I have no idea how to manage my money

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I have no idea how to manage my money

Postby angleslamv1 » Thu Feb 07, 2013 9:00 am

Good Morning,

I am 28. My girlfriend is 25. We live in Florida and combined, we make roughly 90k/yr taxed and also $12,312/yr non taxed @ $1,026/month for life. My job also has a very good rate of growth and great potential for raise/promotion should I choose to go that route.

Typically, after taxes, insurance, and 5% 401k match, I take home $3400 per month. GF takes home about $2100. We combine for about $5500. This does not include annual bonus for me at about 3k.

We have $2700 in total living expenses. Other than car payments, which are both financed at 3%, we have no addl debt. After groceries, going out, gas, pets, vacations, etc, we have about 1k left per month.

We have 6K in savings but are unsure on how high to make our EF as we both work in vastly different industries. If one of us were to lose our job, we would still have at least $3100/month coming in with $2700 in mandatory expenses.

We do love travel, enjoying spending money freely on clothes, dinners, ect and are unwilling to budge or be frugal in that regard. Typically at the end of the month we have $1k left over.

I was intrigued by Roth IRA, but am questioning if I'll really even need it? With my guarenteed monthly money, potential job growth, and 9% total 401k contribution, won't I be set when retirement age comes around?

Please assist. I'm clueless.
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Re: I have no idea how to manage my money

Postby Olduvai » Thu Feb 07, 2013 9:05 am

For starters, I would read "The Four Pillars of Investing" by William Bernstein.
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Re: I have no idea how to manage my money

Postby angleslamv1 » Thu Feb 07, 2013 9:20 am

Not sure if I want to invest other than 401k.
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Re: I have no idea how to manage my money

Postby angleslamv1 » Thu Feb 07, 2013 9:26 am

My question is more geared to...does the need for a roth ira not apply in every situation?
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Re: I have no idea how to manage my money

Postby neatep » Thu Feb 07, 2013 9:26 am

I think congratulations are in order. Most people know they are clueless, but choose to compound that by trying to ignore it.

With questions like these, you are far ahead of the pack, and on the first steps of a very beneficial journey.
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Re: I have no idea how to manage my money

Postby Gill » Thu Feb 07, 2013 9:30 am

In July you were saying you were married filing jointly. Have things changed in your life? :)
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Re: I have no idea how to manage my money

Postby bertilak » Thu Feb 07, 2013 9:32 am

angleslamv1 wrote:won't I be set when retirement age comes around?
You can never be sure so it is best to allow for the worst.

angleslamv1 wrote:Not sure if I want to invest other than 401k.
The beauty of 401(k)s and IRAs is that the growth compounds tax free. Granted, most 401(k) plans involve an employer match so that is even a better deal than an IRA. But tax-free growth is unwise to ignore. The tax advantages are enough that, for anyone who can afford it, maxing out contributions to an IRA is a no-brainer. If you are limited in what you can contribute, start with the 401(k), up to the employer match limit. IRAs are more flexible in the available investment choices.

Traditional and Roth IRAs have different advantages. Determining which type, or combination of types, is best for you involves assumptions that make it difficult to get a precise answer. Just starting out, it is probably best to go traditional. You get an immediate tax break and will have time to fine tune things later. But that's a topic for another discussion. (Your max allowed IRA contribution covers both traditional and Roth as a total of the two.)
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Re: I have no idea how to manage my money

Postby Bogle101 » Thu Feb 07, 2013 9:36 am

"$12,312/yr non taxed @ $1,026/month for life"

Are you getting that now or is that some sort of retirement plan?
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Re: I have no idea how to manage my money

Postby Gill » Thu Feb 07, 2013 9:40 am

Bogle101 wrote:"$12,312/yr non taxed @ $1,026/month for life"

Are you getting that now or is that some sort of retirement plan?

He posted in July he is a disabled veteran. It is probably a disability pension.
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Re: I have no idea how to manage my money

Postby angleslamv1 » Thu Feb 07, 2013 9:57 am

MBMiner wrote:In July you were saying you were married filing jointly. Have things changed in your life? :)
Bruce


Hi Bruce, fortunatly, nothing changed...just plans got delayed. :happy
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Re: I have no idea how to manage my money

Postby angleslamv1 » Thu Feb 07, 2013 9:58 am

Bogle101 wrote:"$12,312/yr non taxed @ $1,026/month for life"

Are you getting that now or is that some sort of retirement plan?


Now and ongoing
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Re: I have no idea how to manage my money

Postby angleslamv1 » Thu Feb 07, 2013 10:06 am

Also, not trying to be morbid, but how would you factor in probable inheritance within the next 15-20 years of roughly low-mid six figures?

I realize this is a lot of questions. Maybe my GF and I are just better off meeting with someone?
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Re: I have no idea how to manage my money

Postby 22twain » Thu Feb 07, 2013 10:38 am

I personally would not try to take the inheritance into account in my current savings/investment strategy. Instead, I would wait until when/if it actually arrives, then make appropriate adjustments. If it's big enough, you can then reduce or stop further savings, or even retire early; if not, or if it doesn't arrive at all, you simply keep going as you were.

I think most people here would consider a 9% total retirement savings rate to be rather small for the long run. I'd push it up to at least the 15%-20% range. It doesn't have to be all at once, since you're still fairly young. You can increase it a percent or two per year as you get raises.
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Re: I have no idea how to manage my money

Postby BigFoot48 » Thu Feb 07, 2013 10:50 am

angleslamv1 wrote:Also, not trying to be morbid, but how would you factor in probable inheritance within the next 15-20 years of roughly low-mid six figures?

I realize this is a lot of questions. Maybe my GF and I are just better off meeting with someone?

If you added these questions to your original post from in July you may have gotten more opinions from people who have already studied you situation.

The risk in using an adviser is that you will be getting an opinion from one person, and/or that from their employer who have a financial interest in the advice. Here you have a chance to get real-world experienced opinions from many people without such bias, and you can weigh all of the advice and decide how you want to proceed on your own.

I would ignore the inheritance, as stuff happens and you need to plan based on your current situation. Good luck and fortune!
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Re: I have no idea how to manage my money

Postby MN Finance » Thu Feb 07, 2013 10:57 am

First, I would build up your emergency fund to as large an amount that is comfortable - and that will change with time and your personal situation. Consider what expenses you might have in the next 12-36 months and build that in. You will be in the driver seat if you can pay for that car or put 30% down on a house, etc.

Beyond that, I would absolutely fund the Roth IRA if there really is extra cash. The compounding of investing in a tax free vehicle at a young age will be amazing. You'll even look back when your 40 and say, wow, look how that small monthly investment grew over 15 yrs. There is NO downside to funding the Roth because you can take out contributions any time without taxes or a penalty. But there is a downside to not doing it because you are only allowed limited contributions each year. There's also nothing that says it has to be invested aggressively, you could have it in cash, but at least get it into a tax free environment.
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Re: I have no idea how to manage my money

Postby Mudpuppy » Thu Feb 07, 2013 1:02 pm

angleslamv1 wrote:Also, not trying to be morbid, but how would you factor in probable inheritance within the next 15-20 years of roughly low-mid six figures?

You don't factor it in. A lot can happen before the parents/grandparents/whomever dies, including having to spend their money on themselves (e.g. health issues, assisted living facilities, nursing home, etc.). Assuming low-to-mid 6-figures is the entire nest-egg they have, it can be quickly drained by such normal elder care costs. There is no way now to know how much will be left over then, so do not include it in any retirement plans until it comes.

Just be glad they have the money to support themselves in their old age, instead of you having to come up with money out of your own budget to do so. That is a gift in and of itself, even if it turns out there's nothing left for an inheritance after they pass.
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Re: I have no idea how to manage my money

Postby letsgobobby » Thu Feb 07, 2013 1:23 pm

I see a good cash flow situation, nothing more or less. You still have a need to save for the future, and 15% is an absolute minimum.

To make it simple, each of you should half max your own 401k. That gets you around 15%, splits the savings between him and her, doesn't put a huge crimp on your lifestyle.

Saving less than that is irresponsible, which of course means lots of people do it.
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Re: I have no idea how to manage my money

Postby Grt2bOutdoors » Thu Feb 07, 2013 1:30 pm

Mudpuppy wrote:
angleslamv1 wrote:Also, not trying to be morbid, but how would you factor in probable inheritance within the next 15-20 years of roughly low-mid six figures?

You don't factor it in. A lot can happen before the parents/grandparents/whomever dies, including having to spend their money on themselves (e.g. health issues, assisted living facilities, nursing home, etc.). Assuming low-to-mid 6-figures is the entire nest-egg they have, it can be quickly drained by such normal elder care costs. There is no way now to know how much will be left over then, so do not include it in any retirement plans until it comes.

Just be glad they have the money to support themselves in their old age, instead of you having to come up with money out of your own budget to do so. That is a gift in and of itself, even if it turns out there's nothing left for an inheritance after they pass.


There is no written or implied obligation that the OP and girlfriend would need to undertake such an action if it came down to it. There are various social support nets that exist - not the most optimal, but you can not deny it's existence at the present time.
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Re: I have no idea how to manage my money

Postby Grt2bOutdoors » Thu Feb 07, 2013 1:35 pm

angleslamv1 wrote:Also, not trying to be morbid, but how would you factor in probable inheritance within the next 15-20 years of roughly low-mid six figures?

I realize this is a lot of questions. Maybe my GF and I are just better off meeting with someone?


It would be better if you used the vast resources on the wiki and to ask your questions here.
You can meet with someone if you want to but then they will likely try to "sell" you products like variable annuities for your retirement, loaded (sales charge either upfront or deferred) high expense ratio mutual funds and the flavor du jour of the day or month special that pays them high fees and/or commissions while you see your money dwindle down the road. Oh, and avoid whole life insurance like the plague.

If you purchased a lottery ticket last night for the Powerball (you haven't checked the results) would you factor it in? No, the expected inheritance should be thought of in the same manner, until the bird is in hand, it's just a dream.
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Re: I have no idea how to manage my money

Postby letsgobobby » Thu Feb 07, 2013 1:59 pm

Grt2bOutdoors wrote:
Mudpuppy wrote:
angleslamv1 wrote:Also, not trying to be morbid, but how would you factor in probable inheritance within the next 15-20 years of roughly low-mid six figures?

You don't factor it in. A lot can happen before the parents/grandparents/whomever dies, including having to spend their money on themselves (e.g. health issues, assisted living facilities, nursing home, etc.). Assuming low-to-mid 6-figures is the entire nest-egg they have, it can be quickly drained by such normal elder care costs. There is no way now to know how much will be left over then, so do not include it in any retirement plans until it comes.

Just be glad they have the money to support themselves in their old age, instead of you having to come up with money out of your own budget to do so. That is a gift in and of itself, even if it turns out there's nothing left for an inheritance after they pass.


There is no written or implied obligation that the OP and girlfriend would need to undertake such an action if it came down to it. There are various social support nets that exist - not the most optimal, but you can not deny it's existence at the present time.



filial support laws can be and have been recently enforced.
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Re: I have no idea how to manage my money

Postby Grt2bOutdoors » Thu Feb 07, 2013 2:04 pm

letsgobobby wrote:
Grt2bOutdoors wrote:
Mudpuppy wrote:
angleslamv1 wrote:Also, not trying to be morbid, but how would you factor in probable inheritance within the next 15-20 years of roughly low-mid six figures?

You don't factor it in. A lot can happen before the parents/grandparents/whomever dies, including having to spend their money on themselves (e.g. health issues, assisted living facilities, nursing home, etc.). Assuming low-to-mid 6-figures is the entire nest-egg they have, it can be quickly drained by such normal elder care costs. There is no way now to know how much will be left over then, so do not include it in any retirement plans until it comes.

Just be glad they have the money to support themselves in their old age, instead of you having to come up with money out of your own budget to do so. That is a gift in and of itself, even if it turns out there's nothing left for an inheritance after they pass.


There is no written or implied obligation that the OP and girlfriend would need to undertake such an action if it came down to it. There are various social support nets that exist - not the most optimal, but you can not deny it's existence at the present time.



filial support laws can be and have been recently enforced.


Maybe in your state - not in NY, they take your assets, then Medicaid picks up the nursing home tab. I've seen it plenty of times - even if the family was wealthy, they paid zip once the frail and sickly individual's assets were exhausted.
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Re: I have no idea how to manage my money

Postby Mudpuppy » Fri Feb 08, 2013 2:05 am

Grt2bOutdoors wrote:
letsgobobby wrote:
Grt2bOutdoors wrote:
Mudpuppy wrote:Just be glad they have the money to support themselves in their old age, instead of you having to come up with money out of your own budget to do so. That is a gift in and of itself, even if it turns out there's nothing left for an inheritance after they pass.

There is no written or implied obligation that the OP and girlfriend would need to undertake such an action if it came down to it. There are various social support nets that exist - not the most optimal, but you can not deny it's existence at the present time.

filial support laws can be and have been recently enforced.

Maybe in your state - not in NY, they take your assets, then Medicaid picks up the nursing home tab. I've seen it plenty of times - even if the family was wealthy, they paid zip once the frail and sickly individual's assets were exhausted.

When it comes to filial support laws, it doesn't matter where you live. What matters is where your parents live. The recent case of a PA court upholding a filial support decision against an out-of-state adult child of a PA resident should stand as an extreme example of one's risk in this area. And it's the period between running out of assets and ending on public support that ran up the bill in that particular case. Good summary article on the case: http://online.wsj.com/article/SB1000142 ... 57508.html
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Re: I have no idea how to manage my money

Postby Easy Rhino » Fri Feb 08, 2013 3:16 pm

Okay, you need an emergency fund. How *secure* are your respective jobs? And notice that the cash flow from one job + the disability won't cover current spending, so if either of you loses your job, you'll start to dip into into savings, or belt-tightening. If you both lose jobs, it obviously gets worse. More importantly, you have emergencies other than a job loss. Massive medical expenses, veterinarian costs, apartments burning down, etc.

But the size of the emergency fund is a lot of personal preference. But still, size it based on spending.

Right now it looks like you spend $5500 a month. You'd always have the disablity, so that leave up to $4500 a month uncovered in a pessimistic situation. So pick the number of months you can to cover that for. If you want to handle an "optimistic" emergency scenario, then it would last more months.

Onto savings, it looks like you're saving about $1k a month in addition to the 5% going into the 401k. you could post for us the options and expenses in the 401k. however, unless it's outstanding, a Roth IRA or two with Vanguard is probably going to provide lower expenses and better investment choices. If you each get one you could put in $11k a year, which accounts for most of your "excess" savings.

Is the disability payment indexed to inflation? If not, then $1000 a month won't be worth squat in 50 years.

Do you each contribute to 401ks, or just you?

Once you start saving the money, then all you need to do is figure out an asset allocation and you're good to go.
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