CONVERGENT FINANCIAL GROUP

is a Registered Investment Advisor serving clients across the United States. We are proud to have been voted the best or among the best financial planners in Charleston and Mount Pleasant since we first opened our doors.

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3850 Bessemer Road

Mount Pleasant, SC 29466

(843) 972-4402

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  • Jeremy Ellisor

Don't Invest Like You Buy A House


There is so much news about the timing of when the fed will increase interest rates and what impact those rate hikes will have on consumer home purchases. This got me thinking about how we buy our homes and how that relates to investing and saving.


I don’t believe we focus on the total price, but rather spend our time shopping for what we think we can afford on a monthly payment basis. What do I mean? We go to the bank, provide some basic information, they run some numbers, and they do some basic calculations. Then they say, “After our review, you can likely get approved for $XXX,XXX.” With a fixed rate of 4.5%, and 100% financing, if we get approval for a monthly Principal & Interest payment of $1,250, then we go looking for a $250,000 house. But if they come back with a $2,050 monthly payment, then we go look for a $400,000 house.


Many of us approach saving and investing the same way… Not through a process of finding out how much we need to save, but rather on what we think we can afford to save. It goes something like this: ‘I think I can save $500 per month. That sounds good, and it’s definitely better than saving nothing, so I’ll go with that and hope for the best.’


Well let’s look at it in more detail: what will my future look like saving and investing $500/month for 30 years with a return rate of 7.7%?


Let’s assume the 30 year rate of return on the S&P 500, including dividends but adjusted for inflation, is 7.7%.* After 30 years we would have $707,540.



That sounds pretty good, but what lifestyle does that amount really get you?


If we have a withdrawal rate (the amount I take out of the portfolio) of 5% per year in retirement, that would equal around $2,900/month for you to live on. However, with a 3% inflation rate, that $2,900 would only be equal to about $1,200/month in today’s dollars. I don’t know about you, but $1,200 doesn’t support the lifestyle I have now or the one I want in the future!


The point I am making is that we think about investing backwards. Most of us focus on where we are and what we think we can sacrifice now. The problem is that we’re not thinking about where we want to go and what it will actually take to get there. And nobody wants to think about the $1,200/month lifestyle! Reality check: you won’t be living in a community like Mount Pleasant at that level.


Saving feels difficult, but it is the most important part of creating wealth. I encourage you to think about why you are investing. For example,


I want to invest so I can retire at 65 with my current lifestyle;


I want to make sure that I can help my kids with 50% of their anticipated college expenses;


I want to make sure I can pay for my daughter’s wedding (or, bless your heart, daughterS’ weddingS), etc.


Once you know the WHY, then you can take steps to determine the numbers and HOW you’ll achieve them.


We believe anyone can achieve their goals. It just takes some encouragement, intentional planning, and the commitment to take small steps over time. I’d love the opportunity to explain how our process can benefit you personally. Just click here to schedule your free consultation with me today.



As always, I encourage you to be a good friend and share this with yours.


Have a great week!



P.S. Feel free to email me with your specific questions.