The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Cwadda on January 03, 2015, 07:45:32 PM
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Hi Folks,
This isn't really some complex case study topic, but I wanted to lay out my situation and ask for advice.
Financial Goals for 2014:
1. Pay off federal unsubsidized student loan $5500 at 6.25%
2. Fully fund Roth IRA for 2014.
3. Have money ready to fully fund Roth IRA for 2015 by the end of 2014.
Currently have:
$18k in Roth (maxed for 2015) - 100% VTSAX
$4000 cash
My expected income for 2015 is $20k
Current debt:
$22k loan at 0% from parents. They refuse to take any money back until I graduate. Expected debt by the end of college is $40k.
Expected tax bill for 2014 - $500
$5500 federal loan - PAID!
Car - Paid in cash!
So I have $4k cash and will hopefully make another $20k this year. My Roth has already been maxed. What do I do now? Do I open a taxable account? Try to convince parents to start taking repayment? Open some other tax advantaged account? Hold onto the money? I lent my parents $7000 over 4 months for a house they were rehabbing. I received 5% on that $7000. If they do another house, should I lend toward it again? Should I try to buy my own rental?
Thanks in advance!!!
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When do you finish school and need to pay back your parents? If you are looking at a short-term investment, you don't want to risk a market correction. I would lean toward putting the money in an online savings account. I think Ally is around .99% APY. It's not much but at least you would have the money available to pay back your parents and to fund your Roth for next year.
I definitely would not buy the rental at this stage in your life. Graduation and a job are priorities.
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I finish school in 1.5 years and then I'm doing graduate school, which shouldn't cost me anything. I do have a job lined up after school but I might opt to move down south.
Do you think a taxable in a lower risk fund to try and get 3-4% is still too risky?
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Given the short time frame, I would say yes. It is awesome that you will be able to pay your parents back, and if I were you i would keep that money in a 'no risk' savings account. If you love your parents then don't exploit them, you are still young and there is LOTS of time to reap benefits when doing long term investment. Set your parents money aside, and invest the rest aggressively.