Getting back to trying to live frugal, correct investments

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rkhanso
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Joined: Mon Jul 07, 2014 11:37 am

Getting back to trying to live frugal, correct investments

Post by rkhanso » Mon Jul 07, 2014 7:45 pm

I've attended Dave Ramsey classes in the past. I really like the YNAB budget software and need to get back to sticking to the budget, using a mixture of YNAB and Dave Ramsey philosophies.

I've invested in the 401k at work, took a break and recently started investing again. I don't have any emergency funds saved and live pretty much paycheck-paycheck. I'm hoping to change that.

I was looking at my employer's 401k website today (through Wells Fargo) and stumbled across their AdviceTrack service. I guess I signed up for it, then it moved all of my investment categories around. I did a little reading on the AdviceTrack and found that it's probably not what I want to use. Through work, they have the standard 401k categories (stock, bond, international, target date funds, etc) - as well as a Charles Schwab PCRA. I'm thinking about moving the 401k into the PCRA. I'm wondering if that's the best option or not. This is new to our company and what I've read - it seems like the best choice.

I used to have about a 25% large cap stock, 25% small cap stock, 20% International stock, 20% target date fund, 10% bonds mix of investments in the 401k.

I only have about
$145k in the 401k - currently contributing 5% of my paycheck
small pension at work
$199k mortgage
$5k credit card debt (1 card)
wife and 2 children living at home. 21 and 17 years old.
am 48 years old.
earn about 85-90k/year
need to get 1 vehicle
would like to replace another vehicle.

After paying off the credit card, working on all debt, investing a larger % into retirement, I'd also like to invest more down the road.

Is the PCRA the way to go? Or, just stick with the options in the 401k for now?

Stan Dup
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Re: Getting back to trying to live frugal, correct investmen

Post by Stan Dup » Tue Jul 08, 2014 10:02 am

You really need to have 6-12 months of expenses in cash, and never touch it. It takes the edge off of life. Really. Some help: http://www.bogleheads.org/wiki/Emergency_fund

You need to list the funds available in your 401k including their symbols and the expense ratios. http://www.bogleheads.org/forum/viewtop ... f=1&t=6212

If you get matching funds in your 401k invest the minimum to get them and then save the rest for your emergency fund.
"The tyranny of compounding expenses is the eighth deadly sin." - George Sisti

freddie
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Re: Getting back to trying to live frugal, correct investmen

Post by freddie » Tue Jul 08, 2014 10:35 am

What do you plan on buying through the PCRA? If you plan has decent funds (A couple total market funds and some bond one), there isn't much reason to go there.

Novine
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Re: Getting back to trying to live frugal, correct investmen

Post by Novine » Tue Jul 08, 2014 11:08 am

AdviceTrack is going to take around 1% of your investments in fees to "manage" your retirement account for you. You don't need AdviceTrack, that's what you come here to get. Dump AdviceTrack as soon as you can.

mlipps
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Re: Getting back to trying to live frugal, correct investmen

Post by mlipps » Tue Jul 08, 2014 11:28 am

In one breath you say you want to try to live frugal and in another you say you want to buy two new-to-you vehicles. Unless these are $5k Honda Civics, I think you need to take a step back & look at the bigger picture. You're almost 50, have next to nothing saved for retirement, but make almost double the median American income. You can do better, but it won't be without sacrifices.

Have you ever read the blog Mr. Money Mustache? You might find some good frugal inspiration/philosophy there.

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RyeWhiskey
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Re: Getting back to trying to live frugal, correct investmen

Post by RyeWhiskey » Tue Jul 08, 2014 11:34 am

I agree that you seem to be conflicted on several items. Here's what I would suggest:

1) Establish an emergency fund of 6-12 months expenses.
2) Pay off your credit card debt.
3) Post your 401k investment options in the appropriate format here and work to get to the simplest, lowest cost, allocation.

To do these things you'll need to budget and reevaluate where your money goes and what you actually 'need.' Do you need the second car? Do you need a new first car? Do you need X, Y, or Z, these letters being where your money is currently going when it could be going to an emergency fund? Hard times call for hard questions. You seem to have the desire to make it happen so I encourage you to do the responsible thing and take your finances seriously. This forum and the wiki have all the information needed to get started or you could head over to one of the many good blogs/websites on similar topics. Good luck! :beer
This post was brought to you by Vanguard Total World Stock Index (VTWSX/VT).

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Toons
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Re: Getting back to trying to live frugal, correct investmen

Post by Toons » Tue Jul 08, 2014 11:44 am

"earn about 85-90k/year"
$5k credit card debt (1 card)...Why?

I think Dave would say your spending is "somewhat out of control".
Correct the behavior. :happy
Not a complicated solution
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Toons
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Location: Hills of Tennessee

Re: Getting back to trying to live frugal, correct investmen

Post by Toons » Tue Jul 08, 2014 11:49 am

"My question to all of you is, would it make sense to pull money (some? all?) out of the IRAs to eliminate the CC debt and some of the student loan debt"

No,that is not going to correct what is going on here.Sounds like you need to address the behavior issue which is spending in an uncontrollable fashion..
Develop a budget and STICK to it,cut out all extras for at least a year and with the new found cash work on paying off card(cut the card half) and auto. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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flossy21
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Re: Getting back to trying to live frugal, correct investmen

Post by flossy21 » Tue Jul 08, 2014 12:00 pm

I would echo what others have said about spending. Having a budget and sticking to it are key. Remember to "pay yourself first" by maximizing your 401(k) automatic withdrawal to the employer match and then evaluate whether a Roth or further 401(k) investment is best, or maybe both. Either way set it up to automatically deduct from each paycheck and you won't be tempted to try and spend it.

My wife's 401(k) uses Schwab and they recently moved to an Advisor centric model that takes a cut for management of your AA. I opted her into the PCRA which gives her access to all the Schwab funds at no fee and low ER. I have her 401(k) 100% invested in Schwab Total Stock Market Index Fund® (SWTSX) with an ER of 0.09 and no loads or transaction fees.

It has worked out nicely so far for us.

wesef
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Re: Getting back to trying to live frugal, correct investmen

Post by wesef » Tue Jul 08, 2014 12:13 pm

I have been re-reading "Your Money or Your Life." It provides tools to engage in a serious analysis of your relationship to money. The idea is that you won't need a prescriptive budget if you ask before every purchase "Do I need this and what is the real cost in lost time and opportunity?" You then do an analysis of spending at the end of every month, which hopefully will give a tangible understanding of how your daily spending is aligned with your long-term goals. There are a lot of very labor-intensive exercises, and the tone can be a bit much, but the basic approach is very powerful. It seems like that needs to be your starting point, and you can tailor the exercises to your liking (Mint.com can take care of a lot of the expense tracking, for example, even though the authors would frown on that). "Millionaire Next Door" might also be a useful read.

rkhanso
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Joined: Mon Jul 07, 2014 11:37 am

Re: Getting back to trying to live frugal, correct investmen

Post by rkhanso » Wed Jul 09, 2014 8:33 am

While I have veered off my budget, I'm not frivolously spending. We've run into some family issues that take a bunch of my income in Doctor bills. I'm hoping that settles down a little bit in the near future. When I talk about cars, my daily driver recently died and I need to replace it. I'm looking at cars I can pay cash for. My debt is the house and one credit card. Then it's just monthly utilities ($~300) / mortgage ($1400/mo) / car insurance ($160/mo) / food ($~800-1000) / gasoline / Kids. I have some things I can sell to pay off the credit card a little faster. That credit card is left over from about 5 years ago. I agree, it needs to be paid off soon.

But, back to the question I had about the PCRA....thanks for the input. I'll just move the money back to the funds I had before the AdviceTrack thing moved it around. I'll look into the PCRA some time down the road.

I've heard of Mr. Mustache, but never read his info. WIll also check that out. Thanks.

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