The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: silvor on October 17, 2012, 08:48:42 PM
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So, here's my situation:
Age 41, wife is 40, makes a nominal amount of money as she mostly takes care of the kids.
Kids, 7 and 9, they each have $200 in savings
house is worth $230k and is fully paid for. I have a 100k credit line I can draw on, but have never really used it.
401k worth $140k, but I have 40k in cash in the account. I can buy ETF's including gold and silver ETF's.
I invest 5% of my 65,000 salary to get the company match. I usually get a $6000 yearly bonus, but don't always. I actually work in the financial services industry, but I don't like how advisors are paid. Such as, they make no money telling you to pay off debt, so obviously they won't tell you to pay off debt. ;-)
I feel like I should be saving more. I think I should be putting more like 10% away. So really that's just an extra $250 a month.
So I figure I have 4 options:
1) physical metals - but How much? I am thinking silver as I can buy a little at a time close to spot. That said, perhaps buying and ETF like SLV is a better bet with all the cash I have? Maybe just take the extra $250 a month and buy silver? But it's after tax money. The other "idea" is, since I have no silver right now, buy a large chunk $3-5k with a 401k loan (since I have a lot of cash doing nothing and I'm paying myself back). Or use the line of credit at 4%?? I found a real good deal on silver at spot so thought I should jump at it. I go back and forth on this one as I've bought and sold precious metals a lot in the past year. Some swear it's "real money, others think is serves no real purpose.
2) Or should I just invest in stocks or bond ETF's in my 401k? I like the dividend payers as you at least get something back, and I get the tax deferral.
3) Save for the kids college?
4) build up cash as we don't really have much on hand as we've paid off the house. But we do have the line of credit if needed.
5) spend it.
a) On the practical: We do need new carpeting for the house. Not want, we really need it.
b) On the frivolous: I don't own anything and it's been real hard to work and work and work and not have anything. Between paying for expenses and paying off the house, we've never spent money. Heck, I used to have a pretty cool guitar and firearm collection I sold off the past few years which helped pay down the mortgage, but I now kind of regret it. :-(
Any help is appreciated!
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You seem to have made this post on a couple other message boards and received a number of replies. It might help to be more targeted with your questions in order to receive more helpful advice.
This post touches on many aspects of your financial life in a very haphazard manner, jumping from 401k allocation, to silver speculation, savings rate, to college saving decisions, to lifestyle choices. It seems like you're in serious need of a holistic plan. Read all of MMM's old blog posts and you should start developing a much clearer picture of how to look at saving and investing (many of the issues that you touch on, like having a cash stash while you have an undrawn credit line are very specifically addressed).
The 401k question is easiest to address without writing a novella. You should be fully invested. There's no reason to be holding cash in that account. I'd read a book on asset allocation and figure out what's right for you given your goals (consider The Intelligent Asset Allocator by Bernstein). Personally I'd avoid putting more than 10% of your retirement assets in precious metals. It can be a useful diversifier in a periodically rebalanced portfolio, but it's ultimately a non-productive asset. In 20 years a pound of silver will still be a pound of silver. If you're worried about all that fiat currency getting churned out, REITs and stocks should track inflation over time as well as provide an incremental return.