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 Post subject: Income Planning 23 Year Old
PostPosted: Sat Feb 23, 2013 2:50 pm 

Joined: Sat Feb 23, 2013 2:04 pm
Posts: 3
Hello,

I am first of all very excited to find a Blog about this kind of information and to get opinions on my current situation. Thank you ahead of time for your time and effort in answering my questions and even reading this article. I would like to first put my situation up here and will then post the questions I would like answered below and any additional information you think important I would thoroughly enjoy.

I am currently 23 Years Old with a Salary of $60,000.00
I will be getting Married in June to my wonderful Fiance and am working toward getting out finances as ahead of the game as we can.
Debt.
-I currently owe only 2k more on my car and my fiance has student loans for about 10k which will both be paid off in about 2 Months.
-I have a Roth IRA through Edward Jones I maxed out last year and am halfway to maxing out this year already.
-I have a 401k that is activated March 2013 and I selected to have 15% of my check into this account
-Essentially when we get Married in June I will have no debt for either of us with about 10k in the Bank.
-I will be receiving full benefits for both of us in June when we get Married through my company as well.
-My Fiance will have her Bachelors in May 2013 and is continuing to either Med-School or P/A School

Current Findings:
-I have seen many places where they have the 50/30/20 breakdown but I don't feel this works for me because all of these work on tackling debt and car payments etc. I am going to only really have the House Payment and regular monthly expenses such as utilities etc. and am wondering so I have a plan going into the Marriage.

Questions:
-I would like your thought on how much % wise for perspective I should pay towards house + extra payments to pay it off faster.
-How much I should save for Vacations and Fun things for us to enjoy?
-How much should I try to pay while my Fiance is going to school vs extra payments towards house.
-How much to have in an emergency account?
-Other things to try and account for.

Once again I thank you so much for your time and opinions.

Nick


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Sat Feb 23, 2013 4:38 pm 

Joined: Fri Jun 25, 2010 3:06 pm
Posts: 81
It sounds like you're doing good so far. I think the normal emergency fund is 6 months worth of expenses. After that, start paying off debt while still funding retirement accounts. I'd prioritize student loans over housing because you can't walk away from those loans, not even in bankruptcy. As far as vacation, I don't know. I suspect saving a thousand or so per year isn't bad but don't feel the need to spend all of it every year. Expect some vacations to cost more and others less. Save the rest for the house. Save for at least a 20% down payment.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Sat Feb 23, 2013 8:22 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1889
How secure is your job?

Does your employee match your 401(k) contributions? How much is the match?

What are your prospects for promotion or advancement?

Do you have any skills that would allow you to earn more if your wife goes to med school? You'll spend a lot of time on your own if she goes.

I wouldn't worry too much about vacations if your wife goes to med school, as she won't really have time for much except maybe some weekend getaways.

Get the hell out of Edward Jones and put your IRA somewhere else.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Sun Feb 24, 2013 1:15 pm 

Joined: Sat Feb 23, 2013 2:04 pm
Posts: 3
I am working a job where I work between 60-70 hours per week now and that will help me pay off all those debts. Her School Loan(all of them) and My car will ALL be paid off within the next 2 months. We will get Married in June with NO debt and +-10k in the bank. I have a very secure job where my salary is about 60k but I will have first choice to go to jobs where I can work more hours (60-70) and earn a salary of 80-90k if I choose. After my debt is paid just live in an apartment for a while or am I better buying a House and getting to the 20% equity mark will take a matter of a few months compared to living in an apartment where I am paying 700-900 month and that is going towards nothing. Why do you say get out of Edward Jones? Advice and response would be great. I have the ability to get a promotion probably within the next 3-5 years but for now my salary will range from 60k to 80-90k should I choose to take the bigger jobs. Let me know and once again thank you for the responses. Oh, my Company matches 1%... not too hot.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Sun Feb 24, 2013 4:34 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1889
Find out what your expenses are on the 401(k) funds provided by your employer. If expenses are high, you'll be losing gains which will add up significantly over the years. Expenses aren't the only factor, of course. One reason you're in a 401(k) is the benefit of tax deferral, so you'll have to run some numbers to determine if this is the best place to put your retirement money.

As for Edward Jones, read http://www.transparentinvesting.com/uploads/wholestory.pdf to get an education about investing. I prefer that you have a foundation in investing rather than you just getting advice from strangers on a forum. If that doesn't give you some insight, come back and ask more questions.

With regard to owning a house, consider that if your wife is accepted to med school, it's entirely possible that you might have to relocate.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Mon Feb 25, 2013 11:47 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
nmarinko wrote:
I am working a job where I work between 60-70 hours per week now and that will help me pay off all those debts. Her School Loan(all of them) and My car will ALL be paid off within the next 2 months. We will get Married in June with NO debt and +-10k in the bank. I have a very secure job where my salary is about 60k but I will have first choice to go to jobs where I can work more hours (60-70) and earn a salary of 80-90k if I choose. After my debt is paid just live in an apartment for a while or am I better buying a House and getting to the 20% equity mark will take a matter of a few months compared to living in an apartment where I am paying 700-900 month and that is going towards nothing. Why do you say get out of Edward Jones? Advice and response would be great. I have the ability to get a promotion probably within the next 3-5 years but for now my salary will range from 60k to 80-90k should I choose to take the bigger jobs. Let me know and once again thank you for the responses. Oh, my Company matches 1%... not too hot.


If you already work 60-70 hrs/week, but can work 60-70 hers/week and get paid $20-30k more, why work for the lower amount? Or are you saying you'd work between 71% and 83% of the week?

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Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Mon Feb 25, 2013 1:07 pm 

Joined: Sat Feb 23, 2013 2:04 pm
Posts: 3
I am currently working the 60-70 Hours a week while my Fiance is finishing School but after we get Married I have the option to have a Base location to work 40-50 Hours/week or continue to travel and Manage bigger Jobs 60-70 Hours per week. So I really have a choice after we get Married in June. Thats why I am working a lot now to pay off all debt and have some savings to start with.

Basically I will be putting 15% of money into 401K with 1% match from company. Once we decide where my Fiance is going to Med School I will probably elect to have that as my home base and (depending where) Rent an apartment or buy a house. But with no Debt and an Emergency Fund established (12K) Should 50-60% go towards paying Mortgage off faster?

Thank you for all the information. After researching what my Rate of Return would have to be to make any profit after paying Financial Advisor and Inflation I am pulling the Money out to Invest somewhere else. I will keep that on top of my Emergency Fund until I properly understand what my options are.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Mon Feb 25, 2013 1:15 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1889
nmarinko wrote:
After researching what my Rate of Return would have to be to make any profit after paying Financial Advisor and Inflation I am pulling the Money out to Invest somewhere else. I will keep that on top of my Emergency Fund until I properly understand what my options are.

Be aware that if you want to keep that money in a Roth IRA account, you need to make that move within 60 days of taking the money out. A direct transfer from EJ to another institution would be the cleanest way to do it.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Tue Feb 26, 2013 7:55 am 

Joined: Mon Mar 09, 2009 1:38 pm
Posts: 12
Reading this makes me wish I would have taken that engineering job out of school instead of going to grad school :D

That being said, the advice given here is good and pretty straight forward. Get an emergency fund up of ~6 months expenses, and then start paying down any debt you have left.

Getting an investment education is very important at this time since you are young and will be investing a lot of money in the future :D . I suggest books by Will Bernstein, a good starter book is http://www.amazon.com/Investors-Manifesto-Prosperity-Armageddon-Everything/dp/1118073762/ref=la_B001H6ID14_1_3?ie=UTF8&qid=1361890213&sr=1-3. He then has a some very good books that are a bit more in-depth for when you have more money and interest in investing.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Tue Feb 26, 2013 3:21 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
VinTek wrote:
nmarinko wrote:
After researching what my Rate of Return would have to be to make any profit after paying Financial Advisor and Inflation I am pulling the Money out to Invest somewhere else. I will keep that on top of my Emergency Fund until I properly understand what my options are.

Be aware that if you want to keep that money in a Roth IRA account, you need to make that move within 60 days of taking the money out. A direct transfer from EJ to another institution would be the cleanest way to do it.


And that you can only rollover once per year (IRA's).

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Wed Feb 27, 2013 5:53 pm 

Joined: Tue Aug 21, 2012 1:33 pm
Posts: 21
Maybe I'm just gun shy, but I don't think you should buy a house while your fiance is going to med school, unless you are pretty sure you and she will want to (and be able to) stay there after she finishes.

Rent isn't throwing money away. The first few years of your mortgage are mostly interest. I would say it would be better to pay for her school with cash instead of taking out loans and getting a mortgage and then trying to pay off the mortgage quickly.

Then, when she's done you have so many options. Without school debt or a house that you may not be able to sell to tie you down, you and she could make any choice you like. Move anywhere, take any job that pays your minimal expenses.

If you already own a house, and may need to move for med school in 2013, I think paying off the mortgage still isn't a good idea. You should just save the cash. If she get into the school where you live, you can pay send a big check then. If you have to move, whoever buys your house will pay off the mortgage and you'll have the cash to deal with the new place before the old place sells. If you are underwater you can bring that money to the table to sell.

I think I'd always put paying for school in cash ahead of reducing the mortgage debt. Grad loans are about 6-8% and your mortgage is probably 4-6%. Your full mortgage interest is tax deductible, student loan is only $2,500. You can sell your house to pay off your mortgage in an emergency or take a foreclosure, you cannot sell your degree or let the bank foreclose on it. You can attempt to refinance or get a modification on your mortgage, but those aren't as readily available for student loans.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Wed Feb 27, 2013 6:27 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1616
Location: Seattle, WA
StarryC wrote:
Rent isn't throwing money away. The first few years of your mortgage are mostly interest.


The worst biggest cost of owning for only a few years, in my opinion, is probably going to be the "friction" of selling the house, which primarily refers to the real estate commissions you will pay to sell it.


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 Post subject: Re: Income Planning 23 Year Old
PostPosted: Thu Feb 28, 2013 12:08 pm 

Joined: Tue Aug 21, 2012 1:33 pm
Posts: 21
Quote:
friction

This is a better way to put it. What I mean is that in the first few years you aren't going to build up much equity (via payments) that could offset losses caused by transactional costs. You also risk the possibility that the propery value declines, which is certainly possible in the short term.

By renting, you are spending a similar amount month to month (or even less) on a place to live, and avoiding the risks associated with property values, the risks associated with maintenance, the risk of an inability to sell at a profit or break even at the end of your ownership, and avoiding the hassle of financing, listing, and selling.

Obviously, this only applies if you don't already own, and believe you may wish to move in 2013 or even at any time before 2018.


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