Author Topic: Beginner Investment Advice  (Read 1492 times)

RavensBrew

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Beginner Investment Advice
« on: July 14, 2014, 02:53:27 PM »
Hi guys! I discovered this website through a friend a few months ago and have been totally addicted. Around that time some friends were talking about their retirement savings and it got me thinking. And worried. I never had anyone sit down with me and discuss this stuff when I was young. Both my parents are weird in their finances in a way that was not helpful as far as any lessons to learn in the real world (my Mom has never saved a dime in her life and my Dad lives in a cabin alone deep in the woods. He tried to live off the grid but realized it was just easier to have a phone and electricity when I was around 10. He retired from his mill job at 39 and has basically been a hermit ever since. His yearly bills come to about $1500 including property taxes and his investments are CDs). My point being I would love some simple advice.

I'm 40 today and have no retirement although by the time time you read this I will have put the max (5500) into a Vanguard VTSMX Roth. My girlfriend (33) has 41k in her 401k through her work. Between the two of us we have about 30k cash in a low interest savings account. We also own a home which we refinanced two years ago at an incredible 30 year rate of 3.25% (total w/pmi, insurance, taxes etc. payment is 2k). The only crappy part is we have three more years of 300 dollar a month PMI payments. We're going to run the numbers on this with our mortgage guy and see if a refi would pan out financially or if it's worth hanging on to that low interest rate. We still have 28 years on the mortgage. The house is in a great part of town in a growing west coast city so we would like to hang on to it as an investment even if we decide to downsize later by moving. At 3.25% it's hard to want to pay this down. We have talked about a 15 year refi but if we rent it out later it would be nice for the rent to cover the mortgage. This wouldn't be possible for a long time (if ever) with a 15 year mortgage.

The main reason I have no retirement is 7 years ago I cashed out my 401 from my previous job to start a small business. The business has worked out but we went in naively to a certain degree and it hasn't produced the income I had hoped for. Not because the business isn't healthy but more because I was uneducated about realistic expectations. Having said that, the last few years it grosses around 50k a year. It took about 5 years to pay off the credit card and other debt we had from opening the business. We piled 100% of our extra cash into getting rid of that debt and zero into any retirement fund for me. This seemed prudent due to the interest rate on the cards. The good news is we are completely debt free now except for the mortgage. Between my GF and I we bring in around 110k a year.  I also have around 1k in a Scottrade account I trade stocks with. I realize this (amateur swing trading) goes against every good piece of advice out there but I enjoy it and so far I haven't lost money. One nice thing for our personal finances is no children and we won't be having any.

From what I gather off the MMM website you want to maximize your tax advantaged possibilities first and foremost. My GF is contributing the max to her work related funds and we both will be maxing out a Roth every year. My question is, what do we do with the rest of the cash? I was thinking of just putting it into a Vanguard taxable fund like the VTSMX. Is this a good choice? Due to my late start I want to try and maximize my return a bit but without too much risk. (who doesn't?) We have thought about buying a rental in our area but not sure it's worth the headache or even if the return would be as good as an index fund.

One more question- does anyone know of a 401k type plan for small business owners that doesn't involve matching funds for employees? I looked into a SEP but we have 6 part time employees and the law requires matching funds. Not that I don't want to be a good boss, but these are minimum wage jobs for 20 somethings going to college who are replaceable. That may sound a bit harsh but the business doesn't make enough money for me to be matching their funds. At the same time I would like to take advantage of the tax benefits of a 401 type plan.

Thanks for your help guys and let me know if you have any questions!