Author Topic: Point me in the right direction...  (Read 1980 times)

Dirt Cupcake

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Point me in the right direction...
« on: March 09, 2017, 01:38:03 AM »
I'm newish to the whole MMM community, but I've read through a ton of the articles on the blog and tons of posts on the forum. Even with all that reading I just need to be pointed in the right direction. There are so many possibilities and I can sit here and agonize over each one, but I'd rather you guys tell me wwyd...

If I am able to save 35-45% of take home pay, what should i be doing with it?


Here are the numbers:
Monthly take home is approximately $3800-$5000 depending on how much OT I pick up. I just paid off a chunk of SO's debt so the numbers are low...
 
ASSETS         
Checking Account: $2,000
Savings Account: $5,000 (0.95% APY)
401(k): $16,500 (currently at 7%)
Betterment: $11,600 (currently $200 a month deposited). Not ready for Vanguard yet. $5k of this is 90% stocks/10% bonds and the other $5k is 50/50.
Home: $195,000         
Total Assets: $230,100

Mortgage: $158,000 (3.5% interest rate)
Student Loans: $12,200 (<3.75% interest rates)
SO's debt that I took on to help kill: $12,500 (0% interest, will be paid off before interest rate begins as long as something terrible doesn't happen)               
Total Liabilities: $182,700   

Not counted: $7000 in home account. SO and I split home shit (33% and 66% respectively... a whole other story there...) plus I rent out the in law apt over the garage. This account has been growing by about $1000/month (basically the rent payment being banked every month) but I plan on doing some things to the house this spring such as a front deck and tarring the driveway which will take close to $4000 out of there and maybe $3000 out of my personal savings.

One thing to keep in mind:
I need some fun money. My kids are only kids for a little while longer (14 & 11) so I still need money set aside for funsies. I'm willing to put off FIRE by a few years in exchange for great memories.

So with all that in mind, focusing on money left over after mortgage and bills are paid:
 
Do I adjust 401k contribution so that I only have enough left over at the end of the month for some funsies (no extra to Betterment/savings/etc)? Or should I do something like 40% into Betterment, 20% fun money, adjust 401k to equal the remaining 40%?

Or do I start throwing extra money toward mortgage? Or student loan? My thought is I'll be able to have a better ROI putting money elsewhere.

When thinking about "saving" and knowing I'm only getting 0.95% in savings account, do I just leave that $5k there and keep putting money into investments? Or is that too risky and I should pad that savings more? Or do I invest in some 24 month 1.35% CDs?

We are hoping to buy an investment property in 2018/19 once SO's finances are fixed.

I'm the first in my family to be in this kind of spot financially, so I have no one to guide me.

What do you suggest?
 Thanks in advance!

OvertheRainbow

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Re: Point me in the right direction...
« Reply #1 on: March 09, 2017, 04:14:40 AM »
Question: Why are you paying debt off for a person who isn't your spouse (are you married to this person?), especially since there are children involved?

To answer your question, you should put that money toward paying off your (non-mortgage) debt as quickly as possible. You can knock the annoying student loans out in less than two years with the income you have. I would NOT be paying off SO's loans (why can't he?) unless we were married.

I would think about opening up a Roth (or Traditional, depending on income) IRA and max it out, hopefully for 2016 as well as this year. I would UP my 401k contributions to AT LEAST 15%...you won't FIRE with only 7% contribution, unless you have some serious rental properties. Also, may I ask, your age and how much you have in retirement accounts? If you are behind in retirement, I would stress investing or debt repayment.

MommyCake

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Re: Point me in the right direction...
« Reply #2 on: March 09, 2017, 05:35:05 AM »
Question: Why are you paying debt off for a person who isn't your spouse (are you married to this person?), especially since there are children involved?

I also wonder about this situation.  You are working overtime, paying your SO's debts, allowing SO to pay only 33% of expenses, and you have children and your own debt and low 401k balance.  Being divorced from a financially selfish and irresponsible person, this post throws up red flags for me.

Vindicated

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Re: Point me in the right direction...
« Reply #3 on: March 09, 2017, 06:53:14 AM »
Assuming you've already signed on to SO's debt, since there is a 0% interest rate, I'm assuming you put it on a Credit Card in your name. 

This wasn't wise, but it's done.  So, let us move forward.  If this is a CC, the interest rate will jump up to what? 18%?  When?  This would probably be your priority, if my assumptions about you putting it on a CC are correct.

I hope SO isn't taking advantage, but I'll just hope you have good judgment in that field.

After the possible high interest debt is paid off, don't force down the low interest debt.  Begin investing the leftover, and pay the student loans and mortgage at the monthly rate, or slightly higher if it makes you feel good.  I pay a little extra ($10-50/mo) towards all of my low interest debt, just because it makes me feel good... that's OK if it keeps your snowball rolling.

OthalaFehu

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Re: Point me in the right direction...
« Reply #4 on: March 09, 2017, 07:29:41 AM »
don't be quick to pay off the mortgage if you claim itemized deductions on your taxes, same with the student loans, those rate locks are pretty good.

Dirt Cupcake

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Re: Point me in the right direction...
« Reply #5 on: March 10, 2017, 05:18:35 PM »
Question: Why are you paying debt off for a person who isn't your spouse (are you married to this person?), especially since there are children involved?
I hope SO isn't taking advantage, but I'll just hope you have good judgment in that field.

In all honesty this relationship feels more like a partnership than my 12 year marriage ever did. But I understand the concern of my money going toward someone's else's debts if we aren't legally bound. It's 15 months interest free and will be paid off in 12 months. Of course I'd rather have put all that money towards my investments but I want to go on adventures with him and without my help he'll never get to that point. If he had his way we'd already be married. I told him the day he is done paying his ridiculously generous non-court-ordered alimony to his free loading exwife I'll marry him. He's just a good guy with a heart bigger than his wallet.
I also plan on making highly encouraging him to buy a house (2018?) that will be rentable. We live right near UConn and they keep taking in more students than they can house.

don't be quick to pay off the mortgage if you claim itemized deductions on your taxes, same with the student loans, those rate locks are pretty good.

I bought the house in July so I did not pay enough in 2016 taxes and interest to be able to itemize, I'm looking forward to that for this tax year. Also, I made too much last year to claim student loan interest. There's no max AGI for claiming mortgage interest, correct? I work as an RN and my employer was offering silly bonuses to work OT last yr. I grossed over $82k, but I'm thinking I'll be closer to low $70's this year.

I would UP my 401k contributions to AT LEAST 15%...you won't FIRE with only 7% contribution

Yeah I did 20% right after I posted. I guess I just needed to put it out there to validate that decision. I still feel weird about it, though. That's socking it somewhere I can't touch without being penalized for 35 more years. What makes the 401k (or an additional IRA) a better choice than a regular taxable investment account that I can get at as needed? I want to be able to fire before I'm 70. If I'm 55 and have it all in a 401k, I can't really use it for 15 more years. Maybe I'm missing something?





 

Fire2025

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Re: Point me in the right direction...
« Reply #6 on: March 10, 2017, 05:52:24 PM »
Yeah I did 20% right after I posted. I guess I just needed to put it out there to validate that decision. I still feel weird about it, though. That's socking it somewhere I can't touch without being penalized for 35 more years. What makes the 401k (or an additional IRA) a better choice than a regular taxable investment account that I can get at as needed? I want to be able to fire before I'm 70. If I'm 55 and have it all in a 401k, I can't really use it for 15 more years. Maybe I'm missing something?

You may want to check out this info on how to get your 401k money early.
http://www.madfientist.com/how-to-access-retirement-funds-early/

Laura33

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Re: Point me in the right direction...
« Reply #7 on: March 10, 2017, 07:10:20 PM »
I want to be able to fire before I'm 70. If I'm 55 and have it all in a 401k, I can't really use it for 15 more years. Maybe I'm missing something?

Where did you get 70 from?  401(k) is 59 1/2.

Dirt Cupcake

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Re: Point me in the right direction...
« Reply #8 on: March 10, 2017, 08:59:02 PM »
I don't even know.

I'm blaming it on the fact that I've been working rotating shifts this week and my brain is shot. :P