All Encompassing Personal Finance Thread

[Spur08 382]

Call it a bug....I've been listening to the Dave Ramsey podcast and have been implementing certain aspects of his "baby steps". 

 

This will be the first year that both my wife and I max out our 401Ks, child-care FSA, and almost max HSA.  We are early-30s, have a toddler under 2, and a mortgage.  

1 car w/ a, roughly just under, $30,000 note; 4 years and change

30 year mortgage (don't plan to accelerate payments)

Grad loan debt of $39K @ 4.24%

Investment loan of $19K @ 6.99% (Dividend payments pay for 3/4 of P + I payments)

 

Both of us have large bonuses coming in the next month which will pay-off the investment loan.  Would it be better to pay down the additional debts or continue to max out 401K and HSA?  Any other personal finance strategies that we're overlooking?

 

[TwiceHorn 31541]

9 minutes ago, Spur08 said:

Call it a bug....I've been listening to the Dave Ramsey podcast and have been implementing certain aspects of his "baby steps". 

 

This will be the first year that both my wife and I max out our 401Ks, child-care FSA, and almost max HSA.  We are early-30s, have a toddler under 2, and a mortgage.  

1 car w/ a, roughly just under, $30,000 note; 4 years and change

30 year mortgage (don't plan to accelerate payments)

Grad loan debt of $39K @ 4.24%

Investment loan of $19K @ 6.99% (Dividend payments pay for 3/4 of P + I payments)

 

Both of us have large bonuses coming in the next month which will pay-off the investment loan.  Would it be better to pay down the additional debts or continue to max out 401K and HSA?  Any other personal finance strategies that we're overlooking?

 

Your interest rate on student loan is high enough that it probably makes sense to retire it ASAP.  Personally, I hate debt.  Some don't and some debt is unavoidable.  But when the interest rate is getting close to reasonable investment return, it probably makes no sense to save instead of retiring the debt. 

I assume you spend your HSA and FSA?

And for the future, if you can't "afford" a car on a traditional three-year note, you can't afford it. 

Edited February 27, 2019 by TwiceHorn

[Spur08 382]

1 minute ago, TwiceHorn said:

Your interest rate on student loan is high enough that it probably makes sense to retire it ASAP.  Personally, I hate debt.  Some don't and some debt is unavoidable.  But when the interest rate is getting close to reasonable investment return, it probably makes no sense to save instead of retiring the debt. 

And for the future, if you can't "afford" a car on a traditional three-year note, you can't afford it. 

Appreciate the input.  The car was poorly planned.  We needed a safe vehicle for our [at the time] pending "oops" baby.  Something I forgot to mention, we are planning on having (conceiving) our second [hopefully, last] kid within a year.  

[52-80 19262]

6 hours ago, TwiceHorn said:

Your interest rate on student loan is high enough that it probably makes sense to retire it ASAP.  Personally, I hate debt.  Some don't and some debt is unavoidable.  But when the interest rate is getting close to reasonable investment return, it probably makes no sense to save instead of retiring the debt. 

I assume you spend your HSA and FSA?

And for the future, if you can't "afford" a car on a traditional three-year note, you can't afford it. 

i agree.  you should retire ASAP.

[Telegraph_it 3359]

I guess I’ll need to start paying attention to this thread. I lose the wife’s income in a couple of months. Baby #1 on the way soon. 

I blocked out what having one income would be like but that probably isn’t the best strategy. 

[Parliament 14333]

Get a paternity test on that "oops baby." Will save you a lot of money over the next 18 years. Don't wanna raise some other dude's kid.

[Telegraph_it 3359]

31 minutes ago, Parliament said:

Get a paternity test on that "oops baby." Will save you a lot of money over the next 18 years. Don't wanna raise some other dude's kid.

I made that joke to my wife. She did not find it nearly as funny as I did. 

[luke duke 6414]

Are you able to write off any of the student loan interest?

[Spur08 382]

Are you able to write off any of the student loan interest?

I put it in TurboTax every year, but I believe I'm maxed out.

[NBMisha 224]

Congrats to you guys that are into this young.  By way of positive feedback I can tell you the payoff, that is, when you can retire and live the life your reasonably want to live, is a beautiful thing.

Once the paycheck stops coming, budgeting skills and living within a budget are at a premium.  Make sure that among your investment etc skills you are building that you become expert at this.  Extra points for achieving this expert level while staying married.

[UTPhil2006 3817]

Buy more houses 

[tokamak 6443]

I have no idea what an "investment loan" is, but I'd do the same as you - 7% is high and you should get rid of that ASAP. I fall under the "don't like debt" category, so I'd probably look at paying more than the minimum on that grad school debt next, but truthfully 4% isn't awful so that's just personal preference.

Next things to look at IMO would be IRAs, then 529s for the kid(s), in that order.

If you max 2x 401ks and an HSA while paying down all that debt, you are probably doing better than like 90% of people.

[HRSchenker 2274]

What's the best alternative to HSA accounts? I found out this month that I do not qualify for one.

[T’Boo Ted Marshall 2740]

And for the future, if you can't "afford" a car on a traditional three-year note, you can't afford it. 

I’ve never heard of this math. Care to elaborate?

[Spur08 382]

9 hours ago, NBMisha said:

Congrats to you guys that are into this young.  By way of positive feedback I can tell you the payoff, that is, when you can retire and live the life your reasonably want to live, is a beautiful thing.

Once the paycheck stops coming, budgeting skills and living within a budget are at a premium.  Make sure that among your investment etc skills you are building that you become expert at this.  Extra points for achieving this expert level while staying married.

I'm actually dealing with this with my folks right now.  My dad is a CPA and, all around, a pretty bright and well-prepared guy.  He just had his contract canceled by his company this past Friday and, it seems, all the planning over the last year leading up to this forced retirement was just shit.  The sobering reality hit him that he needed another year or so for short term costs is really weighing down on him.

7 hours ago, tokamak said:

I have no idea what an "investment loan" is, but I'd do the same as you - 7% is high and you should get rid of that ASAP. I fall under the "don't like debt" category, so I'd probably look at paying more than the minimum on that grad school debt next, but truthfully 4% isn't awful so that's just personal preference.

Next things to look at IMO would be IRAs, then 529s for the kid(s), in that order.

If you max 2x 401ks and an HSA while paying down all that debt, you are probably doing better than like 90% of people.

We've opened a 529 for our daughter, but we haven't started regularly contributing yet -- just special occasions and gifts from the grandparents.  The investment loan is a real estate project that was crowd funded by a close group of friends.  I didn't borrow for the full amount, just a small portion of what I needed.  I do understand that this should be the first to go.

Other notes -- I have a $1MM 30 year term life on myself with some smaller life insurance options through my company for the wife and baby.  Wife and baby have some whole life plans paid for by her folks that they took out themselves.

I thought about seeing a fee-only CFP but feel like I'm doing alright by myself, for now.  Plus I don't want to shell out the $3K...

[TwiceHorn 31541]

47 minutes ago, T’Boo Ted Marshall said:

I’ve never heard of this math. Care to elaborate?

For years, the longest term car note was three years.  Then five-year notes came along.  Now it's any goddamn thing that gets the monthly payment low enough to "afford," eight years and a balloon payment, blah blah blah.

It's mostly criticism of things described in the third sentence, above, which are pure ghetto finance /noracist.

But also, it's paying interest on a swiftly depreciating asset for longer than a reasonably short period.

This is, of course, if you want to be seriously financially responsible and not a car fanboi.  I am a car fanboi to a degree, but I force myself to wait (drive a car 8 years minimum) and shop pretty hard for gently used cars and pay cash.  And typically, longer-term and other goofy-ass finance options are unavailable for used cars.

Edited February 28, 2019 by TwiceHorn

[Spur08 382]

14 minutes ago, TwiceHorn said:

For years, the longest term car note was three years.  Then five-year notes came along.  Now it's any goddamn thing that gets the monthly payment low enough to "afford," eight years and a balloon payment, blah blah blah.

It's mostly criticism of things described in the third sentence, above, which are pure ghetto finance /noracist.

But also, it's paying interest on a swiftly depreciating asset for longer than a reasonably short period.

This is, of course, if you want to be seriously financially responsible and not a car fanboi.  I am a car fanboi to a degree, but I force myself to wait (drive a car 8 years minimum) and shop pretty hard for gently used cars and pay cash.  And typically, longer-term and other goofy-ass finance options are unavailable for used cars.

I agree to an extent, however, it also seems that the 5 year terms popped up as car prices have increased.  I bought my fanboi car straight out of college b/c I felt it was a right-of-passage/was slightly entitled.  The new purchase was mainly safety driven (heh) for the new arrival, but timing was also important.  My car is paid off and I'm working to make it a 10 year car.  By the time my wife's car is paid off, my car will hit 10 years and we will have the same amount available for a new (to us) vehicle.  Granted, I see how and endless cycle of car payments is problematic and unnecessary.

[GottaB 595]

I listened to Dave Ramsey for a while but listening becomes repetitive quick. It’s as if the callers have never listened to a single episode.

A criticism of his strategy is that it relies on a return on investments for what you save is not the current returns being seen. It worked in the 80s. You need to save more than he suggests now.

Listening to him did get me looking at my finances more than ever. And people that follow his strategy / steps will place them better prepared for financial health than 80% of the US population.

I’m 40 and I finished my last degree in my mid 30s so I still have education debt (at 2% interest). I have 3 young kids and we just recently got past the massive monthly daycare bill. My wife and I make a comfortable living but we are just now getting our financial sea legs under us. I’ve always made more than her but she’s gaining (which is awesome).

Things I have because I listened to Dave:
- Term Life insurance policy not connected to my employer that lasts until after the kids would be in college.
- A rental home (investment)
- A used car with a small note (- my wife drives a car that is paid off.
- 529 for my kids with monthly contributions
- savings account for my kids that I control
- 3 months living expenses available in cash. I would like this to be closer to 6 months and we are on our way.
- my kids get an allowance where they give-save-spend out of. They can buy with their money if I approve of the purchase.
- Before listening i was already maxing out my 403b. Now most of those funds are in low cost index funds.

As a bonus, my wife just paid off her school loans in under 10 years. She’s a finance person that is more budget minded than I am.

I still have some bad spending habits. I buy crap I don’t need but I make sure it doesn’t affect our budget. It does keep me from maximizing my savings. I would like to also start a ROTH but I’m not that compelled at this time.

[52-80 19262]

6 hours ago, TwiceHorn said:

For years, the longest term car note was three years.  Then five-year notes came along.  Now it's any goddamn thing that gets the monthly payment low enough to "afford," eight years and a balloon payment, blah blah blah.

It's mostly criticism of things described in the third sentence, above, which are pure ghetto finance /noracist.

But also, it's paying interest on a swiftly depreciating asset for longer than a reasonably short period.

This is, of course, if you want to be seriously financially responsible and not a car fanboi.  I am a car fanboi to a degree, but I force myself to wait (drive a car 8 years minimum) and shop pretty hard for gently used cars and pay cash.  And typically, longer-term and other goofy-ass finance options are unavailable for used cars.

On the various web fora for my car, maybe 1/3rd of the conversations are about acquiring said car, and the entirety of those conversations revolve about strategies on how to get the lowest "monthlies".  You'll find people are astounded to learn that a high downpayment will yield lower payments.  Or that stretching the terms will do the same.  And then once a while one of them will be wanting to scratch their next itch and asking how to return said car... but are puzzled at having to pay extra to recompense the negative equity.  "how do I know if I'm underwater?"

 

Holy fucking kamoley licensed people over 15 years old shouldnt be this deficient in basic arithmetic.  Or common sense and logic.  It's embarrassing for society, and for the species.

 

But then again, these are BMW fora....

 

 

[GottaB 595]

9 hours ago, GottaB said:

A criticism of his strategy is that it relies on a return on investments for what you save is not the current returns being seen. It worked in the 80s. You need to save more than he suggests now.

 

what I meant to say was:

A criticism of his strategy in saving for retirement is that it relies on a return on investments which is greater than the current returns being seen. It worked in the 80s. You need to save more than he suggests now to retire comfortably.  

[TwiceHorn 31541]

 

I agree to an extent, however, it also seems that the 5 year terms popped up as car prices have increased.  I bought my fanboi car straight out of college b/c I felt it was a right-of-passage/was slightly entitled.  The new purchase was mainly safety driven (heh) for the new arrival, but timing was also important.  My car is paid off and I'm working to make it a 10 year car.  By the time my wife's car is paid off, my car will hit 10 years and we will have the same amount available for a new (to us) vehicle.  Granted, I see how and endless cycle of car payments is problematic and unnecessary.

Exactly.  Try to stay off that treadmill. If you are smart about it, you can still have pretty nice cars.

And, as 52-80 notes, if you really, really have to have and need that $75k Suburban (this raises a lot of other questions about choices), save and make a bigass downpayment and keep those "monthlies" low and for three years.

Also, simply because you are savings-conscious, you'll be ok even if you make "mistakes" (however intentional they may be), because the poors tend not to make just the one mistake, they repeat it along with a whole load of others (see, e.g., the people in 52-80s BMW fora: can pretty much guarantee most of those waterheads aren't maxing their 401ks or any other savings, or considering paying down any debt).

Edited February 28, 2019 by TwiceHorn

[luke duke 6414]

My recurring recommendation

Everyone should read this:
The Bogleheads' Guide to Investing
https://www.amazon.com/dp/1118921283/

[52-80 19262]

38 minutes ago, luke duke said:

My recurring recommendation

Everyone should read this:
The Bogleheads' Guide to Investing
https://www.amazon.com/dp/1118921283/

$22.03 for a hardcover?  motherfucker do they got that book on a payment plan?

[Spur08 382]

3 minutes ago, 52-80 said:

$22.03 for a hardcover?  motherfucker do they got that book on a payment plan?

Isn't it actually available for free from somewhere?  Thought I read that before over at Bogleheads

[TwiceHorn 31541]

5 minutes ago, 52-80 said:

$22.03 for a hardcover?  motherfucker do they got that book on a payment plan?

Just make a big downpayment.

[T’Boo Ted Marshall 2740]

I get not wanting longer terms on a depreciating asset but it wasn't a monthly payment I looked at, it was the APR and cost of the SUV.  What that shook out to on a monthly payment number had no impact.  

I got it at 4 years for 2.49% with nothing OOP.  I could have paid cash but that would have slightly eaten into our 9-12 months of savings we have set aside.  As others have mentioned we keep cars well past their payment terms averaging about 7-8 years and at timers have paid them off early.  

[tokamak 6443]

13 hours ago, GottaB said:

I listened to Dave Ramsey for a while but listening becomes repetitive quick. It’s as if the callers have never listened to a single episode.

A criticism of his strategy is that it relies on a return on investments for what you save is not the current returns being seen. It worked in the 80s. You need to save more than he suggests now.

Listening to him did get me looking at my finances more than ever. And people that follow his strategy / steps will place them better prepared for financial health than 80% of the US population.

I’m 40 and I finished my last degree in my mid 30s so I still have education debt (at 2% interest). I have 3 young kids and we just recently got past the massive monthly daycare bill. My wife and I make a comfortable living but we are just now getting our financial sea legs under us. I’ve always made more than her but she’s gaining (which is awesome).

Things I have because I listened to Dave:
- Term Life insurance policy not connected to my employer that lasts until after the kids would be in college.
- A rental home (investment)
- A used car with a small note (- my wife drives a car that is paid off.
- 529 for my kids with monthly contributions
- savings account for my kids that I control
- 3 months living expenses available in cash. I would like this to be closer to 6 months and we are on our way.
- my kids get an allowance where they give-save-spend out of. They can buy with their money if I approve of the purchase.
- Before listening i was already maxing out my 403b. Now most of those funds are in low cost index funds.

As a bonus, my wife just paid off her school loans in under 10 years. She’s a finance person that is more budget minded than I am.

I still have some bad spending habits. I buy crap I don’t need but I make sure it doesn’t affect our budget. It does keep me from maximizing my savings. I would like to also start a ROTH but I’m not that compelled at this time.

I'm not familiar with the teaching of Dave Ramsey but I have a couple comments/questions on that list:

• Is he really advising rental property for people who are "just now getting [their] financial sea legs"? I don't agree with that one. IMO, debt, 401k, IRAs, and emergency fund should all come first. Rental property should be way down the line.
• What's the purpose of the savings accounts for kids? Just for them to put their birthday money from grandma, etc in? I hadn't thought of that one (my kids are still very young, though)

[Llano Estacado 1257]

My recurring recommendation

Everyone should read this:
The Bogleheads' Guide to Investing
https://www.amazon.com/dp/1118921283/

Similar approach here I’ve seen around the webs. Haven’t reread it in a few years.

http:// https://www.etf.com/docs/IfYouCan.pdf

KISS. Budget. Save. Invest. When you invest KISS.

That’s one of the things that annoys me about Ramsey. Now he’s marketing his program (okay a man has to make a living) and his endorsement on “professionals” (mortgages, investing, insurance, etc.) When really his program pairs much better with Boglehead, IMO.

[luke duke 6414]

That’s one of the things that annoys me about Ramsey. Now he’s marketing his program.

This. His message is good for most people, but stay away from any product or mutual fund that he recommends.

[GottaB 595]

I'm not familiar with the teaching of Dave Ramsey but I have a couple comments/questions on that list:

• Is he really advising rental property for people who are "just now getting [their] financial sea legs"? I don't agree with that one. IMO, debt, 401k, IRAs, and emergency fund should all come first. Rental property should be way down the line.
• What's the purpose of the savings accounts for kids? Just for them to put their birthday money from grandma, etc in? I hadn't thought of that one (my kids are still very young, though)

No. He doesn’t suggest rental properties but thinking about “financial independence” made me think about renting a house I was moving out of instead of selling it for below market value. Since then, the house value has climbed and the rent has covered the mortgage.

As far as kids savings, there isn’t a need for it. They don’t know about them now. It was more disciplined allocation of funds. I taught me that saving a little can add up quickly and later I can use as a lesson for my kids (I thought ahead, put a little away, now I can give you this generous cushion when you need it). For us, we started putting money straight from our paychecks (like $50 per kid) that I could stop if I felt like it was affecting our budget. Now they have a savings account I can hand them when they move out. Plus it allowed us to confidently switch the deposits this past year. We stopped adding to their savings and started putting that money into a 529 without missing the money each month.

The kids do have the give-save-spend allowance. They are 6. They get $5 weekly. $1 they have to give (usually to church). $1 they save (at the end of the month they add it to their spend). $3 they can spend. Toys. Candy. Snacks. Whatever. That way when I take them to the store, and they start bugging me to buy them crap, I tell them to use their money.
“I can’t afford that”.
“Exactly. Save up. “

Teaches delayed gratification. Or at least in my mind it does.

[tokamak 6443]

I see. I like the give-save-spend thing, pretty good idea.

[GottaB 595]

Yeah. The “save” period should grow as they get older. Now it is a month. In a couple years, save will go to three months. And so on.

[luke duke 6414]

No. He doesn’t suggest rental properties but thinking about “financial independence” made me think about renting a house I was moving out of instead of selling it for below market value. Since then, the house value has climbed and the rent has covered the mortgage.

Now do the math if you were to sell the house and put all of your equity into the market vs keeping the rental. Remember to assign a dollar figure to vacancies, maintenance, taxes, etc.

[GottaB 595]

Now do the math if you were to sell the house and put all of your equity into the market vs keeping the rental. Remember to assign a dollar figure to vacancies, maintenance, taxes, etc.

Ok. That’s fair. But every case is different. I have been lucky in this stretch. I think the house, even including taxes and maintenance would have outpaced the market.

[William_Cannon 86]

Yeah your student loans seem high. I’d pay those off, especially before contributing to any 529s. If you’re not done paying for your college why would you start paying for someone else’s? Btw, make your kids share the burden of their college expenses so they have skin in the game. My goal is for my kids to work during the summers to help and to graduate with no more than $10k to $15k in debt real value.

[Spur08 382]

Well, shit. I need to fix something bc I owe $6k this year on taxes.

[Parliament 14333]

All those goddamn dividends, Man.  But what do you do...

[TwiceHorn 31541]

On 2/28/2019 at 10:57 AM, T’Boo Ted Marshall said:

I get not wanting longer terms on a depreciating asset but it wasn't a monthly payment I looked at, it was the APR and cost of the SUV.  What that shook out to on a monthly payment number had no impact.  

I got it at 4 years for 2.49% with nothing OOP.  I could have paid cash but that would have slightly eaten into our 9-12 months of savings we have set aside.  As others have mentioned we keep cars well past their payment terms averaging about 7-8 years and at timers have paid them off early.  

Probably can't knock that.  Four years isn't that "manipulative," and I assume we're talking something in the high five figures, so it can be hard to scrape that cash together just deciding what you want to liquidate. 

But the current trend for poors or the unsophisticated is to sell on payment only, and the tems of those can be preposterous.  Basically, as long as you go into it with your eyes open and the understanding that paying anything over about 30-40k is getting into luxury territory (not defensible from a purely fiscal standpoint).

[Llano Estacado 1257]

All those goddamn dividends, Man.  But what do you do...

I recently sold some JNJ on news that they may be giving people cancer, assholes. And maybe asshole cancer depending on where you powdered...

Gonna miss those dividends those. Also if my single stock pick history is any precedent this maybe a reverse hot stock tip to buy JNJ before it sails up to $175 before class actions get settled.

[TwiceHorn 31541]

10 hours ago, Spur08 said:

Well, shit. I need to fix something bc I owe $6k this year on taxes.

I can't remember when I didn't owe at least that much.  Part of that is that the withholding tables were jacked this year.  At some point in the not too distant future, you are going to have enough invested and doing well enough that you are going to have that kind of tax liability every year, along with quarterly payments, yay!  And you could fix that by voluntarily increasing your withholding.  But you will also realize that you can do a lot better on that 10-15k for a quarter or three or four than Uncle Sam.

I do and don't resent my tax liability.  But I guarantee you that if every American had to cut a check at least once a year to the IRS, even if its $50-100, we would be a more fiscally responsible country.

[Reagan1k 3024]

Yup - Instead of automatic withholding, each employee should have to endorse a check to the treasury each pay period...or in today's world,  have a simultaneous and separate debit from their bank account the second their payroll is direct deposited.

Our current system of tax payments didn't occur by happenstance.  

There would be a little more attention paid to our national budget, and tax refunds wouldn't be seen as an annual lottery win.

[Snake Diggity 4627]

21 hours ago, Reagan1k said:

Yup - Instead of automatic withholding, each employee should have to endorse a check to the treasury each pay period...or in today's world,  have a simultaneous and separate debit from their bank account the second their payroll is direct deposited.

Our current system of tax payments didn't occur by happenstance.  

There would be a little more attention paid to our national budget, and tax refunds wouldn't be seen as an annual lottery win.

At a minimum withholding should be broken out in more detail (by Dept) so that people have a better idea of where their money is going.  I saw a guy advocating giving people a choice to allocate 1% of their taxes to the dept of govt they prefer.

Edited March 20, 2019 by Snake Diggity

[tucker 238]

Are there any benefits (e.g. Tax) taking on debt for my house remodel? Looking at unsecured loans as we don't have enough equity in the house since we recently purchased. I have enough cash to remodel but wanted to check if I should use debt. 

Interest rate is probably around 4%-6%.

The cash would sit in a saving account as part of my rainy day fund. Any excess would just go into the market to save up to buy a rental property. 

[Fudge Nuggets 19227]

On 2/28/2019 at 5:28 PM, Spur08 said:

Isn't it actually available for free from somewhere?  Thought I read that before over at Bogleheads

If you put in the effort, any book, movie, TV show or album is free somewhere.