Author Topic: Newbie looking for advice  (Read 1303 times)

Glyn

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Newbie looking for advice
« on: October 02, 2019, 07:30:23 PM »
Hi Everyone
I am new to FI (< a week) and MMM (1 day). I wanted to get some advice.
By the end of November I will be down to 1 credit card at 13.5k, a car loan at $7.5k and my mortgage. I was hoping to pay extra onto the car payment and try to get rid of that in 18 months by increasing my payments up from 232 to about $420. I have 3 options (maybe more but need input);
1. Should I pay off the car that and then use that money to pay off the credit card which is at 0%? (used car - 2013 but now has 110k miles)
2. Or should I use that extra $200 and try to put it into an account like VTSAX (which I learned about in the ChooseFI podcast ep 3 ( I just started)). I am pretty sure my retirement savings is not good.
3. or should I focus on getting my emergency fund up? (at a paltry 5k right now).

I also have some questions about my 401k and if it is optimized. It is at Fidelity and I am still contributing to it. Is it ok to ask about this or is it best via  PM?

thank you!
G

MDM

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Re: Newbie looking for advice
« Reply #1 on: October 02, 2019, 10:02:26 PM »
Glynixx, welcome to the forum.

Some reading and action assignments for you:
1. See http://forum.mrmoneymustache.com/ask-a-mustachian/which-loan-to-pay-extra-first/msg1307278/#msg1307278, download the spreadsheet from Vertex42, and use it to evaluate the costs of your loans.
2. $5K may or may not be fine as an e-fund amount for you.  See Emergency fund - Bogleheads.
3. See
the 'Basic Terms' tab of  the case study spreadsheet.
Getting started - Bogleheads
Investment Order
Stock Series
www.etf.com/docs/IfYouCan.pdf
for more reading material.

After digesting those - what questions remain, and what new ones do you have? :)

If you want to go into details, see How To: Write a "Case Study" Topic.

Good luck!


Raenia

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Re: Newbie looking for advice
« Reply #2 on: October 03, 2019, 07:50:45 AM »
How long is the credit card at 0%?  That's usually an introductory rate that will expire at some point, and you want to be sure you pay off the balance before then.  Other than that, I second the Emergency Fund and Investment Order threads posted by MDM, as your first stops to help you make a decision.

More importantly, congrats on getting started!  We can help you optimize, but the important part is that you're starting now.  None of those options are bad decisions, they will have different pros and cons.  How much emergency fund you are comfortable with is ultimately up to you, for instance.

Feel free to post your questions about your 401k as well, after doing the reading MDM recommended.  We're happy to help!

BECABECA

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Re: Newbie looking for advice
« Reply #3 on: October 03, 2019, 09:21:32 AM »
How long is the credit card at 0%?  That's usually an introductory rate that will expire at some point, and you want to be sure you pay off the balance before then.
...

This is really important so I want to add that the 0% introductory offer may actually be contingent on your balance being paid in full by the end of the introductory period. Otherwise whatever balance is left gets charged interest at the card’s regular rate for the entire time you’ve had it. So if your card had a 0% interest introductory offer for the first 12 months and then a 15% rate after that, if you don’t pay off your balance until one day after the first 12 months is done, then they’ll charge you 15% interest on that balance for 12 months plus one day.

Check the fine print of your introductory offer, and if it’s like this, you will want to focus everything on getting that credit card balance paid.

GermanStache

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Re: Newbie looking for advice
« Reply #4 on: October 03, 2019, 09:57:02 AM »
I personally would not invest if I was in debt. But this does depend a little bit on your age - so if you are young I would focus entirely on paying down the debt. If not maybe invest a little bit but throw most of it at the debt.

Glyn

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Re: Newbie looking for advice
« Reply #5 on: October 03, 2019, 10:57:47 AM »
Hi everyone!
thank you so much!
MDM I have already started the reading and post back once I am done :) Great stuff!

Some more info:
I checked on the card - I have to May 2020 to pay off 9k of it. $4300 is at 9.9%

I am 47. I have 145k in my 401k. It says my rate of return for 1 year is 0.34% but year to date is +11.82%. I get a 6% match and just upped my contribution from 8 to 10%.
I am in the FID Freedom 2035 k (39.63% of my 401k) and 2040 k (60.37% of my 401k).
I have 20k in a rollover IRA (that seems to be losing money by the minute lol) I am in FFFFX FIDELITY FREEDOM 2040 for about $6230 and FFTHX FIDELITY FREEDOM 2035  for about $13.7k

Monthly fixed income is about $3900
Oct 2019   
Mort   1800
Verizon   150
BOA CC   170
Car Payment   282
Oil    130
Amerigas   60
Trash    40
Kids lunch    32
Chase Amazon    100 - to be paid off in November
Kid's 529    50
Life ins   145
Christmas   65
 Oil    130
National grid    200
Music    lessons for kids (goes from 20 to 80)
Fire taxes    50
Christmas   65
Car insurance    217
Co-pay   30
total        3736
Take home    4600


I would post more but have to run to a meeting as lunch is over.
Thank you all!

chemistk

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Re: Newbie looking for advice
« Reply #6 on: October 04, 2019, 05:29:30 AM »
Welcome to the community, your willingness to jump right in is awesome! Any and all questions are welcome here.

Some thoughts:

1) This whole thing is a journey, you'll be able to make some quick changes now but the real rewards come from long-term, sometimes boring, sometimes frustrating, work toward a goal.

2) On the topic of your 401(k) - it would be wise to look into the expense ratio for the funds that your 401(k) reside in, as well as the specific allocation of each of the target date funds. You may find that your 401(k) is costing more than you would like. Don't worry too much about short term returns, the ups and downs of the markets year over year are evened out over the long term.

3) Around here, it's standard practice to 'facepunch' folks - that is, to point out some of the more obvious areas of a budget that could use readjustment. For starters, it seems like you spend a lot on utility costs for your home. Between your mortgage and what appear to be utility and other misc home items, it looks like you're spending a bit over half your monthly income on your home alone.

Also, it would be much more helpful to clarify your income. $3900 is your take-home pay, but what's your gross income?

Glyn

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Re: Newbie looking for advice
« Reply #7 on: October 07, 2019, 07:41:58 PM »
Gross is about 125k. 2nd job is btw 3500-7500 / year. The 3900 prob does not include the 250-300 or so I try to save. Also, I upped my 401k to 10%. Hope to find a way to max it to 15% next year.

I am still reading the stuff MDM recommended but wanted to post so that you know I am still here. I have read the EF post and working thru the boggle head vids.

I am not sure what the best order of attack should be - 3 to 6 mo emergency fund or debt...

I can double check the fees. I suspect i will have to call Fidelity to get a solid answer.

The house expenses are high but the electricity is usually about $100-130 vs $200. I need to cut the cord but I believe i am locked in for 2 years and only about 1 year in. Fire taxes are $300 so that $50 will drop off in a couple of months. Oil is $260 (they wanted $290 a month) and gas is $60 down from 90 because I don't think they can get the budget right lol. Oil is for dryer and cooking only. I think I only filled it 2 or 3 times last year.

I was thinking of leaving the emergency fund at 5k and work on paying off the car. I owe 7700 and I suspect that if I throw my tax return at it ($1000), stop saving in my EF - usually 200-250 a month- and my money from my second job, I may be able to pay it off by May or June of next year if I throw about $600 a month (plus 2400 from extra job after taxes and 1k from taxes). Then I can use that to try and pay off BOA which should take 13 months. (EF savings + car payment is about $500-600 + 2 semesters of part time job at about 4800-5600).

Car insurance would only drop $20 per month if I upped the deductible from $500 to $1000 so idk if I should do that.

Local credit union has a 0% for 15 months w a 2.9% bal transfer fee. Maybe i should do that or see if I can get a $0 transfer fee (if that is possible) card and move the BOA cc to it around Feb. 2020.

So far this year (last few months as I started getting smart) i have paid off my student loan and 3 credit cards. The 4th card will be paid off by Nov 1. That will leave me with 1 card and my car payment. I am slowly trying to be less stupid.

I suspect 47 yrs old may be too late for FI but I cant be sure. Even if it is, maybe i can be a role model for my kids and help them as they grow.

I am working thru the blog posts from MMM, Ramit's "I Will Teach you to be rich " book as well as choosefi.com podcasts

Glyn

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Re: Newbie looking for advice
« Reply #8 on: October 09, 2019, 11:09:05 AM »
I did find out that for my 401k (and IRA) the fees / expenses are as follows:
The expense ratio for the FFFFX is .75% Fidelity Freedom® 2040 Fund
The expense ratio for FFTHX is .73% - Fidelity Freedom® 2035 Fund

Is that too high?

MDM

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Re: Newbie looking for advice
« Reply #9 on: October 09, 2019, 11:21:34 AM »
I did find out that for my 401k (and IRA) the fees / expenses are as follows:
The expense ratio for the FFFFX is .75% Fidelity Freedom® 2040 Fund
The expense ratio for FFTHX is .73% - Fidelity Freedom® 2035 Fund

Is that too high?
What are your other choices and their fees?

Glyn

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Re: Newbie looking for advice
« Reply #10 on: October 09, 2019, 11:35:19 AM »
Truly I am not certain. They had me look at an index versions of those 2 funds and then told me i needed 100k to qualify.
The only other one that seems to be lower is the Fidelity Large Cap growth index fund as it has an expense ratio of 0.035%:
https://fundresearch.fidelity.com/mutual-funds/summary/31635V729


She gave me this list but  they are all more expensive (0.77% to 1.32%) than the ones I have except the above:
https://www.fidelity.com/fund-screener/compare.shtml#!&fIds=FSPGX%2CCPOAX%2CAKREX%2CFBGRX%2CFDSVX&tab=mf

(to be honest i dont even know what a large cap growth fund even is :(  i feel kinda stupid and definitely overwhelmed lol)

MDM

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Re: Newbie looking for advice
« Reply #11 on: October 09, 2019, 12:48:56 PM »
(to be honest i dont even know what a large cap growth fund even is :(  i feel kinda stupid and definitely overwhelmed lol)
People don't know anything until they learn it. :)

E.g., see Large Cap growth index fund - Google Search.

Putting all your 401k money into that fund, and using other accounts to reach your desired asset allocation, would not be unreasonable.

diapasoun

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Re: Newbie looking for advice
« Reply #12 on: October 09, 2019, 01:24:48 PM »
I think most of us felt stupid when we started teaching ourselves about investing and finances. :) I know I did!

Congrats on starting the journey, and I especially wanted to point out what you said here:

Even if it is, maybe i can be a role model for my kids and help them as they grow.

If you have credit card debt, then definitionally you've been living beyond your means. Learning how to live within your means takes effort and practice, and there might be moments when you want to throw in the towel. Stuff like this -- being a good role model for your kids -- can be a really powerful motivator. Hold on to that if/when the going gets rough!

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Re: e-fund or debt payoff: To some extent, this is about your comfort. You have a small e-fund set up (looks like a little under a month and a half of expenses). Is that sufficient for your comfort? If so, throw it all at the debt. If not -- keep saving while making at least minimum payments on the debt.

Welcome to the forums, and good luck!