Hello everyone, first time poster! My wife and I are recent visitors to the MMM forum/website and are overwhelmed with this great source of financial information!
We are both 31 and have 2 children (3 years old and 9 months). Over the years we have been generally frugal and have no major debt outside of our homes and my school loans. My wife works from home part time running/working for our side business and I work at a corporate day job. Recently we have talked about how great it would be if I could eventually work exclusively from home as part of our side business and enjoy some of the perks of working my own hours and working less in general. We would like to have enough assets built up for me to quit my full-time job by the time I am 40 (a little over 8 years from now) at the latest. We are not looking to retire by 40 per se, but would like to be able to live on the money that we make from our side business and have a hefty cushion in place in case things with the business don’t go well.
We are trying to formulate a plan to build assets quickly and make our money work for us the best we can, but since we are just now really getting serious we have some questions. I have included a breakdown of our assets, debts, income and a few questions below. Any insight that you can give would be appreciated!
Retirement Accounts
My Retirement Accounts:
Current 401k: $24,000 (I contribute 10% with 3% company match)
Previous Employer 401k: $24,000 (we are working on having this rolled into the above account)
Previous Employer State Retirement Plan: $12,000
Wife’s Retirement Accounts:
Traditional IRA Account at Sharebuilder: $20,000 (she contributes the max $5000/yr to this account)
Traditional IRA account at e-trade: $5,500
Previous Employer 401k: $21,000
401k Rollover at E-trade: $7,000
Total: $113,500
Non-Retirement Accounts
E-Trade Brokerage Account: $22,000
ING Money Market Account: $15,000 (this includes $10,000 earmarked for emergency fund and the rest is for our next car purchase and periodic insurance charges)
Total: $37,000
Credit Debt:
-Mortgage on Primary Residence: $171,000 @ 4.85 (PITI $1300) – Property is worth approx $230,000
-Mortgage on a Rental : $149,000 @ 6.625 (PITI $1471) – Not exactly sure of property value. Most likely between 190 and 200k
-Student Loan - $7,300 @ 2.125%
-All credit cards are paid off monthly. We generally have $1500 - $2000 leftover monthly to save but are looking at ways to trim our discretionary expenses to save more.
Income:
My corporate job: $85,000/yr
Consulting business: $40,000/yr (this is the business I would like to quit my day job to grow)
Rental Income: $1500/month
My Questions:
1. Based on the info above, should I try to increase my 401k contribution to the max allowed? I am in the process of rolling my old 401k into the 401k with my current employer because that is what was suggested to me by the financial planner that my company deals with. Is this a good idea or should I roll the old 401k somewhere else?
2. We are trying to sort through what to do with my wife’s accounts. Our initial thought was to transfer the e-trade traditional IRA to the Sharebuilder account, and then invest everything in the Vanguard funds (VFINX, VB, VDMIX, and VBISX) suggested by MMM. Does this seem advisable given our situation? We would also like to roll the two 401k accounts together as well, but then what should we invest that money in? Should we invest in the same Vanguard funds or something different?
3. Does anyone have any suggestions for funds that we can open to keep our non-retirement savings in?
4. We are not sure what to do about our Rental Property. We purchased it back in 2003 right before we got married and lived in one of the units (it’s a twinplex) until we bought our house in 2006. We put very little money down and as a result now get very little cash flow from it ($25/month max). It is in good condition so we don’t have much per year in the way of repairs, but we do pay approx $75/month for lawn maintenance in the summer and snow plowing in the winter. We have been thinking about refinancing to get a lower rate, but since we aren’t sure of the value there is a chance that we still don’t have the 25% in the property that all lenders seem to require for NOO properties. Is it worth paying down the loan amount, or should we just cut our losses with this property and sell? And if we do sell, we will have to reinvest in another property to avoid Capital Gains Tax, correct?
All comments and suggestions are appreciated. Thanks so much for taking the time to read this!
