Financial Advice: best way to invest 10g's

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Re: Financial Advice: best way to invest 10g's

Postby ViPeRx007 » Fri Jan 23, 2009 12:15 am

Actually I'm sort of in the same spot. I've got some money I'd like to invest. I opened up a stock trading account recently but I'm nervous to do anything. I've been told that when people are nervous about the market it's the best time to invest, but dang....
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Re: Financial Advice: best way to invest 10g's

Postby Mellanby_equals_grit » Fri Jan 23, 2009 8:23 am

I'm contemplating opening my first 401k.. Since my job offers contribution-matching I feel like I'm missing out on free moniez.
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Re: Financial Advice: best way to invest 10g's

Postby Leedog » Fri Jan 23, 2009 10:49 am

Mellanby_equals_grit wrote:I'm contemplating opening my first 401k.. Since my job offers contribution-matching I feel like I'm missing out on free moniez.


You definately are. Especially if you take into consideration that, I think the number is 2%, of your money withheld in a 401k, will not effect your takehome pay at all since you are paying tax on less money.
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Re: Financial Advice: best way to invest 10g's

Postby the knob » Fri Jan 23, 2009 1:22 pm

deadphish wrote:So over the last year or so the wife and I have managed to stash away 10 grand. Pretty impressive considering she is a public school teacher and I am a musician. We are homeowners (about 1 year into our mortgage) already and have 2 kids under 3 yrs old. Some other points:

-I'm not really interested in designated "college funds" as they seem to lock you in to a long term investment with penalties for early withdrawal.
-Basically I am looking for a way to get some short term gains to try and catch up a little to families that might have started building wealth earlier in life. We're both 35.
-The wife already has about 60 grand put aside for retirement through her school retirement program (auto from paychecks).
-CD's seem a little too safe and not very high rates. As do US Bonds and the like.
-We'll be meeting with a financial adviser soon from are Credit Union anyway, but I know there are knowledgeable peeps here that might have some decent advice.

TIA


I'll run you down the Dave Ramsey baby steps first.

Got an emergency fund of $1K in the bank? If not, setting that up is pretty easy.

Debt-free other than your mortgage? If not, consider paying that off with the cash, then moving on to the steps below.

After that, Dave recommends three to six months of expenses in a fund somewhere that you can acccess. Depending on how stable both of your jobs are, can go for the low or high end of that range.

Next step is to put 15% of your annual income into retirement. If you are up to this step and have money left, dump it into a Roth. I think the limit is $6K per spouse this year, you may be able to fund last year's IRA up until April 15th, but I'm not sure I'm remembering that correctly. Don't buy individual stocks, buy funds with at least a ten-year track record of good returns. I'm getting ready to do some re-allocation as I pulled a good chunk out of my 401k into a standard IRA when my company was bought and now look like a sheer genius leaving that in a money market fund during 2008. :grin:

After that comes funding the kids' education. You've got a lot of time to build that up and ride the market's ups and downs. Look into Missouri's MO$T program, there are various funds that you can allocate in that (blanking on who runs it now). That's assuming you are a Missouri resident, which gives you a break on state taxes. Dave likes the educational IRA (Coverdells I think), but seems to be OK with 529s like MO$T as well.

Final step is to aggressively pay off the house. Take a look at your current mortgage rates and see what you can get, maybe from the credit union that you are talking to. I'm getting to refi for the last time in my life hopefully (going from 6.125% to around 4.5ish%). I'll also be shooting for a ten-year note to roughly keep my current payoff horizon (get it paid before the first kid hits college). If you have a 30-year loan, look at doing a 15 or 20-year and save a buttload on interest.
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Re: Financial Advice: best way to invest 10g's

Postby stinkdified » Sat Jan 24, 2009 4:06 pm

the knob wrote:
deadphish wrote:So over the last year or so the wife and I have managed to stash away 10 grand. Pretty impressive considering she is a public school teacher and I am a musician. We are homeowners (about 1 year into our mortgage) already and have 2 kids under 3 yrs old. Some other points:

-I'm not really interested in designated "college funds" as they seem to lock you in to a long term investment with penalties for early withdrawal.
-Basically I am looking for a way to get some short term gains to try and catch up a little to families that might have started building wealth earlier in life. We're both 35.
-The wife already has about 60 grand put aside for retirement through her school retirement program (auto from paychecks).
-CD's seem a little too safe and not very high rates. As do US Bonds and the like.
-We'll be meeting with a financial adviser soon from are Credit Union anyway, but I know there are knowledgeable peeps here that might have some decent advice.

TIA


I'll run you down the Dave Ramsey baby steps first.

Got an emergency fund of $1K in the bank? If not, setting that up is pretty easy.

Debt-free other than your mortgage? If not, consider paying that off with the cash, then moving on to the steps below.

After that, Dave recommends three to six months of expenses in a fund somewhere that you can acccess. Depending on how stable both of your jobs are, can go for the low or high end of that range.

Next step is to put 15% of your annual income into retirement. If you are up to this step and have money left, dump it into a Roth. I think the limit is $6K per spouse this year, you may be able to fund last year's IRA up until April 15th, but I'm not sure I'm remembering that correctly. Don't buy individual stocks, buy funds with at least a ten-year track record of good returns. I'm getting ready to do some re-allocation as I pulled a good chunk out of my 401k into a standard IRA when my company was bought and now look like a sheer genius leaving that in a money market fund during 2008. :grin:

After that comes funding the kids' education. You've got a lot of time to build that up and ride the market's ups and downs. Look into Missouri's MO$T program, there are various funds that you can allocate in that (blanking on who runs it now). That's assuming you are a Missouri resident, which gives you a break on state taxes. Dave likes the educational IRA (Coverdells I think), but seems to be OK with 529s like MO$T as well.

Final step is to aggressively pay off the house. Take a look at your current mortgage rates and see what you can get, maybe from the credit union that you are talking to. I'm getting to refi for the last time in my life hopefully (going from 6.125% to around 4.5ish%). I'll also be shooting for a ten-year note to roughly keep my current payoff horizon (get it paid before the first kid hits college). If you have a 30-year loan, look at doing a 15 or 20-year and save a buttload on interest.

pokersource.com?
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Re: Financial Advice: best way to invest 10g's

Postby the knob » Sat Jan 24, 2009 5:52 pm

stinkdified wrote:pokersource.com?


Play poker, win stuff like it says. :okman:
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Re: Financial Advice: best way to invest 10g's

Postby Philo » Sun Jan 25, 2009 1:28 am

goon attack wrote:I forgot the tenure issue. Once you're tenured, you're gold!

That kind of job security must be nice...real nice.




thought you were a teacher?
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Re: Financial Advice: best way to invest 10g's

Postby goon attack » Sun Jan 25, 2009 9:06 am

Philo wrote:
goon attack wrote:I forgot the tenure issue. Once you're tenured, you're gold!

That kind of job security must be nice...real nice.




thought you were a teacher?


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Re: Financial Advice: best way to invest 10g's

Postby kodos » Sun Jan 25, 2009 11:43 am

Mellanby_equals_grit wrote:I'm contemplating opening my first 401k.. Since my job offers contribution-matching I feel like I'm missing out on free moniez.


Do it. Do it now. With the economy completely in the crapper, this is actually a good time to buy, and since you won't be touching the money for a long time, it will have plenty of time to grow.

Just put in as much as they will match.
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Re: Financial Advice: best way to invest 10g's

Postby deadphish » Tue Jan 27, 2009 12:45 pm

the knob wrote:
deadphish wrote:So over the last year or so the wife and I have managed to stash away 10 grand. Pretty impressive considering she is a public school teacher and I am a musician. We are homeowners (about 1 year into our mortgage) already and have 2 kids under 3 yrs old. Some other points:

-I'm not really interested in designated "college funds" as they seem to lock you in to a long term investment with penalties for early withdrawal.
-Basically I am looking for a way to get some short term gains to try and catch up a little to families that might have started building wealth earlier in life. We're both 35.
-The wife already has about 60 grand put aside for retirement through her school retirement program (auto from paychecks).
-CD's seem a little too safe and not very high rates. As do US Bonds and the like.
-We'll be meeting with a financial adviser soon from are Credit Union anyway, but I know there are knowledgeable peeps here that might have some decent advice.

TIA


I'll run you down the Dave Ramsey baby steps first.

Got an emergency fund of $1K in the bank? If not, setting that up is pretty easy.

Debt-free other than your mortgage? If not, consider paying that off with the cash, then moving on to the steps below.

After that, Dave recommends three to six months of expenses in a fund somewhere that you can acccess. Depending on how stable both of your jobs are, can go for the low or high end of that range.

Next step is to put 15% of your annual income into retirement. If you are up to this step and have money left, dump it into a Roth. I think the limit is $6K per spouse this year, you may be able to fund last year's IRA up until April 15th, but I'm not sure I'm remembering that correctly. Don't buy individual stocks, buy funds with at least a ten-year track record of good returns. I'm getting ready to do some re-allocation as I pulled a good chunk out of my 401k into a standard IRA when my company was bought and now look like a sheer genius leaving that in a money market fund during 2008. :grin:

After that comes funding the kids' education. You've got a lot of time to build that up and ride the market's ups and downs. Look into Missouri's MO$T program, there are various funds that you can allocate in that (blanking on who runs it now). That's assuming you are a Missouri resident, which gives you a break on state taxes. Dave likes the educational IRA (Coverdells I think), but seems to be OK with 529s like MO$T as well.

Final step is to aggressively pay off the house. Take a look at your current mortgage rates and see what you can get, maybe from the credit union that you are talking to. I'm getting to refi for the last time in my life hopefully (going from 6.125% to around 4.5ish%). I'll also be shooting for a ten-year note to roughly keep my current payoff horizon (get it paid before the first kid hits college). If you have a 30-year loan, look at doing a 15 or 20-year and save a buttload on interest.


Knob,

Great stuff. That is very informative. All of the things Dave mentions are on my radar. We'll be pretty loose with the 3-6 months expenses savings (great job security), but will certainly have $1000 liquid for emergencies.

I think we will avoid any traditional "college funds" for our 2 kids. I just don't like pigeon holing children into thinking they have to attend college. I'd rather invest this money in other lower-medium risk stuff I can access if they need it when they are 10 or 16 or whenever. Feel free to talk me out of this. It's just my gut reaction to these types of funds.

I want to refi out of our 30yr mortgage ASAP. Especially if rates keep breaking into the 4's. I've done the math many times and it still amazes me the amount of interest you can save with a shorter term. Saving that $50-100k on the mortgage is like a huge gain we could feel years before retirement age. Only prob is we didn't put much down when we bought in 11/07 and, with the economic crisis, are probably a little underwater (maybe even if we're lucky). So I guess we'll just keep making extra payments as often as we can until we are able to do a refi. I wish we could somehow get out of PMI in the meantime.
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Re: Financial Advice: best way to invest 10g's

Postby the knob » Tue Jan 27, 2009 1:44 pm

deadphish wrote:Knob,

Great stuff. That is very informative. All of the things Dave mentions are on my radar. We'll be pretty loose with the 3-6 months expenses savings (great job security), but will certainly have $1000 liquid for emergencies.

I think we will avoid any traditional "college funds" for our 2 kids. I just don't like pigeon holing children into thinking they have to attend college. I'd rather invest this money in other lower-medium risk stuff I can access if they need it when they are 10 or 16 or whenever. Feel free to talk me out of this. It's just my gut reaction to these types of funds.

I want to refi out of our 30yr mortgage ASAP. Especially if rates keep breaking into the 4's. I've done the math many times and it still amazes me the amount of interest you can save with a shorter term. Saving that $50-100k on the mortgage is like a huge gain we could feel years before retirement age. Only prob is we didn't put much down when we bought in 11/07 and, with the economic crisis, are probably a little underwater (maybe even if we're lucky). So I guess we'll just keep making extra payments as often as we can until we are able to do a refi. I wish we could somehow get out of PMI in the meantime.


Are you saying you don't want to go into a plan 529 or don't want to be stuck with a small selection of funds in there? If you're pretty sure your kids will be going to college, I think you are better off investing in a 529 rather than outside of it, since all gains are tax-free as long as they are used for educational expenses. Here's what a link off the state treasurer's site (don't know if you are in MO or elsewhere, but think all states have a 529) says:

Owners of MOST accounts are able to make a deduction for contributions of up to $8,000 per year per taxpayer from their Missouri income taxes.

Contributions can grow free from federal and Missouri income tax until withdrawn. When it is time for the beneficiary to go to college, withdrawals used for qualified higher education expenses, including any earnings the investments may have yielded – also will be exempt from federal and Missouri income taxes.


As for the house, don't sweat the mortgage at first. We had a 30-year when we bought our house and refi'd to a 15 after my wife got out of nursing school and our income went up. We put an addition on, had a construction loan, then had to get some weird first/second because Fannie Mae or whomever was going to buy our loan didn't like something about it all being on one mortgage, but were able to keep it a 15. After having that for a couple years, we refi'd to our current loan, which I had the bank do as a 12-year so I can make sure it's paid off before the older boy is ready for college. I think we'll probably have it paid off after about 21 years in the end, what with the different mortgages listed above, although I'm hoping to start banging out some massive payments when my professional student wife gets her masters in a couple years and starts making more than me (and not due to me being laid off like the last time that happened).

I think as long as you and the wife prepare to hit it in the next couple of years and refi you should be OK. Just don't be in the mindset of thinking it's a good tax deduction and that's why you should keep the mortgage:

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Re: Financial Advice: best way to invest 10g's

Postby Leedog » Tue Jan 27, 2009 2:27 pm

Just an off handed thought. Find out what it would take to refi. Maybe you can use part of your 10 grand to buy it down enough. As you said yourself, the money you can save is staggering. Prolly more than you can get investing it. Just a thought. Really haven't thought it through.
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Re: Financial Advice: best way to invest 10g's

Postby Mellanby_equals_grit » Tue Jan 27, 2009 4:02 pm

kodos wrote:
Mellanby_equals_grit wrote:I'm contemplating opening my first 401k.. Since my job offers contribution-matching I feel like I'm missing out on free moniez.


Do it. Do it now. With the economy completely in the crapper, this is actually a good time to buy, and since you won't be touching the money for a long time, it will have plenty of time to grow.

Just put in as much as they will match.


Well I just opened it up online.. BJC offers up to 1.75% match for a contribution of 4% or more.. Not dollar for dollar but still free moniez.. I didn't really know what percent of it to put in what so just guessed on some things.. I figure I'm 24 and am now saving for retirment I'm ahead of 90% of people my age. I'll get more serious about what exactly to put the investment in later on.
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Re: Financial Advice: best way to invest 10g's

Postby deadphish » Tue Jan 27, 2009 9:56 pm

Leedog wrote:Just an off handed thought. Find out what it would take to refi. Maybe you can use part of your 10 grand to buy it down enough. As you said yourself, the money you can save is staggering. Prolly more than you can get investing it. Just a thought. Really haven't thought it through.

I pressed a couple mortgage guys on the phone about this...saying I was more interested in the long term savings than a few G's out of pocket. They always ended up convincing me to just put more into the principal on a monthly basis to save long term. Our loan is FHA and you can do a streamline refi with FHA (no appraisal, minimal paperwork), but the rate is about a point higher than a conventional mortgage. If I see rates in the 4's again I just might bite and do a conventional refi. Dropping from 6.25% to anything in the 4's is hard to pass up.
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Re: Financial Advice: best way to invest 10g's

Postby Leedog » Wed Jan 28, 2009 7:09 am

My point on that is if you are gonna do an extra $100 bucks for a year or $1200 in one check is all the same. My house is paid for so I'm not up on the current rates. But if/when you think they have bottomed out, maybe the thing to do is pull the trigger on the lump sum, instead of chipping away and have the best window close while you are waiting around.
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Re: Financial Advice: best way to invest 10g's

Postby marco » Wed Jan 28, 2009 6:17 pm

The Discount-Point Interest-Rate Buydowns aren't all that sexy right now. They're not taking big chunks out of the interest rate and it's taking longer to recoup your investment - although long term, they're still the way to go if they're offered.

Although what you said about cutting years off your loan to save money is absolutely true. There are three things you can change on your loan to save you money and the order of magnitude in which they save you money are: term (length), interest rate, loan amount (smaller). Most people avoid the term savings b/c it costs more per month and then fixate on the interest rate instead.

Say you add another $250/mo to principle on a $100,000 mortgage at 6.25% you'll take it from a 30 year loan to having it paid off 3 months before the 15th year rolls around. You'll go from making $221,658 in payments to $153,232 in payments and saving $68,426 in total payments and owning your house outright more than 15 years earlier. Then if you invested what you were paying on your house to pay it off early into an investment that returned 6% over 15 years, you'd have $251,767 in that investment, plus the free and clear title. If the investment only returned 3% you'd still have $196,494 at the end of 15 years.
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Re: Financial Advice: best way to invest 10g's

Postby marco » Wed Jan 28, 2009 6:21 pm

Leedog wrote:My point on that is if you are gonna do an extra $100 bucks for a year or $1200 in one check is all the same. My house is paid for so I'm not up on the current rates. But if/when you think they have bottomed out, maybe the thing to do is pull the trigger on the lump sum, instead of chipping away and have the best window close while you are waiting around.

Pretty much, the differences between doing it bit by bit, or at the beginning or end of the year are too small to pick about. In my example, above that $250/mo is $3,000/yr. and you would effectively get the same bang for your buck doing it in one lump sum each year. My gut says rates have bottomed... but you never know, although I don't see how they can get too much lower.
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Re: Financial Advice: best way to invest 10g's

Postby Leedog » Wed Jan 28, 2009 6:43 pm

Yeah. My point is do what you gotta do to pull the trigger when you think things are bottomed. If you think they are now, then the lump sum now might be the way to go. Look at an ammoritization (sp?) schedule and see what you are pissing away on interest each month compared to a new 15 year note and you may want to move sooner rather than later instead of chipping away. I'll bet the amount makes you sick.
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Re: Financial Advice: best way to invest 10g's

Postby marco » Wed Jan 28, 2009 7:14 pm

Leedog wrote:Yeah. My point is do what you gotta do to pull the trigger when you think things are bottomed. If you think they are now, then the lump sum now might be the way to go. Look at an ammoritization (sp?) schedule and see what you are pissing away on interest each month compared to a new 15 year note and you may want to move sooner rather than later instead of chipping away. I'll bet the amount makes you sick.

Oh yeah, it adds up real quick. Just look at my example on an measly $100,000 mortgage, nothing by today's standards and you can cut nearly $70k in interest just by going from a 30 to a 15 at 6.50% for only an extra $250 a month or $3,000 a year.

And not to be a spelling nazi, trust me I have no room to talk, but since you put the little (sp?) next to it, I'll show you the way I break down that beast.

a +
mort (like mortal - it will be paid off to zero - also the same root in mortgage) +
ization (the process of)
= amortization (am - ort - iz - ation)
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