Author Topic: Just starting, some questions  (Read 5060 times)

MrD

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Just starting, some questions
« on: June 19, 2012, 01:29:36 PM »
Saving - $462

401k - 10k
60% Company Stock
40% fidelity 2050 retirement plan


Savings - $1000

Goes towards:
Emergency fund - total at 10k
100% checking account at .75% APY

ROTH IRA (first year) - 5k
100% Vangaurd 2050 retirement plan

No debt.

Regular Checking Balance:
1.6k

I am some times have extra money coming in from a side business so that is why it is not currently saved.

Spending ~1400 (includes everything)


I was thinking of getting in hyper savings mode for a down payment on a house since my current lease is up in November. I could put all of my 1000/month savings towards it and have 7.6k ready to go.

My gf could probably also contribute 2k by this time.

I am looking for a house in the range of 150k-200k.

Reasons for wanting to buy a new house:
-Where I currently live I have higher taxes, my rent is (60%)535/month with my gf paying the other 40%.
-Interest rates are low
-Moving to the state I would be moving to would dramatically drop taxes, gas, food, everything essentially

Other ideas:

I could potentially take money from my emergency fund to help with the down payment. My job is 99% secure, the only way I could lose my job is if my company some how was taken down like ENRON or something.



Questions:
-Should I move this November or stick it out a year and have a larger down payment and risk the interest rates and housing prices to jump.

-Unless I get some crazy suggestions I may likely wait even 2 years before buying a house because I really think having 20% is a requirement. Where should I store my downpayment money while I build it up?


gooki

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Re: Just starting, some questions
« Reply #1 on: June 20, 2012, 01:29:33 PM »
If dipping into your emergency fund gets you over the 20% down payment amount so you can avoid PMI, then do it.

As for when to move, that's largely dependent on if you find a home you want and is worth the money. As soon as you find it, I'd say do it.

Mr Mark

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Re: Just starting, some questions
« Reply #2 on: June 20, 2012, 04:16:42 PM »
Agree you should avoid PMI. Can you scale back the housing budget, and save like crazy? Don't touch the stash you've already got.

And do you have to hold company stock in the 401k?

MrD

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Re: Just starting, some questions
« Reply #3 on: June 21, 2012, 06:48:03 AM »
Agree you should avoid PMI. Can you scale back the housing budget, and save like crazy? Don't touch the stash you've already got.

And do you have to hold company stock in the 401k?

Yes I can scale back and that is what I am doing. I also found that if done correctly I will have enough for a 15000 down payment while still have my safety net.

I do not have told hold company stock, but our stock has rose from 33 1.4 years to 72 now.

grantmeaname

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Re: Just starting, some questions
« Reply #4 on: June 21, 2012, 08:33:20 AM »
That may be a good return, but it's also a colossal amount of risk, especially for your retirement savings. There were people just like you twelve years ago who could point to their 401(k)s holding only Enron stock and they could be absolutely thrilled with the performance they were getting.

MrD

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Re: Just starting, some questions
« Reply #5 on: June 21, 2012, 08:54:15 AM »
That may be a good return, but it's also a colossal amount of risk, especially for your retirement savings. There were people just like you twelve years ago who could point to their 401(k)s holding only Enron stock and they could be absolutely thrilled with the performance they were getting.

Oh I am sorry I didnt realize I had the high number posted up, I actually scaled back my 401k to look like this:

Tier   Asset Class   Subclass   Fund Name   Desired %
1   Blended Fund Investments   --   2050 RETIRE STRATEGY    0%
2   Stock Investments   Large Cap   NT RUSSELL 3000 INDX    35%
2   Stock Investments   Large Cap   NTGI SP500 EQ INDEX    35%
2   Bond Investments   Income   NTGI AGGR BOND INDEX    20%
3   Stock Investments   Company Stock   Company STK FND    10%

grantmeaname

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Re: Just starting, some questions
« Reply #6 on: June 21, 2012, 01:18:08 PM »
That makes me a little less nervous. Still, what if you lost your job and 10% of your retirement savings all at once?

The conventional wisdom around the PF blogosphere is that it's only okay to own company stock if you're still vesting into an employee stock purchase plan, and that you should sell it as soon as you're able to without penalty. It just seems so risky...

MrD

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Re: Just starting, some questions
« Reply #7 on: June 22, 2012, 06:44:31 AM »
That makes me a little less nervous. Still, what if you lost your job and 10% of your retirement savings all at once?

The conventional wisdom around the PF blogosphere is that it's only okay to own company stock if you're still vesting into an employee stock purchase plan, and that you should sell it as soon as you're able to without penalty. It just seems so risky...

It may be naive of me, but really I see no way my company could go under. They have had solid growth for over 40 years, and have double in the last 2. Not only that but our market is growing exponentially and we are the top company in the industry. I feel like the banks would collapse before my company does.

arebelspy

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Re: Just starting, some questions
« Reply #8 on: June 22, 2012, 07:50:49 AM »
It may be naive of me, but really I see no way my company could go under. They have had solid growth for over 40 years, and have double in the last 2. Not only that but our market is growing exponentially and we are the top company in the industry. I feel like the banks would collapse before my company does.

It only takes a few bad eggs to bring down even a large company that is tops in their industry.

See: Enron, WorldCom, etc. etc.

Say some big news does come out (unethical CEO actions, whatever) that causes the company to have to do massive layoffs to shed and reimage the company, while the stock takes a dive.

Completely unrelated to their products and past growth, but a potential scenario, especially in this day and age.

Diversity is important, especially from company stock which you work for, as the two are tied together, and a disaster in that one thing hits you doubly.

You're gonna do what you're gonna do, and it may well work out fine.  We're just trying to open your eyes to why it may not be such a good idea.
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Mr Mark

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Re: Just starting, some questions
« Reply #9 on: June 22, 2012, 08:09:08 AM »
Ahh, that is better. My personal rule of thumb is max 5% of total net worth in non-boggle investments. Just make sure to rebalance every year, so if the stock keeps going up, your purchaces should be directed to the index funds to keep the company stock at 10% (in your case).

And the money you spend on housing is mainly consumption, not investment.

MrD

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Re: Just starting, some questions
« Reply #10 on: June 22, 2012, 09:13:38 AM »
Thanks for the advice guys. I have decided after reading around the last hour or two to drop my 401k to 0% company stock and instead use the employee purchase plan in a separate account and sell off every quarter to reinvest in different indexes effectively keeping my holding of my company at a continual 5%. uhh run on sentence

grantmeaname

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Re: Just starting, some questions
« Reply #11 on: June 22, 2012, 09:23:54 AM »
There you go! You're taking advantage of the ESPP to buy index funds for cheap! Now that's mustachian.

Mr Mark

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Re: Just starting, some questions
« Reply #12 on: June 22, 2012, 11:15:11 AM »
Sounds like a plan! Good luck.

MrSaturday

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Re: Just starting, some questions
« Reply #13 on: June 22, 2012, 11:45:52 AM »
It may be naive of me, but really I see no way my company could go under. They have had solid growth for over 40 years, and have double in the last 2. Not only that but our market is growing exponentially and we are the top company in the industry. I feel like the banks would collapse before my company does.

Financial advisers used to say things like: "It's risky to own a lot of company stock, unless it's a diverse multinational that can't fail, like GE."

I used to work for GE when they were saying that.  I managed to avoid several rounds of layoffs, but my stock didn't do so well.

arebelspy

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Re: Just starting, some questions
« Reply #14 on: June 22, 2012, 04:01:14 PM »
Thanks for the advice guys. I have decided after reading around the last hour or two to drop my 401k to 0% company stock and instead use the employee purchase plan in a separate account and sell off every quarter to reinvest in different indexes effectively keeping my holding of my company at a continual 5%. uhh run on sentence

Good plan, great way to continually get your employer's stock cheaper and then diversify.  Good luck!
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.