New to Investing/Saving- help

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mbs051218
Posts: 2
Joined: Mon Jun 11, 2018 10:31 am

New to Investing/Saving- help

Post by mbs051218 » Mon Jun 11, 2018 10:49 am

Hello-
I am just getting started with taking my finances seriously (unfortunately). I am 30 and feel that I am behind. I am looking for a very high level investment strategy/overall guidance to help me and my husband plan for retirement.

Here is my basic information:
- Gross income: $65k/year (-husband makes $77/year) + bonuses, in a fairly LCOL area
- Mortgage: $1300/mo (includes taxes, insurance)
- Car payment: $225/mo (will be paid off early 2019)
- Student loan payment: $140/mo (will be paid off in next couple months)
- Have 2,500 of CC debt from post graduate years
- Have $12,000 worth of savings (but sitting as cash as I don't know what to do with it- how much is recommended as a cushion?)
- Have $70,000 in my 401k- I almost always contribute 10% of my paycheck unless very stretched for cash (which I was recently having just gotten married). My employer matches 6%.
- Just set up a Fidelity ROTH IRA , but haven't allocated anything yet- just funded it with the 50.00- my coworked recommended a few Vanguard index funds.
- Also just started an Acorns account to see what happens- only have $300.00 in this.

That is pretty much it. My husband has no outstanding debt.

I guess our goals would be a) increase our "emergency fund" if necessary (especially since we just purchased an older house) b) pay off our house early (which we just purchased this year with a 30 yr mortgage) c) save for future children's education d) save plenty for retirement and e) if possible, travel.

My 401k asset allocation is as follows:
LifePath 2050 (99%)with a .09 net expense ratio.
Company stock (1%).

Is this 401 asset allocation okay? What else should I be doing? Should I be contributing more to my 401k? I am not near maxing out my contribution. Should I be paying off my credit card more aggressively? (I did a balance transfer to a zero interest credit card and am paying 250/month- I have paid down over 10,000 in credit card debt over last five years or so). Should we be paying our exact amount of mortgage each month, or more, given our income and budget?

Should I start contributing to my ROTH? If so, how much?

There are a ton of questions in here, but I would be happy to have anyone of them answered. I am trying to get a grip on my finances and have very little understanding of how to do so.

Thank you!

bloom2708
Posts: 4146
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: New to Investing/Saving- help

Post by bloom2708 » Mon Jun 11, 2018 11:43 am

What are the balances owed on the car and student loans?

I would pay off the credit card today. Now you have $9,500 cash.

A typical Emergency Fund (cash set aside in a savings account) is ~6 months of monthly expenses. To be used (hopefully) for emergencies and large unexpected expenses (roof needs to be replaced, AC goes out).

Dave Ramsey (The Total Money Makeover Book, 7 baby steps) would have you set aside $1,000 in your Emergency Fund. Put the $8,500 (after paying the CC off) on the smallest balance owed. If that pays off one of the car or the student loan, put the rest on the loan left.

Then use the extra money from the CC payment you aren't making and car/student loan you aren't paying to blast the remaining loan. Put all effort into getting down to just the mortgage as fast as possible. Usually 12 months or a bit longer. It is amazing what you can accomplish if you are laser focused with a goal. Sell stuff. Shrink the budget for a time period.

Once down to just the mortgage, then those payments go to build your Emergency Fund back up to 6 months of expenses. Yes, having only $1,000 is nerve wracking, but that is the point. Kill the debt, then build it back up fast.

The other strategy is to just continue paying the minimums. Based on the payoff dates, the balances can't be too high on the car/student loan. If you are paying any interest on the CC, that should be the priority.

Once down to just the mortgage and your Emergency Fund back up, then you bump up your retirement savings. Work toward filling up your 401ks and Roth IRAs each year. Raises go to increasing contributions. Pre-tax 401k and Roth IRA (post tax with the tax savings+)

At 30, I don't think you are all that far behind. Feeling that way a little will help you knock off some of those debts, clean the slate and start saving more. Once you clear the small debts, don't borrow for a car again. Set aside money for those near term 1-5 year purchases.

Your Target Fund in your 401k is great. Diversified and low cost. I would stick with that fund if it matches your desired mix of stocks/bonds.

Hopefully others have ideas. $15 spent on the Total Money Makeover (or get it from the local Library) might be a good read. Change your view on debt. Good luck!
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

PFInterest
Posts: 1394
Joined: Sun Jan 08, 2017 12:25 pm

Re: New to Investing/Saving- help

Post by PFInterest » Mon Jun 11, 2018 11:59 am

mbs051218 wrote:
Mon Jun 11, 2018 10:49 am
- Gross income: $65k/year (-husband makes $77/year) + bonuses, in a fairly LCOL area
- Mortgage: $1300/mo (includes taxes, insurance)
- Car payment: $225/mo (will be paid off early 2019)
- Student loan payment: $140/mo (will be paid off in next couple months)
- Have 2,500 of CC debt from post graduate years
--This is an emergency. Good thing you have an emergency fund. Pay this off today.
- Have $12,000 worth of savings (but sitting as cash as I don't know what to do with it- how much is recommended as a cushion?)
- Have $70,000 in my 401k- I almost always contribute 10% of my paycheck unless very stretched for cash (which I was recently having just gotten married). My employer matches 6%.
- Just set up a Fidelity ROTH IRA , but haven't allocated anything yet- just funded it with the 50.00- my coworked recommended a few Vanguard index funds.
--if you opened it at fidelity, just pick fidelity index funds.
- Also just started an Acorns account to see what happens- only have $300.00 in this.
--a gimmick but doesnt matter.

I guess our goals would be a) increase our "emergency fund" if necessary (especially since we just purchased an older house) b) pay off our house early (which we just purchased this year with a 30 yr mortgage) c) save for future children's education d) save plenty for retirement and e) if possible, travel.
--yes Efund especially with an older house.
-- pay off loans and car first, then mortgage.
-- i would prioritize 401k and rIRA prior to college saving or extra mortgage.


My 401k asset allocation is as follows:
LifePath 2050 (99%)with a .09 net expense ratio.
Company stock (1%).
--we cant answer this without knowing all your options. but the price is right at least!

Is this 401 asset allocation okay?
--you need to decide your overall AA. I am guessing that fund is 90:10 which is a little rich for 30yo but not wrong.
Should I be contributing more to my 401k?
--yes you and your husband should shoot to max out at least 1 401k and both rIRA.
-- a good goal is 20% for retirement. so on 140K thats 28K (or 1 401k + 2 rIRA).
.
Should I be paying off my credit card more aggressively?
--yes. you have already seen above. dont do it again if possible.
Should we be paying our exact amount of mortgage each month, or more, given our income and budget?
--i would prioritize investing. you didnt say what % your mortgage is either.
Should I start contributing to my ROTH? If so, how much?
--yes. 5500 for each of you. Fidelity is fine to keep it there.
good luck.

Darth Xanadu
Posts: 327
Joined: Sat Jan 27, 2018 1:47 am
Location: Middle Earth

Re: New to Investing/Saving- help

Post by Darth Xanadu » Mon Jun 11, 2018 12:31 pm

Good advice given thus far. Also, check out the "Prioritizing Investments" wiki (you can search the google box at the top of BH page).

Crush the cc debt, then the car and student loans. Then build a reasonable emergency fund. Then max as much as possible your tax advantaged accounts (401k and Roth IRA). I wouldn't mess around with acorns at this point if I were you. I also would not pay more on mortgage or separate college savings at this point until those tax-advantaged accounts are being maxed. Also explore if HSA is an option for you.
My friends said stick to your guns, but instead I just got stuck.

delamer
Posts: 4832
Joined: Tue Feb 08, 2011 6:13 pm

Re: New to Investing/Saving- help

Post by delamer » Mon Jun 11, 2018 12:46 pm

You and your husband need to get on the same page as far as savings and debt payment are concerned.

It sounds like you are approaching this from the point-of-view of your individual finances rather than joint finances. You mentioned joint goals, but only how you might contribute to them.

That does not mean that you have to have joint accounts for everything, but that you need to work together. For instance, what is he contributing to his retirement and how is it invested?

megabad
Posts: 137
Joined: Fri Jun 01, 2018 4:00 pm

Re: New to Investing/Saving- help

Post by megabad » Mon Jun 11, 2018 4:31 pm

delamer wrote:
Mon Jun 11, 2018 12:46 pm
You and your husband need to get on the same page as far as savings and debt payment are concerned.
I think this is a fair point, but it can be difficult to adjust to a joint life at first for newlyweds (the We instead of the I/you). If couples financial counseling was not required before your marriage, I would strongly urge a sit down with your husband just to see what his thoughts are about the questions you are asking.

Excellent job on paying down the credit card debt thus far, would continue that strategy (regardless of the interest rate). LifePath fund looks like a great option for you personally without knowing your (or your husband's) other options. I would likely mirror this with something similar in your Roth IRA (ie. Fidelity Freedom Index Fund 2050, once you save $2500). I do not think you are necessarily "behind" despite what you feel. You are relatively young and you have two great jobs bringing in a great income. That coupled with a $70,000 start in your 401k puts you in great shape as soon as the revolving debt goes away (and its sounds like it will soon). If you have an auto step up feature in your 401k (feature that automatically steps the contribution rate up 1% periodically), I would use it. Focus on enjoying life your husband.

mbs051218
Posts: 2
Joined: Mon Jun 11, 2018 10:31 am

Re: New to Investing/Saving- help

Post by mbs051218 » Wed Jun 13, 2018 8:51 am

Thank you all for the help and insights.

I am making set monthly payments on the CC debt of 250/mo, because there is no interest for the time being. I was going to pay off the remaining balance the month before the interest is set to "turn on." However, I think that paying it off in full sounds like a better idea, based on the feedback i got.

Re: Newlyweds- this is correct. We did not have any financial counseling as we had a non religious, casual ceremony. We just returned from our honeymoon so I am still getting used to the idea of being a joint unit financially, however we are going to combine our finances shortly. We have maintained separate finances up to this point. We are going to open up a joint checking and savings account.

My husband is younger than me- 3 years- he contributes 8% to his 401k and has about 40k in his currently. So our total 401k balances combined is~105k right now.
Ideally, I would love to try and live off of mainly one salary, and max out 401ks/ROTH IRA contributions, once we combine our accounts.

My car loan has a remaining balance of ~4,000.00 on it.

My student loan has a remaining balance of about ~1,000.00

Our mortgage has an interest rate of 3.725.

It's true, I am used to saying (I/me) because I seem to be the one with the lack of financial aptitude, and we never combined our finances while dating. My husband is very good about his spending, and hardly ever buys "products." He lets his shirts/socks/ pants get holes in them before he buys new ones. He has always paid off his credit card balance monthly- since he got one, and only uses cash for bigger purchases- and is very good at saving. Meanwhile, I am still trying to break myself of the habit of - get paid, have money to spend (which I have made progress on). I want to be in the mindset of - get paid, save more! I have progressed leaps and bounds (i.e. paying off 10k of credit card debt and bumping my 401k contribution up). Also, my salary has jumped tremendously (for me haha) in the last few years so my income was very different just a few years back. I was making low 40s just two years ago, and living alone making it a bit more difficult to save $.

I want to avoid "lifestyle creep" since my husband also recently got a significant raise.

I will focus on paying off my (now , "our' debt) and adding to the emergency fund, while increasing our 401k contributions.

Thank you everyone!

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Sandtrap
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Location: 10/90 Allocation - Hawaii😀 Northern AZ.😳

Re: New to Investing/Saving- help

Post by Sandtrap » Wed Jun 13, 2018 9:45 am

Welcome :D
You've done a great job.
Excellent suggestions on initial steps to pay down debt, and so forth.

Here is a toolbox of actionable reading and steps that you can take as you get forum suggestions, etc.

0
It might benefit you to step back a bit and get an overall view of things.
These are things you might do in this, sort of, actionable order to brush up on things you already know. . . . and learn a few new things.

1
Post a portfolio review to clean up, as needed, everything you have right now. (you can edit your original post to provide missing data)
(Be sure to put in the fund names next to the Ticker Symbols) (edit your original post this way.)
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212
2
Then get, "The Little Book on Common Sense Investing" by Jack Bogle ($14) which is the foundation for everything on this forum.
https://www.amazon.com/Little-Book-Comm ... jack+bogle
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
Forum Library of Investing Advice with links
https://www.bogleheads.org/wiki/Main_Page
3
While you are waiting for the book, read this stuff. (you might know more than 90% of most folks when you're done).
Your Toolbox.
GETTING STARTED
https://www.bogleheads.org/wiki/Getting_started
Bogle Philosophy
https://www.bogleheads.org/wiki/Bogleh ... hilosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleh ... rt-up_kit
4
While you are reading the links, start working on this and keep refining it to fit your needs.
Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement
5
Keep reading:
Outline of Investing
https://www.bogleheads.org/wiki/Outline_of_investing
Outline of Financial Planning (with links)
https://www.bogleheads.org/wiki/Outlin ... _planning
Funding Priority (what do I do first?)
https://www.bogleheads.org/wiki/Priori ... vestments
Tax Efficient Fund Placement
https://www.bogleheads.org/wiki/Tax-ef ... _placement
Asset allocation in multiple accounts
https://www.bogleheads.org/wiki/Asset ... accounts
Risk Tolerance (what is your "sleep factor"?)
https://www.bogleheads.org/wiki/Risk_tolerance
Asset Allocation (what is right for you?) https://www.bogleheads.org/wiki/Asset_allocation
6
While you are doing all this be sure you have this:
Emergency Fund
https://www.bogleheads.org/wiki/Emergency_fund
7
And, read this free booklet.Free Reading: "If You Can" by Bernstein
https://www.google.com/url?sa=t&rct=j& ... -SB3S580I5
8
[u use these tools to keep your funds, etc, in order, etc.
[/u]
ONLINE FINANCIAL TOOLS
PORFOLIO VISUALIZERS, PROJECTIONS, AND ANALYSIS
https://www.portfoliovisualizer.com
Firecalc. Retirement. How long will your money last?
https://www.firecalc.com
Morningstar Instant Xray
https://members.morningstar.com/Registe ... L100&vUrl=

This is a general well worn path from start to launch on the way to "Bogleheadville".
When you have completed this outline, you will be ahead of the pack.
I hope this is helpful to you.
good luck,
j :D

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