SavingsTalk.com

daren

Hello,

I am new to this board. This is my first post.

I am looking at getting started with personal financial planning for myself. This is my situation:

Just graduated from college and will begin work on Sept. 5th. I am working full time right now at a temporary job to help me save money for the summer. I will be making $48,500/year at my new job. I will be putting 6% into a 401k which will be 25% matched. I have no student loans to pay, no credit card debt, no car payments, and I am living for free at my parents house for the time being to save money. I am getting engaged next month and have paid off the ring already with money I saved through college.

My future fiance has been working for 6 months and makes $50,000/year. She is also debt free.

I have about $25,000 invested in various mutual funds that I inherited from grandmother's will. I have a Roth IRA that I have been feeding for the last 4 years with about $14,000. I have about $2,000 in a cash account.

Now... where do I go from here? I would like to continue putting money away for a house until I get married. I am not sure if we will look to buy a house or to rent for a little while when we get married. What should I be doing with the current money I have, and when I begin my full time job in September, how should I be looking to invest/save that money?

Thanks experts!

jeff

There a quite a few folks who can speak to investing, retirement planning, etc. , much much better than I.

I would encourage you to think about what is important to you, and choose to spend accordingly. If an area doesn't mean a whole lot to you, spend low in that area. Your grocery, grooming, vehicle, entertainment budgets should be thought out. You may love sporty cars but not care about groceries; you may adore cooking and be willing to drive a put-put. So spend accordingly; don't have gourmet groceries and a fast car if that's not what floats your boat-use money to float your boat, don't waste it.

Talk out finances with your fiance and make sure your priorities are the same; you don't want to be in a position where she wants a huge wedding and a 2 day honeymoon, and where you want a quickie wedding and a month long honeymoon. You should know each others short term and long term plans, and see if compromise is possible in areas you don't agree.

And always spend less than you make, no matter how much you make.

gooner

I was close to your situation, except my wife and I had some school loans (consolidated at 3.3%). I'm 25 now and my suggestion would be to attempt to live off the lower of your two incomes and save atleast 75% of the other spouse's income.

That's what my wife and I do...she makes 90K, I make about 90K. Between 401K, mutual funds, moneymarkets and CDs, we manage to stash away about 80K/yr.

bill_gatez

First, always have a budget for EVERYTHING! Don't overspend on lavish gifts and nice cars, but define long term and short term goals to give your money a purpose. Perhaps a 20% downpayment on a house. If the relationship with your parents is great, and they love having you, then stay and save like a madman until you're married (then you'll have to ask the wife is she really wants to live with her inlaws).

1. Keep the $2K as an emergency fund in your local savings account.

2. Then save enough for 3-6 months of your expected expenses for when (usually when and not if) you become unemployed or have a significant financial hardship. That should be with a mortgage payment and utilities and taxes figured in for when you and your fiance get your own place. You can put that money in an online bank. Many people here seem to like HSBC.

3. Save for a Downpayment on a house. The bigger the better. buy a modest house at first, in a comfy neighborhood, with 2 bedrooms at least (just in case, or perhaps for an office). There are conflicting oppinions on whether to buy or rent, and it does depend on your financial situation. If you can manage to save 20%, then everyone agrees to go ahead and buy a house.

4. Save for your wedding. You may want this to be goal 2 or 3, depending on the timing of your wedding, and how much you're putting away in savings.

To maximize savings, look into being frugal, though I suspect you may be already... try to have "no spending" days, always eat at home, etc... I definately agree on trying to live off of only one income. My dh and I do it, and we've got three kids... and make less than what you'll be making in the fall. (that sounds so wrong! ack!) So, even when you two are married, and have two incomes, make like you're poor, get creative with your dates, eat at home, and keep saving like a mad husband and wife.

If your employer always matches 25% of what you put in your 401k, it may be worthwhile to put all your retirement money there until you get a different job and that policy changes. You might be able to find calculators online that can help you predict, or the investment-wise people here can give thieir input.

Once you're married and have a home, possibly children, make sure you get adequate life & disability insurance, and a will, and you may even want to get a power of attorney and living will set up with your spouse.

If you manage to get all your savings goals done before kids come along, perhaps even have a house already paid off, then look into college funds. Some college funds can be started before a child is even born, in some states, under your name or your spouses name, and transferred as soon as the baby has a social security number. the michigan 529 plan at least used to allow this, though I'm not sure if they do now. If not, you can always put it in an online savings account earning 5% interest, or in money market or something along those lines. Again, the investment-savy members here will be more helpful.

Keep reading and learning! And always ask questions. Never make a large purchase without sleeping on it for a few (not just one) days. NEVER LEASE A CAR (I hate to admit I did that). And buy used. Almost anything can be bought used (and in fairly new condition) so many people buy so much junk, that they don't need, the "secondary market" is swamped with great deals.

Hope some of that helps! Good luck and congrats!

BOB+

Wow. You're doing great, much better than I did when I was 22. I'm jealous now.

I agree that the first thing is to build up an emergency fund out to roughly six months of living expenses. This could be low if you choose to stay at your parent's place (which I do recommend if you can swing it). If not, it will be much higher in order to cover rent.

I would consider kicking up retirement savings to 15% so long as employer contribution will match that. I would also look into it to make sure that it is at an appropriate aggressive level. In fact, at 22, you should be going all-out aggressive on your investments. The same with your Roth IRA.

Speaking of IRA, I would try to max that each year, and mix it up with different funds than your 401ks here. Diversifying is good. However, between the two, I would still focus more on 401k so long as your employer will match it.

I would also start a car fund, perhaps for 2 cars worth if you need them for commuting for work. If not, I highly recommend avoiding the car bug.

Next, I would start up a house fund. I would see if I can't save up to pay for a house in full! I would resist rent if it can be helped, which I think is very possible in your case? Otherwise, it may be a waste for you when you could be saving that amount to buy a house instead.

And although your fiance (any just about any other female reading this ) may not agree, but THEN I would start up a wedding fund to save up for a wedding. Actually, maybe you could compromise with your fiance. For example, you can save up for the house while she can save up for the wedding, or something like that.

Naturally, all this will require a budget to track everything. A budget is vital anyway, just because you want to be able to track your expenses and know where everything is going.

I also recommend not developing an expensive taste for too many things. If you can live sensibly, you will be rewarded greatly in the future without regretting your past.

Keep up the great job!

getnick

if you fully invest into your ira and roth, save like the above articles. but also look into a life insurance policy. term is good because it's cheap, but then it's gone. kinda like car insurance. look into what is called a variable universal life, or "VUL". you can "overfund" it and have it grow tax deferred. it's a good way to get growth and have something to show at the end. get upwards of 10X your annual income.