Furloughed firefighter, What should I do with 100K from selling my house.

[Troutbum73]

Good morning brilliant finical advisors,
Within the next couple days I will be receiving 100k from selling my house.  I sold my house to get the equity while the market is hot.  I am currently renting a house in another town where the average price of a home is 700k.  I am hoping the housing market will go down somewhat soon so i can buy another home when i can afford it.   My question to you is what should do with it in the meantime? I plan on paying of all of my small debt first.   I would also like to set up a some sort of college fund for my two year old and newborn. I truly appreciate all input. Thank you.

[Bracken_Joy]

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

And decide how much you want on hand for a down payment. Don't invest anything you need in the next ~5 years (some people say 3 years, I border on conservative). There are CDs and high yield savings accounts for losing less ground to inflation in the meantime.

[Boofinator]

The investment order thread is generally good advice. I'll differ from Bracken_Joy's advice in that I'm much less conservative with money I may need soon (if I'm a long way from retirement); for any money you may need, I recommend bonds with a maturity about equal to the timeframe with which you will need the money (this will usually beat out a savings account, and if not you'd lose out minimally).

[nereo]

Bracken_joy and boofinator have covered the relevant options.
To decide between them it would be helpful to know more about your current finances.  Do you have you hold any high-interest debt? Are you contributing enough to your tax-advantaged accounts (and what is your taxable burden)? Is your income fairly secure and consistent, or highly variable and uncertain? Does your company offer a 401(k) match, and are you currently participating?  Answers to these questions (and others) will determine what you do with that $100k.

In general I concur with boofinator - any money that I intend to spend in the next 0-2 years I keep in either a savings account or in CDs (depending on the time frame). If it's more of a "i might use it" rather than "i definitely will use it" than I'm more likely to invest it, following the investment order bracken_joy provided. If you hold any high interest debt (> 8%), eliminate that first, before doing anything else.

[Troutbum73]

Bracken_joy and boofinator have covered the relevant options.
To decide between them it would be helpful to know more about your current finances.  Do you have you hold any high-interest debt? Are you contributing enough to your tax-advantaged accounts (and what is your taxable burden)? Is your income fairly secure and consistent, or highly variable and uncertain? Does your company offer a 401(k) match, and are you currently participating?  Answers to these questions (and others) will determine what you do with that $100k.

In general I concur with boofinator - any money that I intend to spend in the next 0-2 years I keep in either a savings account or in CDs (depending on the time frame). If it's more of a "i might use it" rather than "i definitely will use it" than I'm more likely to invest it, following the investment order bracken_joy provided. If you hold any high interest debt (> 8%), eliminate that first, before doing anything else.

Thank you all for your input it is very helpful. I wasn’t sure how much information I should delvulge my wife said I can get to wordy, so I aired in being brief, but Since you all were so helpful I figured I should delvuldge just a lilttle more to offer up anymore advice. I would truly appreciate it all.

I am a federal wildland fire fighter working for the United States forest service. I am currently furloughed. So now I have time to dig deep into finically investing. That said, I know little nothing about investing. I wish I did and would love any insight/ articles/ podcasts to help expand my basic knowledge. Lost in where to begin. This forum is a great tool however I get overwhelmed with a lot of it.

Current investement situation: I’m 36 years old, married with a 2 year old and a newborn. Evey two weeks I take 15% out of my paycheck and put it into my TSP a Roth IRA. The government matches up to 5%. That’s it for investing. Current debt: truck loan 8k w/3% interest. Student loan 8k w/6%, and a TSP loan for 4K. That is it.

Really appreciate all councel and intel you can provide. Really enjoy listening to podcasts and would love any suggestions on those. Thanks again.

[Bracken_Joy]

Bracken_joy and boofinator have covered the relevant options.
To decide between them it would be helpful to know more about your current finances.  Do you have you hold any high-interest debt? Are you contributing enough to your tax-advantaged accounts (and what is your taxable burden)? Is your income fairly secure and consistent, or highly variable and uncertain? Does your company offer a 401(k) match, and are you currently participating?  Answers to these questions (and others) will determine what you do with that $100k.

In general I concur with boofinator - any money that I intend to spend in the next 0-2 years I keep in either a savings account or in CDs (depending on the time frame). If it's more of a "i might use it" rather than "i definitely will use it" than I'm more likely to invest it, following the investment order bracken_joy provided. If you hold any high interest debt (> 8%), eliminate that first, before doing anything else.

Thank you all for your input it is very helpful. I wasn’t sure how much information I should delvulge my wife said I can get to wordy, so I aired in being brief, but Since you all were so helpful I figured I should delvuldge just a lilttle more to offer up anymore advice. I would truly appreciate it all.

I am a federal wildland fire fighter working for the United States forest service. I am currently furloughed. So now I have time to dig deep into finically investing. That said, I know little nothing about investing. I wish I did and would love any insight/ articles/ podcasts to help expand my basic knowledge. Lost in where to begin. This forum is a great tool however I get overwhelmed with a lot of it.

Current investement situation: I’m 36 years old, married with a 2 year old and a newborn. Evey two weeks I take 15% out of my paycheck and put it into my TSP a Roth IRA. The government matches up to 5%. That’s it for investing. Current debt: truck loan 8k w/3% interest. Student loan 8k w/6%, and a TSP loan for 4K. That is it.

Really appreciate all councel and intel you can provide. Really enjoy podcast.

Hey, most of us made it here with no investing knowledge =) SO no worries there! Sorry to hear you're impacted by the shutdown. Here was my "aha" reading for investing: https://jlcollinsnh.com/stock-series/ I don't have any podcast reccs on this, sorry!

What do you have your TSP invested in? Basically, it's a "bucket", but the money inside you still have different investing options. I'm not a fed employee, but from my recollection from one of my friends, there's different options with letters to represent them, right? So like, L2020 and stuff like that. It would also help to know how the money in your TSP is invested.

Honestly, investing 15% of each paycheck is a great start! It isn't to the level some people around here do, but it's better than like 95% of the country, so that's pretty dang good. And your debt situation isn't out of control by any means. Are any of the interest rates variable? Variable rates make them a higher payoff priority.

[Troutbum73]

Bracken_joy and boofinator have covered the relevant options.
To decide between them it would be helpful to know more about your current finances.  Do you have you hold any high-interest debt? Are you contributing enough to your tax-advantaged accounts (and what is your taxable burden)? Is your income fairly secure and consistent, or highly variable and uncertain? Does your company offer a 401(k) match, and are you currently participating?  Answers to these questions (and others) will determine what you do with that $100k.

In general I concur with boofinator - any money that I intend to spend in the next 0-2 years I keep in either a savings account or in CDs (depending on the time frame). If it's more of a "i might use it" rather than "i definitely will use it" than I'm more likely to invest it, following the investment order bracken_joy provided. If you hold any high interest debt (> 8%), eliminate that first, before doing anything else.

Thank you all for your input it is very helpful. I wasn’t sure how much information I should delvulge my wife said I can get to wordy, so I aired in being brief, but Since you all were so helpful I figured I should delvuldge just a lilttle more to offer up anymore advice. I would truly appreciate it all.

I am a federal wildland fire fighter working for the United States forest service. I am currently furloughed. So now I have time to dig deep into finically investing. That said, I know little nothing about investing. I wish I did and would love any insight/ articles/ podcasts to help expand my basic knowledge. Lost in where to begin. This forum is a great tool however I get overwhelmed with a lot of it.

Current investement situation: I’m 36 years old, married with a 2 year old and a newborn. Evey two weeks I take 15% out of my paycheck and put it into my TSP a Roth IRA. The government matches up to 5%. That’s it for investing. Current debt: truck loan 8k w/3% interest. Student loan 8k w/6%, and a TSP loan for 4K. That is it.

Really appreciate all councel and intel you can provide. Really enjoy podcast.

Hey, most of us made it here with no investing knowledge =) SO no worries there! Sorry to hear you're impacted by the shutdown. Here was my "aha" reading for investing: https://jlcollinsnh.com/stock-series/ I don't have any podcast reccs on this, sorry!

What do you have your TSP invested in? Basically, it's a "bucket", but the money inside you still have different investing options. I'm not a fed employee, but from my recollection from one of my friends, there's different options with letters to represent them, right? So like, L2020 and stuff like that. It would also help to know how the money in your TSP is invested.

Honestly, investing 15% of each paycheck is a great start! It isn't to the level some people around here do, but it's better than like 95% of the country, so that's pretty dang good. And your debt situation isn't out of control by any means. Are any of the interest rates variable? Variable rates make them a higher payoff priority.

Thank you. I will read the article. Currently I have the TSP allocated 30% into C, 30% S, 20% I, 10% in G/F. I was told somewhere down the line this was good % distribution, totally open to suggestions. Hopefully the letters make sense for  the funds.

[Laura33]

First and foremost:  what is your current cash situation?  How long can you guys make it through the furlough?  My inclination for right now would be to keep a whole bunch liquid so that you don't have the added burden of worrying about making ends meet.  You have time to figure things out; being in or out of the market over the next month or two is not going to materially affect your future prospects.

Beyond that, I would pay off the student loan -- that's a pretty high rate of interest.  I would also personally pay off the TSP loan; you need all of your retirement investments to be in the market, and so effectively loaning yourself money at 4% interest isn't great.  Of course, both of those depend on there being non-furloughed people available to process the payoffs.  I would not pay off the truck loan, as the interest rate is low.

If you pay off @$12K of debt, that will leave you between $85-90K to play with.  Figure out how much of that you need to set aside for your emergency fund to get you through the furlough, and put that in a savings account or money-market. 

What you do with the rest depends on your priorities.  Generally speaking, a 20% savings rate will put you in position to retire sometime in your 60s -- see https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/.  So if that is your goal, then go ahead and put the rest aside for a downpayment on a home. 

OTOH, if you want to be able to retire earlier than that, then the money needs to go towards your retirement.  A house is fundamentally a consumption item, like a truck or clothes: yes, you need somewhere to live, but you don't need a $700K house to meet that need, just as you don't need designer clothes to wear or a spanky new truck to transport you from one place to another; therefore, choosing to upgrade to those "nicer" options is a consumption choice, not an investment.  And the key to FIRE is to keep your lifestyle costs as low in proportion to your income as you can while still living a satisfying lifestyle. 

So I would recommend taking your furlough time to really work through all of that -- not just figuring out what investments and how to invest and all that, but focusing on what you want your life to be.  How long do you want to work?  How long do you think you will be physically able to work given the nature of your job?  What do you need to save to be able to FIRE by that point?  Are you and your family willing to live that kind of lifestyle?  Or do you need to be planning on a longer working career in order to provide the kind of long-term lifestyle that will keep everyone happy.  Etc.  Once you have that larger vision, there are a bunch of people here who can help with the execution.

[Bracken_Joy]

30% into small cap (S) plus 20% international (I) would be considered pretty aggressive around here. But the overall Stock to bond ratio (90/10) is a pretty typical recommendation for your age group around here. C, or common stock, is a decent comp to the VTSAX you see recommended in a lot of MMM's blog posts. Only different is that VTSAX is a total market index and C is an S&P500 index, so the largest 500 companies as opposed to adding all the smaller companies in proportion to their market share. Anyway, my take away on it is that that's fine, but I'd be tempted to say do 40-50% C, 10-20% S, keep the rest the same. Just because small cap can be so volatile and high risk.

Next question then. You say you also invest in a roth IRA? Who is that through and what are you invested in there? Do you know the "expense ratio" for what you're invested in?

Do *you* have any specific questions right now?

Cross post. Once again @Laura33 knocks it out of the park with the big view. Totally agree with all her recommendations.

[JZinCO]

I'm not sure why you sold the house to capture equity and are waiting to buy back in. Sounds like you are timing your real estate market (sell high buy low). But in housing you have to live somewhere, so making money on real estate transactions usually happens only when moving sufficiently far or, downsizing (in terms of size or condition). Anyway what's done is done so I wouldn't fret over that.

No low risk place to store your money short term is likely to get 6% so it's clear, you should pay that loan off. As for the 3% loan, I think there are 2 year CDs that are close to that. So I would continue to pay the minimum for that loan.
Your TSP allocation looks fine but you might want to use this extra time being furloughed to dig into why you are selecting your allocation. In other words, you want to choose your allocation based on your risk tolerance and be comfortable with thr ups and downs of the market. Looking at Portfolio Charts website is a good start!

Anyway congratulations on being so diligent. I spent seasons on type 1 and 2 handcrews. Firefighting attracts specific personalities that, especially at a young age, aren't sympatico with the get rich slowly mindset haha. I know I blew all my money every winter back then

[JZinCO]

Also, I assume you are in a primary fire position, yeah? If you are looking for assistance regarding your retirement assets, it would be good to divulge the generalities of that specific pension.

edit: If I got this right it's 25 yr or age 57 and 20 yr to retire. You get a bonus multiplier on your FERS calculation. So it is something like 1.7% * high-3 * 20 + 1% * high-3 * (YS-20), where YS is years of service. This is in contrast to the regular FERS which uses 1% for all years of service.

[Bracken_Joy]

Oh yeah, the firefighting highlights a good question- do you have long term disability insurance and life insurance? A lot of high risk positions will have disability insurance through work, but you need to know if it's short or long term disability.

[Peachtea]

Fellow furloughed fed here (although not a firefighter). I’m not sure if you heard, but Wednesday night Trump signed the bill that guarantees furloughed employees backpay after the shutdown. So you want to keep enough cash to get through the shutdown, but you can safely plan on being able to use your savings to invest, pay off debt, or use as down payment after backpay. Earlier in the the shutdown (Jan 1) I put a somewhat large chunk of savings into Roth IRAs and a 529. I kind of regret that now because I had no idea how unprecedented the shutdown was going to be. So now I’m stopping all of my regular investments (except my husband’s 401k/HSA contributions) until the shutdown is over, because I want to be able to last months in case this goes way over the top. I mean it’s already been one month, so who knows what might happen.

Outside of furlough planning, I agree with other advice about killing the SLs and TSP loan. I probably wouldn’t wait for shutdown to be over to do that, since you’ll still have a lot of cash on hand. I think car loan is low enough that I wouldn’t pay it off early. But you might want to think about setting up a savings account to just to slowly save for future car replacement so you don’t have to take out a loan next time.

+1 to https://jlcollinsnh.com/stock-series/ for investment research and I also recommend boggleheads: https://www.bogleheads.org/wiki/Three-fund_portfolio and https://www.bogleheads.org/wiki/Traditional_versus_Roth

As others mentioned, your current TSP selection is perfectly fine, it’s just a matter of deciding after research if it’s the best for you. So don’t feel like you need to rush in changing your portfolio. Plenty of time to do your research. I would actual start researching whether you should be in Roth vs traditional 401k first. It will depend on your income now vs how much you expect to have annually in retirement.

I’d also take the free time to read all the mmm posts from start to end. Tons of ideas to save money, which will then allow you to invest more.