26, have a job, now what?! Seeking advice!

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tardigrade
Posts: 17
Joined: Wed Dec 13, 2017 10:14 pm

26, have a job, now what?! Seeking advice!

Post by tardigrade » Thu Jan 11, 2018 9:06 pm

**Edited once more to add my concise question

*Edited 1/12/18 to reflect change from "EFT" to "ETF" and to change link to images to higher resolution images
-----------------------------

A lot of my issues have already been addressed, please read my porfolio with this guiding question in mind
I can realistically save ~$1,500/month and maintain my current spending (entertainment, travel, bills, ect). There are 4 appealing ways to use my money, how much should I put toward each? What should my timeline look like? Maybe a good strategy that would maximize my savings??
  • down payment for a house
  • saving for a car payment for a new car(s)
  • putting toward retirement (putting more money than just company match toward my husbands 401K/contributing to a roth IRA for me/husband)
  • paying more than the minimum toward my student loan debt


I just started my new job late 2016 and have been trying to get my bearings with my personal finances. I’ve been waiting to post because I feel fairly overwhelmed by the large amount of information available and trying to self-educate in advance to avoid seeming too ignorant, but being a bit overwhelmed by the self-education process. I’ve only started my research and have taken a personal finance class while in school (very basic). I did get the Boglehead guide and started reading that but still feel fairly new to all of this. I decided I’d go ahead and bring what I have to the table and see if you guys could offer some insight.


income: net ($6,500 per month/ $84,00 per year)
• Gross Income: 135,000ish + husband 13,000ish
• Net income after taxes, health insurance, 401k, HAS, company stock: ~$84,000 per year (~$6,500 per month)

investments/savings/assets (~$42,000 with $26,550 going in each year from 401K/HAS/stock)
• Emergency funds: $10,000 earning 0.02% in my credit union savings account (sigh)
• Total 401K (making max contribution yearly with 6% company match): $23,000 (invested in the MyRetirment 2055 fund) We will start contributing the 5% to get a 4% compnay match from my husbands 401K ASAP
• Total HSA (making max contribution yearly): $6,000 (haven’t invested it yet)
• Company stocks (contributing $1800/year with 15% match up to 18K): $2,800
• Assets: 2 cars, both 10+ years old which we owe without debt
debt: ~38,000 (monthly payment is 650 between the two of these)
• student loan from my grandpa at 0.5%: 22,000
• student loan at 3.27% variable 5 year loan :15,000

monthly bills: $2,855
• church donation (1/10 of my gross income): $1,050 (every 4 weeks)
• rent: 595
• student loans: 650 (175 to my grandpa and 475 to lender)
• other misc (internet/cell/insurance/utilities/gym): $484

additional savings:
• savings for a downpayment on a house: ~6,000 invested in ETF through robin hood (earned $240 since I started putting in there the start of 12/2017)
• we can generally save ~$1,500 per month after entertainment, food, travel, ect

Tax Filing Status:
• Married Filing Jointly – no dependents (yet)
Tax Rate:
• Federal: 25% (until ’18 which will change to 22%)
• State: 9.9%
State of Residence: Oregon
Age: me: 26 Husband: 34
Desired Asset allocation: not so sure, help?
Desired International allocation hmm? none?

Investement options through my work/my own investement
401k investment options
HSA investment options
ETF investments through robinhood

Questions:
1. Regarding my emergency fund/extra savings

a. I wish to be making at least some money on the 10K that is sitting in that account. I did some very minimal shopping when it came to credit unions and found that most in my area do not offer a great return. I do know that using the credit union co-op, more credit unions are available to be, however I have no idea how to begin researching rates on credit unions. Would a credit union be the best option for me, if no, then what? If yes, any guidance on searching out a credit union with good rates?

b. My brother has recently told me about Robin Hood, a free stock trading app. I have started using to put the money I’m saving for my down payment on a house into ETF stock using Robin Hood. I wonder if it is a wise choice to put my savings for a down payment into ETF. If so any direction on ETF selection would be helpful.

c. I wonder if it would be reasonably safe to also use the 10k for emergencies to buy ETF. My thought is that I would still be able to get the funds out within a reasonable amount of time (during market hours and it will take 5 business days for the money to seat) so my money would still be fairly liquid.

2. Regarding retirement savings

a. Any in helping me choose how my funds are allocated (both 401K/ HSA) would be appreciated!

b. Should I be contributing to 401K for my husband? A roth IRA for both me and my husband? How much? Is there a good tool to know how much I need to be saving? We would like to enjoy some of our money now for vacation, ect. to have a nice work/home life balance before I turn 65+ but I do want to have a secure retirement.

3. Regarding buying a house

a. I have a few strategies I’ve been thinking about for timing and buying a house. Any thoughts or suggestions to help me decide which is a good idea or if they are all garbage, and maybe there is a better idea even still? Keep in mind, we want to be in a house in the next 1-2 years and we can save about 20K per year for a house. Right now we have 6K in savings and an additional 10K in emergency (which we would use at the time of buying a house, then immediately work toward replenishing that)
  • Save up 20% down for a 150-200k house that I will live in for ~5 years to save up 10-20% down on a 500K+ house with land (we want to build a net zero, off grid house with some land and do some homesteading). Then move into the new house and use the old house for a rental property where the renters pay the mortgage payment.
  • Save 5% down right now and buy the 150-200K house, then in ~2-3 years buy the 500K+ house and have the other house be a rental, with the mortgage being paid off by the renters.
  • Save up 5% down right now and buy our 500k+ house with land, and later buy a rental property if/when we have additional savings
Last edited by tardigrade on Fri Jan 12, 2018 10:10 am, edited 3 times in total.

SimplicityNow
Posts: 453
Joined: Fri Aug 05, 2016 10:31 am

Re: 26, have a job, now what?! Seeking advice!

Post by SimplicityNow » Fri Jan 12, 2018 1:00 am

lindsayladell wrote:
Thu Jan 11, 2018 9:06 pm
I just started my new job late 2016 and have been trying to get my bearings with my personal finances. I’ve been waiting to post because I feel fairly overwhelmed by the large amount of information available and trying to self-educate in advance to avoid seeming too ignorant, but being a bit overwhelmed by the self-education process. I’ve only started my research and have taken a personal finance class while in school (very basic). I did get the Boglehead guide and started reading that but still feel fairly new to all of this. I decided I’d go ahead and bring what I have to the table and see if you guys could offer some insight. Welcome to the forum. You came to a good place to ask questions.

income: net ($6,500 per month/ $84,00 per year)
• Gross Income: 135,000ish + husband 13,000ish
• Net income after taxes, health insurance, 401k, HAS, company stock: ~$84,000 per year (~$6,500 per month)

investments/savings/assets (~$42,000 with $26,550 going in each year from 401K/HAS/stock)
• Emergency funds: $10,000 earning 0.02% in my credit union savings account (sigh)
• Total 401K (making max contribution yearly with 6% company match): $23,000 (invested in the MyRetirment 2055 fund)
• Total HSA (making max contribution yearly): $6,000 (haven’t invested it yet)
• Company stocks (contributing $1800/year with 15% match up to 18K): $2,800
• Assets: 2 cars, both 10+ years old which we owe without debt
debt: ~38,000 (monthly payment is 650 between the two of these)
• student loan from my grandpa at 0.5%: 22,000
• student loan at 3.27% variable 5 year loan :15,000

monthly bills: $2,855
• church donation (1/10 of my gross income): $1,050 (every 4 weeks)
• rent: 595
• student loans: 650 (175 to my grandpa and 475 to lender)
• other misc (internet/cell/insurance/utilities/gym): $484

additional savings:
• savings for a downpayment on a house: ~6,000 invested in EFT through robin hood (earned $240 since I started putting in there the start of 12/2017)
• we can generally save ~$1,500 per month after entertainment, food, travel, ect

Tax Filing Status:
• Married Filing Jointly – no dependents (yet)
Tax Rate:
• Federal: 25% (until ’18 which will change to 22%)
• State: 9.9%
State of Residence: Oregon
Age: me: 26 Husband: 34
Desired Asset allocation: not so sure, help?
Desired International allocation hmm? none?

Investement options through my work/my own investement
401k investment options
HSA investment options
EFT investments through robinhood

Questions:
1. Regarding my emergency fund/extra savings

a. I wish to be making at least some money on the 10K that is sitting in that account. I did some very minimal shopping when it came to credit unions and found that most in my area do not offer a great return. I do know that using the credit union co-op, more credit unions are available to be, however I have no idea how to begin researching rates on credit unions. Would a credit union be the best option for me, if no, then what? If yes, any guidance on searching out a credit union with good rates?You could earn a much higher rate using an online bank. As an example: Ally Bank currently pays 1.25% with no minimum balance. Purepoint Bank pays 1.40% with a $10,000 minimum. To investigate other you can go to www.depositaccounts.com and research more.

b. My brother has recently told me about Robin Hood, a free stock trading app. I have started using to put the money I’m saving for my down payment on a house into EFT stock using Robin Hood. I wonder if it is a wise choice to put my savings for a down payment into EFT. If so any direction on EFT selection would be helpful. I'm not sure what you mean by EFT stock. Do you mean ETF? And what ETF did you purchase. A general rule of thumb is any money you need in the short term (less then 5 years) should not be invested in the stock market by something safer like a high yield savings account, short term CD's etc.

c. I wonder if it would be reasonably safe to also use the 10k for emergencies to buy EFT. My thought is that I would still be able to get the funds out within a reasonable amount of time (during market hours and it will take 5 business days for the money to seat) so my money would still be fairly liquid. What you are describing, trading stocks in the short term has very high risk, Not only is it something most here would not recommend, it is certainly not something a person with very minimal knowledge should even be considering. Market timing does not work over the long term. Day trading even less so.

2. Regarding retirement savings

a. Any in helping me choose how my funds are allocated (both 401K/ HSA) would be appreciated!It was hard for me to read your list of 401K choices but it looks like you have many excellent low expense ratio Black Rock Funds. Once you determine your asset allocation (see recommended reading) you could probably pick a simple 3 fund portfolio and get a lower expense ratio then the target date funds.

b. Should I be contributing to 401K for my husband? A roth IRA for both me and my husband? How much? Is there a good tool to know how much I need to be saving? We would like to enjoy some of our money now for vacation, ect. to have a nice work/home life balance before I turn 65+ but I do want to have a secure retirement. You are young and have many years to save for retirement. Time is your friend here. That is why it is important to start saving now to enjoy the miracle of compounding. Yes it is important to enjoy life, vacations etc. Retirement savings needs to be near the top, if not the top of the list.

3. Regarding buying a house

a. I have a few strategies I’ve been thinking about for timing and buying a house. Any thoughts or suggestions to help me decide which is a good idea or if they are all garbage, and maybe there is a better idea even still? Keep in mind, we want to be in a house in the next 1-2 years and we can save about 20K per year for a house. Right now we have 6K in savings and an additional 10K in emergency (which we would use at the time of buying a house, then immediately work toward replenishing that) Not a good idea to exhaust your emergency funds for a house purchase. It is there for an emergency.
  • Save up 20% down for a 150-200k house that I will live in for ~5 years to save up 10-20% down on a 500K+ house with land (we want to build a net zero, off grid house with some land and do some homesteading). Then move into the new house and use the old house for a rental property where the renters pay the mortgage payment.
  • Save 5% down right now and buy the 150-200K house, then in ~2-3 years buy the 500K+ house and have the other house be a rental, with the mortgage being paid off by the renters.
  • Save up 5% down right now and buy our 500k+ house with land, and later buy a rental property if/when we have additional savings
More people will come along with other suggestions. My biggest suggestion would be to continue to educate yourself BEFORE you invest more.
1) Finish the Boglhead Guide
2) Read Dr. Bill Bernsteins pdf document If You Can, https://www.etf.com/docs/IfYouCan.pdf
3) Read Rick Ferri's Book: All About Asset Allocation
4) Read the Boglehead forum Getting Started Guide.
Last edited by SimplicityNow on Fri Jan 12, 2018 1:05 am, edited 1 time in total.

PFInterest
Posts: 1460
Joined: Sun Jan 08, 2017 12:25 pm

Re: 26, have a job, now what?! Seeking advice!

Post by PFInterest » Fri Jan 12, 2018 1:02 am

lindsayladell wrote:
Thu Jan 11, 2018 9:06 pm
• Gross Income: 135,000ish + husband 13,000ish
• Net income after taxes, health insurance, 401k, HAS, company stock: ~$84,000 per year (~$6,500 per month)

investments/savings/assets (~$42,000 with $26,550 going in each year from 401K/HAS/stock)
• Emergency funds: $10,000 earning 0.02% in my credit union savings account (sigh)
- move to ally at least, get 1%.
• Total 401K (making max contribution yearly with 6% company match): $23,000 (invested in the MyRetirment 2055 fund)
• Total HSA (making max contribution yearly): $6,000 (haven’t invested it yet)
• Company stocks (contributing $1800/year with 15% match up to 18K): $2,800

debt: ~38,000 (monthly payment is 650 between the two of these)
• student loan from my grandpa at 0.5%: 22,000
• student loan at 3.27% variable 5 year loan :15,000

monthly bills: $2,855
• church donation (1/10 of my gross income): $1,050 (every 4 weeks)
• rent: 595
• student loans: 650 (175 to my grandpa and 475 to lender)
• other misc (internet/cell/insurance/utilities/gym): $484

additional savings:
• savings for a downpayment on a house: ~6,000 invested in EFT through robin hood (earned $240 since I started putting in there the start of 12/2017)
- whats your time frame for a house? <5 years probably shouldn't be in the market. 5-10 yrs can take some risk. >10 years sure do whatever.
• we can generally save ~$1,500 per month after entertainment, food, travel, ect

Tax Filing Status:
• Married Filing Jointly – no dependents (yet)
Tax Rate:
• Federal: 25% (until ’18 which will change to 22%)
• State: 9.9%
State of Residence: Oregon
Age: me: 26 Husband: 34
Desired Asset allocation: not so sure, help?
- why dont you start at 80 stock: 20 bond.
Desired International allocation hmm? none?
- most ppl rec some intl. you can start small at 10-20%. but also picking none is an option.

Investement options through my work/my own investement
- would pick the blackrock russel funds for US stock, bond index, and again if you want the intl fund.
- no clue what is in the myretirement mix.


Questions:
1. Regarding my emergency fund/extra savings

a. I wish to be making at least some money on the 10K that is sitting in that account. I did some very minimal shopping when it came to credit unions and found that most in my area do not offer a great return. I do know that using the credit union co-op, more credit unions are available to be, however I have no idea how to begin researching rates on credit unions. Would a credit union be the best option for me, if no, then what? If yes, any guidance on searching out a credit union with good rates?
- see above.

b. My brother has recently told me about Robin Hood, a free stock trading app. I have started using to put the money I’m saving for my down payment on a house into EFT stock using Robin Hood. I wonder if it is a wise choice to put my savings for a down payment into EFT. If so any direction on EFT selection would be helpful.
- i think you mean ETFs. most ppl here dont use those apps because we dont have to. we can buy funds straight from vanguard or fidelity for free.
- it is not rec to put all your down payment in STOCKS if your purchase horizon is soon. BONDS might be appropriate. but so can be CDs, ibonds,
etc


c. I wonder if it would be reasonably safe to also use the 10k for emergencies to buy EFT. My thought is that I would still be able to get the funds out within a reasonable amount of time (during market hours and it will take 5 business days for the money to seat) so my money would still be fairly liquid.
- at this time, no. EF is meant for emergencies. once you have enough money not to worry about market fluctuations, then you can get fancy.

2. Regarding retirement savings

a. Any in helping me choose how my funds are allocated (both 401K/ HSA) would be appreciated!

b. Should I be contributing to 401K for my husband? A roth IRA for both me and my husband? How much? Is there a good tool to know how much I need to be saving? We would like to enjoy some of our money now for vacation, ect. to have a nice work/home life balance before I turn 65+ but I do want to have a secure retirement.
- you are saving over 20% which is a great start.
- if you can cont to the rIRAs sure. its definitely a balance.
- what does he do? how can we increase his earnings?


3. Regarding buying a house

a. I have a few strategies I’ve been thinking about for timing and buying a house. Any thoughts or suggestions to help me decide which is a good idea or if they are all garbage, and maybe there is a better idea even still? Keep in mind, we want to be in a house in the next 1-2 years and we can save about 20K per year for a house. Right now we have 6K in savings and an additional 10K in emergency (which we would use at the time of buying a house, then immediately work toward replenishing that)
- first off. you need to save a DP and have a sep EF. also you need money saved for furniture, etc.
- in 2 years.....everything needs to be in savings CDs. get that money out of stocks soon.

  • Save up 20% down for a 150-200k house that I will live in for ~5 years to save up 10-20% down on a 500K+ house with land (we want to build a net zero, off grid house with some land and do some homesteading). Then move into the new house and use the old house for a rental property where the renters pay the mortgage payment.
  • Save 5% down right now and buy the 150-200K house, then in ~2-3 years buy the 500K+ house and have the other house be a rental, with the mortgage being paid off by the renters.
  • Save up 5% down right now and buy our 500k+ house with land, and later buy a rental property if/when we have additional savings
- all grand plans but what will you do when the market tanks and you cant sell your house, get renters, or go underwater?

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: 26, have a job, now what?! Seeking advice!

Post by itstoomuch » Fri Jan 12, 2018 1:17 am

Tough to do if you live in the metro Portland area.
Easier to do from Salem to Eugene.
A lot has to do with housing inflation. Although we live in Salem 60 years, we are more familiar with Seattle housing where we have investment property. Seattle housing is appreciating 2015-2017 at ~16%/yr conservatively. Thus in Seattle, your savings and savings's growth has to be at least 16% just to keep your purchasing power.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

User avatar
luminous
Posts: 76
Joined: Sat Dec 30, 2017 10:28 pm

Re: 26, have a job, now what?! Seeking advice!

Post by luminous » Fri Jan 12, 2018 2:08 am

Welcome!
a. I wish to be making at least some money on the 10K that is sitting in that account. I did some very minimal shopping when it came to credit unions and found that most in my area do not offer a great return. I do know that using the credit union co-op, more credit unions are available to be, however I have no idea how to begin researching rates on credit unions. Would a credit union be the best option for me, if no, then what? If yes, any guidance on searching out a credit union with good rates?
Credit unions are all very local, so searching will be local. Online banks tend to have higher interest rates on savings accounts than any credit union or local bank in my area. Ally is a good option to look at, as another poster pointed out.
b. My brother has recently told me about Robin Hood, a free stock trading app. I have started using to put the money I’m saving for my down payment on a house into EFT stock using Robin Hood. I wonder if it is a wise choice to put my savings for a down payment into EFT. If so any direction on EFT selection would be helpful.
I would definitely not save downpayment money in the stock market. As boring as it is, I'd put it into a savings account. Your savings could go down in value by half overnight and you'd be very sad.
c. I wonder if it would be reasonably safe to also use the 10k for emergencies to buy EFT. My thought is that I would still be able to get the funds out within a reasonable amount of time (during market hours and it will take 5 business days for the money to seat) so my money would still be fairly liquid.
Not at all, please don't do this. If the stock market goes down you will lose value in your emergency fund. Your 10k could become 5k overnight.
a. Any in helping me choose how my funds are allocated (both 401K/ HSA) would be appreciated!
In your situation for the 401k I'd pick a Vanguard target date retirement fund that most closely matches the year you expect to retire. As you learn more through the years you may change your mind, but this is a solid starting point. I wouldn't invest your HSA savings at all if you expect to have to spend it on medical expenses.
b. Should I be contributing to 401K for my husband? A roth IRA for both me and my husband? How much? Is there a good tool to know how much I need to be saving? We would like to enjoy some of our money now for vacation, ect. to have a nice work/home life balance before I turn 65+ but I do want to have a secure retirement.
You'll have to decide which you value more at this point: day to day luxuries like vacations, buying a house, or saving for retirement. This isn't an easy choice and it will change over time. Personally I live in a high cost of living (HCOL) area and we have prioritized saving for retirement, in which case I'd recommend you contribute to Roth IRAs and have your husband contribute to a 401k (you cannot do that for him).

This is one calculator you could use to get some starting ideas: https://retirementplans.vanguard.com/VG ... meCalc.jsf
a. I have a few strategies I’ve been thinking about for timing and buying a house. Any thoughts or suggestions to help me decide which is a good idea or if they are all garbage, and maybe there is a better idea even still? Keep in mind, we want to be in a house in the next 1-2 years and we can save about 20K per year for a house. Right now we have 6K in savings and an additional 10K in emergency (which we would use at the time of buying a house, then immediately work toward replenishing that)
  • Save up 20% down for a 150-200k house that I will live in for ~5 years to save up 10-20% down on a 500K+ house with land (we want to build a net zero, off grid house with some land and do some homesteading). Then move into the new house and use the old house for a rental property where the renters pay the mortgage payment.
  • Save 5% down right now and buy the 150-200K house, then in ~2-3 years buy the 500K+ house and have the other house be a rental, with the mortgage being paid off by the renters.
  • Save up 5% down right now and buy our 500k+ house with land, and later buy a rental property if/when we have additional savings
How stable are your jobs? How likely is your income to go up over time? How likely are you to have children in the next 5 years? The safest course of action would be option 1. It doesn't make you "house poor", it gives you the most options over time if your income doesn't go up, someone loses a job, a parent decides to stay home with the kids, childcare costs end up higher than you expect, you decide to move states, etc etc etc.
45/25/30 US stock/international stock/bonds. Target date funds. Hope to semi-retire in 2026.

tardigrade
Posts: 17
Joined: Wed Dec 13, 2017 10:14 pm

Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 6:56 am

*edited for formating 1/12/18
This is my first time replying in one of these forums, hopefully I am doing this right

First, I just want to thank you for taking the time to read through and respond to my portfolio, your responses were very attentive, kind, and helpful!

My responses are below:
You could earn a much higher rate using an online bank. As an example: Ally Bank currently pays 1.25% with no minimum balance. Purepoint Bank pays 1.40% with a $10,000 minimum. To investigate other you can go to www.depositaccounts.com and research more.
Thank you so much, this is exactly the sort of thing what I was hoping to find.
I'm not sure what you mean by EFT stock. Do you mean ETF? And what ETF did you purchase. A general rule of thumb is any money you need in the short term (less then 5 years) should not be invested in the stock market by something safer like a high yield savings account, short term CD's etc.
Yes, you are correct, I did mean ETF, I posted a screenshot of the ETF that I own. ETF investments through robinhood
When you say high yield savings account - is that the online banking that you were recommending. CD's are probably a great way to go for my down payment savings and high yield savings account is probably great for my emergency fund. My brother-in-law works for a local credit union in Idaho, where I am visiting which I know has a high yield savings rate, perhaps I'll set up an account while I'm here and put my emergency fund in there :)
What you are describing, trading stocks in the short term has very high risk, Not only is it something most here would not recommend, it is certainly not something a person with very minimal knowledge should even be considering. Market timing does not work over the long term. Day trading even less so.
I agree. My brother, who is taking advantage of Robin Hood, is a bit more risky than me, personally. After reading these responses, I think I'll take your advice and switch to a CD for my down payment savings, and high yield savings account for my emergency fund.
It was hard for me to read your list of 401K choices but it looks like you have many excellent low expense ratio Black Rock Funds. Once you determine your asset allocation (see recommended reading) you could probably pick a simple 3 fund portfolio and get a lower expense ratio then the target date funds.
Sorry, I just re-uploaded with a higher resolution image, but I don't know that it solved the problem. I do like your idea of building my own, to avoid the expense. I guess I'm not super savvy quite yet. My target date fund is pretty low expense, but I'm interested in learning more. What is a good way to allocate the funds? It seems my options are stocks, bonds, and money market. So between those three?
You are young and have many years to save for retirement. Time is your friend here. That is why it is important to start saving now to enjoy the miracle of compounding. Yes it is important to enjoy life, vacations etc. Retirement savings needs to be near the top, if not the top of the list.
I agree! In your opinion should I be taking more advantage of this time, and be contributing more? If so, should I open a roth IRA for both myself and my husband and max that out? Or, should I have my husband start contribute to a 401K more than just his company matches. I just found out he is eligible for matching, so we are going to get him signed up for at least their matching. Also, with respect to IRA - any suggestions for someone shopping?
Not a good idea to exhaust your emergency funds for a house purchase. It is there for an emergency.
Noted! I will keep those in my new high yield savings account.
More people will come along with other suggestions. My biggest suggestion would be to continue to educate yourself BEFORE you invest more.
1) Finish the Boglhead Guide
2) Read Dr. Bill Bernsteins pdf document If You Can, https://www.etf.com/docs/IfYouCan.pdf
3) Read Rick Ferri's Book: All About Asset Allocation
4) Read the Boglehead forum Getting Started Guide.
Okay, I will make this a priority. I can be patient! I just downloaded If You Can, the subtitle gave me a laugh, "How Millennials can Get Rich Slowly." Very appropriate!

Carl53
Posts: 1574
Joined: Sun Mar 07, 2010 8:26 pm

Re: 26, have a job, now what?! Seeking advice!

Post by Carl53 » Fri Jan 12, 2018 7:30 am

lindsayladell wrote:
Fri Jan 12, 2018 6:56 am
*edited for formating 1/12/18
This is my first time replying in one of these forums, hopefully I am doing this right

First, I just want to thank you for taking the time to read through and respond to my portfolio, your responses were very attentive, kind, and helpful!

My responses are below:
You could earn a much higher rate using an online bank. As an example: Ally Bank currently pays 1.25% with no minimum balance. Purepoint Bank pays 1.40% with a $10,000 minimum. To investigate other you can go to www.depositaccounts.com and research more.
Thank you so much, this is exactly the sort of thing what I was hoping to find.
I'm not sure what you mean by EFT stock. Do you mean ETF? And what ETF did you purchase. A general rule of thumb is any money you need in the short term (less then 5 years) should not be invested in the stock market by something safer like a high yield savings account, short term CD's etc.
Yes, you are correct, I did mean ETF, I posted a screenshot of the ETF that I own. ETF investments through robinhood
When you say high yield savings account - is that the online banking that you were recommending. CD's are probably a great way to go for my down payment savings and high yield savings account is probably great for my emergency fund. My brother-in-law works for a local credit union in Idaho, where I am visiting which I know has a high yield savings rate, perhaps I'll set up an account while I'm here and put my emergency fund in there :)
What you are describing, trading stocks in the short term has very high risk, Not only is it something most here would not recommend, it is certainly not something a person with very minimal knowledge should even be considering. Market timing does not work over the long term. Day trading even less so.
I agree. My brother, who is taking advantage of Robin Hood, is a bit more risky than me, personally. After reading these responses, I think I'll take your advice and switch to a CD for my down payment savings, and high yield savings account for my emergency fund.
It was hard for me to read your list of 401K choices but it looks like you have many excellent low expense ratio Black Rock Funds. Once you determine your asset allocation (see recommended reading) you could probably pick a simple 3 fund portfolio and get a lower expense ratio then the target date funds.
Sorry, I just re-uploaded with a higher resolution image, but I don't know that it solved the problem. I do like your idea of building my own, to avoid the expense. I guess I'm not super savvy quite yet. My target date fund is pretty low expense, but I'm interested in learning more. What is a good way to allocate the funds? It seems my options are stocks, bonds, and money market. So between those three?
You are young and have many years to save for retirement. Time is your friend here. That is why it is important to start saving now to enjoy the miracle of compounding. Yes it is important to enjoy life, vacations etc. Retirement savings needs to be near the top, if not the top of the list.
I agree! In your opinion should I be taking more advantage of this time, and be contributing more? If so, should I open a roth IRA for both myself and my husband and max that out? Or, should I have my husband start contribute to a 401K more than just his company matches. I just found out he is eligible for matching, so we are going to get him signed up for at least their matching. Also, with respect to IRA - any suggestions for someone shopping?
Not a good idea to exhaust your emergency funds for a house purchase. It is there for an emergency.
Noted! I will keep those in my new high yield savings account.
More people will come along with other suggestions. My biggest suggestion would be to continue to educate yourself BEFORE you invest more.
1) Finish the Boglhead Guide
2) Read Dr. Bill Bernsteins pdf document If You Can, https://www.etf.com/docs/IfYouCan.pdf
3) Read Rick Ferri's Book: All About Asset Allocation
4) Read the Boglehead forum Getting Started Guide.
Okay, I will make this a priority. I can be patient! I just downloaded If You Can, the subtitle gave me a laugh, "How Millennials can Get Rich Slowly." Very appropriate!
You have received a lot of good advice thus far.

Do have your husband contribute to his 401k however much it takes to get the maximum company match, it is free money. Is his position full time? His company may have different rules for part time employees. Do look over his 401k fund options to select the best.

Note that your brother's CU may not have high yield savings accounts that rival some of those that you will find via the links provided by others. Check the terms and conditions and read the comments regarding how well the institutions work with customers on the depositaccounts.com/blog. Likewise on the CDs. You might want to stick with shorter term CDs if you hope to buy a home in a few years. Beware of Early Withdrawal Penalties (EWP), that might claw back some of your otherwise higher earnings.

Do not plan on using your EF when you buy a home, things will crop up after you move in that might force you to use some, but if you use it up with the initial home purchase it will not be there when you need it.

Be sure to have a full 20% down payment on the home when you go for it. Otherwise you will be paying for PMI (private mortgage insurance for the lender), a waste of money.

It was very nice of your grandfather to loan you money while you were in school. He could certainly do better than 0.5% he generously allowed you. Consider paying him off sooner than later as you are now out of school making good money.

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bottlecap
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Re: 26, have a job, now what?! Seeking advice!

Post by bottlecap » Fri Jan 12, 2018 7:33 am

Congratulations!

We cannot help you determine you asset allocation. A good rule of thumb is that whatever percentage of stock allocation you have you must be able to stomach a 50% drop in a short period of time.

That’s why it’s a bad idea to have any money for short term goals (less tha 7 or 8 years) in stock investments, ETF or not.

You can also search the web for quizes to determine you risk tolerance. Vanguard should have one on its website.

Once you determine that, I would use the target date retirement funds available to you in your 401k. They are not prohibitively expensive and they do everything for you. If you decide later, after more self-education, that you want to do it yourself and take advantage of those black rock funds, so be it. For now, keep it simple.

If you want to know rates at credit unions, check their websites or walk in and ask.

I would slow down on your home dreams. It doesn’t make a whole lot of sense to buy for less that 5 years only to buy again, but some do and it can turn out well. 5% down on a $500,000 home your salary will be miserable. You are young and have a lot of time to achieve your dreams. Don’t jump the gun.

Get out of Robinhood. Short term trading is a loser's game. I understand you don’t have to do short term trading, but the temptation will be there.

Congrats on finding this forum at 26. Many of us had to make a lot of mistakes before landing here.

Good luck,

JT

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 7:45 am

Thank you so much for your thoughtful remarks, PFInterest! I appreciate your help :) My responses are below:

- whats your time frame for a house? <5 years probably shouldn't be in the market. 5-10 yrs can take some risk. >10 years sure do whatever.
Well, we are hoping to buy within the next 2 years to get out of our rental. We are in a tiny 500 sq ft. apartment atm and hoping to start having kids in 1-2 years. Do you recommend to get out of our apartment and rent a bigger space until the market cools down, then buy a house? Our rent currently is 695 for that small apartment, if we got something bigger it would be 1,200+

I am curious though, because the interest rates for houses are so low right now, what is your thought process for waiting the 5 years? Maybe i misinterpreted, did you mean how long do we plan on staying in the house? It's hard to say, we live in Oregon, are from Idaho, wouldn't mind moving back to Idaho to be with family, but only if I can get a direct transfer through my company to maintain my benefits, which is unlikely something will come up, but who knows what the future holds. So, from where I'm at it seems we could be in this place for >10 years if no job transfer comes through.

Desired Asset allocation: not so sure, help?
- why dont you start at 80 stock: 20 bond.
Desired International allocation hmm? none?
- most ppl rec some intl. you can start small at 10-20%. but also picking none is an option.
Investement options through my work/my own investement
- would pick the blackrock russel funds for US stock, bond index, and again if you want the intl fund.
- no clue what is in the myretirement mix.
Yea, I don' know what is in the myretirement mix either! I think I understand, 10-20% out 80% being international equity and the rest use blackrockrussel and then lastly the bond index being 20%. Thank you! I'll look into this!

- i think you mean ETFs. most ppl here dont use those apps because we dont have to. we can buy funds straight from vanguard or fidelity for free.
- it is not rec to put all your down payment in STOCKS if your purchase horizon is soon. BONDS might be appropriate. but so can be CDs, ibonds,
etc
How would one be eligible to buy funds for free without using an app? It seems that I probably don't need to worry about investing any other money that isn't for retirement until after I have my down payment for my house sorted out. And it has been recommended in the previous post that I use a high yield savings account to hold my savings for a downpayment.
- at this time, no. EF is meant for emergencies. once you have enough money not to worry about market fluctuations, then you can get fancy.
Noted, no funny business!
- you are saving over 20% which is a great start.
- if you can cont to the rIRAs sure. its definitely a balance.
- what does he do? how can we increase his earnings?
I'm considering doing something more for retirement, because it seems wiser to do that than save up for a higher down payment for a house because it seems my earnings will be greater than what my interest on a house would be? But what if we bought land/build and go for the 500K property/house, interest on that would rely go up. At what point is it better to pour more into saving/paying off the house (if/when we buy) vs putting more into retirement? Are there calculators that can figure this stuff out?

He is working part time a cashier for Kroger, has worked for them for ~10 years. In addition to working part time he takes care of all of the household chores. He wouldn't mind a career change atm, but when we start having kids he will be stay at home dad/homestead managing. Do you have any ideas for him?
- first off. you need to save a DP and have a sep EF. also you need money saved for furniture, etc.
- in 2 years.....everything needs to be in savings CDs. get that money out of stocks soon.
My current EF which is all minimal expenses ~5 months out which I just realized isn't the full 6 months that I'd originally estimated, I probably need more like 15K for that, but, once I do that, how much would I set aside for the separate EF (great idea). Is this mostly for repairs? Also, how much do you recommend saving for a DP? I've been trying to figure this out, because the interest rates are pretty low right now, it seems my money is better served in a retirement fund. I'll get it all out of stocks ASAP!
- all grand plans but what will you do when the market tanks and you cant sell your house, get renters, or go underwater?
Why would I want to sell my house? I suppose if my job had a transfer available to me I would want to take it, if it seemed reasonable, but if I was underwater I wouldn't. It wouldn't kill me to stay in Oregon.

Sometimes it is hard to get renters, which is why I wanted to get a fairly small, cheap place that we would use to rent so it would be easy to find renters in our town we have a shortage of renters, and if we did the rental property we would definitely have like a years worth of payments out before we started anything like that, advice we got from some people we know who rent.

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 7:50 am

itstoomuch wrote:
Fri Jan 12, 2018 1:17 am
Tough to do if you live in the metro Portland area.
Easier to do from Salem to Eugene.
A lot has to do with housing inflation. Although we live in Salem 60 years, we are more familiar with Seattle housing where we have investment property. Seattle housing is appreciating 2015-2017 at ~16%/yr conservatively. Thus in Seattle, your savings and savings's growth has to be at least 16% just to keep your purchasing power.
Agreed, housing in Portland, *phew* I don't live in Portland, I live in more rural country - south of Eugene!
Let me see if I understand what you mean. Do you mean that unless I am earning >16% in other investment, it would be better, in Seattle at least, to buy a house? I am currently debating if it is smarter to put even more into retirement (open a roth IRA for me/husband or a 401K for my husband) but aslo between that and buying a house. How could I tell what the housing market looks like for my area to know what sort of rate we are growing at. Also, the market is sort of hot right now for sellers. What are your speculations on that vs. the low interest rate we are having now? Wait or jump on it?

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 8:07 am

luminous wrote:
Fri Jan 12, 2018 2:08 am
Welcome!
Thank you and thank you for your time and attention to my post! :)
Credit unions are all very local, so searching will be local. Online banks tend to have higher interest rates on savings accounts than any credit union or local bank in my area. Ally is a good option to look at, as another poster pointed out.
Yes, I am happy to hear about the advantages of online banks.

I would definitely not save downpayment money in the stock market. As boring as it is, I'd put it into a savings account. Your savings could go down in value by half overnight and you'd be very sad.
c. I wonder if it would be reasonably safe to also use the 10k for emergencies to buy EFT. My thought is that I would still be able to get the funds out within a reasonable amount of time (during market hours and it will take 5 business days for the money to seat) so my money would still be fairly liquid.
Not at all, please don't do this. If the stock market goes down you will lose value in your emergency fund. Your 10k could become 5k overnight.
Agreed! Very sad! I was being far too hasty. Another poster mentioned to use CDs and high yield savings accounts. Seems much better.

In your situation for the 401k I'd pick a Vanguard target date retirement fund that most closely matches the year you expect to retire. As you learn more through the years you may change your mind, but this is a solid starting point. I wouldn't invest your HSA savings at all if you expect to have to spend it on medical expenses.
I have a link to my 401K investment options (very tiny, sorry), unfortunately Vanguard isn't included, maybe for a roth? Good call on the HSA, I forgot my plan was to save enough for 2 deductibles, then invest the rest so I guess I still don't need to worry about that for a while. Good idea?
You'll have to decide which you value more at this point: day to day luxuries like vacations, buying a house, or saving for retirement. This isn't an easy choice and it will change over time. Personally I live in a high cost of living (HCOL) area and we have prioritized saving for retirement, in which case I'd recommend you contribute to Roth IRAs and have your husband contribute to a 401k (you cannot do that for him).


This is one calculator you could use to get some starting ideas: https://retirementplans.vanguard.com/VG ... meCalc.jsf
I guess what I meant was have him put his money into a 401K, I tend to lump all of our money in together when thinking/speaking about it. I'm certainly debating between contributing more to retirement, and getting into a house sooner right now. I'll use that calculator, that should help me!
How stable are your jobs? How likely is your income to go up over time? How likely are you to have children in the next 5 years? The safest course of action would be option 1. It doesn't make you "house poor", it gives you the most options over time if your income doesn't go up, someone loses a job, a parent decides to stay home with the kids, childcare costs end up higher than you expect, you decide to move states, etc etc etc.
Things to consider! Options are certainly good over time. Especially how non-committal I am about where I am located.

ICMoney
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Re: 26, have a job, now what?! Seeking advice!

Post by ICMoney » Fri Jan 12, 2018 8:30 am

lindsayladell wrote:
Fri Jan 12, 2018 7:45 am

...

Well, we are hoping to buy within the next 2 years to get out of our rental. We are in a tiny 500 sq ft. apartment atm and hoping to start having kids in 1-2 years. Do you recommend to get out of our apartment and rent a bigger space until the market cools down, then buy a house? Our rent currently is 695 for that small apartment, if we got something bigger it would be 1,200+

I am curious though, because the interest rates for houses are so low right now, what is your thought process for waiting the 5 years? Maybe i misinterpreted, did you mean how long do we plan on staying in the house? It's hard to say, we live in Oregon, are from Idaho, wouldn't mind moving back to Idaho to be with family, but only if I can get a direct transfer through my company to maintain my benefits, which is unlikely something will come up, but who knows what the future holds. So, from where I'm at it seems we could be in this place for >10 years if no job transfer comes through.

...

I'm considering doing something more for retirement, because it seems wiser to do that than save up for a higher down payment for a house because it seems my earnings will be greater than what my interest on a house would be? But what if we bought land/build and go for the 500K property/house, interest on that would rely go up. At what point is it better to pour more into saving/paying off the house (if/when we buy) vs putting more into retirement? Are there calculators that can figure this stuff out?

He is working part time a cashier for Kroger, has worked for them for ~10 years. In addition to working part time he takes care of all of the household chores. He wouldn't mind a career change atm, but when we start having kids he will be stay at home dad/homestead managing. Do you have any ideas for him?

...

Why would I want to sell my house? I suppose if my job had a transfer available to me I would want to take it, if it seemed reasonable, but if I was underwater I wouldn't. It wouldn't kill me to stay in Oregon.

Sometimes it is hard to get renters, which is why I wanted to get a fairly small, cheap place that we would use to rent so it would be easy to find renters in our town we have a shortage of renters, and if we did the rental property we would definitely have like a years worth of payments out before we started anything like that, advice we got from some people we know who rent.
Welcome and congratulations on the job and getting started with investing!

I would suggest waiting to move into a bigger place (whether buy or rent) until you have a baby, and the baby is at least 6 months old. The latest AAP recommendation is for baby to roomshare with parents until at least 6 months old anyway - and infants don't need much space so you may be able to still fit in your current place for awhile? Also, having kids may motivate you to want to move back to Idaho to be near family - having a baby will change you in many ways and this may suddenly become a priority for you. Also, since your future in Oregon seems a bit uncertain, maybe that is further reason to continue to rent for now. Any real estate transaction costs would likely exceed any interest rate savings if you do have to sell shortly after buying, so I wouldn't worry too much about needing to buy because "interest rates are going up" (plus, no one knows if they will go up or down anyway!).

Do you have good term life insurance? Do you have an own-occ disability policy on yourself? Those would definitely be things to get before having kids (and even before getting pregnant, not sure if insurance companies would give you trouble if trying to get a policy while pregnant...). Guardian is regarded as best on this forum for own-occ disability policies. Term4sale.com would be a place to start for life insurance.

If you could max out 401ks for both you and husband, plus max HSA, plus max Roth IRAs for you and your husband (5,500 each), you would be doing great from a retirement savings perspective.

Best,
ICM
Last edited by ICMoney on Fri Jan 12, 2018 8:57 am, edited 1 time in total.

tmhudg
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Re: 26, have a job, now what?! Seeking advice!

Post by tmhudg » Fri Jan 12, 2018 8:35 am

lindsayladell wrote:
Fri Jan 12, 2018 7:45 am
Thank you so much for your thoughtful remarks, PFInterest! I appreciate your help :) My responses are below:
- first off. you need to save a DP and have a sep EF. also you need money saved for furniture, etc.
- in 2 years.....everything needs to be in savings CDs. get that money out of stocks soon.
My current EF which is all minimal expenses ~5 months out which I just realized isn't the full 6 months that I'd originally estimated, I probably need more like 15K for that, but, once I do that, how much would I set aside for the separate EF (great idea). Is this mostly for repairs? Also, how much do you recommend saving for a DP? I've been trying to figure this out, because the interest rates are pretty low right now, it seems my money is better served in a retirement fund. I'll get it all out of stocks ASAP!
Just a small note but I'm wondering if you misunderstood this. I don't think the suggestion was to have two separate EF's - just don't combine your Down Payment and your Emergency Fund.

Also, is your username your actual name? Entirely up to you of course but most people try to obscure their real life info somewhat - especially on a site where you are divulging lots of personal financial information.

If it's not, then please ignore my comment.
Last edited by tmhudg on Fri Jan 12, 2018 8:54 am, edited 2 times in total.

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 8:35 am

Carl53 wrote:
Fri Jan 12, 2018 7:30 am
You have received a lot of good advice thus far.
Yes I have, and I thank you for also putting your hat into the ring!
Do have your husband contribute to his 401k however much it takes to get the maximum company match, it is free money. Is his position full time? His company may have different rules for part time employees. Do look over his 401k fund options to select the best.
Yes, I told him to get that information for me. He is even less savvy with finances than me, nor does he have the interest in it. He is part time but I do believe he can still contribute, his company is union. I'll be sure to look at the details before signing up.
Note that your brother's CU may not have high yield savings accounts that rival some of those that you will find via the links provided by others. Check the terms and conditions and read the comments regarding how well the institutions work with customers on the depositaccounts.com/blog. Likewise on the CDs. You might want to stick with shorter term CDs if you hope to buy a home in a few years. Beware of Early Withdrawal Penalties (EWP), that might claw back some of your otherwise higher earnings.
I will do my research between the online banks and his CU. Thanks for that heads up on that blog. I just looked his bank up and they hae 2.5% checking up to 10,000. (but with some requirements). They also had one review I could read. My current CU has only 1 review as well. This is the best tool ever. This is exactly the sort of thing I was hoping for when doing research about local institutions.
I agree about the shorter term CD. Not too interested in the penalties. Thank you so much!!
Do not plan on using your EF when you buy a home, things will crop up after you move in that might force you to use some, but if you use it up with the initial home purchase it will not be there when you need it.
Noted, will keep it there!
Be sure to have a full 20% down payment on the home when you go for it. Otherwise you will be paying for PMI (private mortgage insurance for the lender), a waste of money.
I thought this as well, but what about the following scenario.
I want to buy within 2 years. Assuming I plan to buy and stay in a house 5+ years, the soonder I get into the house, the sooner I am building equity, which, I'll admit I have no idea how much to assume on that. Assuming the money that I would have been saving for the additional 15% (20+5) down on a house over the 2 years would go into a retirement fund, could I be earning more money on that 15% extra downpayment than losing in PMI? I guess my other option is that I could rent a larger space and save up for 20% down until that time. But that additional rent money for a larger space would be a larger waste of money? I guess this is the sort of thing I'm trying to figure out. Its not that I'm in any sort of rush, but I do want a larger space. I'm just trying to figure out the best use of my money :?
It was very nice of your grandfather to loan you money while you were in school. He could certainly do better than 0.5% he generously allowed you. Consider paying him off sooner than later as you are now out of school making good money.
I agree, how very nice it was of him! I did offer to pay off his loan first in line to be considerate of his generosity, he recommended I pay him off last which was sweet. I guess he had pulled that money from a liquid savings which was making that much so he used that same rate (I offered a higher rate as well) I think he was just going to use my payments to him as a sort of monthly income. He recently passed and my father is now managing his funds for my grandma. I asked my dad to be sure that they didn't need me to pay it off sooner and he assured me there was sufficient amount in their liquid savings for my grandma to use. I did tell him I could pay more if she needed it. He gave me 10 years but, with my plan, I shouldn't take more than 6 years to pay it off.

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 8:48 am

bottlecap wrote:
Fri Jan 12, 2018 7:33 am
Congratulations!

We cannot help you determine you asset allocation. A good rule of thumb is that whatever percentage of stock allocation you have you must be able to stomach a 50% drop in a short period of time.

That’s why it’s a bad idea to have any money for short term goals (less tha 7 or 8 years) in stock investments, ETF or not.

You can also search the web for quizes to determine you risk tolerance. Vanguard should have one on its website.

Once you determine that, I would use the target date retirement funds available to you in your 401k. They are not prohibitively expensive and they do everything for you. If you decide later, after more self-education, that you want to do it yourself and take advantage of those black rock funds, so be it. For now, keep it simple.

If you want to know rates at credit unions, check their websites or walk in and ask.

I would slow down on your home dreams. It doesn’t make a whole lot of sense to buy for less that 5 years only to buy again, but some do and it can turn out well. 5% down on a $500,000 home your salary will be miserable. You are young and have a lot of time to achieve your dreams. Don’t jump the gun.

Get out of Robinhood. Short term trading is a loser's game. I understand you don’t have to do short term trading, but the temptation will be there.

Congrats on finding this forum at 26. Many of us had to make a lot of mistakes before landing here.

Good luck,

JT
JT,
Thank you for the input! I'm so happy I found this forum. I was doing some research for investing and stumbled upon this forum and my eyes almost fell out of my head. I feel very lucky. If there is anyone's advice that I want, it is conservative, experienced investors! I've been anxious to put my portfolio up here for a while, but wanted to do some self-educating first. I was so excited about this that I told my dad about it and let him borrow my copy of the Boglehead book I bought. He was also impressed.

I like your idea for keeping my 401K investment simple until I figure it out more.

Carl53 gave me a link to a great website that has all the rates for credit unions https://www.depositaccounts.com/banks Hooray!

For my home dreams, I wasn't really talking about selling the second house, but using it for investment purposes. But you're right, I need to be careful not to jump the gun. I guess I'm just really wanting to start homesteading, and trying to get creative with my options so I could get into one sooner.

I'm getting out of Robinhood. Very tempting!

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CyclingDuo
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Re: 26, have a job, now what?! Seeking advice!

Post by CyclingDuo » Fri Jan 12, 2018 9:05 am

lindsayladell wrote:
Thu Jan 11, 2018 9:06 pm
*Edited 1/12/18 to reflect change from "EFT" to "ETF" and to change link to images to higher resolution images

Stands for Exchange Traded Fund. Common ones based on mutual funds that are used to develop one of the lazy portfolios, such as a Boglehead favorite - The Three Fund Portfolio - can be done with Vanguard ETF's, iShares ETF's, Charles Schwab ETF's, or State Street SPDR's:

https://www.bogleheads.org/wiki/Three-fund_portfolio


I just started my new job late 2016 and have been trying to get my bearings with my personal finances. I’ve been waiting to post because I feel fairly overwhelmed by the large amount of information available and trying to self-educate in advance to avoid seeming too ignorant, but being a bit overwhelmed by the self-education process. I’ve only started my research and have taken a personal finance class while in school (very basic). I did get the Boglehead guide and started reading that but still feel fairly new to all of this. I decided I’d go ahead and bring what I have to the table and see if you guys could offer some insight.

income: net ($6,500 per month/ $84,00 per year)
• Gross Income: 135,000ish + husband 13,000ish

You are doing great for a combined household income! What are the prospects for your husband to be able to generate more income in the future?

• Net income after taxes, health insurance, 401k, HAS, company stock: ~$84,000 per year (~$6,500 per month)
investments/savings/assets (~$42,000 with $26,550 going in each year from 401K/HAS/stock)
• Emergency funds: $10,000 earning 0.02% in my credit union savings account (sigh)
• Total 401K (making max contribution yearly with 6% company match): $23,000 (invested in the MyRetirment 2055 fund)
• Total HSA (making max contribution yearly): $6,000 (haven’t invested it yet)
• Company stocks (contributing $1800/year with 15% match up to 18K): $2,800
• Assets: 2 cars, both 10+ years old which we owe without debt

We would be saving aggressively as you will have auto replacement expense coming up in the next few years.

debt: ~38,000 (monthly payment is 650 between the two of these)
• student loan from my grandpa at 0.5%: 22,000
• student loan at 3.27% variable 5 year loan :15,000

We would suggest you attack the 3.27% one to get it off the balance sheet.

monthly bills: $2,855
• church donation (1/10 of my gross income): $1,050 (every 4 weeks)

We understand the importance/desire to tithe. In your overall financial picture for where you are right now, and getting your own house in order first, are you dead set on having to contribute this much right now at your age? The option of using that money (or a portion of it) to work for you in building your portfolio, paying off your debts, and saving for your goals of housing (not to mention a possible child and car replacements) could mean you would find yourself in a much better financial position to contribute down the road from one that is a more stable financial picture. That, coming from a Minister's son who understands the "business" of religion. 8-)

Maybe sing in the choir, volunteer as much as you can until your own debts and shorter term goals are taken care of, etc... while scaling back on the amount you are giving.


• rent: 595
• student loans: 650 (175 to my grandpa and 475 to lender)
• other misc (internet/cell/insurance/utilities/gym): $484

additional savings:
• savings for a downpayment on a house: ~6,000 invested in ETF through robin hood (earned $240 since I started putting in there the start of 12/2017)

What's the time frame for the house? 1-2 years? Those ETF's are speculating if your goal is 5 years or less, perhaps even 7 years or less. They could drop way below your initial $6K investment at the drop of a hat. If you are serious about the 1-2 year time frame, I would trade out of the equity ETF's and get them into money market ETF's.

• we can generally save ~$1,500 per month after entertainment, food, travel, ect

Tax Filing Status:
• Married Filing Jointly – no dependents (yet)
Tax Rate:
• Federal: 25% (until ’18 which will change to 22%)
• State: 9.9%
State of Residence: Oregon
Age: me: 26 Husband: 34
Desired Asset allocation: not so sure, help?

90/10 - 80/20 would be typical for your ages as aggressive growth, 70/30 would be more conservative (for your age, that is - not for our age).

Desired International allocation hmm? none?

For the equity portion to dial in your Asset Allocation, the sample three fund portfolios shown give some suggestions for international %: https://www.bogleheads.org/wiki/Three-fund_portfolio


Investement options through my work/my own investement
401k investment options
HSA investment options
ETF investments through robinhood

Keep it simple and look at the lazy portfolios: The Three Fund Portfolio, Core Four, etc...

Questions:
1. Regarding my emergency fund/extra savings

a. I wish to be making at least some money on the 10K that is sitting in that account. I did some very minimal shopping when it came to credit unions and found that most in my area do not offer a great return. I do know that using the credit union co-op, more credit unions are available to be, however I have no idea how to begin researching rates on credit unions. Would a credit union be the best option for me, if no, then what? If yes, any guidance on searching out a credit union with good rates?

b. My brother has recently told me about Robin Hood, a free stock trading app. I have started using to put the money I’m saving for my down payment on a house into ETF stock using Robin Hood. I wonder if it is a wise choice to put my savings for a down payment into ETF. If so any direction on ETF selection would be helpful.

A money market ETF would be wise if your goal is 5 years or less.

c. I wonder if it would be reasonably safe to also use the 10k for emergencies to buy ETF. My thought is that I would still be able to get the funds out within a reasonable amount of time (during market hours and it will take 5 business days for the money to seat) so my money would still be fairly liquid.

No. Unless it is a money market ETF.

2. Regarding retirement savings

a. Any in helping me choose how my funds are allocated (both 401K/ HSA) would be appreciated!

b. Should I be contributing to 401K for my husband? A roth IRA for both me and my husband? How much? Is there a good tool to know how much I need to be saving? We would like to enjoy some of our money now for vacation, ect. to have a nice work/home life balance before I turn 65+ but I do want to have a secure retirement.

We would max out a Roth IRA for both you and your husband (you'll qualify based on your incomes). If your husband can contribute to a 401k, at least put enough in for him to get the company match. I already asked above, but what are his chances for increased income going forward?

This is where that $12,600 per year you have going to the church could come in handy as after your current expenses, you're not going to have much left if he contributes to his 401k and you both max out your Roth IRA's. If you both max out your Roth IRA's at $5500 each, that's a total of $11,000 - or nearly what you are giving to the church. And you mention you have about $1500 - currently - at the end of the month. Is that $1500 enough to fund two Roth IRA's, absorb whatever amount your husband would contribute to his 401k and not have in his paycheck, save for the downpayment of a house, save for car replacements, pay off the debt, etc? The $1500 a month you have gives you $18K for the year. The church contributions would give you an additional $12.6K. Combined, that gives you a lot more working room to meet your financial goals and shore up the balance sheet. That's why we asked about the prospects for your husband's income. If that could increase, it would allow you to meet your goals as well as contribute to your church.


3. Regarding buying a house

a. I have a few strategies I’ve been thinking about for timing and buying a house. Any thoughts or suggestions to help me decide which is a good idea or if they are all garbage, and maybe there is a better idea even still? Keep in mind, we want to be in a house in the next 1-2 years and we can save about 20K per year for a house. Right now we have 6K in savings and an additional 10K in emergency (which we would use at the time of buying a house, then immediately work toward replenishing that)

Again, if your goal is 1-2 years away: Get your money out of the stock ETF's ASAP that you have ear-marked for this downpayment!
  • Save up 20% down for a 150-200k house that I will live in for ~5 years to save up 10-20% down on a 500K+ house with land (we want to build a net zero, off grid house with some land and do some homesteading). Then move into the new house and use the old house for a rental property where the renters pay the mortgage payment.
  • Save 5% down right now and buy the 150-200K house, then in ~2-3 years buy the 500K+ house and have the other house be a rental, with the mortgage being paid off by the renters.
  • Save up 5% down right now and buy our 500k+ house with land, and later buy a rental property if/when we have additional savings
We wouldn't be house hopping in short time frames such as buying a house to live in for a 2 to 3 years with the goal of moving up to a larger one 36 months later. Think longer term and save for a house that you will enjoy for a good duration of time. House hopping gets expensive really, really fast and in our opinion - is not ideal for accumulating wealth.
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tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 9:09 am

ICMoney wrote:
Fri Jan 12, 2018 8:30 am

Welcome and congratulations on the job and getting started with investing!

I would suggest waiting to move into a bigger place (whether buy or rent) until you have a baby, and the baby is at least 6 months old. The latest AAP recommendation is for baby to roomshare with parents until at least 6 months old anyway - and infants don't need much space so you may be able to still fit in your current place for awhile? Also, having kids may motivate you to want to move back to Idaho to be near family - having a baby will change you in many ways and this may suddenly become a priority for you. Also, since your future in Oregon seems a bit uncertain, maybe that is further reason to continue to rent for now. Any real estate transaction costs would likely exceed any interest rate savings if you do have to sell shortly after buying, so I wouldn't worry too much about needing to buy because "interest rates are going up" (plus, no one know if they will go up or down anyway!).

Do you have good term life insurance? Do you have an own-occ disability policy on yourself? Those would definitely be things to get before having kids (and even before getting pregnant, not sure if insurance companies would give you trouble if trying to get a policy while pregnant...). Guardian is regarded as best on this forum for own-occ disability policies. Term4sale.com would be a place to start for life insurance.

If you could max out 401ks for both you and husband, plus max HSA, plus max Roth IRAs for you and your husband (5,500 each), you would be doing great from a retirement savings perspective.

Best,
ICM
ICM,
Thanks for the great reply! I have been told that I could stay in the apartment for up to 6 mo after having a baby. My concern was mostly that with all the research I was doing right now into buying a house and trying to figure out all the hoops I have to jump through, that might be a lot to handle while working full time with a 6 mo year old baby. You are right about wanting to move to Idaho. The problem is that no matter how bad I want to, it isn't wise for me to move unless there really is a transfer available to me and I really love my workplace environment that i have here and am not so sure it would improve if I were to move to the town in Idaho that both my husband and I are from (high competition - not my style). But I do have the same fear that I will want to get out ASAP when I have a baby, so that does make me nervous. All of this makes me nervous really!

I actually have been wanting to look into life insurance but wasn't sure this was the right place to ask! How lovely it is for you to answer my unasked question. I will look into both of those. I have been wanting to take out policies for my husband and I. I have the life/disability insurance my company offers but want to get some better coverage.
when you say "max out 401ks for both you and husband, plus max HSA, plus max Roth IRAs for you and your husband (5,500 each)" you do realize that almost $29,000 more yearly :shock: Really?! Maybe I should max out our roth IRA's though. I dont' know about his 401k. We will do the company match, (match 4% for evey 5% percent he puts in and he makes 13,000/year so about 1,200 between him ($650) and his company ($520)) but that would leave 17,450 additional out of our savings. I mean, we could certainly do it but we couldn't do that AND save up 20% down for a house which we will have to do eventually - ?

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 9:17 am

tmhudg wrote:
Fri Jan 12, 2018 8:35 am
lindsayladell wrote:
Fri Jan 12, 2018 7:45 am
Thank you so much for your thoughtful remarks, PFInterest! I appreciate your help :) My responses are below:
- first off. you need to save a DP and have a sep EF. also you need money saved for furniture, etc.
- in 2 years.....everything needs to be in savings CDs. get that money out of stocks soon.
My current EF which is all minimal expenses ~5 months out which I just realized isn't the full 6 months that I'd originally estimated, I probably need more like 15K for that, but, once I do that, how much would I set aside for the separate EF (great idea). Is this mostly for repairs? Also, how much do you recommend saving for a DP? I've been trying to figure this out, because the interest rates are pretty low right now, it seems my money is better served in a retirement fund. I'll get it all out of stocks ASAP!
Just a small note but I'm wondering if you misunderstood this. I don't think the suggestion was to have two separate EF's - just don't combine your Down Payment and your Emergency Fund.

Also, is your username your actual name? Entirely up to you of course but most people try to obscure their real life info somewhat - especially on a site where you are divulging lots of personal financial information.

If it's not, then please ignore my comment.
Oh, I think that you are right about my misunderstanding! Thank you!

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 9:56 am

CyclingDuo wrote:
Fri Jan 12, 2018 9:05 am
Stands for Exchange Traded Fund. Common ones based on mutual funds that are used to develop one of the lazy portfolios, such as a Boglehead favorite - The Three Fund Portfolio - can be done with Vanguard ETF's, iShares ETF's, Charles Schwab ETF's, or State Street SPDR's:

https://www.bogleheads.org/wiki/Three-fund_portfolio



You are doing great for a combined household income! What are the prospects for your husband to be able to generate more income in the future?

We would be saving aggressively as you will have auto replacement expense coming up in the next few years.



We would suggest you attack the 3.27% one to get it off the balance sheet.


We understand the importance/desire to tithe. In your overall financial picture for where you are right now, and getting your own house in order first, are you dead set on having to contribute this much right now at your age? The option of using that money (or a portion of it) to work for you in building your portfolio, paying off your debts, and saving for your goals of housing (not to mention a possible child and car replacements) could mean you would find yourself in a much better financial position to contribute down the road from one that is a more stable financial picture. That, coming from a Minister's son who understands the "business" of religion. 8-)

Maybe sing in the choir, volunteer as much as you can until your own debts and shorter term goals are taken care of, etc... while scaling back on the amount you are giving.


What's the time frame for the house? 1-2 years? Those ETF's are speculating if your goal is 5 years or less, perhaps even 7 years or less. They could drop way below your initial $6K investment at the drop of a hat. If you are serious about the 1-2 year time frame, I would trade out of the equity ETF's and get them into money market ETF's.


90/10 - 80/20 would be typical for your ages as aggressive growth, 70/30 would be more conservative (for your age, that is - not for our age).

Keep it simple and look at the lazy portfolios: The Three Fund Portfolio, Core Four, etc...


A money market ETF would be wise if your goal is 5 years or less.

No. Unless it is a money market ETF.

We would max out a Roth IRA for both you and your husband (you'll qualify based on your incomes). If your husband can contribute to a 401k, at least put enough in for him to get the company match. I already asked above, but what are his chances for increased income going forward?

This is where that $12,600 per year you have going to the church could come in handy as after your current expenses, you're not going to have much left if he contributes to his 401k and you both max out your Roth IRA's. If you both max out your Roth IRA's at $5500 each, that's a total of $11,000 - or nearly what you are giving to the church. And you mention you have about $1500 - currently - at the end of the month. Is that $1500 enough to fund two Roth IRA's, absorb whatever amount your husband would contribute to his 401k and not have in his paycheck, save for the downpayment of a house, save for car replacements, pay off the debt, etc? The $1500 a month you have gives you $18K for the year. The church contributions would give you an additional $12.6K. Combined, that gives you a lot more working room to meet your financial goals and shore up the balance sheet. That's why we asked about the prospects for your husband's income. If that could increase, it would allow you to meet your goals as well as contribute to your church.



Again, if your goal is 1-2 years away: Get your money out of the stock ETF's ASAP that you have ear-marked for this downpayment!

We wouldn't be house hopping in short time frames such as buying a house to live in for a 2 to 3 years with the goal of moving up to a larger one 36 months later. Think longer term and save for a house that you will enjoy for a good duration of time. House hopping gets expensive really, really fast and in our opinion - is not ideal for accumulating wealth.
Thank you so much for your response.

To answer a few of your questions/my clarifications:
Yeah, the tithing is quite daunting. Especially since it is twice what we are paying in rent. YOWZERS! It's what my church asks, for now I'm sticking with it. I'm working on a faith transition of my own right now, which is pretty scary, but also unrelated. For now I'm leaving it until I'm ready to deal with all of that. So lets just pretend that I make $12,000 less :(

My husband works part time, and has NO interest in money. He would rather be poor than work. I don't mind so much because he tends to all the household chores. When we have children he will be a stay at home dad, so its looking like it might decrease in the future.

The plans for buying a smaller, then larger house were to use the smaller house as a stepping stone until we got the house we really wanted, then our first house would serve as a rental property. IDK, just trying to get creative.

Now for my questions:
I'm curious what you mean by saving aggressively for a car. I know that we will need one soon, that's why I included that they were old. Lets say I really only have 1,500 per month to use. I can divide it among puttng it toward a house, retirement, a car savings fund, or paying off my debts. Help me figure out how to best manage this. Initially I had a load more in student loan debt than I do now, I was aggressively paying that off until I realized that 3.2 percent is actually less than most rates for home mortgages so I changed my gear to saving for a house instead. I'm just trying to find a good balance but struggling to find the right answer! Maybe I should get a financial adviser :?

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CyclingDuo
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Re: 26, have a job, now what?! Seeking advice!

Post by CyclingDuo » Fri Jan 12, 2018 10:59 am

lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
To answer a few of your questions/my clarifications:
Yeah, the tithing is quite daunting. Especially since it is twice what we are paying in rent. YOWZERS! It's what my church asks, for now I'm sticking with it. I'm working on a faith transition of my own right now, which is pretty scary, but also unrelated. For now I'm leaving it until I'm ready to deal with all of that. So lets just pretend that I make $12,000 less :(
At least just keep it as a serious option for cash flow if needed. The church will not evict you if you back off on tithing. It happens all the time. As I mentioned, I'm a minister's kid. So I tend to view the business of religion about the same as Bogleheads view annuity salesmen. :mrgreen: That being said, we are proud members of a congregation, but tithe about 1/5 of what you do.
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
My husband works part time, and has NO interest in money. He would rather be poor than work. I don't mind so much because he tends to all the household chores. When we have children he will be a stay at home dad, so its looking like it might decrease in the future.
Lots of threads here at Bogleheads about couples being on the same page when it comes to finances, saving, and developing an ISP. You may have wildly different goals than him if he'd rather be poor than work. That's a tough one. Here's to him finding something that pays well and that he doesn't consider to be "work".
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
The plans for buying a smaller, then larger house were to use the smaller house as a stepping stone until we got the house we really wanted, then our first house would serve as a rental property. IDK, just trying to get creative.
Got it. We'd still focus on getting something that will last you for a good number of years in case all of the plans don't work out to move up to the larger house. In other words, always buy a workable solution that you could foresee staying in for a long time (even if it ends up a stepping stone). You don't want to be stuck in something you don't like to reside in. Think of it as a place to live, not as an investment. If, it turns out in a favorable fashion that it ends up being a rental as you move up to a larger home - fine. If not, fine.
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
Now for my questions:
I'm curious what you mean by saving aggressively for a car. I know that we will need one soon, that's why I included that they were old. Lets say I really only have 1,500 per month to use. I can divide it among puttng it toward a house, retirement, a car savings fund, or paying off my debts. Help me figure out how to best manage this. Initially I had a load more in student loan debt than I do now, I was aggressively paying that off until I realized that 3.2 percent is actually less than most rates for home mortgages so I changed my gear to saving for a house instead. I'm just trying to find a good balance but struggling to find the right answer! Maybe I should get a financial adviser :?
It looks to us like you need to address it all: downpayment on a house, retirement savings, car fund, servicing debt. Our suggestion would be to back off from maxing out your 401k, back off on the HSA contributions, and back off on the church contributions to address it all. That's probably what a financial planner would advise you to do. If you backed off to saving 8-10% of your gross income in your 401k for a 2-3 years (when you add the company 6% match, you would still have a retirement savings rate of 14-16% which is fine at your age and income level thanks to the power of time and compounding), that frees up some cash flow. Cut the HSA contributions for now. Cut or at least tithe less. And suddenly you can address it all: saving for your downpayment, saving for retirement, saving for a car fund, and servicing your debt. It puts you immediately in a better position to meet your shorter term goals, and avoid taking on more debt than you need to with upcoming purchases. As income grows, and things are stable, you can increase the 401k contributions, address the HSA again, consider Roth IRA's, etc... . Over-saving for retirement can be just as destructive as under-saving. You create a cash flow situation for where you are right now at age 26. Finding the balance that addresses all of your needs/goals is going to be critical.

True, your loan rate is not that high to be concerned about as long as you are able to service it and have good cash flow for the household budget. Concerns rise though when you start adding loans to it (mortgage, possible car loan or two). At that point, you are going to have more expenses with the house than you have now, higher insurance expense with the home and newer cars, all while servicing a larger amount of debt. The money going to the HSA, the money to the Robinhood ETF's, the money to the church, the over-saving in the 401k - could all be pooled to clean the slate within a year, while still saving some for your housing goal, retirement, and possible vehicle replacement. Have you calculated what your monthly mortgage/taxes/insurance payment would be on a $200K house?

Several ways one can purchase a car. With a loan by financing it. Leasing it. Or paying cash (always our preference). With the student loans, a possible mortgage, the $12.6K going to the church, for the most part, a one income household - adding additional loans for cars will not be desirable for your cash flow. Something would have to give. You don't have to buy a brand new car, but if you are saving cash so you can do a cash transaction for a replacement set of wheels if one of your cars fizzes out or gives up the ghost sounds like it is coming up on your agenda.

I don't think you need to rush to a financial advisor. The Wiki pages here, as well as comments from other Bogleheads who have been in your position before provide plenty of content.

https://www.bogleheads.org/wiki/Boglehe ... art-up_kit
https://www.bogleheads.org/wiki/Paying_ ... _investing

Again, you are in good shape. Just need to tweak some things to address it all from the best position possible.
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luminous
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Re: 26, have a job, now what?! Seeking advice!

Post by luminous » Fri Jan 12, 2018 11:31 am

I don’t think you need a financial advisor, but you do need a financial plan. You have a lot of goals and a lot of income, but are maybe trying to do too much too soon.

Something that has worked for me is imagining the goals I’m working towards and working backwards. I’d love to eventually own a house, but a comfortable retirement and paying for college for my kids is more important to me. So first I paid off my debt (took years!). Then I maxed out my retirement accounts. When we bought our most recent car 8 years ago in cash we started saving for its replacement at the same time. When the kids were born we opened college savings accounts. All of these goals made saving for a house hard or impossible at times, but I have no regrets. I am 41 in a single income household, two kids and we are still renters. But our financial situation is rock solid which is honestly the best feeling since I’m the sole wage earner and provider in the family.
45/25/30 US stock/international stock/bonds. Target date funds. Hope to semi-retire in 2026.

ponyboy
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Re: 26, have a job, now what?! Seeking advice!

Post by ponyboy » Fri Jan 12, 2018 11:38 am

lindsayladell wrote:
Fri Jan 12, 2018 9:56 am

My husband works part time, and has NO interest in money. He would rather be poor than work. I don't mind so much because he tends to all the household chores. When we have children he will be a stay at home dad, so its looking like it might decrease in the future.
Big red flag imo. Someone who couldnt care less about money and doesnt want to work. That doesnt seem to align with your goals. I hope things work out for you.

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 11:46 am

luminous wrote:
Fri Jan 12, 2018 11:31 am
I don’t think you need a financial advisor, but you do need a financial plan. You have a lot of goals and a lot of income, but are maybe trying to do too much too soon.

Something that has worked for me is imagining the goals I’m working towards and working backwards. I’d love to eventually own a house, but a comfortable retirement and paying for college for my kids is more important to me. So first I paid off my debt (took years!). Then I maxed out my retirement accounts. When we bought our most recent car 8 years ago in cash we started saving for its replacement at the same time. When the kids were born we opened college savings accounts. All of these goals made saving for a house hard or impossible at times, but I have no regrets. I am 41 in a single income household, two kids and we are still renters. But our financial situation is rock solid which is honestly the best feeling since I’m the sole wage earner and provider in the family.
Yea, I guess everyone's priorities are a little different!

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 11:49 am

ponyboy wrote:
Fri Jan 12, 2018 11:38 am
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am

My husband works part time, and has NO interest in money. He would rather be poor than work. I don't mind so much because he tends to all the household chores. When we have children he will be a stay at home dad, so its looking like it might decrease in the future.
Big red flag imo. Someone who couldnt care less about money and doesnt want to work. That doesnt seem to align with your goals. I hope things work out for you.
I guess my responses were a bit misleading. I'm not saying that he doesn't want to work or has a bad work ethic but for his own priorities he would rather have less money and be able to enjoy more of his life not working, which is fine imho. Our goals are aligned, our functions are different. I'm just trying to say that I'm looking for options/strategies other than increasing his salary.

tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 11:52 am

CyclingDuo wrote:
Fri Jan 12, 2018 10:59 am
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
To answer a few of your questions/my clarifications:
Yeah, the tithing is quite daunting. Especially since it is twice what we are paying in rent. YOWZERS! It's what my church asks, for now I'm sticking with it. I'm working on a faith transition of my own right now, which is pretty scary, but also unrelated. For now I'm leaving it until I'm ready to deal with all of that. So lets just pretend that I make $12,000 less :(
At least just keep it as a serious option for cash flow if needed. The church will not evict you if you back off on tithing. It happens all the time. As I mentioned, I'm a minister's kid. So I tend to view the business of religion about the same as Bogleheads view annuity salesmen. :mrgreen: That being said, we are proud members of a congregation, but tithe about 1/5 of what you do.
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
My husband works part time, and has NO interest in money. He would rather be poor than work. I don't mind so much because he tends to all the household chores. When we have children he will be a stay at home dad, so its looking like it might decrease in the future.
Lots of threads here at Bogleheads about couples being on the same page when it comes to finances, saving, and developing an ISP. You may have wildly different goals than him if he'd rather be poor than work. That's a tough one. Here's to him finding something that pays well and that he doesn't consider to be "work".
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
The plans for buying a smaller, then larger house were to use the smaller house as a stepping stone until we got the house we really wanted, then our first house would serve as a rental property. IDK, just trying to get creative.
Got it. We'd still focus on getting something that will last you for a good number of years in case all of the plans don't work out to move up to the larger house. In other words, always buy a workable solution that you could foresee staying in for a long time (even if it ends up a stepping stone). You don't want to be stuck in something you don't like to reside in. Think of it as a place to live, not as an investment. If, it turns out in a favorable fashion that it ends up being a rental as you move up to a larger home - fine. If not, fine.
lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
Now for my questions:
I'm curious what you mean by saving aggressively for a car. I know that we will need one soon, that's why I included that they were old. Lets say I really only have 1,500 per month to use. I can divide it among puttng it toward a house, retirement, a car savings fund, or paying off my debts. Help me figure out how to best manage this. Initially I had a load more in student loan debt than I do now, I was aggressively paying that off until I realized that 3.2 percent is actually less than most rates for home mortgages so I changed my gear to saving for a house instead. I'm just trying to find a good balance but struggling to find the right answer! Maybe I should get a financial adviser :?
It looks to us like you need to address it all: downpayment on a house, retirement savings, car fund, servicing debt. Our suggestion would be to back off from maxing out your 401k, back off on the HSA contributions, and back off on the church contributions to address it all. That's probably what a financial planner would advise you to do. If you backed off to saving 8-10% of your gross income in your 401k for a 2-3 years (when you add the company 6% match, you would still have a retirement savings rate of 14-16% which is fine at your age and income level thanks to the power of time and compounding), that frees up some cash flow. Cut the HSA contributions for now. Cut or at least tithe less. And suddenly you can address it all: saving for your downpayment, saving for retirement, saving for a car fund, and servicing your debt. It puts you immediately in a better position to meet your shorter term goals, and avoid taking on more debt than you need to with upcoming purchases. As income grows, and things are stable, you can increase the 401k contributions, address the HSA again, consider Roth IRA's, etc... . Over-saving for retirement can be just as destructive as under-saving. You create a cash flow situation for where you are right now at age 26. Finding the balance that addresses all of your needs/goals is going to be critical.

True, your loan rate is not that high to be concerned about as long as you are able to service it and have good cash flow for the household budget. Concerns rise though when you start adding loans to it (mortgage, possible car loan or two). At that point, you are going to have more expenses with the house than you have now, higher insurance expense with the home and newer cars, all while servicing a larger amount of debt. The money going to the HSA, the money to the Robinhood ETF's, the money to the church, the over-saving in the 401k - could all be pooled to clean the slate within a year, while still saving some for your housing goal, retirement, and possible vehicle replacement. Have you calculated what your monthly mortgage/taxes/insurance payment would be on a $200K house?

Several ways one can purchase a car. With a loan by financing it. Leasing it. Or paying cash (always our preference). With the student loans, a possible mortgage, the $12.6K going to the church, for the most part, a one income household - adding additional loans for cars will not be desirable for your cash flow. Something would have to give. You don't have to buy a brand new car, but if you are saving cash so you can do a cash transaction for a replacement set of wheels if one of your cars fizzes out or gives up the ghost sounds like it is coming up on your agenda.

I don't think you need to rush to a financial advisor. The Wiki pages here, as well as comments from other Bogleheads who have been in your position before provide plenty of content.

https://www.bogleheads.org/wiki/Boglehe ... art-up_kit
https://www.bogleheads.org/wiki/Paying_ ... _investing

Again, you are in good shape. Just need to tweak some things to address it all from the best position possible.
As far as simplifying; 135000 x 6% = 8,100 x 2 = 16200, just 1800 short of the max contribution. Why I am maxin out my HSA and 401K is to take advantage of the tax shelter. I'm not as worried about paying interest on a car loan as I am on saving 25% off on my taxes while I'm in this higher tax bracket atm. You've given me a lot to think about! I definitely need to have a strategy and maybe simplify.

Carl53
Posts: 1574
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Re: 26, have a job, now what?! Seeking advice!

Post by Carl53 » Fri Jan 12, 2018 12:01 pm

lindsayladell wrote:
Fri Jan 12, 2018 8:35 am
Carl53 wrote:
Fri Jan 12, 2018 7:30 am

Be sure to have a full 20% down payment on the home when you go for it. Otherwise you will be paying for PMI (private mortgage insurance for the lender), a waste of money.
I thought this as well, but what about the following scenario.
I want to buy within 2 years. Assuming I plan to buy and stay in a house 5+ years, the soonder I get into the house, the sooner I am building equity, which, I'll admit I have no idea how much to assume on that. Assuming the money that I would have been saving for the additional 15% (20+5) down on a house over the 2 years would go into a retirement fund, could I be earning more money on that 15% extra downpayment than losing in PMI? I guess my other option is that I could rent a larger space and save up for 20% down until that time. But that additional rent money for a larger space would be a larger waste of money? I guess this is the sort of thing I'm trying to figure out. Its not that I'm in any sort of rush, but I do want a larger space. I'm just trying to figure out the best use of my money :?
I hear what you are saying about building equity. Housing prices do not always keep going up. You do not want to be the ones that buy at the top of the market like in 2008 and get stuck or worse have a income shortfall and cannot sell their overpriced home.

Regarding PMI, you presented two scenarios, 5% down on either a nominal 200k or 500k house. Using https://www.goodmortgage.com/calculator ... rison-tool
I get that the PMI on the lower 30 year loan would be $48/month and the higher loan $119/month. Given that the additional minimum principal that would make them go away initially is $30k or $150k, you are paying an additional 3+% annually on that portion of the loan. So instead of 3.75%, you are paying nearly 7% on the first $30/$150k and 3.75% on the balance. Some lenders reset PMI payments each year, but from my son's experience they do not go down as fast as one might expect if at all. Thus the PMI/(remaining principal shortfall) expressed as a percentage goes up from 3% as time goes on.

Others on this board will be more knowledgeable on PMI, but PMI is not cheap.

Renting a smaller place for as long as you can, and then buying a modest home that you can live in long term if your family finances do not allow a future upgrade seems prudent. Life brings changes to plans, as you have noted, you may have a desire to stay home once you have children. That will not be possible without you generating substantial income outside your current paycheck, either via your spouse working or other side income.

Regarding the tithing, follow your heart. Our family did so and have been blessed despite my spouse with the better degree and long term earning potential mostly staying home with the children and then working part time or volunteering.

A lot of folks on this site are not Dave Ramsey fans, but some are. Keeping your debt outside of a mortgage to as close to zero is a worthy goal.
Your vehicles are aged. Putting some extra $ each month into your emergency fund each month with the idea that you will buy a used vehicle for perhaps $5-15k cash when necessary rather than potentially having a car payment weigh you down might be a good way to go. Buying good value used vehicles and driving them into the ground has us saved a ton of money over the last few decades.

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BolderBoy
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Re: 26, have a job, now what?! Seeking advice!

Post by BolderBoy » Fri Jan 12, 2018 12:04 pm

lindsayladell wrote:
Thu Jan 11, 2018 9:06 pm
• Emergency funds: $10,000 earning 0.02% in my credit union savings account (sigh)
Alliant CU is presently advertising 1.3% on savings accounts. Alliant is based in Chicago but has a presence in many cities around the country. I recommend them (was a customer for 5 years).
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

gtaylor
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Re: 26, have a job, now what?! Seeking advice!

Post by gtaylor » Fri Jan 12, 2018 12:25 pm

One suggestion for where to put which money: you can put money for a home down payment into your IRAs. This will keep those earnings tax deferred until you do buy a house, whenever that is, and will also keep you from spending that money on anything else.

For a regular IRA, you can withdraw up to 10,000 for a first time home purchase (and your spouse can do the same, so 20k total). For a Roth IRA, you can take out all the way up to your total contributions, but no earnings, without penalty, before retirement, doesn't even have to be for the house, so that could be for arbitrary household startup things. (But it is a bad idea(tm) to use a retirement account as a piggy bank in general).

That said, it would obviously be better to fund the house and everything else entirely from taxable, AND to always contribute the maximum to the retirement accounts without ever touching them. The sooner you can establish a regime of maxing out all of the usual tax sheltered retirement options and living off the remainder, the better.

There was some suggestion of saving for a car, with two 10 year old cars I would expect that you have at most 5 years before a new car will be required, so target having a car's worth of extra cash on hand well before then.

I agree with everyone else about not rushing into the house thing. I wouldn't buy a house now, or before kids really. A house for raising kids is a fundamentally different thing than a house for homesteading project fun. You want good schools, other kids nearby, a community so that there are organized activities like soccer or scouts, etc. Parenting time will be more appealing than house project time, so you'll want a house that's not high maintenance. And so forth.

In the meantime you really ought to get DH earning a lot more so as to contribute to the big upcoming goals before he becomes a stay at home parent. If he does not want to earn money to contribute financially now, I am not sure what other way he can help progress towards the goal in the absence of a child care need. Really by not making a meaningful contribution now, he is actively delaying progress on your allegedly shared goals. This whole situation is a little worrisome. If it's a life/work balance thing, maybe he should focus now on self-improvement and/or gaining skills so that he will be able to contribute in the future. He might get the hang of carpentry or basic plumbing so he can better maintain the eventual house (there's a considerable savings if you can avoid paying for expensive handyman and plumber visits). Ditto for car maintenance, oil and often brakes are generally feasible home-garage tasks.

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CyclingDuo
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Re: 26, have a job, now what?! Seeking advice!

Post by CyclingDuo » Fri Jan 12, 2018 12:28 pm

lindsayladell wrote:
Fri Jan 12, 2018 11:52 am
As far as simplifying; 135000 x 6% = 8,100 x 2 = 16200, just 1800 short of the max contribution. Why I am maxin out my HSA and 401K is to take advantage of the tax shelter. I'm not as worried about paying interest on a car loan as I am on saving 25% off on my taxes while I'm in this higher tax bracket atm. You've given me a lot to think about! I definitely need to have a strategy and maybe simplify.
Are you doing the married, filing jointly return? Should put you in the 22% bracket, plus you'll get the $24K standard deduction for 2018 when you do taxes next year. Run your numbers through some tax software to see the difference of what you would pay, or how much more you would pay that is, if you contributed $8400 less to your 401k and $6000 less to HSA.

Totally understand to keep your taxes down. But you've got other fish to fry, and paying taxes is not a bad thing as opposed to over-saving for retirement and not being able to meet your goals in life (as from age 26 - 65 which is the largest portion of your journey here on earth).

CD
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tardigrade
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 1:19 pm

Carl53 wrote:
Fri Jan 12, 2018 12:01 pm
lindsayladell wrote:
Fri Jan 12, 2018 8:35 am
Carl53 wrote:
Fri Jan 12, 2018 7:30 am

Be sure to have a full 20% down payment on the home when you go for it. Otherwise you will be paying for PMI (private mortgage insurance for the lender), a waste of money.
I thought this as well, but what about the following scenario.
I want to buy within 2 years. Assuming I plan to buy and stay in a house 5+ years, the soonder I get into the house, the sooner I am building equity, which, I'll admit I have no idea how much to assume on that. Assuming the money that I would have been saving for the additional 15% (20+5) down on a house over the 2 years would go into a retirement fund, could I be earning more money on that 15% extra downpayment than losing in PMI? I guess my other option is that I could rent a larger space and save up for 20% down until that time. But that additional rent money for a larger space would be a larger waste of money? I guess this is the sort of thing I'm trying to figure out. Its not that I'm in any sort of rush, but I do want a larger space. I'm just trying to figure out the best use of my money :?
I hear what you are saying about building equity. Housing prices do not always keep going up. You do not want to be the ones that buy at the top of the market like in 2008 and get stuck or worse have a income shortfall and cannot sell their overpriced home.

Regarding PMI, you presented two scenarios, 5% down on either a nominal 200k or 500k house. Using https://www.goodmortgage.com/calculator ... rison-tool
I get that the PMI on the lower 30 year loan would be $48/month and the higher loan $119/month. Given that the additional minimum principal that would make them go away initially is $30k or $150k, you are paying an additional 3+% annually on that portion of the loan. So instead of 3.75%, you are paying nearly 7% on the first $30/$150k and 3.75% on the balance. Some lenders reset PMI payments each year, but from my son's experience they do not go down as fast as one might expect if at all. Thus the PMI/(remaining principal shortfall) expressed as a percentage goes up from 3% as time goes on.

Others on this board will be more knowledgeable on PMI, but PMI is not cheap.

Renting a smaller place for as long as you can, and then buying a modest home that you can live in long term if your family finances do not allow a future upgrade seems prudent. Life brings changes to plans, as you have noted, you may have a desire to stay home once you have children. That will not be possible without you generating substantial income outside your current paycheck, either via your spouse working or other side income.

Regarding the tithing, follow your heart. Our family did so and have been blessed despite my spouse with the better degree and long term earning potential mostly staying home with the children and then working part time or volunteering.

A lot of folks on this site are not Dave Ramsey fans, but some are. Keeping your debt outside of a mortgage to as close to zero is a worthy goal.
Your vehicles are aged. Putting some extra $ each month into your emergency fund each month with the idea that you will buy a used vehicle for perhaps $5-15k cash when necessary rather than potentially having a car payment weigh you down might be a good way to go. Buying good value used vehicles and driving them into the ground has us saved a ton of money over the last few decades.
Wow, PMI is the pits! I guess for my specific situation, (wanting to get out of my 500 sq ft appt) my options are to move into a bigger rental (increasing my monthly bills by 800-1500 in rent/utilities) or just buy a place and pay that extra on property taxes, PMI and mortgage interest. We would stay for a year or two, but it seems that if we really want to pick a house that is big enough for us to grow into, that might be 250K which would put me at 5 years out (with saving 18K per year). Is the issue that I'm not being conservative with my savings, and should probably save more?I'm just trying to be realistic based on what we have been doing.

That is good, solid advice about the cars, what my grandpa recommended, but thats another ~500/mo from my savings which puts the house out even further. At what point would it have just been okay to have a car payment and a house payment. I don't know how to weigh those out. I guess that's the trick of it all.

ICMoney
Posts: 170
Joined: Fri Oct 28, 2016 2:38 pm

Re: 26, have a job, now what?! Seeking advice!

Post by ICMoney » Fri Jan 12, 2018 1:25 pm

lindsayladell wrote:
Fri Jan 12, 2018 9:56 am
...
My husband works part time, and has NO interest in money. He would rather be poor than work. I don't mind so much because he tends to all the household chores. When we have children he will be a stay at home dad, so its looking like it might decrease in the future.

The plans for buying a smaller, then larger house were to use the smaller house as a stepping stone until we got the house we really wanted, then our first house would serve as a rental property. IDK, just trying to get creative.

Now for my questions:
I'm curious what you mean by saving aggressively for a car. I know that we will need one soon, that's why I included that they were old. Lets say I really only have 1,500 per month to use. I can divide it among puttng it toward a house, retirement, a car savings fund, or paying off my debts. Help me figure out how to best manage this. Initially I had a load more in student loan debt than I do now, I was aggressively paying that off until I realized that 3.2 percent is actually less than most rates for home mortgages so I changed my gear to saving for a house instead. I'm just trying to find a good balance but struggling to find the right answer! Maybe I should get a financial adviser
^ +1 as others have said, I would wait on the financial adviser if I were you - the If You Can pdf addresses this as well. You seem smart and interested in learning, and since your situation isn't very complicated you can likely DIY your personal finances/investing (that's what bogleheads is here for after all).

On the house, maybe think about waiting to buy until you are pregnant and know the baby is healthy at a minimum? I would still consider renting longer if your future in Oregon seems in question. If you go the rental + homesteading route, do you think your husband would like being a landlord - assuming he'd be doing most of the work with the rental while you work full-time? (i.e. midnight calls from tenants when something breaks, dealing with a bad tenant, needing to coordinate and pay for unexpected expenses like a new roof/furnace for the rental, etc.) What is the market value of the rent you'd be able to charge for the small house? I'm no real estate expert, but feel like I've read on this forum that ideally at a minimum you'd want monthly rent to be 1% of the home's market value (and ideally at least 2% to be "making money" on the rental - maybe someone else will chime in on this). We considered keeping a house in another state when we moved to be near family as a rental when we were a bit older than you, but decided being landlords was not what we wanted to spend our energy on - especially with young kids. Also, for fun you may want to look into what it would take to get a loan on a $500K homestead when you already have a $150Ka-ish mortgage on another home - could that be difficult on your income alone (i.e. difficult to qualify for an additional $500K, and/or difficult to afford - what would your monthly payments be plus property taxes and insurance on both places?)? Maybe it will be ok, depending on what your future salary expectations are?

One potential goal I see for you would be to pay off the student loan at 3.27% this year. You could take the $6K you already saved for the down payment and put it towards this student loan instead, stop contributing to the company stock fund (ESPP? Not sure contributing to this makes sense in your situation since you're not maxing out retirement accounts yet - other bogleheads, correct me if you disagree...), and throw the extra $1500/month at the 3.27% loan until it's gone. You'd be able to build back up the house down payment fund/new car fund quickly afterwards (since you'd have about $2K in excess monthly cash flow without the 3.27% student loan payment anymore) - and/or contribution more to retirement savings.

I think you've gotten some great advice here, and keep your questions coming as you have them.

Best,
ICM

tardigrade
Posts: 17
Joined: Wed Dec 13, 2017 10:14 pm

Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 1:26 pm

gtaylor wrote:
Fri Jan 12, 2018 12:25 pm
One suggestion for where to put which money: you can put money for a home down payment into your IRAs. This will keep those earnings tax deferred until you do buy a house, whenever that is, and will also keep you from spending that money on anything else.

For a regular IRA, you can withdraw up to 10,000 for a first time home purchase (and your spouse can do the same, so 20k total). For a Roth IRA, you can take out all the way up to your total contributions, but no earnings, without penalty, before retirement, doesn't even have to be for the house, so that could be for arbitrary household startup things. (But it is a bad idea(tm) to use a retirement account as a piggy bank in general).

That said, it would obviously be better to fund the house and everything else entirely from taxable, AND to always contribute the maximum to the retirement accounts without ever touching them. The sooner you can establish a regime of maxing out all of the usual tax sheltered retirement options and living off the remainder, the better.

There was some suggestion of saving for a car, with two 10 year old cars I would expect that you have at most 5 years before a new car will be required, so target having a car's worth of extra cash on hand well before then.

I agree with everyone else about not rushing into the house thing. I wouldn't buy a house now, or before kids really. A house for raising kids is a fundamentally different thing than a house for homesteading project fun. You want good schools, other kids nearby, a community so that there are organized activities like soccer or scouts, etc. Parenting time will be more appealing than house project time, so you'll want a house that's not high maintenance. And so forth.

In the meantime you really ought to get DH earning a lot more so as to contribute to the big upcoming goals before he becomes a stay at home parent. If he does not want to earn money to contribute financially now, I am not sure what other way he can help progress towards the goal in the absence of a child care need. Really by not making a meaningful contribution now, he is actively delaying progress on your allegedly shared goals. This whole situation is a little worrisome. If it's a life/work balance thing, maybe he should focus now on self-improvement and/or gaining skills so that he will be able to contribute in the future. He might get the hang of carpentry or basic plumbing so he can better maintain the eventual house (there's a considerable savings if you can avoid paying for expensive handyman and plumber visits). Ditto for car maintenance, oil and often brakes are generally feasible home-garage tasks.
One of my brothers did point me to that advantage of a roth IRA (being able to withdraw your contributions) I guess that mitigates my fear of putting too much into retirement for fear I won't have enough cash flow. That is a good idea.

Also, you make some good argument about the parenting priority vs. house priority. Don't worry about the husband, nobody should worry about him. We also recognize the value of focusing on gaining real life skills! Thanks for the input!

tardigrade
Posts: 17
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Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 1:32 pm

CyclingDuo wrote:
Fri Jan 12, 2018 12:28 pm
Are you doing the married, filing jointly return? Should put you in the 22% bracket, plus you'll get the $24K standard deduction for 2018 when you do taxes next year. Run your numbers through some tax software to see the difference of what you would pay, or how much more you would pay that is, if you contributed $8400 less to your 401k and $6000 less to HSA.

Totally understand to keep your taxes down. But you've got other fish to fry, and paying taxes is not a bad thing as opposed to over-saving for retirement and not being able to meet your goals in life (as from age 26 - 65 which is the largest portion of your journey here on earth).

CD
Well. problem is that it's a 1 to 1 match. I suppose I should have specified. I could reduce my 401K savings by ~1800 like I said, but I think it would be unwise to not take advantage of my company match. I could contribute less to my HSA to focus on other goals, that is true. What is better HSA or roth? I guess I'm getting conflicting opinions from everyone. I think everyone agrees on the same basic principles but its not realistic for me to max out on my 401K, HSA, rIRA, pay off my student loan, and save up 15K for a car and 50 K for a 250,000 mortgage (one that would be big enough that we wouldn't have to swap out houses).

tardigrade
Posts: 17
Joined: Wed Dec 13, 2017 10:14 pm

Re: 26, have a job, now what?! Seeking advice!

Post by tardigrade » Fri Jan 12, 2018 1:44 pm

ICMoney wrote:
Fri Jan 12, 2018 1:25 pm

^ +1 as others have said, I would wait on the financial adviser if I were you - the If You Can pdf addresses this as well. You seem smart and interested in learning, and since your situation isn't very complicated you can likely DIY your personal finances/investing (that's what bogleheads is here for after all).

On the house, maybe think about waiting to buy until you are pregnant and know the baby is healthy at a minimum? I would still consider renting longer if your future in Oregon seems in question. If you go the rental + homesteading route, do you think your husband would like being a landlord - assuming he'd be doing most of the work with the rental while you work full-time? (i.e. midnight calls from tenants when something breaks, dealing with a bad tenant, needing to coordinate and pay for unexpected expenses like a new roof/furnace for the rental, etc.) What is the market value of the rent you'd be able to charge for the small house? I'm no real estate expert, but feel like I've read on this forum that ideally at a minimum you'd want monthly rent to be 1% of the home's market value (and ideally at least 2% to be "making money" on the rental - maybe someone else will chime in on this). We considered keeping a house in another state when we moved to be near family as a rental when we were a bit older than you, but decided being landlords was not what we wanted to spend our energy on - especially with young kids. Also, for fun you may want to look into what it would take to get a loan on a $500K homestead when you already have a $150Ka-ish mortgage on another home - could that be difficult on your income alone (i.e. difficult to qualify for an additional $500K, and/or difficult to afford - what would your monthly payments be plus property taxes and insurance on both places?)? Maybe it will be ok, depending on what your future salary expectations are?

One potential goal I see for you would be to pay off the student loan at 3.27% this year. You could take the $6K you already saved for the down payment and put it towards this student loan instead, stop contributing to the company stock fund (ESPP? Not sure contributing to this makes sense in your situation since you're not maxing out retirement accounts yet - other bogleheads, correct me if you disagree...), and throw the extra $1500/month at the 3.27% loan until it's gone. You'd be able to build back up the house down payment fund/new car fund quickly afterwards (since you'd have about $2K in excess monthly cash flow without the 3.27% student loan payment anymore) - and/or contribution more to retirement savings.

I think you've gotten some great advice here, and keep your questions coming as you have them.

Best,
ICM
Thank you for giving me a direct strategy. My question with it (because that is what i was doing until recently) is that realistically if I put all my savings and start maxing out my payment toward my loan that'll be like ~6mo away. From then, I have to save up 30-50 K for a down payment on a house which is another 20 - 33 mo (2-3 years). Which, was what was reccomended to me (save up the full 20 percent). So it seems like your plan has me set to be able to buy a house in 2.5-3.5 years from now (unless I'm missing something) which I know doesn't seem like a lot more than my desired 1-2 years in this appt but we are already pretty ready to get out of the appt, having been here for nearly 2 years already and wanting to start having kids. For me i need to be in this house before I have kids, its my preference which won't change. So its between paying off my 3.2% student loan and saving up for a larger down payment by the end of 2 years. i guess I should have just specified that I have more firm than loose deadlines.

gtaylor
Posts: 318
Joined: Tue Feb 17, 2009 3:22 pm

Re: 26, have a job, now what?! Seeking advice!

Post by gtaylor » Fri Jan 12, 2018 1:51 pm

ICMoney wrote:
Fri Jan 12, 2018 1:25 pm
What is the market value of the rent you'd be able to charge for the small house? I'm no real estate expert, but feel like I've read on this forum that ideally at a minimum you'd want monthly rent to be 1% of the home's market value (and ideally at least 2% to be "making money" on the rental - maybe someone else will chime in on this).
That can't be right, I thought something like 7% was more the thing.

Guidelines for just house maintenance alone vary from 1-5% depending on severity of weather and age of house. Lifehacker has an article suggesting 4%, based on data from the Times showing most people's actual spending being 3.5-4.5%.

In any case, if you do end up on a path involving a rental, be quite sure DH is on board with doing all the property management and maintenance himself. At the scale of one property it must be all your time and labor to make a buck or even just break even. (The standard advice for scale is a 2-4 unit property, possibly where you live in one, because up to 4 units it's not too complicated in many ways. However this does not seem compatible with your housing plan and cash flow).

Carl53
Posts: 1574
Joined: Sun Mar 07, 2010 8:26 pm

Re: 26, have a job, now what?! Seeking advice!

Post by Carl53 » Fri Jan 12, 2018 1:53 pm

lindsayladell wrote:
Fri Jan 12, 2018 1:19 pm

Wow, PMI is the pits! I guess for my specific situation, (wanting to get out of my 500 sq ft appt) my options are to move into a bigger rental (increasing my monthly bills by 800-1500 in rent/utilities) or just buy a place and pay that extra on property taxes, PMI and mortgage interest. We would stay for a year or two, but it seems that if we really want to pick a house that is big enough for us to grow into, that might be 250K which would put me at 5 years out (with saving 18K per year). Is the issue that I'm not being conservative with my savings, and should probably save more?I'm just trying to be realistic based on what we have been doing.

That is good, solid advice about the cars, what my grandpa recommended, but thats another ~500/mo from my savings which puts the house out even further. At what point would it have just been okay to have a car payment and a house payment. I don't know how to weigh those out. I guess that's the trick of it all.
No problem shopping around for another apartment, but go for what is acceptable rather than your dreams. Be realistic, you have have a very good income, but not one that can have everything instantly that those that have worked a lifetime for. You mention considering moving to Idaho. Also you mentioned renting out your first home. No way would I want a rental (having done this) in a county other than where I reside let alone another state. Are properties lower cost in Idaho? Perhaps that transfer might happen in a few years. You could be in a good position to purchase at that time, particularly if it is a lower cost of living area.

I'm not sure that you need to allocate $500/month towards vehicles. That would get you $12000 after two years, $30k in five years. If one of your vehicles lasts two years and the other five years, you would need perhaps $350/month.

Whatever you do, be on the same page as your spouse or at least OK with how he views things (and vice versa). He may be OK with living more modestly, or perhaps he wants more like you, but then may need to contribute financially more to that goal, or accept that the time frame is longer.

You are already making more annually than I did for most years of my career. Great start. We had a couple of little homes when we started out, but never had PMI and got them paid off well ahead of schedule. The current house was purchased with about 1/3 down and paid off in less than 10 years. It just takes diligence and an attitude so as to not always going for instant gratification on every fun thing that might be available.

ICMoney
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Re: 26, have a job, now what?! Seeking advice!

Post by ICMoney » Fri Jan 12, 2018 2:04 pm

lindsayladell wrote:
Fri Jan 12, 2018 1:44 pm
Thank you for giving me a direct strategy. My question with it (because that is what i was doing until recently) is that realistically if I put all my savings and start maxing out my payment toward my loan that'll be like ~6mo away. From then, I have to save up 30-50 K for a down payment on a house which is another 20 - 33 mo (2-3 years). Which, was what was reccomended to me (save up the full 20 percent). So it seems like your plan has me set to be able to buy a house in 2.5-3.5 years from now (unless I'm missing something) which I know doesn't seem like a lot more than my desired 1-2 years in this appt but we are already pretty ready to get out of the appt, having been here for nearly 2 years already and wanting to start having kids. For me i need to be in this house before I have kids, its my preference which won't change. So its between paying off my 3.2% student loan and saving up for a larger down payment by the end of 2 years. i guess I should have just specified that I have more firm than loose deadlines.
Understood that you want to get in a house. Would your husband be open to temporarily (for 1-2 years - i.e. until baby arrives) getting a full-time job in order to accelerate saving for a house down payment, if that is your primary goal? That would seemingly get you there in the timeframe you desire.

SimplicityNow
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Re: 26, have a job, now what?! Seeking advice!

Post by SimplicityNow » Fri Jan 12, 2018 2:15 pm

You have received a lot of good advice since I first replied so I will just address the further questions you asked here. I haven't read every reply verbatim so some of this may have already been answered for you.
lindsayladell wrote:
Fri Jan 12, 2018 6:56 am
*edited for formating 1/12/18
This is my first time replying in one of these forums, hopefully I am doing this right

First, I just want to thank you for taking the time to read through and respond to my portfolio, your responses were very attentive, kind, and helpful!

My responses are below:
You could earn a much higher rate using an online bank. As an example: Ally Bank currently pays 1.25% with no minimum balance. Purepoint Bank pays 1.40% with a $10,000 minimum. To investigate other you can go to www.depositaccounts.com and research more.
Thank you so much, this is exactly the sort of thing what I was hoping to find.
I'm not sure what you mean by EFT stock. Do you mean ETF? And what ETF did you purchase. A general rule of thumb is any money you need in the short term (less then 5 years) should not be invested in the stock market by something safer like a high yield savings account, short term CD's etc.
Yes, you are correct, I did mean ETF, I posted a screenshot of the ETF that I own. ETF investments through robinhood
When you say high yield savings account - is that the online banking that you were recommending. Yes it is. Currently online banks are paying 1.25 - 1.6% on savings account. CD's are probably a great way to go for my down payment savings and high yield savings account is probably great for my emergency fund. My brother-in-law works for a local credit union in Idaho, where I am visiting which I know has a high yield savings rate, perhaps I'll set up an account while I'm here and put my emergency fund in there :)
What you are describing, trading stocks in the short term has very high risk, Not only is it something most here would not recommend, it is certainly not something a person with very minimal knowledge should even be considering. Market timing does not work over the long term. Day trading even less so.
I agree. My brother, who is taking advantage of Robin Hood, is a bit more risky than me, personally. After reading these responses, I think I'll take your advice and switch to a CD for my down payment savings, and high yield savings account for my emergency fund.
It was hard for me to read your list of 401K choices but it looks like you have many excellent low expense ratio Black Rock Funds. Once you determine your asset allocation (see recommended reading) you could probably pick a simple 3 fund portfolio and get a lower expense ratio then the target date funds.
Sorry, I just re-uploaded with a higher resolution image, but I don't know that it solved the problem. I do like your idea of building my own, to avoid the expense. I guess I'm not super savvy quite yet. My target date fund is pretty low expense, but I'm interested in learning more. What is a good way to allocate the funds? It seems my options are stocks, bonds, and money market. So between those three? There are many answers. Certainly a target date fund is the easiest. I don't know what yours are comprised of but if they mirror the Vanguard ones they would be a good choice. I believe the expense ratio was about .33% which is not bad but not the lowest. You may decide to trade ease for some additional costs. As long as they are in tax deferred account you can move them later without any tax consequence if they increase in value. If you want to pick individual funds many here recommend a simple 3 fund portfolio. Total Stock Market Index Fund or a fund that tracks the S&P500, a Total Bond Market Index Fund and if YOU decide you want more global diversification you can also invest in a Total International Stock Market Index Fund. The percentages is each you can determine once you decide on your asset allocation. Anything between 70- 90% stocks and the rest in fixed income assets (bonds, CDs, money market) would be considered reasonable for your ages. Personally I think most should hold at least 20% in fixed income assets, especially fi they have not yet experienced a large market downturn.
You are young and have many years to save for retirement. Time is your friend here. That is why it is important to start saving now to enjoy the miracle of compounding. Yes it is important to enjoy life, vacations etc. Retirement savings needs to be near the top, if not the top of the list.
I agree! In your opinion should I be taking more advantage of this time, and be contributing more? If so, should I open a roth IRA for both myself and my husband and max that out? Or, should I have my husband start contribute to a 401K more than just his company matches. I just found out he is eligible for matching, so we are going to get him signed up for at least their matching. I copied this from the Boglehead WIKI. Here is a general account funding priority that often works well for many people (not all points will apply to everyone):

Contribute to the work-based plan (401(k), 403b,) enough to get the full employer match (the match is like free money, your best possible investment),
Pay off high interest debt (a guaranteed high return, the next best thing to free money),
Contribute to a Health Savings Account (HSA) if available (unlike many other tax deductions, there are no income restrictions to contribute to an HSA),[1][note 1]
Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique[note 2]), depending on eligibility and personal circumstances,
Contribute the remainder of the maximum employee contribution to the work-based plan,
Contribute to a taxable investing account,
Contribute to non-deductible IRAs (may be better than taxable in certain circumstances) or annuities.
If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA.

An investor's tax bracket may influence the decision as well: those in higher tax brackets should consider higher contributions to a tax-deferred plan (e.g. traditional 401(k) or IRA) rather than a post-tax plan (e.g. Roth 401(k) or IRA); see Traditional versus Roth for more guidance.

Health savings accounts: Use of an HSA requires participation in an IRS qualified high deductible health plan (HDHP) at work. Look at your particular health care needs to decide if you may be better off with a traditional health care plan or an HDHP plus HSA. If the latter, then using the HSA as an investment account can be advantageous.
Also, with respect to IRA - any suggestions for someone shopping?
Not a good idea to exhaust your emergency funds for a house purchase. It is there for an emergency.
Noted! I will keep those in my new high yield savings account.
More people will come along with other suggestions. My biggest suggestion would be to continue to educate yourself BEFORE you invest more.
1) Finish the Boglhead Guide
2) Read Dr. Bill Bernsteins pdf document If You Can, https://www.etf.com/docs/IfYouCan.pdf
3) Read Rick Ferri's Book: All About Asset Allocation
4) Read the Boglehead forum Getting Started Guide.
Okay, I will make this a priority. I can be patient! I just downloaded If You Can, the subtitle gave me a laugh, "How Millennials can Get Rich Slowly." Very appropriate!

N10sive
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Re: 26, have a job, now what?! Seeking advice!

Post by N10sive » Fri Jan 12, 2018 2:20 pm

If your getting a 1 to 1 match I would definitely take advantage up to the max the company will match in your 401k.

Someone once told me, since I had so many scattered payments and goals like you that its hard to see any progress as everything is spread out. You'll have to make a decision on if your comfortable with that or focus more on certain things, paying off the student loan first then saving for a car etc.

You are on the verge of phasing out of the student loan interest deduction. However, your interest is pretty low. If you are able to recoup that student loan interest deduction you may just keep making current payments on it. People do look at this as paying it off and getting a guaranteed 3.27% return.

If I had a choice, I would contribute to an HSA before a Roth IRA because of the tax advantage of the HSA and other advantages of it. If you want to save more for other goals. You can search about the advantages of an HSA. Of course a Roth IRA is great but if you had to choose what to max out I would start with the HSA first then contribute what you can to a roth IRA.

The list below is the bogleheads guide to funding priority. Notice HSA is before Roth IRA. High interest debt is considered to be anything higher than 4-6%. Your student loan is close but with the interest deduction if you qualify its effectively lower.

Contribute to the work-based plan (401(k), 403b,) enough to get the full employer match (the match is like free money, your best possible investment),
Pay off high interest debt (a guaranteed high return, the next best thing to free money),
Contribute to a Health Savings Account (HSA) if available (unlike many other tax deductions, there are no income restrictions to contribute to an HSA),
Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique[note 2]), depending on eligibility and personal circumstances,
Contribute the remainder of the maximum employee contribution to the work-based plan,
Contribute to a taxable investing account,
Contribute to non-deductible IRAs (may be better than taxable in certain circumstances) or annuities.

I would also make a better balance sheet of your 6500 take home pay. Monthly bills are 2800 and savings is 1500? That leaves $2200 for entertainment, food, travel etc. If you really want to save for your goals you could reduce this somewhat. Your salary is great at your age so taking advantage of that is definitely well deserved. But this is also one thing to look into.

There are many ways to approach this and people will do it differently as you have received many different ideas. Do a lot more research and determine how you best think you can save and reach your goals while enjoying life at the same time.

gtaylor
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Re: 26, have a job, now what?! Seeking advice!

Post by gtaylor » Fri Jan 12, 2018 2:25 pm

lindsayladell wrote:
Fri Jan 12, 2018 1:44 pm
Thank you for giving me a direct strategy. My question with it (because that is what i was doing until recently) is that realistically if I put all my savings and start maxing out my payment toward my loan that'll be like ~6mo away. From then, I have to save up 30-50 K for a down payment on a house which is another 20 - 33 mo (2-3 years). Which, was what was reccomended to me (save up the full 20 percent). So it seems like your plan has me set to be able to buy a house in 2.5-3.5 years from now (unless I'm missing something) which I know doesn't seem like a lot more than my desired 1-2 years in this appt but we are already pretty ready to get out of the appt, having been here for nearly 2 years already and wanting to start having kids. For me i need to be in this house before I have kids, its my preference which won't change. So its between paying off my 3.2% student loan and saving up for a larger down payment by the end of 2 years. i guess I should have just specified that I have more firm than loose deadlines.
Well, the math is what it is. Clearly it is important to pay the loans off in order of interest rate (well, by the numbers it might make sense to never pay down grandpa, but that's up to you). Once you do move to buy a house it's all about cash flow.

Clearly it is important to scrimp and save to get as much cash on hand as possible to support the house plan and the impending car repair/replacement.

Then you start to have variables you can twist...

The most flexible variable is the under-earning DH. He could instantly put your plan on a more solid footing if he earned more for just a few years. (Sorry to harp on him again :) )

The second most flexible variable is your expenses. There are plenty of tongue-in-cheek references in thrifty living blogs to living on rice and beans. This sort of thinking plus a whole host of other economizing will be needed. Is there somewhere meaningfully cheaper you could live than in your 500ft apartment? A couple that fits in a small apartment is probably as portable a family as you will ever be, so now would be a good time to think outside the box: add a roommate, live in a small studio, live near work and eliminate a car, live with a parent and bank the whole rent, etc.

There is the least good option of buying with 10% down or the like. As discussed this will cost you something extra in PMI or more interest or whatever. If you go into it with your eyes open and a plan for how to end up with a standard rate conventional mortgage and >= 20% equity after a very small number of years perhaps it is worth it to keep the child plan on schedule. This cost is entirely computable, so you should do that math and see. Going down this path, though, you would have little margin for error. Don't do it if you can't maintain a proper emergency fund and then some.

In the end I would also price out child-workable apartments. Yes, it's not your own house, but for children apartment complexes can be good - there are often lots of other kids around, and having other young kids to play with is great. This seems like a workable compromise to buy you the time you need to make the numbers work. Renting first in your target house area is not a bad idea, anyway, we did that before buying our second house, and are glad we did.

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Watty
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Re: 26, have a job, now what?! Seeking advice!

Post by Watty » Fri Jan 12, 2018 2:50 pm

FYI,

If your user name is based on you real name you might want to have it changed to something more anonymous.

Here is an old thread about how to change it.

viewtopic.php?t=198024

soccerrules
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Re: 26, have a job, now what?! Seeking advice!

Post by soccerrules » Fri Jan 12, 2018 3:08 pm

Welcome to BH. I arrived only about 6mo ahead of you albeit I am twice your age :D . Great forum, solid advice.

I might recommend the following and KISS it. Slow down.
1) Reduce your spending and save as much as you can in 2018. Max 401k/IRA space (put in Target Fund) , stick the rest you save this year in a savings account.
2) Read and learn (BH Forum,Books, WIKI)
3) Revisit your desired goals and prioritize them

Don't make any money/investing decisions for 1 year. Come back in 1 year.

Getting in the habit of strong savings will help you reach your short and long term goals far more than trying to do it all right now. (boil the ocean)
Don't let your outflow exceed your income or your upkeep will be your downfall.

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CyclingDuo
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Re: 26, have a job, now what?! Seeking advice!

Post by CyclingDuo » Fri Jan 12, 2018 3:25 pm

lindsayladell wrote:
Fri Jan 12, 2018 1:32 pm
CyclingDuo wrote:
Fri Jan 12, 2018 12:28 pm
Are you doing the married, filing jointly return? Should put you in the 22% bracket, plus you'll get the $24K standard deduction for 2018 when you do taxes next year. Run your numbers through some tax software to see the difference of what you would pay, or how much more you would pay that is, if you contributed $8400 less to your 401k and $6000 less to HSA.

Totally understand to keep your taxes down. But you've got other fish to fry, and paying taxes is not a bad thing as opposed to over-saving for retirement and not being able to meet your goals in life (as from age 26 - 65 which is the largest portion of your journey here on earth).

CD
Well. problem is that it's a 1 to 1 match. I suppose I should have specified. I could reduce my 401K savings by ~1800 like I said, but I think it would be unwise to not take advantage of my company match. I could contribute less to my HSA to focus on other goals, that is true. What is better HSA or roth? I guess I'm getting conflicting opinions from everyone. I think everyone agrees on the same basic principles but its not realistic for me to max out on my 401K, HSA, rIRA, pay off my student loan, and save up 15K for a car and 50 K for a 250,000 mortgage (one that would be big enough that we wouldn't have to swap out houses).
Do not pass up on the free money, so cut the stock plan contributions. Do the HSA over a Roth IRA.

You are only 26. We had our first child when my wife was 34 and I was 30. By that time, we were much more financially stable, living in a house and had zero debt. Perhaps you could wait a few years as it is not out of the norm to have a first child in one's early 30's. By then debt is wiped out, you've saved up, probably moved into your house, etc... .

Hubby working more and contributing more financially will solve pretty much all issues. You will hear BH members over and over again say something along the lines of marrying the right person who is on the same page with them when it comes to saving/investing and utilizing their human capital was the key to their financial success.

Are you up for a few decades of being the bread winner with him not working full time?
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CyclingDuo
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Re: 26, have a job, now what?! Seeking advice!

Post by CyclingDuo » Mon Jan 15, 2018 10:09 am

IRS data on all US taxpayers (this happens to be for tax year 2014) shows what the average US household deducts based on what they contribute to charity (includes tithing for religious organizations). This, of course, measures those who itemize:

Image

That may or may not help the OP see where her 10% going to her church fits in with what everyone else is doing in the US. In the $100K - $200K Adjusted Gross Income bracket, the average is only deducting $4,130 or 3% per year. We are in that AGI bracket, and average 4-6% of our AGI each year to charity (which includes tithing for our congregation).


More data/stats here removes the itemized deduction data, and simply looks at who tithes:

http://www.kennyjahng.com/facts-church- ... osity-gap/

Tithers make up only 10-25 percent of a normal congregation. (Christianity Today)

Only 5% tithe, and 80% of Americans only give 2% of their income. (Church Development)

Christians are giving at 2.5% of income; during the Great Depression it was 3.3%. (ChurchLeaders)

Only 3-5% of Americans who give to their local church do so through regular tithing. (HRF)

When surveyed, 17% of Americans state that they regularly tithe. (HRF)

For Christian families making less than $20k/yr, 8% of them gave at least 10% in tithing. (HRF)

For families making $75k+, the church tithing figure drops to just 1%. (HRF)

3 out of 4 people who don’t go to church make donations to nonprofit organizations. (HRF)

The average giving by adults who attend US Protestant churches is about $17 a week. (HRF)

37% of regular church attendees and Evangelicals don't give money to church. (HRF)

17% of American families have reduced the amount that they give to their local church. (HRF)

7% of churchgoers have dropped regular giving by 20% or more. (HRF)


It's never bad to review what the norms are, and where one can free up cash flow on their household balance sheet to meet goals. We realize it is a personal subject when it comes to tithing, but saving for housing, saving for cars, saving for retirement, and saving for having a child are also personal subjects that we all must address.
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