Author Topic: New to MMM and need help investing 300k  (Read 1944 times)

Megs193

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New to MMM and need help investing 300k
« on: June 23, 2017, 01:53:26 PM »
I recently discovered MMM.  I'm trying to get my husband interested in FIRE but for now he is happy with our life and doesn't want to make any changes.  I am 34 and he is 38.  We recently built our dream house and sold our old house. We now have $300k that we need to do something with.  Here is a snapshot of our finances.

My husband brings home 17k a month. This is after maxing out his 401k, profit sharing, taxes and insurance.  He also gets a bonus each September. It is usually around 75k before tax.  I work per diem so my pay varies but I'm currently working very little and only bringing home about 10k a year. 

We don't budget so I'm not sure what we spend on things other than savings and the mortgage.  We never spend more than we have and we usually have leftover money in checking that eventually gets transferred to savings.

We owe 720k at 4.125% on a house worth 960k.  We don't have any other debts.

We own 2 cars outright. A 2009 Altima and a 2015 Acura. We don't plan on replacing either in the next few years.

We have 1k per paycheck go to savings automatically so 26k per year plus part of my husbands bonus.  We have $260k in emergency savings.  I know this is really high but for now it's what we are comfortable with.  We have another 300k from the sale of the house that is currently sitting in this account.

We save $600 a month for college. We have $74k saved.

Our retirement accounts have a total of $590k in them

We use my husbands bonus to fund IRA's and put the rest in savings.

Essentially we have no idea how to invest.  We would like to start investing outside of retirement funds and college savings but we have no idea what to do.  After reading some of the blog I realized that we need to start because it's a waste to keep our money in a savings account.  Where do we start? 

Frankies Girl

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Re: New to MMM and need help investing 300k
« Reply #1 on: June 23, 2017, 02:13:10 PM »
You make a ridiculously awesome salary, and you're saving a fantastic amount, and already have a very high amount for a nestegg. Wow - if you did decide to go full on Mustachian, you'd both be able to retire in a few years, not decades. So good for you! But it sounds like you are spending a huge amount of money (despite the decent amount going into the retirement accounts/savings), so there's definitely room for improvement without too much loss of enjoyment.

First thing would be to start tracking your expenses. Suggestions would be to use programs like You Need A Budget or Mint, or just start using a tracking spreadsheet if you're into tables and such. Not so much to set a hardline budget, but to get a better grip on what your spending patterns are like and what is needs vs wants and areas you could improve on. Since you only have your mortgage debt (even with it being super high) you could focus on both getting more money into investing and paying down that mortgage by funneling your extra $$ into both.

As far as learning how to invest, the absolute best primer out there is Jim Collins' website (now available as a book): http://jlcollinsnh.com/stock-series/

Once you've read through that, you should have a very good grasp of how the market works, how to invest and all that other fun stuff.

Then you can set up your investor policy statement, figure out an asset allocation based off of your goals and long term plans, and start pushing that money into developing a decent portfolio for your future.


Heroes821

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Re: New to MMM and need help investing 300k
« Reply #2 on: June 23, 2017, 02:18:54 PM »
I'm going to second http://jlcollinsnh.com/stock-series/

Between that and MMM himself most of the stress and fear of getting started should fade away.

Megs193

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Re: New to MMM and need help investing 300k
« Reply #3 on: June 23, 2017, 02:22:57 PM »
Thanks for the website recommendation!  It looks like it has the simple breakdown that I need!

Cossack

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Re: New to MMM and need help investing 300k
« Reply #4 on: June 23, 2017, 04:55:55 PM »
You could FIRE now if you sold your house and rented somewhere else. Maybe think about having your dream house after you FIRE? You could move to somewhere else in the country (heck just about any country) and get your dream house for much cheaper than your current one. Otherwise, start with paying off your mortgage.


Rosy

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Re: New to MMM and need help investing 300k
« Reply #5 on: June 23, 2017, 06:20:13 PM »
I second the backdoor Roth, there are discussions on this board about it or just google it.

Do you really want to pay $20K in interest on the mortgage if you can avoid that?

Overall you appear to be super conservative and certainly live below your means, but investing and being tax savvy about your wealth is important. You are right about looking into better ways to grow your hard earned money, besides letting it sit in a savings account for the bank to profit from.
I understand your feeling about not needing a budget, since you have enough income and always send something into savings each month, but I bet that you could easily make a change or two to improve your savings rate. So commit 30-60-90 days to keeping track via YNAB it will crystallize your expenses. Then go from there.

The mortgage would bother me, I'd pay it down to a more comfortable level and then let it ride if you prefer. Losing $20K to interest is a lot of money, more than your DH makes in an entire year (well without the bonus, anyway:)

If you do nothing else - do open a Vanguard account and pay down the house a bit more - good luck, I envy you:)
 

Megs193

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Re: New to MMM and need help investing 300k
« Reply #6 on: June 23, 2017, 08:12:39 PM »
Thanks for all of the replies!  I just calculated how much interest we would pay in the mortgage this year because I couldn't believe it was that high.  It was 28k!  I'm tempted to dump 200k into the mortgage and invest 100k. Our plan was to live in this house until we retire and then sell it and move to an area with a lower cost of living.

I also plan on trying to track my expenses. My husband is not on board right now because he feels like we save plenty and live a comfortable life so why change it. I am trying to get him to understand that we can still live a comfortable life without spending money on whatever we feel like.  Hopefully I'll be back in 2 months with a budget to critique.

tyort1

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Re: New to MMM and need help investing 300k
« Reply #7 on: June 23, 2017, 09:50:28 PM »
I'd rec signing up at Mint.com and actually tracking your spending.  I like Mint because it collates all your accounts together in one place and it'll categorize the expenses so you can see easily in a graph where your $$s are going.  Once you see this, you can work on optimizing.  Shop around for car insurance (Geiko is where I ended up), and home insurance (Geiko gave me a bigger discount for going w/their partner).  Cut out cable, if you have it.  Go to the library for books and DVD's instead of Amazon.  Get your cell phone bill down to $50 or less for 2 lines (I use MetroPCS but there's lots of other options).  Make cooking at home the default, and eating out is only an every-once-in-a-while treat.  Make coffee at home and take it with you instead of going to the coffee shop. If you have Amazon Prime, there's some good free Yoga videos you can stream.  Go for walks or ride a bike for exercise.  Check out "Convict Conditioning" for body-weight exercises you can do at home and cut your gym membership (if you have one). 

You'll be surprised how quickly these things add up.  Hell, it's not even that hard to do, once you know where to cut. 

Beach_Stache

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Re: New to MMM and need help investing 300k
« Reply #8 on: June 24, 2017, 06:30:16 AM »
You are a high income earning family which is great!  You are also doing well saving which is also great, but I would really think about the lifestyle you are living and if it can be maintained in retirement.  At your current savings you will surely be able to retire early, but probably not at the rate of $17k/month from your investments, so really think about that.  Life is good right now, and your savings are good, certainly enough to retire early but if you keep spending $17k/month and don't adjust your lifestyle before retirement then it's going to be a big shock.  I have a sister who her and her husband are both very high earners.  They have a house about the same cost as you but have 5 kids.  They do a terrible job saving but do a great job spending :)  They can maintain their lifestyle because they are such high earners, but they are in for a huge rude awakening come retirement (if they ever get that far) because they haven't saved much in retirement, certainly not enough to maintain that lifestyle with no income.  I would really think about the lifestyle you have though and what you want it to look like in retirement and when you want to retire? 

You said you are new to MMM, but honestly it sounds like you are already doing a good job saving so I think your mentality is already there.  If you can make a few tweaks like paying down your house or putting excess in investments then you'll be in even better shape.  You don't have to be an investment genius, just buy the low cost index funds that mimic the total market or S&P and keep investing and try to forget about it for a decade or two.  If they are low cost index funds they that's all you really need to go.  Sounds like you are doing very good saving though, so props to your family!

chasesfish

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Re: New to MMM and need help investing 300k
« Reply #9 on: June 24, 2017, 08:16:19 AM »
Congrats on the high income!  I'm sure the lifestyle seems high relative to others on here, but your expenses don't sound crazy.

Personally, I'd figure out how much you and your husband want to have in after-tax savings (if everything goes to hell) and pay down the mortgage with the difference.  I'd consider taking the balance down to $417,000 then look into refinancing into a 7 year ARM or 15 year mortgage and cut your rate by over 1%.

Start a budget or just track expenses to look for any obvious leaks that are easy to plug.

Then I'd agree with everyone else, start reading the Stock Series and if you don't already have one, open an account with Vanguard and send $10,000 to buy this:  https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT .  Put additional savings in there are necessary.

Good luck on your newfound journey


Dee18

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Re: New to MMM and need help investing 300k
« Reply #10 on: June 24, 2017, 08:58:53 AM »
I suspect you could substantially reduce expenses without your husband even noticing.  If you are the primary purchaser, just think of ways to spend less.  Have one more meal a week cooked at home instead of eating out or carry out.  Limit buying clothes, shoes, and household goods for yourself and your kid(s).  Get beyond the idea that specials occasions require new clothes. Read zerowastehome blog to recognize how much we all tend to spend on things that get thrown away.  For example, don't buy new school supplies when your kids have enough of everything.  Use a "30 day list" where you write on a list anything you want, but wait at least 30 days before buying it.  It's amazing how often one no longer feels the want or need for the item. Food shop consciously.  In my city, Aldi's has better organic produce than Whole Foods ( though much less selection) for half the price. End any monthly subscriptions you don't really value....whether it's a gym, Hulu, etc.  once a year check for lower prices on phones, internet, etc.  shop for car insurance.  (When you have teen drivers, check what will reduce their costs....for mine a two day driving course more than paid for itself in reduced insurance costs).  Read MMM's blog posts for many more great ideas.

Megs193

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Re: New to MMM and need help investing 300k
« Reply #11 on: June 24, 2017, 05:30:36 PM »
I suspect you could substantially reduce expenses without your husband even noticing.  If you are the primary purchaser, just think of ways to spend less.  Have one more meal a week cooked at home instead of eating out or carry out.  Limit buying clothes, shoes, and household goods for yourself and your kid(s).  Get beyond the idea that specials occasions require new clothes. Read zerowastehome blog to recognize how much we all tend to spend on things that get thrown away.  For example, don't buy new school supplies when your kids have enough of everything.  Use a "30 day list" where you write on a list anything you want, but wait at least 30 days before buying it.  It's amazing how often one no longer feels the want or need for the item. Food shop consciously.  In my city, Aldi's has better organic produce than Whole Foods ( though much less selection) for half the price. End any monthly subscriptions you don't really value....whether it's a gym, Hulu, etc.  once a year check for lower prices on phones, internet, etc.  shop for car insurance.  (When you have teen drivers, check what will reduce their costs....for mine a two day driving course more than paid for itself in reduced insurance costs).  Read MMM's blog posts for many more great ideas.

This is so true!  I do the majority of the buying in our house.  I can definitely make some changes without him noticing.  We usually go out to eat on Saturday night but tonight I decided to cook because of this post!