth looking at this purchase as more than loosing your cash at closing and increased monthly costs. Everyone is scared after the housing bust, but there is value in your purchase. And that purchase may easily increase faster than a savings account. And that's the whole point.

[vanillahip]

May 18, 2012 13:32:44 GMT -5 dexteroni said:

I wouldn't want to own two homes and only have 6 months' worth of expenses in savings. If you were moving some of that to investments, not spend it all on a house. Let me make sure I have this clear - you want to spend nearly 17 months' worth of expenses on just a down payment and closing costs? Are you in a HCOL area? If not, then that seems super high.

We live well beneath our means in an already LCOL area (ermm, doesn't get much lower than metro Detroit), and I did say we'd still have MORE than 6 mos (which is a healthy e-fund, right?), including new house PITI & misc expenses. Doing the math on a specific house that we both love, we'd still have.... about 10 months of all expenses with both homes (at our current spending). Plus we both have extremely stable jobs, almost no debt, a renter already lined up for our current home, and we're cheap lol

Do you think that's not enough? Seriously, I'm open to any insight. I'm no finance guru, I've always been decent with money but I'm certainly not saying that I'M RIGHT, kwim?

[M]

I dont see anything wrong with hoarding cash. People dont realize that there are 3 positions in investments - long, short, and cash. And cash is the only position where you wont lose any money. Unless you can find somewhere who will guarantee you a return then cash is the safest position.

Honestly, I wouldnt be buying a home until you sell your current home unless you can get enough rent to cover all your expenses on it. Owning a home is not really an investment anymore considering it'll take a couple of decades to get back to where we once were. H and I arent even thinking about buying a home anytime in the near future. Plus i would NOT want to dwindle my hard earned savings down to 6 months with 2 mortgages.

[80sjunkie]

May 19, 2012 19:27:17 GMT -5 M said:

I dont see anything wrong with hoarding cash. People dont realize that there are 3 positions in investments - long, short, and cash. And cash is the only position where you wont lose any money. Unless you can find somewhere who will guarantee you a return then cash is the safest position.

Honestly, I wouldnt be buying a home until you sell your current home unless you can get enough rent to cover all your expenses on it. Owning a home is not really an investment anymore considering it'll take a couple of decades to get back to where we once were. H and I arent even thinking about buying a home anytime in the near future. Plus i would NOT want to dwindle my hard earned savings down to 6 months with 2 mortgages.

Sorry but this is pretty terrible advice. Hoarding cash will actually lead to a loss, because inflation will certainly eat into your cash. That means that your money will be worth less with each passing decade, year, month, what have you.

The OP has a stable renter lined up for her current property, and it doesn't sound like she is renting at a loss. A home might not be a great investment, but we all need a place to live. As long as I don't have to sell my home in the near future, it is actually a great investment for us. For one, the tax savings we get from owning it are HUGE, plus we bought a new construction home and in the last four years nothing has gone wrong (knock on wood). In addition, we can barely rent a one bedroom apartment for our PITI. That sound pretty great to me.

OP, as others have stated, you do need to try to talk to your DH about finances and definitely stay the course with your retirement accounts. Hopefully you can convince him to stop changing his savings # over time.

[UMaineTeach]

If you take out the money for a DP/closing and go from 23 mo e-fund to 6-10 mo e-fund how long until you can pay it back to the fund?

Since he feels ok taking short term 'loans' from the fund to grow his business, maybe with a set time frame to re-pay yourselves he will feel better.

[Deleted]

This would be a topic I would take to a therapist. We have had great luck getting assistance when we get to an impass like this. Probably 2-3 visits and you can come to a resolution.

[M]

May 19, 2012 19:43:25 GMT -5 80sjunkie said:

May 19, 2012 19:27:17 GMT -5 M said:

I dont see anything wrong with hoarding cash. People dont realize that there are 3 positions in investments - long, short, and cash. And cash is the only position where you wont lose any money. Unless you can find somewhere who will guarantee you a return then cash is the safest position.

Honestly, I wouldnt be buying a home until you sell your current home unless you can get enough rent to cover all your expenses on it. Owning a home is not really an investment anymore considering it'll take a couple of decades to get back to where we once were. H and I arent even thinking about buying a home anytime in the near future. Plus i would NOT want to dwindle my hard earned savings down to 6 months with 2 mortgages.

Sorry but this is pretty terrible advice. Hoarding cash will actually lead to a loss, because inflation will certainly eat into your cash. That means that your money will be worth less with each passing decade, year, month, what have you.

The OP has a stable renter lined up for her current property, and it doesn't sound like she is renting at a loss. A home might not be a great investment, but we all need a place to live. As long as I don't have to sell my home in the near future, it is actually a great investment for us. For one, the tax savings we get from owning it are HUGE, plus we bought a new construction home and in the last four years nothing has gone wrong (knock on wood). In addition, we can barely rent a one bedroom apartment for our PITI. That sound pretty great to me.

OP, as others have stated, you do need to try to talk to your DH about finances and definitely stay the course with your retirement accounts. Hopefully you can convince him to stop changing his savings # over time.

I completely disagree. Inflation is at 2.3% where as your average interest rate on home loans are about 4+%.... So unless you can buy in cash or put a huge down payment of about half or more...home owning is not a good investment at this point. OP also has a place to live already.

2 years of efund may be quite a bit to have sitting around and I agree that some of it should go into some kind of investment, but not home buying/rental property... I have an investment firm so it's not like I'm against investing at all, but I don't think OP should blow 75% of her savings on a 2nd mortgage leaving only 6 months of efund left which will likely be less considering 2 mortgages that she will have to cover. Renters are also not guaranteed to stay and should not be counted on as guaranteed income.

If I were in OP's shoes, I would stay where she's at and invest all but 8 months of of their savings. Half the investment in something a bit risky and the other half in something less risky. That investment will grow a lot faster than the equity in any home she buys or rents out. If she wants a new home then she should sell the current home and use what equity she might be able to get out of it as DP on the new home.

[livinitup]

this is another point of advice - growing up poor also might mean growing up without 'owning' anything. cash is solid and tangible. A clear marker of security. But owning something also lets you use its value to leverage it. Can you get a line of credit on your current house? - maybe if he "saw" that converting your current property into an investment property and income generator -with the benefit of a stable line of credit - if ever needed. Then he wouldn't feel like his cash was 'gone'.

Do you owe more the house is worth? If you sold, would you make a profit? How long would it take to sell the house if you needed cash quickly? Part of saying that you have 6 months of savings is saying that if you both lost jobs and had no income that you find new employment or sell one house in 6 months- and keep going until you stablize. He might be thinking is "just" 6 months , when really you have much more time if needed. It just means you'd have to sell or adjust or get credit against what you own.

[Deleted]

I'm Team Husband. Homes aren't going anywhere, why deplete your savings?

[M]

May 19, 2012 19:43:25 GMT -5 80sjunkie said:

May 19, 2012 19:27:17 GMT -5 M said:

I dont see anything wrong with hoarding cash. People dont realize that there are 3 positions in investments - long, short, and cash. And cash is the only position where you wont lose any money. Unless you can find somewhere who will guarantee you a return then cash is the safest position.

Honestly, I wouldnt be buying a home until you sell your current home unless you can get enough rent to cover all your expenses on it. Owning a home is not really an investment anymore considering it'll take a couple of decades to get back to where we once were. H and I arent even thinking about buying a home anytime in the near future. Plus i would NOT want to dwindle my hard earned savings down to 6 months with 2 mortgages.

Sorry but this is pretty terrible advice. Hoarding cash will actually lead to a loss, because inflation will certainly eat into your cash. That means that your money will be worth less with each passing decade, year, month, what have you.

The OP has a stable renter lined up for her current property, and it doesn't sound like she is renting at a loss. A home might not be a great investment, but we all need a place to live. As long as I don't have to sell my home in the near future, it is actually a great investment for us. For one, the tax savings we get from owning it are HUGE, plus we bought a new construction home and in the last four years nothing has gone wrong (knock on wood). In addition, we can barely rent a one bedroom apartment for our PITI. That sound pretty great to me.

OP, as others have stated, you do need to try to talk to your DH about finances and definitely stay the course with your retirement accounts. Hopefully you can convince him to stop changing his savings # over time.

Actually my parents are perfect examples and the also hoard cash. They have 2 rental properties and a home that they live in. One rental property is only covering 50% of that mortgage but it's in California where the economy got hit really hard. The second property is in an area that has remained relatively flat but they are still losing 15%. All of which don't include property tax, insurance, HOA, repairs, etc, that they have to make. They also have to deal with finding renters when they move out...luckily their current tenants don't look like they're wanting to leave anytime soon but the ones in the second property is a PITA.

They also have decent size investment accounts with us of which they gained 34% last year. They also didn't have to do anything except receive a monthly statement. So between the 3, investment has brought them income, cash has increased from hoarding more, and their 2 rental properties has lost them a lot of money and also created a lot of work and these "tax advantages" aren't worth the amount of taxes they still have to pay, not to mention the amount they are losing on the mortgage payment.

We rent our home in FL and we pay half of our landlords mortgage payment. He also covers HOA, taxes, insurance, and repairs...we don't. And the house was vacant for 4 months before we rented it.

[rubytue]

In 20 years, M6 is either going to be riding circles around us laughing all the way to the bank b/c all her advice was right, or somewhere along the line she'll realize that being always against the grain is a sign.

Also, M6 - you are in Florida. Real estate is local. The math on your housing in Florida does not apply to the rest of the county. I'm glad you have a great deal there, but in other areas that is not as true. We can all throw out anecdotes: The rental rates in my neighborhood mean it would cost me over $500 more per month to rent rather than buy, our rental house makes us money each month, and my father's net worth is several million due to his real estate holdings (all done part time while working a real job).

Inflation averaged 3.2 for 2011. Mortgage rates are at an all time low and are under 4. By the time you add in the tax advantage, its a great deal. There is nothing wrong with being a renter. There are actually many advantages. But there is also nothing wrong with buying a home. The house you live in is your housing, not an investment. Sure, traditionally it is the largest source of wealth for the middle class, but buying a house to live in should not use the same investment math as your actual investments.

[marynjoe]

I grew up without money and it has definitely shaped how I am with money today. So, I understand your DH's perspective. That being said, I don't think a therapist is the answer. I think using a financial planner is the way to go. See an objective person who can guide your money goals, keep you both on board, and help both of you see the best plan of action.

[Balki.Bartokomous]

Please tell me that M6 is the "investment manager" from MM and that we don't have yet another person spouting off poor advice consistently.

OP - I am with you. Given that the market is so low right now, sitting on cash does not make sense. The term "opportunity cost" comes to mind. Also, given that land is a finite resource, in the long haul, purchasing a home makes sense. Getting a loan at 4% and getting a return on your investments which is greater than that is how you make money. As long as you have steady incomes & can cover your homes, I would be ok with 6-8 months' worth of savings in the bank.

We are actually in the same position as you - kept our 1st place in Pittsburgh as a rental. The market there is decent, so rental income > PITI + HOA. We decided to buy out here (SoCal) because the market isn't so great out here - we got a 1400 sq ft TH for slightly more than what we were paying for a cheap, but decent 600 sq ft apt. FWIW, we have not yet regretted this. Just make sure you do your homework & know your worth & how long it would take you to find another job in the event that either one of you guys lost yours.

[80sjunkie]

Notice M6's poor reading comprehension, the OP did not state that she would be investing the cash and earning 34% (congrats to you M6 for beating out the market). She said that her husband is actually weary of investments and likes to keep the money in low interest bearing savings accounts. I'd guess that means they are earning maybe 1% with something like the American Express savings account. Even with M6's stated rate of inflation, the OP is losing cash.

[M]

May 20, 2012 11:12:27 GMT -5 rubytue said:

In 20 years, M6 is either going to be riding circles around us laughing all the way to the bank b/c all her advice was right, or somewhere along the line she'll realize that being always against the grain is a sign.

Also, M6 - you are in Florida. Real estate is local. The math on your housing in Florida does not apply to the rest of the county. I'm glad you have a great deal there, but in other areas that is not as true. We can all throw out anecdotes: The rental rates in my neighborhood mean it would cost me over $500 more per month to rent rather than buy, our rental house makes us money each month, and my father's net worth is several million due to his real estate holdings (all done part time while working a real job).

Inflation averaged 3.2 for 2011. Mortgage rates are at an all time low and are under 4. By the time you add in the tax advantage, its a great deal. There is nothing wrong with being a renter. There are actually many advantages. But there is also nothing wrong with buying a home. The house you live in is your housing, not an investment. Sure, traditionally it is the largest source of wealth for the middle class, but a a house to live in should not use the same investment math as your actual investments.

Exactly. everyone here is generalizing and assuming that it's the same throughout the country. (Including myself ) That's why I said I was in FL where it's not so good. But my parents are in NC where real estate hasn't fallen nor risen any through all the economic down turn. It's been flat and they are still losing money on their rental property that is in NC. I know it's different in all areas which is why I said where all these places were. But I am confident that the housing market won't be going anywhere for at least the next 5-10 years. In 20 years it would be nice to have a rise and a booming economy.

Inflation as of April 2012 is at 2.3% according to BEA's website. Mortgage rates are at an all time low, but that's what people were also saying when it was at 5% just 2 years ago. I never said there was anything wrong with buying a home...if you've ever read any of my other posts, I've always stated that if you plan to live there for 10+ years then go for it. It takes about 15 years on a 30 year mortgage at 4%apr to break even between all the costs that could be involved. But OP already has a home and I just don't believe rental income can generate much, if any, real income...at least not in today's market. Tax advantages aren't great enough to simply run out and buy a home. If you pay $4k in taxes you get, what?, $500 off how much you have to pay? I'm not a tax expert so these arent' exactly right but mathematically it doesn't make sense why you would spend money to get only some back.

That's great that your dad was able to generate millions out of rental property but that's not reality for everyone and especially not in today's market. When was it that he was able to generate millions in income anyways? If it was in this poor economy then that's wonderful, but again it's not reality for most people.

And you're right, you shouldn't look at your home as an investment. Financially speaking, you should add the potential costs for owning a home in your area for how long you plan to live there (including all taxes, repairs, hoa, insurance, etc) and compare it to how much you might spend renting. If owning is cheaper than that's the way to go. Again OP already has a home and I don't think she should buy another without selling the first unless she can get enough rent to cover ALL expenses which would be amazing assuming the renters stay there forever.

[M]

May 20, 2012 13:03:24 GMT -5 80sjunkie said:

Notice M6's poor reading comprehension, the OP did not state that she would be investing the cash and earning 34% (congrats to you M6 for beating out the market). She said that her husband is actually weary of investments and likes to keep the money in low interest bearing savings accounts. I'd guess that means they are earning maybe 1% with something like the American Express savings account. Even with M6's stated rate of inflation, the OP is losing cash.

I never read that she would. Notice that you didn't read that my parents were examples. I suggested that would be what I would do if I were in her shoes. I said hoarding cash is better than buying a home at 4%. Inflation rate = 2.3% which is < 4% interest payment. Of course that's assuming they don't live there for at least 10+ years to break even. Thanks for trying.

[rubytue]

May 20, 2012 12:51:26 GMT -5 Balki.Bartokomous said:

Please tell me that M6 is the "investment manager" from MM and that we don't have yet another person spouting off poor advice consistently.
.

I'm assuming so. The other one that was M6something and had a dobie or two in her sig.

[M]

May 20, 2012 12:51:26 GMT -5 Balki.Bartokomous said:

Please tell me that M6 is the "investment manager" from MM and that we don't have yet another person spouting off poor advice consistently.

No I wouldn't say something unless I actually know what I'm talking about lol. Of course everyone has an opinion and that's all I have are opinions too. I'm not considered an "investment manager"..not yet at least. I will be getting my licensing here in a couple weeks if I ever find time to go. Then I will be...for now I'm just an analyst. I was an econ and a finance major so that's why I feel like the economy...especially the housing market won't be going anywhere in the near future...of course I could be wrong! No one ever knows what will happen for sure. That's why I never say "definite".

I was a mortgage lender at my last job and did an amortization schedule for a $300k home with 20% down at 4.5% apr....after adding potential repair costs, HOA, insurance at a relatively LCOL area, and taxes, I found that you don't break even until around year 15 on a 30 year mortgage. So IMO, no one should buy unless they plan to stay for at least 10 years.

ETA: of course this is not to say that it's true for all areas. And I agree with you that OP should do her homework and make sure her rental income matches all the expenses on her rental property.

[AB]

Between this and the fact that you were confused about net worth, I really hope you don't actually work in finance. This blows my mind.

[M]

May 20, 2012 16:06:10 GMT -5 @AB said:

Between this and the fact that you were confused about net worth, I really hope you don't actually work in finance. This blows my mind.

HAHA I was not confused about net worth. I explained myself but of course you continue on with your assumption. It's no wonder why some of the other boards say people here are mean. I'm not the best at saying what I mean but I'm not an idiot about my money. I stand by what I say here and I still believe it's a bad idea to blow money on a second home in this economy. But if you truly believe buying a second home during an uncertain economy is good advice than good luck to you. I'm also not the only here who thinks OP's H is doing the right thing.

Yes I am in finance. I was up 120% on my investments in 2011, I'm up about 40% so far ytd, and our clients are up 20% on average ytd so can you really say I don't know what I'm doing?