Author Topic: Help me start over and do it right  (Read 2090 times)

Ryanpascarelli

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Help me start over and do it right
« on: June 21, 2016, 08:48:19 AM »
So I'm at a time in my life where I am able to reset and do things right. I recently got divorced from my wife whom I've been with for over 12 years. (I'm 28). I currently work retail making $18 hr or $37,000 per year. I put 6% with company match into Roth and regular 401k. I put 6% into the stock purchase plan. I take home roughly 1900 per month. I sold my house and now have about $30,000 in the bank. I recently got a new job making roughly $25 per hour with a lot of overtime potential. I have $9800 in student loans and $13,300 for a car loan. No other debt. I am looking to see where I should start first in starting over. I am staying in a house rent free for the next few months. I would like to buy a condo because housing in Massachusetts is insanely high and I can't afford anything that doesn't require a lot of work. My thought is, pay off the student loans, then the car, buy a condo and start investing. I would really appreciate some recommendations from the MMM community because there are a lot of people on here who are a lot smarter than me with money.

Kaspian

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Re: Help me start over and do it right
« Reply #1 on: June 21, 2016, 08:54:19 AM »
My quick advice?  Don't work your butt off to get out of debt only to jump right back in as soon as you can.  (Yes, mortgage is debt.  And no, there's no such thing as "good debt".  (Such a cute idea.))  Pay off your debts and build a GIANT mofo nest egg before even considering the condo.

mairuiming

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Re: Help me start over and do it right
« Reply #2 on: June 21, 2016, 08:57:33 AM »
I tend to avoid company stock plans.
Imagine when next recession hits the economy, you may lose your job and investment.
Try to diversify your investments.

esq

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Re: Help me start over and do it right
« Reply #3 on: June 21, 2016, 09:07:09 AM »
Is is possible to sell the car and buy a beater that will survive MA winters?  I bought a 2003 Camry 3 yrs ago for 5k.  Had 97k miles on it.  Those little babies last forever. 

Married at 16!  Guess you learned a life lesson there. :)  Best of luck to you.

Ryanpascarelli

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Re: Help me start over and do it right
« Reply #4 on: June 21, 2016, 09:26:08 AM »
I work for Apple so I got to buy stock at a discount every 6 months and the discount is off the lowest price in that 6 months. I got married at 26 but was with her since I was 16. Definitely learned some lessons there.

I was thinking about buying a used corolla or something and then selling my car and hopefully make a couple grand. Although I love my car. It's fast and gets like 34 mpg. It's a gti.

There's so many ways I can go with this and it's pretty confusing. Thank you all for the recommendations.

ysette9

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Re: Help me start over and do it right
« Reply #5 on: June 21, 2016, 10:04:43 AM »
In the right circumstances I think that employee stock purchase plans can be good because they usually involve some sort of guaranteed return. For example, my husband's company allows him to purchase stock at 15% off of the lower price from either the beginning or ending stock price in a rolling 6-month period. If the stock goes up then he can make a lot. If it doesn't, he get a guaranteed 15% return up to a certain $ amount each year. If this is how your system is set up then it would be worth it, but I would recommend cashing out of company stock as quickly as you can and then roll those funds over into something more diversified such as VTSAX.

I am not smart enough on this stuff though to tell you whether this is better than just taking that 6% and throwing it directly into your 401(k). There are many wise people on this forum though who I am sure can help.

Kapiira

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Re: Help me start over and do it right
« Reply #6 on: June 21, 2016, 10:13:27 AM »
I think this article does a really good job of explaining why renting can be more cost effective than owning.  It's worth looking at the numbers before deciding what to do.

http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/

Axecleaver

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Re: Help me start over and do it right
« Reply #7 on: June 21, 2016, 10:55:21 AM »
1. Minimize your expenses.
2. Max out your employee stock purchase plan (ESPP); this is free money. If you're in a 423 plan, it's best to hold the shares for at least a year from purchase date and two years from grant date, so they're taxed as capital gains. You're putting a lot of eggs in one basket doing this, but the tax advantages make it worth the risk.
3. Use the proceeds to pay down your debt.
4. Review your tax situation as you will need to file Single in future years. You may want to increase your tax-deferred contributions (401k, ira).
5. Proceed according to the following MMM investing order guidelines:

Quote
WHAT
0. Establish an emergency fund to your satisfaction
1. Contribute to 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.
3. Max HSA
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)
6. Fund mega backdoor Roth if applicable
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.
8. Invest in a taxable account with any extra.

WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks
1. Company match rates are likely the highest percent return you can get on your money
2. When the guaranteed return is this high, take it.
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower
5. See #4 for choice of traditional or Roth for 401k
6. Applicability depends on the rules for the specific 401k
7. Again, take the risk-free return if high enough
8. Because earnings, even if taxed, are beneficial

prognastat

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Re: Help me start over and do it right
« Reply #8 on: June 21, 2016, 11:50:10 AM »
My recommendations would be.

1. If your student loans are over 5% use the 30k to pay them off.
2. Sell the car and move to a cheaper vehicle that still leaves you with with no loan and a decent bit as an emergency fund of your 30k - possibly student loans, being single I would want 6 months of expenses saved up.
3. Reduce your expenses, use something like Mint to track your expenses and see which are high and trim down where you can. Housing, food and car/travel related expenses are usually the biggest categories for most people.
4. I would avoid buying unless you are in a market where renting is high and housing is low. For most people this is not the case though and being single means you don't quite get the benefits out of a house that a family does. If you do buy anything I would avoid buying anything more expensive than about 2x your annual income and only if you can put a 20% downpayment to avoid PMI. This downpayment would be separate from my emergency fund. I myself would focus on spending as little as possible on housing at the moment. Try to love using the minimum you would really need. If I were single I would find a small reasonably priced 1 bedroom 1 bathroom apartment or do a shared living situation with a house where I was paying for 1 bedroom and sharing the rest of the house. Try finding something relatively close to work. This will save you both time and money.
5. Pretty much the things Axecleaver listed.
« Last Edit: June 21, 2016, 03:53:12 PM by prognastat »