Author Topic: Looking for advice on long term plan  (Read 2278 times)

younggunner

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Looking for advice on long term plan
« on: November 30, 2015, 01:09:09 PM »
Hello all and thanks for reading-

I am only 25 and I am looking for some advice on a long term plan with the end of the year coming up. 

My current situation is:

-Avg income around 75k for the last two years, before that 40-45k
-Avg monthly expenses around 2k a month including mortgage. (watching it more closer now)
-Not a very stable job, as my company is involved in a merger/takeover, and future is unclear.
-0 credit card debt
-I owe 10.9k on a '14 subaru @.9%
-5k checking account
-5k ER fund in a 'savings account' 
-19k 401k
-16k in a diversified TDameritrade stock portfolio (I know, not index funds yet)
-I bought a house 3 years ago and I owe 120k on it @ 4.75%,  (worth anywhere between 160-200k) and I have a 12k HELOC on it, which is low becuase there recent apprasail was 160 and before was 200 (based on foreclosure comps)

I am planning on upping my HELOC in the next few weeks for as much as they allow.



So my thoughts are that I want to move the 5k out of the savings account.  I have liquid money in my stocks, a decent HELOC, 4-5k averaging in my checking account... So I am considering opening an IRA and funding it to the max with savings account (earning nothing) so that I can atleast get the tax breaks as I will be at a higher tax bracket this year.   My other option could be to put it into the stocks as an index fund and although I wouldnt get any tax breaks, I would still have the funds easily accessible.  My goal is to purchase an investment property to either flip or rent in the 40-100k range (in PA).  I am hesitant to put the 5k in an IRA because I feel that It might be more beneficial to save as much cash now for a downpayment on a real estate purchase.  Can I just use the HELOC on my down payment?  I would imagine it should be much higher than 12k this time around.. also, as much as I want to get out of all debt, I am not really considering paying off the subaru car loan, since its only .9% interest. 

So, in summary:  My long term plan is to get started in real estate, but looking for advice on how/when to get started in the game, before I use funds elsewhere for tax saving. 
« Last Edit: December 01, 2015, 07:06:04 PM by younggunner »

ysette9

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Re: Looking for advice on long term plan
« Reply #1 on: November 30, 2015, 01:35:31 PM »
I think it would be helpful to have some more information. What is your salary, how secure is your job, what type of income increases do you expect in the future? Do you have access to a 401(k) and do you participate? How much of a down payment are you hoping to have on this potential future investment property? How much are you saving each month and where is that going? What is your average spending?

Typically the advice around here is to take advantage of the tax-advantaged savings vehicles (401(k), IRA, etc.) before putting money into a taxable account. Personally I am likely more risk-averse than you, so I would not feel comfortable taking on more debt in the form of an investment property with something like a car loan hanging around.

MDM

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Re: Looking for advice on long term plan
« Reply #2 on: November 30, 2015, 01:51:25 PM »
-19k taxable 401k

...I am considering opening an IRA and funding it to the max with savings account (earning nothing) so that I can atleast get the tax breaks as I will be at a higher tax bracket this year.   My other option could be to put it into the stocks as an index fund and although I wouldnt get any tax breaks, I would still have the funds easily accessible.
A couple of things:
1) What do you mean by "taxable 401k"?  We could guess, but better if you elaborate.
2) Are you aware that your contributions to a Roth IRA may be withdrawn at any time without paying tax?

Quote
  My goal is to purchase an investment property to either flip or rent in the 40-100k range (in PA).  I am hesitant to put the 5k in an IRA because I feel that It might be more beneficial to save as much cash now for a downpayment on a real estate purchase.
...
So, in summary:  My long term plan is to get started in real estate, but looking for advice on how to get jumpstarted in the game, before I use funds elsewhere for tax saving.
This seems your biggest decision at this point, and only you can make it: to concentrate on running your own real estate business vs. investing via index funds in other people's businesses.  Either way can work.

younggunner

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Re: Looking for advice on long term plan
« Reply #3 on: November 30, 2015, 03:49:18 PM »
-19k taxable 401k

...I am considering opening an IRA and funding it to the max with savings account (earning nothing) so that I can atleast get the tax breaks as I will be at a higher tax bracket this year.   My other option could be to put it into the stocks as an index fund and although I wouldnt get any tax breaks, I would still have the funds easily accessible.
A couple of things:
1) What do you mean by "taxable 401k"?  We could guess, but better if you elaborate.
2) Are you aware that your contributions to a Roth IRA may be withdrawn at any time without paying tax?


I edited the post.  I think I meant taxable portfolio and a 401k through work that I take advantage of a 5% match.  I will increase it so I hit the max limit.

I also need to research the roth IRA more, So I assume I can withdraw what I put in?   
I am currently making around 75k a year, but my job isnt very 'secure' .  Basically I'm working for a company thats getting taken over and noone knows the future at my company.  That being said, I made about 75k this and last year, so I assumed the standard IRA would be better than the roth.

In regards to the index vs. real estate comment:  I think that I want to try to get into the real estate investing early on in hopes to get cash flow that I can then put the profits into the index funds.  However right now I'm not sure what I can and cannot do with my HELOC in regards to a mortgage on a second property or if I need all cash.  If I am going to need all cash, then maybe i dont want to do anything with the 5k savings account right now..
« Last Edit: November 30, 2015, 03:52:50 PM by younggunner »

formerlydivorcedmom

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Re: Looking for advice on long term plan
« Reply #4 on: December 01, 2015, 01:21:38 PM »
What are your monthly expenses?  If your job is unstable right now, I wouldn't take the $5k out of savings.  You need an emergency fund just in case your job goes poof.

younggunner

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Re: Looking for advice on long term plan
« Reply #5 on: December 01, 2015, 07:03:58 PM »
What are your monthly expenses?  If your job is unstable right now, I wouldn't take the $5k out of savings.  You need an emergency fund just in case your job goes poof.

My monthly expenses are about 2k.  Mortgage included.  I have about 5k in a checking account above 3 months mortgage payments in a seperate account.  That said, I have probably about 3 months expenses saved as ER.  I think you are right tho, with my company possibly closing the doors or getting transfered any day, maybe I should save more than just 3 months of expenses.  I was thinking I should have ER covered enough and looking toward the tax saving benefits... but looking to kickstart the real estate investing...