new chapter of life started - want to save and grow money

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Topic Author
Bones_Jones
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Joined: Thu Aug 11, 2016 2:27 pm

new chapter of life started - want to save and grow money

Post by Bones_Jones »

hi guys, total noob here.

just finished residency(long journey!). new work starting next month.
I want to work hard, save money and even grow money. both my spouse and I never really thought hard on this topic sadly. we were just very very stupid. we just studied and worked hard, but never really cared about this. i'm pretty much financial illiterate. but now we must grow up and make sure we are on a right track.
please take a brief look at our financial situation.

UPDATED

Age - 36
spouse's age - 36
no kids, but plan to have one.

tax filling - married joint file
state - Washington, tacoma area
my salary - $230k - (starting work date 9/1, salary can go up when productivity kicks in - i get bonuses, but won't list here)
wife salary - approx $58k, self-employed web/graphic designer. (her income varies last 5 year lowest was 45k, highest 78k, last year 53k. she is on pace for 65k this year)
combined take home pay - approx $16000 after tax (not including 401k, ira contribution)

PLAN FOR RETIREMENT
me
1. move old residency 401k(tiaa-cref money market r2, current balance $26k)
2. new job's 401k (employer match 50% of 3% salary)
3. traditional IRA

wife
1. self employed 401k
2. SEP IRA

subject to change! i'll be max contributing mine, but don't know what to do with wife's yet. will start things on 10/1, after i get my first pay check

COMBINED SPENDINGS - approx $13000
Mortgage - $3500 monthly
2 new cars - $1000 month brand new hyundai santa fe & sonata. 60 month
furniture financing - $600 monthly 60 month
cable & internet, phones, utility bills - $600 could be more. house is kinda big...
credit cards(5 cards 3 department store cards) - $700 should be able to pay off all in 2 years
insurances - $300 ish
food - $900? i have no idea how much this will be to be honest... previously $500 was enough for us. but we will probably eat out once or twice a month at a nice restaurant. we drink starbucks daily. and we only buy organic...
shopping - $500 this scares me the most. it could be alot more than $500 monthly. previously we did all the shopping with credit cards. i'm determined not to use credit cards for shopping, but life just don't work that way.
gym membership - $200
leisure - $200 golf, movies, etc
combined student loan payments - $4500 monthly :|

no emergency funds spent almost all our savings on a down payment and closing cost..
savings account - $5000

after many payments are paid off i should have some breathing room, but won't happen till 4-5 years later. i want to invest on mutual funds.i have tiaa acount. and i saw this page
https://www.tiaa.org/public/investment- ... mfinstonly

should I just use $5000 in my savings and just invest in any one of them now? maybe this one?
https://www.tiaa.org/public/investment- ... ker=316178

or wait till next year and save up even more an invest about 10k on it? i think i should be able to save 5k...

any kind of advise is appreciated.
thx in advance!

p.s finisehed reading rich dad, poor dad and currently reading common sense on mutual funds
p.s ordered 'common sense investing' by john bogle
Last edited by Bones_Jones on Thu Aug 18, 2016 3:21 pm, edited 12 times in total.
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Toons
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Re: new chapter of life started - want to save and grow money

Post by Toons »

"combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)."

I would start out approaching it in a logical step by step method:
1.Stop Spending Money on Stuff.
2.Allocate that money to paying off your debt.
You will start to see the light at the end of the tunnel then :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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ruralavalon
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Re: new chapter of life started - want to save and grow money

Post by ruralavalon »

Welcome to the forum :) .

Some additional information about your accounts and contributions is necessary.
Bones_Jones wrote:combined salary - $270000 (should grow gradually)
combined monthly income - about $13500 after tax, 2 401ks, traditional IRA and SEP IRA
. . . . .
i want to invest on mutual funds.i have tiaa acount. and i saw this page
https://www.tiaa.org/public/investment- ... mfinstonly
Do each of you have a 401k offered thru TIAA-CREF? How much is in each 401k?
What fund company is the traditional IRA with, whose account is that, how much is in the account, and what investments are in it?
What fund company is the SEP IRA with, whose account is that, how much is in the account, and what investments are in it?
How much is being contributed to each account annually?
Please simply amend your original post using the edit button to add this information, please see: "Asking portfolio questions".

Bones_Jones wrote:should I just use $5000 in my savings and just invest in any one of them now? maybe this one?
You cannot make a 401k contribution from savings. Contributions to a 401k must come as salary reductions in the form of payroll deductions.

I would use these broadly diversified, low expense ratio index funds:
Equity Index Fund Institutional (TIEIX) ER 0.05%
International Equity Index Fund Institutional (TCIEX) ER 0.06%
Bond Index Fund Institutional (TBIIX) ER 0.12%
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Engineer250
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Re: new chapter of life started - want to save and grow money

Post by Engineer250 »

Bones_Jones wrote:combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)
Furniture financing?
Where the tides of fortune take us, no man can know.
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RyeWhiskey
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Re: new chapter of life started - want to save and grow money

Post by RyeWhiskey »

1. Rebuild your emergency fund.
2. Reduce your spending to a more reasonable level.
3. Invest your new savings as per wiki (shelters first, etc).

:sharebeer
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Topic Author
Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

Toons wrote:"combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)."

I would start out approaching it in a logical step by step method:
1.Stop Spending Money on Stuff.
2.Allocate that money to paying off your debt.
You will start to see the light at the end of the tunnel then :happy

thx. most of these purchases are new purchases so it won't go away in a while... :(
Topic Author
Bones_Jones
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Joined: Thu Aug 11, 2016 2:27 pm

Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

Engineer250 wrote:
Bones_Jones wrote:combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)
Furniture financing?
we borrowed a ton from restoration hardware. 4 year low financing. it's a price of a nice new suv. :shock:
dfitz247
Posts: 69
Joined: Tue Jul 12, 2016 8:44 pm

Re: new chapter of life started - want to save and grow money

Post by dfitz247 »

Bones_Jones wrote:hi guys, total noob here.

just finished residency(long journey!). new work starting next month.
I want to work hard, save money and even grow money. both my spouse and I never really thought hard on this topic sadly. we were just very very stupid. we just studied and worked hard, but never really cared about this. i'm pretty much financial illiterate. but now we must grow up and make sure we are on a right track.
please take a brief look at our financial situation.

Age - 36
spouse's age - 36
no kids, but plan to have one.

tax filling - married joint file
state - Washington
combined salary - $270000 (should grow gradually)
combined monthly income - about $13500 after tax, 2 401ks, traditional IRA and SEP IRA

Mortgage - $3500 monthly (just purchased a new home)
combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)
combined student loan payments - $4500 monthly :| )

no emergency funds (spent almost all our savings on a down payment and closing cost..)
savings account - $5000

after many payments are paid off i should have some breathing room, but won't happen till 4-5 years later. i want to invest on mutual funds.i have tiaa acount. and i saw this page
https://www.tiaa.org/public/investment- ... mfinstonly

should I just use $5000 in my savings and just invest in any one of them now? maybe this one?
https://www.tiaa.org/public/investment- ... ker=316178

or wait till next year and save up even more an invest about 10k on it? i think i should be able to save 5k...

any kind of advise is appreciated.
thx in advance!

p.s just order rich dad, poor dad and common sense on mutual funds

1.)Your expenses are crazy for people with a negative net worth... lower them.
2.)Pay off a good chunk of the debt once the emergency fund is in place.
3.) Brokerage account and traditional IRA with Vanguard.
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BolderBoy
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Re: new chapter of life started - want to save and grow money

Post by BolderBoy »

1. Emergency Fund! 6-12 months of expenses, tucked away, just in case.
2. Max out all retirement plans every year.
3. Get to work on that debt!!!

At some point, start looking at your spending to see if you can corral it a bit.

Welcome to the BHs.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Topic Author
Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

ruralavalon wrote:Welcome to the forum :) .

Some additional information about your accounts and contributions is necessary.

Do each of you have a 401k offered thru TIAA-CREF? How much is in each 401k?
What fund company is the traditional IRA with, whose account is that, how much is in the account, and what investments are in it?
What fund company is the SEP IRA with, whose account is that, how much is in the account, and what investments are in it?
How much is being contributed to each account annually?

You cannot make a 401k contribution from savings. Contributions to a 401k must come as salary reductions in the form of payroll deductions.

I would use these broadly diversified, low expense ratio index funds:
Equity Index Fund Institutional (TIEIX) ER 0.05%
International Equity Index Fund Institutional (TCIEX) ER 0.06%
Bond Index Fund Institutional (TBIIX) ER 0.12%


1. i have 401k from tiaa account from residency. it's at $26k and i was advised to leave the residency 401k alone and don't transfer to new job. i don't even know why...
2, and new job will offer 401k. 3% contribution is what i'm thinking. which comes out to $575 monthly
3. starting IRA with tiaa cref when the job starts next month. $400 monthly contribution. i'm going with tiaa cref because i don't know anybody else. lol and people in the residency told me to stick with tiaa cref...
4. wife is self-employed and she is wants her own 401k and SEP ira. haven't decided with whom. around $600 monthly is what i'm thinking...
5. oh by the way i forgot to mention that i'm getting $20k bonuses for first 3 years... i guess this would help my emergency funds and have some room to invest

again, i just finished residency and purchased home just now. all of these stuff are over my head....
everything will start when i start my new job next month. so things can change...

and thx for your suggestion! i'll look into those low expense ratio index funds
Topic Author
Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

BolderBoy wrote:1. Emergency Fund! 6-12 months of expenses, tucked away, just in case.
2. Max out all retirement plans every year.
3. Get to work on that debt!!!

At some point, start looking at your spending to see if you can corral it a bit.

Welcome to the BHs.

we actually didn't spend much money... we had 1 car which was paid off and drove it for 10 years since we got married... but 10 years of suffering with economy car and living in the tiny apartment led to spending frenzy this summer... argh. 2 new cars, new furniture every room, big spending on vacation, etc, etc...

i didn't even know i was capable of this kinda spending. scared da hell out of me... and we spent all of our savings on the down payment and closing cost...

wife is from wealthy family and she thinks suffering 10 year was enough... damn
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BolderBoy
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Re: new chapter of life started - want to save and grow money

Post by BolderBoy »

Bones_Jones wrote:1. i have 401k from tiaa account from residency. it's at $26k and i was advised to leave the residency 401k alone and don't transfer to new job. i don't even know why...
Might be no good reason. Keep open the option of transferring it to the new job 401k. There is not a rush on this.
2, and new job will offer 401k. 3% contribution is what i'm thinking. which comes out to $575 monthly
Plan to max out your contribution limit (is it $18000 for you this year?) Max it out EVERY year.
3. starting IRA with tiaa cref when the job starts next month. $400 monthly contribution. i'm going with tiaa cref because i don't know anybody else. lol and people in the residency told me to stick with tiaa cref...
May I boldly suggest going with Vanguard for your IRA? Cheaper, better fund selections.
4. wife is self-employed and she is wants her own 401k and SEP ira. haven't decided with whom. around $600 monthly is what i'm thinking...
She should go with a 401k and not a SEP-IRA. Consider using Vanguard for this as well; good fund choices, cheap.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Jakson
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Re: new chapter of life started - want to save and grow money

Post by Jakson »

You spend too much. I lived with a girl from a rich family. Spent more money the 2 years I was with her than I had the previous 30 years of my life combined. I am glad that relationship didn't work out.
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ruralavalon
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Re: new chapter of life started - want to save and grow money

Post by ruralavalon »

Bones_Jones wrote:1. i have 401k from tiaa account from residency. it's at $26k and i was advised to leave the residency 401k alone and don't transfer to new job. i don't even know why...
2, and new job will offer 401k. 3% contribution is what i'm thinking. which comes out to $575 monthly
Your old 401k with TIAA-CREF may be a much better plan than the plan with your new employer.

What fund company is the new 401k with? What funds (fund names, tickers and expense ratios) are offered in the new 401k plan?

(If you already know which fund company the new 401k is with and what funds are offered, then please just add that to your original post using the edit button.)

I wouldn't make any major decisions about investing until you know what's offered in your new 401k plan. For simplicity you might want to keep as many accounts as possible with one company.

Bones_Jones wrote:3. starting IRA with tiaa cref when the job starts next month. $400 monthly contribution. i'm going with tiaa cref because i don't know anybody else. lol and people in the residency told me to stick with tiaa cref...
I think that Vanguard might be better for the new IRA. Vanguard has the largest selection of low expense mutual funds offered anywhere. Again, I would not make any decision until learning what fund company your new 401k is with. For simplicity you might want to keep as many accounts as possible with one company.

Your "combined salary -$270000 (should grow gradually)" means that you will need to use a "backdoor Roth IRA". "A Backdoor Roth IRA is a technique for contributing to a Roth IRA when your income exceeds the contribution limit. There is no income limit on contributing to a nondeductible Traditional IRA, nor on converting a Traditional IRA to a Roth IRA."

Bones_Jones wrote:4. wife is self-employed and she is wants her own 401k and SEP ira. haven't decided with whom. around $600 monthly is what i'm thinking...
Here is a comparison of several types of small plans she could consider. Vanguard, small business plans "Compare". Fidelity also offers these types of plans, as do other fund companies. Again, I would not make any decision until learning what fund company your new 401k is with. For simplicity you might want to keep as many accounts as possible with one company.

The wiki also includes articles on each of these types of plans.

Bones_Jones wrote:5. oh by the way i forgot to mention that i'm getting $20k bonuses for first 3 years... i guess this would help my emergency funds and have some room to invest

again, i just finished residency and purchased home just now. all of these stuff are over my head....
everything will start when i start my new job next month. so things can change...
Congratulations on completion of your Residency and on buying your new home.

Try to keep your expenses low, even though your income is dramatically increasing. Don't buy a lot of new stuff right away. Wait until you have a better handle on managing money, paying your student debt, and investing. For example, in my opinion you should probably be contributing much more than $575/month ($6,900/year) to your new 401k.

I think that you will find the "White Coat Investor" website to be very helpful.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

thx for the advice guys! this will help me alot. i don't even know the details of 401k i'm getting. :oops:
i'll do some readings and research first. will get back to you guys and update where i'm at. thx a bunch! :sharebeer
Topic Author
Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

one question though - i hate the idea of maximum 401k because i want the reap what i sow 10-15 years later when i'm around 50... not when i'm nearing 70...

so instead of contributing $1500 monthly to 401k, why not do 40% 401k and 60% on other investments? or do 50/50? $1500 monthly just seems too much when i can maybe save half of it aside and start getting into stocks and bonds or whatever you guys recommend...

what are the advantages of 401k other than receiving ton of money 25 years later?
Engineer250
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Re: new chapter of life started - want to save and grow money

Post by Engineer250 »

Bones_Jones wrote:one question though - i hate the idea of maximum 401k because i want the reap what i sow 10-15 years later when i'm around 50... not when i'm nearing 70...

so instead of contributing $1500 monthly to 401k, why not do 40% 401k and 60% on other investments? or do 50/50? $1500 monthly just seems too much when i can maybe save half of it aside and start getting into stocks and bonds or whatever you guys recommend...

what are the advantages of 401k other than receiving ton of money 25 years later?
The tax benefits are pretty significant.

I understand how you feel, but at your income you should absolutely be able to max out your 401k for you, your spouse, and max out two IRAs for you and your spouse, AND be putting additional money into a taxable savings account. For now, I would contribute 401k only up to your employer match and put everything else towards your student loans to pay them off early. But I am anti-debt and tend to see things like that as a priority, others will disagree.

I think you would strongly benefit from using either spreadsheet budgeting or something like Mint.com for a few months to track every single expense. It will help curb impulse buys if you see you are not making your savings goals or not putting what you want towards student loans. I will leave that financed furniture thing alone, your emoji said enough :D
Where the tides of fortune take us, no man can know.
Topic Author
Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

thx. there will be an opportunity for me to get into productivity early and make about 15-20% more by next year. i guess i'll aggressively payoff the student loans first. half million dollars of it...

401k with new job -
Tax Deferred Investment Plan - A 401(k) Plan - All employees may choose to defer up to 75% of their paycheck, to the allowable IRS maximum, on a pretax basis to this plan. Employees are automatically enrolled at a contribution rate of 6% of salary. will match 50% up to the first 3% of pay you save.

that's all it says with no other details. what does it mean by 'will match 50% up to the first 3% of pay you save' ?? so is this mean they will contribute 50% of 3% of my salary which is $3450? and if i stick with 6% which is $13800 then my yearly 401k investment is $17250?


also here is the detail of 401k with residency
CREF Money Market Account (R2)
Employer $22,620.41
Employee $3,163.24
Total $25,783.65

https://www.tiaa.org/public/pdf/ffs/194408191.pdf


Estimated
Expense Charge
0.38%
Unit Value
$25.5404
Day's Change
0.0001 (0.00%)
Portfolio Net Assets
$11.26B
AS OF 07/31/2016
7-Day Current / Effective Ann. Yield
0.07% / 0.07%
AS OF 08/12/2016
52 Week Range
$25.5338 – $25.5404
08/14/15
08/12/16
AS OF CLOSE 08/12/2016


what happens if i leave this residency 401k alone? will it keep grow even though i don't contribute anymore? how does it work? can i put money there too? :confused
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ruralavalon
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Re: new chapter of life started - want to save and grow money

Post by ruralavalon »

Bones_Jones wrote:also here is the detail of 401k with residency
CREF Money Market Account (R2)
Employer $22,620.41
Employee $3,163.24
Total $25,783.65
. . . . .
what happens if i leave this residency 401k alone? will it keep grow even though i don't contribute anymore? how does it work? can i put money there too? :confused
You cannot add contributions to the old residency 401k after you leave employment there.

Don't leave your money in the money market fund, you will not get any return on that investment. In fact you will likely lose money net of inflation. Instead move that money in the residency 401k to these very well diversified, low expense ratio index funds:
Equity Index Fund Institutional (TIEIX) ER 0.05%
International Equity Index Fund Institutional (TCIEX) ER 0.06%
Bond Index Fund Institutional (TBIIX) ER 0.12%

After you learn which fund company the new 401k is with and what funds are offered in it, then you can consider whether it's a good idea to roll the old residency 401k over into the new 401k.

Bones_Jone wrote:401k with new job -
Tax Deferred Investment Plan - A 401(k) Plan - All employees may choose to defer up to 75% of their paycheck, to the allowable IRS maximum, on a pretax basis to this plan. Employees are automatically enrolled at a contribution rate of 6% of salary. will match 50% up to the first 3% of pay you save.

that's all it says with no other details. what does it mean by 'will match 50% up to the first 3% of pay you save' ?? so is this mean they will contribute 50% of 3% of my salary which is $3450? and if i stick with 6% which is $13800 then my yearly 401k investment is $17250?
You are correct, if you stick with the 6% salary deferral the employer will contribute another 3% of salary to your account.

I suggest that you consider increasing your salary deferral from 6% to the percent necessary (about 7.8%) to make your employee contribution the allowable maximum of $18,000 per year.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

ouch.. i didn't know that. but i don't why the adviser was adamant about leaving the residency plan alone. most of residents are keeping them... maybe i'm missing something...

so let's say i move this money to index funds. what are the steps? i can just contact tiaa and move the funds to elsewhere? or transfer to vanguard if possible? or maybe transfer this money to IRA? also after investing in index funds, do i regularly contribute? or do i go get another funds? that's how people build portfolio? invest in bunch of different funds?

also am i getting tax benefits if i do max $18000 a year? why max it out other than the reason that i'm getting more returns when i retire?


sorry for so many questions.. i'm a total idiot in this department...
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ruralavalon
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Re: new chapter of life started - want to save and grow money

Post by ruralavalon »

Bones_Jones wrote:ouch.. i didn't know that. but i don't why the adviser was adamant about leaving the residency plan alone. most of residents are keeping them... maybe i'm missing something...

so let's say i move this money to index funds. what are the steps? . . .
Are you moving to a new job with the same employer? Or are you moving to a new job and a new employer?

If the list of funds that you linked in your original post is the list of funds offered in your old residency 401k, then you just tell them to transfer your money to the 3 funds that I stated. The money stays in the old residency 401k, it's just moved to different funds in that 401k.

If that is not a list of the funds offered, then what are the funds offered (fund names, tickers & expense ratios) in the old residency 401k?

Bones_Jones wrote: . . . i can just contact tiaa and move the funds to elsewhere? or transfer to vanguard if possible? or maybe transfer this money to IRA? also after investing in index funds, do i regularly contribute? or do i go get another funds? that's how people build portfolio? invest in bunch of different funds?
I have been assuming that you are moving to a new employer with a new 401k. Wait until you find out which fund company the new 401k is with and what funds are offered in it, then you can consider whether it's a good idea to roll the old residency 401k over into the new 401k.

As mentioned before, you cannot contribute more to the old residency 401k after you leave that employment. You do regularly contribute to your new 401k, through payroll deductions, and invest in the different funds offered in the new 401k.

You don't build a portfolio by investing in a large number of random funds. In selecting funds select just a few funds and strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

Examples of the types of broadly diversified, very low expense ratio (ER) funds to use are: TIAA-CREF Equity Index Fund Institutional (TIEIX) ER 0.05%; TIAA-CREF International Equity Index Fund Institutional (TCIEX) ER 0.06%; and TIAA-CREF Bond Index Fund Institutional (TBIIX) ER 0.12%


Bones_Jones wrote:also am i getting tax benefits if i do max $18000 a year? why max it out other than the reason that i'm getting more returns when i retire?
You get a tax deduction in the amount of your employee contribution. Also the dividends are not taxed when paid, but everything grows tax-free until you withdraw money in retirement.

Bones_Jones wrote:sorry for so many questions.. i'm a total idiot in this department...
Ask as many questions as you wish.

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews".

Also you could start reading some of the wiki articles on points that concern you. Bogleheads' wiki, main page.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Shackleton
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Re: new chapter of life started - want to save and grow money

Post by Shackleton »

You don't quite have the match on your new plan figured out correctly. They will match 50% of what you contribute up to a max of 3% of your salary. So the max they will contribute is your salary X 3% which is closer to $6900. Some examples to help clarify:

You contribute 6% of salary, company matches 50% so company contributes 3% ($6900)
You contribute 10% of salary, company matches 50% (5%) but only up to a max of 3%, so company contributes 3% ($6900). Also, since your salary is over $180k/year you will not be able to contribute this much (18k limit for employee contributions) and may miss some of the match depending on how they calculate the matching and whether they allow after-tax contributions to the 401k.
You contribute 4%, company matches 50% so company contributes 2% ($4600 and you have missed out on what amounts to an additional 1% of income)

For a lot of the other questions, I highly recommend you read the Bogelheads Guide to Investing which will cover the basics and give you a solid understanding of the basics. It's a very easy book to read -- I read it over a weekend when first starting to learn about investing.
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton
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Shackleton
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Re: new chapter of life started - want to save and grow money

Post by Shackleton »

I just saw you ordered Rich Dad Poor Dad and Common Sense on Mutual Funds. I strongly recommend you read the Bogleheads Guide to investing before the other two. And Rich Dad Poor Dad may not be entirely compatible with Boglehead investing.

Additionally, I think Dave Ramsey's Total Money Makeover would be good for you to get a handle on your budgeting, spending, and debt. Just please skip any chapters in his book about investing. He's great at helping people to get out of debt and on a budget. He's a bit of an idiot about investing.
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton
jarhead1
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Re: new chapter of life started - want to save and grow money

Post by jarhead1 »

Toons wrote:"combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)."

I would start out approaching it in a logical step by step method:
1.Stop Spending Money on Stuff.
2.Allocate that money to paying off your debt.
You will start to see the light at the end of the tunnel then :happy
Toons is so right. please go here to below link and start reading! Kill your debt, this plan works like a champ and so does the advice. your expenses with mortgage...everything should not exceed 36% of your net income.

https://www.daveramsey.com/baby-steps/1
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

ruralavalon wrote:
Bones_Jones wrote:ouch.. i didn't know that. but i don't why the adviser was adamant about leaving the residency plan alone. most of residents are keeping them... maybe i'm missing something...

so let's say i move this money to index funds. what are the steps? . . .
Are you moving to a new job with the same employer? Or are you moving to a new job and a new employer?

If the list of funds that you linked in your original post is the list of funds offered in your old residency 401k, then you just tell them to transfer your money to the 3 funds that I stated. The money stays in the old residency 401k, it's just moved to different funds in that 401k.

If that is not a list of the funds offered, then what are the funds offered (fund names, tickers & expense ratios) in the old residency 401k?

Bones_Jones wrote: . . . i can just contact tiaa and move the funds to elsewhere? or transfer to vanguard if possible? or maybe transfer this money to IRA? also after investing in index funds, do i regularly contribute? or do i go get another funds? that's how people build portfolio? invest in bunch of different funds?
I have been assuming that you are moving to a new employer with a new 401k. Wait until you find out which fund company the new 401k is with and what funds are offered in it, then you can consider whether it's a good idea to roll the old residency 401k over into the new 401k.

As mentioned before, you cannot contribute more to the old residency 401k after you leave that employment. You do regularly contribute to your new 401k, through payroll deductions, and invest in the different funds offered in the new 401k.

You don't build a portfolio by investing in a large number of random funds. In selecting funds select just a few funds and strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

Examples of the types of broadly diversified, very low expense ratio (ER) funds to use are: TIAA-CREF Equity Index Fund Institutional (TIEIX) ER 0.05%; TIAA-CREF International Equity Index Fund Institutional (TCIEX) ER 0.06%; and TIAA-CREF Bond Index Fund Institutional (TBIIX) ER 0.12%


Bones_Jones wrote:also am i getting tax benefits if i do max $18000 a year? why max it out other than the reason that i'm getting more returns when i retire?
You get a tax deduction in the amount of your employee contribution. Also the dividends are not taxed when paid, but everything grows tax-free until you withdraw money in retirement.

Bones_Jones wrote:sorry for so many questions.. i'm a total idiot in this department...
Ask as many questions as you wish.

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews".

Also you could start reading some of the wiki articles on points that concern you. Bogleheads' wiki, main page.


thx! you are awesome!

it's a new employer. i'll find out the details on tiaa account. i see all kinds of info there, but don't know what to make of it. it only has 'money market' listed, but maybe i'm missing something. i'll probably call them directly.

i'll start with boggleheads guide to investing! just ordered it on ebay. $8.99 shipped. not bad. :D
Last edited by Bones_Jones on Sat Aug 13, 2016 6:01 pm, edited 2 times in total.
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

Shackleton wrote:I just saw you ordered Rich Dad Poor Dad and Common Sense on Mutual Funds. I strongly recommend you read the Bogleheads Guide to investing before the other two. And Rich Dad Poor Dad may not be entirely compatible with Boglehead investing.

Additionally, I think Dave Ramsey's Total Money Makeover would be good for you to get a handle on your budgeting, spending, and debt. Just please skip any chapters in his book about investing. He's great at helping people to get out of debt and on a budget. He's a bit of an idiot about investing.
i just finished rich dad poor dad in 1 sitting. very short book. and i loved it. the most important thing i got out of is how the rich thinks and the difference between the asset and the liability and how i should only focus on growing my asset via minding my own business. it's a life changing book just like how this is a life changing forum! :D

y for 36 years of my life i've never once thought about these topic. i'm like a 3 year old, so i'll absorb anything everything good or bad. and i wouldn't know what is good or bad. hopefully i get to form my own opinion soon.
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

jarhead1 wrote:
Toons wrote:"combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)."

I would start out approaching it in a logical step by step method:
1.Stop Spending Money on Stuff.
2.Allocate that money to paying off your debt.
You will start to see the light at the end of the tunnel then :happy
Toons is so right. please go here to below link and start reading! Kill your debt, this plan works like a champ and so does the advice. your expenses with mortgage...everything should not exceed 36% of your net income.

https://www.daveramsey.com/baby-steps/1
thx! wow 36%? ouch, that's gonna be super tough. but wife may make much more very soon. that will help reducing the debt fast. eventually these payments will be paid off 4-5 years later... i just hope we don't get the crazy urge to spend again...
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

Shackleton wrote:You don't quite have the match on your new plan figured out correctly. They will match 50% of what you contribute up to a max of 3% of your salary. So the max they will contribute is your salary X 3% which is closer to $6900. Some examples to help clarify:

You contribute 6% of salary, company matches 50% so company contributes 3% ($6900)
You contribute 10% of salary, company matches 50% (5%) but only up to a max of 3%, so company contributes 3% ($6900). Also, since your salary is over $180k/year you will not be able to contribute this much (18k limit for employee contributions) and may miss some of the match depending on how they calculate the matching and whether they allow after-tax contributions to the 401k.
You contribute 4%, company matches 50% so company contributes 2% ($4600 and you have missed out on what amounts to an additional 1% of income)

For a lot of the other questions, I highly recommend you read the Bogelheads Guide to Investing which will cover the basics and give you a solid understanding of the basics. It's a very easy book to read -- I read it over a weekend when first starting to learn about investing.
Thx! it makes sense now.
book ordered. thx so much!
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Toons
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Re: new chapter of life started - want to save and grow money

Post by Toons »

i just hope we don't get the crazy urge to spend again

Easy.
Start working on a crazy urge to Save :mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
ABQ4804
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Re: new chapter of life started - want to save and grow money

Post by ABQ4804 »

Bones_Jones, you've come to the right place - welcome to the Bogleheads.

As you are in the medical profession, I'd highly second the recommendation to go to http://whitecoatinvestor.com as well as purchase his recent book: The White Coat Investor: A Doctor's Guide To Personal Finance And Investing. Dr. Jim Dahle (also a frequent poster on Bogleheads) has great advise and Boglehead strategies for medical professionals, who, like you, have been concentrating on your medical education and training, rather than personal finance. Now you're in the money, and there are a lot of vultures out there to avoid. Good luck!
nimo956
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Re: new chapter of life started - want to save and grow money

Post by nimo956 »

So you graduated residency, still with a sizable amount of student loan debt, and instead of working on paying it off you decided to immediately spend your entire savings on financing a house, furniture, 2 new cars, and a vacation on credit cards.

That is an incredibly serious mistake, which will set you back immensely on the path to building wealth. You don't finance depreciating assets like furniture and cars, and you don't keep a balance on credit cards that you can't pay back in full every month.

Right now what you need to do is order all debts from highest to lowest interest rate, and throw all your money at the highest one after maxing out tax deferred options (pay the minimum amount on all other loans). Once the highest is paid off, move on down the list until all debt is gone.

Paying interest on debt is the exact opposite of earning compound interest on investments. The more debt you have, the more it works against you and the harder it is to build wealth.

This is a very expensive mistake that you should learn from and never repeat again. You need to learn to control your spending.
50% VTI / 50% VXUS
O2sats
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Re: new chapter of life started - want to save and grow money

Post by O2sats »

I am in a similar situation as you. I am 35 and just finished fellowship. I have been following the whitecoat investor and bogleheads for about one and a half years. It has been a huge help to me, along with reading the WCI book and a few other recommended books you mentioned. I would highly suggest you become familiar with the WCI website and this one.

One of the main recommendations WCI has is to "live like a resident" for 2-5 years, then you can slowly grow into your income. If you live like a resident (or even give yourself a 50% raise over resident salary), you will be able to set yourself up for success. You can pay off debt, save for a downpayment, and still max tax-advantaged accounts. You say you have one half a million dollars of student loan debt. But you seem to have already moved right into the attending lifestyle (i.e. new house, 2 new cars, "furniture financing"). This will make it hard to attack your student loan debt, and get out from under that.

As an example, I will have a little more than half of the student loan debt you have, but will be making more money than you. I haven't made any big purchases yet. The only nicer thing I did was to rent a house for my girlfriend and her 13 year old daughter. It costs an extra $600 a month than my previous rent. Sure, I would like to start buying nicer things, but I have a negative net worth. It doesn't matter how much money I make. I plan to maximize all my tax-advantaged retirement accounts (since I never get that space back), save up for an emergency fund and aggressively pay off my student loans. I plan to be debt free in 2-3 years. It helps my girlfriend doesn't like debt. We don't have a couch for our upstairs living room, since most of my old furniture wasn't allowed to make the move :wink: We have browsed at some couches, and I wanted to get one, but she says we can't afford it. So until we absolutely need one or can afford it, we aren't going to have a couch in the upstairs living room. Not ideal, but doesn't really affect our life either way.

I didn't comment much on how to grow money via investments. Your main hindrance to growing your money will be paying off the debt and reducing your spending. You can get there, it will just take some hard work and discipline. But I do think you should be maxing out your retirement accounts.
Last edited by O2sats on Sun Aug 14, 2016 10:57 am, edited 1 time in total.
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Shackleton
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Re: new chapter of life started - want to save and grow money

Post by Shackleton »

First off, I love trying to guess what type of doc someone is from their name. I'm guessing Orthopedic Surgeon for Bones_Jones, and something to do with respiratory something or other (I don't know a lot about the medical field) for O2Sats.

Anyway, O2Sats has some great points.

Also, Bones_Jones has mentioned a couple times about not wanting money tied up in retirement plans that he/she can't access until he/she is much older (I think he said something about "until I'm 70" in one post.) You can withdraw from an IRA or 401k without penalty starting at 59.5 years. There are also ways to withdraw earlier (5 year, even withdrawals, I don't recall the name of this but someone will.) Additionally, you can only put a limited amount into your tax advantaged accounts, and that will lower your AGI/taxable income so you don't want to miss out on that. And at your level of income, you should be saving additional money on top of the maxed out 401k/IRA, so that money will be available whenever you decide to retire. Although, at the rate you seem to be spending, I think you will be working a very long time to pay off those loans and so you will not have nearly the investment portfolio you expect until you are close to mid-50s or later. Sorry for the harsh truth, but you've setup a spending pattern that does not lead to early retirement.
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton
Traveler
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Re: new chapter of life started - want to save and grow money

Post by Traveler »

I really wish medical school had a personal finance class requirement. But for that matter, a personal finance class requirement for all college degrees would be nice.

That said, one thing I didn't see in the comments is anything about long term disability. Research and invest in a good policy. While you may feel invincible right now, the odds of you becoming disabled during your working life are much higher than actually dying during your working life. Since you are the breadwinner, LTD would protect you and your wife.

And as others said, get your spending under control. Someone mentioned living as a resident for a couple years and gradually increasing your lifestyle. I think you're beyond that with your exorbitant spending recently, but you can still rein it in and move forward with starting to build wealth.
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

thx guys.

my spending bill looks like this. $5000 is an estimate. it could be more. maybe it could be less (i doubt it)

furniture $600 month (restoration hardware.. very expensive. bought everything for every room... 5 year plan. ouch)
2 cars - $1000 month (4 years, 2 new none luxury cars - trust me i had work hard at convincing my wife that we don't need new 90k MB suv. had hyundai elantra for 10 years. car never left us stranded. nothing but oil change. but it's too small, gotten over 100k miles. and 10 year was long time!)
cable & internet, phones, utility bills - $600 could be more. house is kinda big...
credit cards(5 cards 3 department store cards) - $700 (should be able to pay off all in 2 years)
insurances - $300 ish
food - $900? i have no idea how much this will be to be honest... previously $500 was enough for us. but we will probably eat out once or twice a month at a nice restaurant. we drink starbucks daily. and we only buy organic...
shopping - $500 this scares me the most. it could be alot more than $500 monthly. previously we did all the shopping with credit cards. i'm determined not to use credit cards for shopping, but life just don't work that way.
gym membership - $200
leisure - $200 (golf, movies, etc)


i guess if we curb the next urge i should be able to shave it down to $3000 in 4 years. but i'm not sure it will because by then we will have 2 kids... :o

anyway, this is the first time i wrote out the spending. it's kinda scary and liberating. i just signed up with mint.com nice website, but kinda buggy. it doesn't sign up some of the info. but love the idea of it. learned something new!
Dottie57
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Re: new chapter of life started - want to save and grow money

Post by Dottie57 »

Bones_Jones wrote:
jarhead1 wrote:
Toons wrote:"combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, cars, furniture financing, etc, etc)."

I would start out approaching it in a logical step by step method:
1.Stop Spending Money on Stuff.
2.Allocate that money to paying off your debt.
You will start to see the light at the end of the tunnel then :happy
Toons is so right. please go here to below link and start reading! Kill your debt, this plan works like a champ and so does the advice. your expenses with mortgage...everything should not exceed 36% of your net income.

https://www.daveramsey.com/baby-steps/1
thx! wow 36%? ouch, that's gonna be super tough. but wife may make much more very soon. that will help reducing the debt fast. eventually these payments will be paid off 4-5 years later... i just hope we don't get the crazy urge to spend again...
You really need to get out the of spending mentality. I save about 45% of total gross income. My income is about 100k.

I think you did things in the he wrong order. Go find out about Dave Ramsey and his way to get out of debt.
Dicast
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Re: new chapter of life started - want to save and grow money

Post by Dicast »

I think you are going to need significant budgeting to realize your goals. Try http://www.youneedabudget.com to get yourself started. I've heard lots of good things about the budgeting software. The most mint.com will do for you is track your spending. You need a budget will make you accountable for every dollar. I'm sure it will be painful. You might not like it. Your spouse might not like it. Your wallet and bank account will love it.

I'm also a physician and married to a physician. We're on track to use almost 50% of our gross income this year to retire debt and build retirement accounts and we have a 2 year old. We've planned our mortgage, cars and other expenditures with the goal of 50% in mind. If you don't have a goal or a target then you'll have a lot of trouble. If something is going to cost us our goal, we don't do it.
Bentire
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Re: new chapter of life started - want to save and grow money

Post by Bentire »

save and invest till it hurts, the pain will go away when you retire (early).
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BeBH65
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Re: new chapter of life started - want to save and grow money

Post by BeBH65 »

Hello Bones_Jones,


You have already received a lot of honest feedback based on the philosophy adhered by the people on this site.

The first two principles of the Bogleheads_investment_philosophy are Develop a workable plan and Invest early and often.

Elements in Develop a workable plan are:
* establishing a sound financial lifestyle --> watch the video
* develop a healthy saving rate: 15% of your take home pay is a rule of thumb. If you want a shorter career you will need to save more. HAve a look at the post on Working years vs. Savings Rate on the MMM site
* get the necessary insurance
* build an emergency fund
* avoid bad debt: credit cards, loans for consumer items
* create a realistic budget and adhere to it -- based on what i read above, I think this should be top priority for you and your wife. Read the first chapter of Bogleheads_Guide_To_Investing and decide which financial lifestyle your wife and you want to adhere to: the Borrowers, the Consumers or the Keepers.
More info in the video on Develop_a_workable_Plan.

The section on Invest early and often talks about the power of compounding especially for early savings. It also introduces the 401k where you can get free money from your employer. Do not leave it on the table! You should not need any money from your 401k before your normal retirement date.

Hope this gives you some guidance in the setting up of your financial lifestyle.

Regards,
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
TOJ
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Re: new chapter of life started - want to save and grow money

Post by TOJ »

You may need to ask them about that 401k match. To me, it reads like they'll contribute 1.5% if you contribute at least 3%.
Traveler
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Re: new chapter of life started - want to save and grow money

Post by Traveler »

Wow, after looking at your detailed expenses, I'm impressed that you spend so much money and question if this is actually a joke. You take home $13,500 a month and spend at least $13,000 each month. Do you have an emergency fund of any kind? What happens when you blow a tire on one of the new cars? Or the water heater in your house goes out? While you have a nice income, you're spending as if that income is 50% higher than what it is.
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Bones_Jones
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Re: new chapter of life started - want to save and grow money

Post by Bones_Jones »

not a joke. 2 cars and furniture killing us, and i honestly thought credit card is there for emergency...

not trying to make excuses, but we honestly never worried about these things. if something happens parents are there for us. we were spoiled kids. we are both 36, but we still feel like in our 20's probably because we don't have kids and i've been in school for too long.

i expect my salary to jump to 300k in 3 years. my wife's earning should jump up to 70k. in 5 years our cars, furniture financing and credit card should be paid off. that should give us a plenty of breathing room. technically i can make up to $270k now, but i don't want to work extra 10 hours a week. i kinda want to take it slow right now. burnt out as hell... residency killed me...

half way through on 'common sense on mutual funds' by bogle. kinda tough book to read. took finance course 15 years ago!
thx guys for advise!
kjvmartin
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Re: new chapter of life started - want to save and grow money

Post by kjvmartin »

Many have made mistakes early in financial life. Don't feel too bad.

I was on a much smaller income scale, but I dreamed of my first new car throughout my time in college. I got my $30k a year post undergrad job in social work and jumped into my $450 Mustang GT car payment instead of getting the finances in order. The negative ramifications of that decision lasted till I was almost 30 and effected my long term wealth in ways I am only beginning to understand. The stress of living "at my spending limit" is what drove me to make some serious changes. That car was so expensive to fuel and insure, and was terrible in the snow. My job involved driving a lot in the winter. I had to trade it within a year, going further upside down on the next loan. And then a few years after that they "got me" with another "brand new one for the same payment" technique when I was in for warranty work.

All the while making minimum student loan payments, saving nothing for my first house, not thinking at all of retirement, minimal emergency fund, and essentially living paycheck to paycheck. Wish I had kept my paid for car. I think of the years of wasted money thrown into payments, interest, and insurance on cars. You're going to look back on furniture, cars, and clothes the same way.

What worked for me should work for you -

#1 Add your fixed expenses/loan payments and then make a variable expenses budget for you and your wife.
#2 Pick your favorite way to pay off your debt. Highest interest first would be advisable and throw your extra money at that.
#3 As you free up your cash flow, direct more to repaying loans and some of that extra into retirement savings, trying to max your 401k ASAP.

kjv
Pulling Hard
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Re: new chapter of life started - want to save and grow money

Post by Pulling Hard »

Also, check out some of those books from the library. You don't have to spend money to learn. :happy
Good luck!
ABQ4804
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Re: new chapter of life started - want to save and grow money

Post by ABQ4804 »

Bones_Jones wrote:not a joke. 2 cars and furniture killing us, and i honestly thought credit card is there for emergency...
Don't feel too bad, many of us got late starts being sensible with finances also. We'd just like to help you not make as drastic a detour, financially.

What ever you do, don't give up on Bogleheads or whitecoatinvestor.com, for getting your financial life in order. There are many testimonials on this forum, of members who have straightened out huge debts like yours.
Last edited by ABQ4804 on Sat Jan 20, 2018 8:33 pm, edited 1 time in total.
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4nursebee
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Re: new chapter of life started - want to save and grow money

Post by 4nursebee »

[OT comment removed by admin LadyGeek]

Here is my reaction to the OP: "You spend too much".

Here is my advice:

Take a big step back from all of this.
Decide on what your real goals are.
Decide on what needs to be done to achieve those goals.
Do those things.

If I were a new post resident kind of person, I'd hope to have read and followed a bit of white coat guys advice and still live like a resident. I dont think you are doing that with new home and 2 new cars, though I bet those things are nice.
Pale Blue Dot
10YearPlan
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Re: new chapter of life started - want to save and grow money

Post by 10YearPlan »

youdiditr2 wrote:This is definitely a troll post.

Who has $5k in expense that doesn't include student loan and a mortgage???

This troll could be making $2 million a year and then still be broke with that kind of expense.


"combined monthly expenses - $5000 monthly (foods, shopping, credit cards, insurances, 2 new cars, bills, furniture financing, etc, etc)"
A lot of people do. This is definitely not a troll post and treating it as such because the person has spent differently than you is not very welcoming.

OP-It does look like you need to get a budget. I'd recommend taking a real look at your last three months of expenditures in every category so you don't have to estimate what you're spending. Then you can look at the real picture and decide what you really need to keep spending and where you can cut. The good news is, you have a very high income and it seems that a lot of your spending is non-essential, so that means you really have some flexibility.

What I would do, minimally, is max the 401k for both of you, and build the rest of your spending/saving goals around that. All the while building your emergency fund. You could do a "shopping" freeze for a few months and tuck away that $500 to your emergency fund. Then you could use the bonus ($20k) to add to it. I would shoot for a 3-6m of expenses (so around $75k). If/when your wife's income increases, make sure you don't increase your spending, tuck the entire (or most of it) increase away.

Is the Restoration Hardware a 0% interest loan for the entire time?
Lafder
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Re: new chapter of life started - want to save and grow money

Post by Lafder »

Bones_Jones,
Welcome here! Congrats on finishing your training!

The decisions and choices about furniture/cars/house are made. It could be worse :) Enjoy your new home ! The cars and furniture should last for years! I agree with you that the payments will end in the next few years and give you more breathing room. You have had this experience and perspective. I have also bought furniture on credit, it was more comfortable than paying a chunk of cash. Though I have never bought more than one room's worth at a time :) Some folks here would have an MI to even think about buying a car or furniture on credit!

You have found the best source for financial wisdom and perspective out there. Folks here can help you make the most of your large income to optimize your long term financial health. This financial stuff does start as a new language, but you are smart and will figure it out quickly. You will know you are getting it when you see posts with "wrong" info in them and want to correct them :)

There is a balance between saving and spending. Some folks here are extreme in the saving category. You happen to have just had a huge burst of spending, which I do understand :) The sweet spot is somewhere in between extreme frugality and excess credit bought luxuries. It is important that you and your wife not think that level of spending on an ongoing basis can be supported by your income if you also plan to save for eventual retirement. It sounds to me like you and your wife do get that, and these were a one time set up fees for a household etc. But, she may have different perspectives on $ and it is important to keep the discussions going and include her in the savings/planning.

The great news is that your income is high and you have time to build up your savings and find your own balance.

As you read deeper about your employer offered plans, it will become more familiar to look for the ERs and the index funds amongst the choices. In general I think a 3 fund portfolio or all in one funds are the simplest way to go :) you can read more about both on this website. If you take the time to post all of your employer offerings, we can help you pick the best options and explain why.

:) lafder
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