Desperately In Need Of Advice

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Zero2HundoVesto
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Desperately In Need Of Advice

Post by Zero2HundoVesto » Mon Oct 07, 2019 6:57 pm

I'm 33 just got married. I live in an apartment with my wife. I pay for everything, except for electricity and food she pays. My total monthly bills $1700. I make $90-100K a year. Currently I have $140K in my checking account just sitting there collecting dust. I don't have 401K, Roth IRA nothing, NADA... I don't have any knowledge on investing at all. Today I called to make an appointment with a financial advisor Fee-only of course as to what I should do but they charge $375 an hour which seems to kind of expensive to me but I don't know, maybe it's considered reasonable??? I told them I'll get back to them.

My question is this. I'm planning on buying a house within range of $250-300K in the next 1-2 years, 2 years is the latest. I would like to have my $140K make me a little bit of money like put it in a CDs, or Savings or something else in the meantime. Could you guys(experts) lead me to the right path as to what I should do with my money please??

TL;DR
-Age 33 Married
-No debt. Just monthly bills
-Monthly Bills$1700
-$140K sitting in bank doing nothing
-No invesments(401K, RothIRA, nothing...)
-No knowledge of investing at all
-Planning on buying a house in 1-2 years, 2 years the latest within range of $250-300K
-Would like to know where can i put my $140K so it makes me some money before i need the money in 1-2 years to buy a house

Thanks for reading. I apologize if I made it too long. Any help is appreciated. Thanks! :beer

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Watty
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Re: Desperately In Need Of Advice

Post by Watty » Mon Oct 07, 2019 8:53 pm

Zero2HundoVesto wrote:
Mon Oct 07, 2019 6:57 pm
-Would like to know where can i put my $140K so it makes me some money before i need the money in 1-2 years to buy a house
For money that will be needed in 1-2 years it really needs to be in something like an insured CD or high interest FDIC savings account. You can shop around for the best interest rate but it will not be all that high.

If you deal with some financial advisor there is a risk that they will suggest some hard to understand complex investment that has risks that you may not understand.

Tdubs
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Re: Desperately In Need Of Advice

Post by Tdubs » Mon Oct 07, 2019 9:00 pm

Sounds like a CD is a good place. A no-penalty CD if you think you will suddenly have the urge to buy a house and need the money quick. A one-year if not. Ally has one of the better no-penalty CDs.

For a one year, try https://direct.comenity.com/products/ce ... of-deposit

Or go to the website,

https://www.doctorofcredit.com/high-int ... gs-to-get/

aristotelian
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Re: Desperately In Need Of Advice

Post by aristotelian » Mon Oct 07, 2019 9:04 pm

Your instinct to avoid the advisor is a good one. At $100K income, you should certainly be saving a portion of your salary in a 401k if you have a plan available to you (or individual 401k if self employed). Roth IRA is also a no brainer--his and hers, up to $6,000 per year. If you are a conservative investor, you can invest either account conservatively, but most of us recommend core holdings in diversified stock index funds. You should do some reading to get a sense of the potential risks and expected returns. William Bernstein's "If You Can" free PDF is a great place to start.

Just curious, why does your wife contribute so little? You could work at McDonalds and cover food and electric with money to spare. Apologies if the question is off base.

gw
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Re: Desperately In Need Of Advice

Post by gw » Mon Oct 07, 2019 9:12 pm

I personally wouldn't hassle with a CD. Just put it in a money market fund like VMMFX. It'll earn about the same amount of interest and remain easily accessible for when you need it.

Or if you don't mind a small amount of risk, could consider sticking it in a short-term bond fund like VFISX, or even an intermediate-term fund like VBMFX.

You're looking at earning $2-3K per year on that money. Not life-changing, but certainly better than giving it away to the bank through your checking account for no reason.

I would skip the financial advisor for now. You don't need any complicated advice.

Good luck!

cp73
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Re: Desperately In Need Of Advice

Post by cp73 » Mon Oct 07, 2019 9:12 pm

$375 an hour seems high to me to help you develop your plan. I might ask around or keep looking for another one that is not selling any products. You could even ask them if they would fix the amount. Another thought is to go over to Vanguard and talk with one of their personal advisors. Their fee is .3% which would be less. My thought is since you plan on buying a house in 1-2 years of up to $300,000 then you wont need all that cash for the house. Maybe put $75,000 in some CDs at your local bank or credit union. Shop around to see where you can get best rates, although rates are very low now. This would give you 25% of your purchase price which is more than you should need for a down payment. The remainder $65,000 then you could transfer to Vanguard and have an advisor develop a financial plan for you. The fee would be based on the $65,000 or about $200. I think this would be a good way to get you started. At some point after you feel comfortable you could stop using the advisor at Vanguard.

HomeStretch
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Re: Desperately In Need Of Advice

Post by HomeStretch » Mon Oct 07, 2019 9:18 pm

Agree with advice to keep house savings in a high yield savings account or CD.

You have ~ 50% of the house price saved already. Hopefully your wife has saved towards the goal too. To prepare for getting a mortgage, check your/spouse’s credit reports (you can get one free each year from each of the 3 major credit reporting agencies at annualcreditreport.com). Also check your FICO scores as an excellent credit score should qualify you for the best mortgage rate.

Suggest you keep 6 months of living expenses (~ $25k) as an emergency fund. This is separate from your house savings.

Suggest you save 20-25% of your gross salary for retirement - up to $19k in a 401k if available and $6k Roth IRA. If you need help with investments, suggest you read the BH wiki to learn. Post here if you need help with fund selections.

NewMoneyMustBeSmart
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Re: Desperately In Need Of Advice

Post by NewMoneyMustBeSmart » Mon Oct 07, 2019 9:26 pm

Tdubs wrote:
Mon Oct 07, 2019 9:00 pm
Sounds like a CD is a good place. A no-penalty CD if you think you will suddenly have the urge to buy a house and need the money quick. A one-year if not. Ally has one of the better no-penalty CDs.

For a one year, try https://direct.comenity.com/products/ce ... of-deposit

Or go to the website,

https://www.doctorofcredit.com/high-int ... gs-to-get/
Brio offers 2.4% interest in a savings account, the rate's not locked in but I'd rather gamble for the extra interest.

NewMoneyMustBeSmart
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Re: Desperately In Need Of Advice

Post by NewMoneyMustBeSmart » Mon Oct 07, 2019 9:33 pm

Zero2HundoVesto wrote:
Mon Oct 07, 2019 6:57 pm
Could you guys(experts) lead me to the right path as to what I should do with my money please??
You can and should read the boglehead wikis, specifically:

https://www.bogleheads.org/wiki/Getting_started

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

With $140k in savings you have demonstrated you are fiscally responsible. I'd recommend you throw 2 hours $750 at the financial planner. He'll tell you the basics. Make sure you communicate expectations up front.

If I were you here's what I'd do:

* Immediately max out your 401k (pay 100% of salary into it for the rest of the year)

* Contribute $6k per year for both you and your wife's Roth

* Invest half the $190k in the 3 fund portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio

* Invest half the $190k in Brio savings account for your down payment. $85k is more than enough down payment for a $350k house

* All other money you can save, fund things properly. Reddit has a good flowchart here: https://www.reddit.com/r/personalfinanc ... flowchart/

The important thing is to be debt free and save money. Live beneath your means. Keep debt free, build emergency account, and start investing!

Put that money to work. A bank account is subjectively bad in my opinion unless you want access and ultra-safety. The 3-fund portfolio is where I think my savings should go if I can tolerate ups/down over 5 years.

If you want more help/guidance DM me.

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Tyler Aspect
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Re: Desperately In Need Of Advice

Post by Tyler Aspect » Mon Oct 07, 2019 9:39 pm

I would suggest a different path. Have you thought about the possibility of delaying purchasing a house? Invest with a 80% stock / 20% bond portfolio that is typical of your age group. Contribute yearly into Roth IRA and Spousal IRA account. Reserve 6 month of emergency cash, and start a taxable brokerage account with the rest of the cash. When you have accumulated 300k of investment in your taxable account, then purchase a house.

Example young investor portfolio:

60% VTI (US stock)
20% VEA (International stock)
20% BND (US bond)
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

zeal
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Re: Desperately In Need Of Advice

Post by zeal » Tue Oct 08, 2019 6:15 am

You've already gotten some great advice here. The If You Can PDF (linked here) by William Bernstein is an excellent, very short and informative read to give you all the basic info that you are hoping to receive from an advisor--save yourself $375 and instead spend an hour (or probably less) reading the PDF. I highly recommend starting with this PDF and also reading the Getting Started page on the wiki and/or watching its videos.

I'll second the advice from earlier about contributing 100% of your paycheck to 401k for the rest of the year--the 401k is a tool you should definitely be using if it is available to you, as it will save you money on taxes. If you do not have access to a 401k, there are other similarly valuable tax-saving options--if you can't get a 401k are you self-employed, a federal/state employee, etc? Also, you should open a Roth IRA for each of you and your wife, where you can move $6k into each from your $140k savings pot. For your down payment, you only really need 20% ($60k on a $300k house), as mortgage interest rates are so low these days that it usually makes sense to borrow 80% and invest your extra savings. Your down payment savings would be best placed in either a high-yield savings account (>2%) or a CD (I believe you can get >3% on these right now). 140k-6k-6k-60k=68k leftover, which you can use for emergency fund + expenses for the rest of the year (to make up for 100% of income going to 401k), and any excess could be invested in a taxable brokerage account.

My only other recommendation at this point is to write a post to the forum in this format. Writing a post in this format will not only allow us to give better personalized advice, but it also will teach you what parts of your retirement plan/investment options are important. It was a great learning exercise for me when I was new to investing.

student
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Re: Desperately In Need Of Advice

Post by student » Tue Oct 08, 2019 6:35 am

I don't think you need an advisor.

1) For money that you plan to buy a house, use a high yield online saving account such as Ally, Barclays, AMEX or Marcus. These are FDIC insured up to $250k per account.

2) For investment, how come you do not have a 401k? If possible, you should contribute to a Roth IRA. You can either use 3-fund portfolio or use a even simpler target date fund but make sure that it is an index fund.

Tdubs
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Re: Desperately In Need Of Advice

Post by Tdubs » Tue Oct 08, 2019 8:45 am

If you do decide to use the $140k for a near-term house purchase, I wouldn't wait a single day to put the money in a CD. Whatever high-yield savings account you find will pay less interest very soon.

retiredjg
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Re: Desperately In Need Of Advice

Post by retiredjg » Tue Oct 08, 2019 9:10 am

Your question about the $140k does not need an advisor. Money needed in a couple of years should be held in very safe investments - savings, CD, money market, maybe a little in a short term bond.

Your real question is which of these is the best to use at this time. Some people have suggested some things above. You can also find different interest rates at bankrate.com . You can call around. And you can look for recent threads using that google box above.

As for whether you need an advisor for the rest of your financial situation, I don't think you are ready for one just yet. Spend some time here, reading the wiki, reading a book or two, going through the "getting started" link, etc. After that, you might post your information according to the link at the bottom of this message. You can start forming your own ideas about how to invest for retirement.

Then you can decide if you want to spend some money on an advisor and whether the one you have chosen is the right one for your situation. Right now, I think that money would be wasted because you don't know enough to keep your hours with the advisor short.

mhalley
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Re: Desperately In Need Of Advice

Post by mhalley » Tue Oct 08, 2019 9:17 am

Another option would be to post your info here for a bogleheads review for free. Or go with Mark Zoril with planvision for $96 flat fee.

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bertilak
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Re: Desperately In Need Of Advice

Post by bertilak » Tue Oct 08, 2019 2:49 pm

Watty wrote:
Mon Oct 07, 2019 8:53 pm
... risks that you may not understand.
And that's not because you are stupid!

It is an intentional technique used by many "advisors" (who are really salesmen) to keep you feeling reliant on them so they can earn their high fees. They don't want you to understand.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet (AKA S.O.B.)

Small Savanna
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Re: Desperately In Need Of Advice

Post by Small Savanna » Tue Oct 08, 2019 4:27 pm

A question you should ask yourself is whether you really want to put the whole $140K into a house. My advice to a young person would be to buy a house you can afford with a 20% down payment. 20% is a good number because you will avoid PMI. At your income, a $300K house with $60K down and a $240K mortgage is affordable. At today's interest rates, your mortgage payment will probably be close to what you're paying in rent.

With that in mind, save $60K in a CD or money market toward the house. The other $80K should go toward retirement, with as much as possible in some combination of 401Ks and IRAs up to the maximum you're allowed to contribute. Get as much as you can into your company's 401K before the end of this calendar year and use some of the checking account money to live on, then $6K each in IRAs for 2019 and $6K each in IRAs in 2020, then $19K in the 401k next year, and you'll have a great head start on a retirement nest egg.

For money that you can't get into tax deferred or Roth accounts within the next few months, start a taxable account at Schwab, Vanguard, or Fidelity, and then keep funding your IRA and 401k to the limits every year. The decision about Roth vs. regular accounts is important, and you should read about that on this forum. The other big decision is asset allocation. At the start I'd suggest putting 70% in stock index funds and the rest in bonds, following the 3-fund portfolio advice you'll find on this forum. You can adjust that as you get more confident in your knowledge as an investor.

GlacierRunner
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Re: Desperately In Need Of Advice

Post by GlacierRunner » Wed Oct 09, 2019 1:39 am

I agree with the others who suggest you don't need an adviser just yet.

For your immediate needs, I would would recommend the following.

1) 6 months emergency fund
I would stash $12,000 in a high interest account (e.g. Ally)

2) Save/invest at least 15% of your income for retirement
If you or your wife have access to retirement accounts at work start funding a traditional account. In addition, open a Roth IRA at your preferred brokerage (Vanguard, Fidelity, Schwab). If you are unsure about mutual funds to pick, stash contributions in a age based account. 2050 or 2055 should be fine. The hardest part is setting up the account so just do it. Others have recommended living off your savings for the next 2.5 months in order to put as much as you can away for 2019. This is not a bad idea.

3) Evaluate whether you have any pressing needs (e.g. necessary car replacement in the next six months) and set aside funds for them.

4) Open a CD for your house down payment. That is likely the best place for a 1 - 2 year time frame.

I recommend that you read some personal finance books such Bogleheads guide to investing and the Automatic Millionaire.

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FiveK
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Re: Desperately In Need Of Advice

Post by FiveK » Wed Oct 09, 2019 2:16 am

Zero2HundoVesto wrote:
Mon Oct 07, 2019 6:57 pm
I'm 33 just got married.
...
Thanks for reading. I apologize if I made it too long. Any help is appreciated.
You may find the pronoun "we" is now appropriate for the first person perspective. ;)

In other words, what are your spouse's thoughts about all this?

German Expat
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Re: Desperately In Need Of Advice

Post by German Expat » Wed Oct 09, 2019 4:06 am

You really need to look at the total picture and your plans going forward in a holistic view (including your spouse and your future plans). I would do the following things.

1. Sit together with your wife and agree what your common plans are. When do you want to buy a home, how long would you stay there, do you plan to have children and if so when. Will your wife go back to work after having children? Do you want to work until you are in your 60s or retire earlier? Are both of you savers or you rather spend money. Plans can change with life events but the point is that you need to have a common understanding how to proceed.

2. Look at the total picture and combine your and your spouses information (your salary, your 401k optionis, her salary, her 401k options etc.)

3. Check how large your emergency fund needs to be and how much money you will probably need for a house down payment. Put those things into safe investments (CD's, money market, ...) that match your planned time line.

4. Create a budget and plan what to do with the rest, how much to invest in tax advantaged vehicles (make sure you get at least the 401k match from your employer, its free money) and other savings. Key is first though to align your spending priorities with your wife.

5. Familiarize yourself with investments (options in both of your 401ks, Roth IRA's, taxable investments) and you can use the forum here for more information. But in order to do it you really need to post a more complete picture and also make sure you know your future goals. It is not too hard after you did the basics. Try to estimate your spending etc.
e.g. if you know you need 30k in an emergency fund and 80k for a home purchase (20% down and some money for closing costs, furniture etc.) you will have 30k left to invest now. Also post what both of your 401k (403b or whatever) options and matches are (if any) and post them here. People are more then willing to help.

It is not too hard after you break the task down and you can go slow. 3 month less in the market won't make or break it with your age. Having a solid plan for the next decades will make all the difference.

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