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Re-intro and investment question

Forum: Financial Planning and Budgeting


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June 11th, 2010, 11:55 AM
sara~b's Avatar Platinum Supermommy
Join Date: Aug 2006
Location: Pittsburgh PA
Posts: 10,350
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Hi ladies! It's been some time since I've been down here. I started following Dave Ramsey's plan a year or two ago and I've slowly been eating away at our debt. In the next month or so we will be left with only our mortgage, our 2 car payments, a remodeling loan and my student loans (which are deferred as I'm still in school).

It looks like I am going to be receiving a substantial windfall shortly so I am looking at investment and savings opportunities. I will pay off some debt but I want to back us up with some substantial savings as well. I am hoping to split the money between liquid accounts and long-term savings/investment accounts.

My credit union offers the following:
-Two money market accounts (regular or super) - the regular would be $1000 minimum investment. The super is $5,000 minimum investment.

-Share certificates in either 6, 12, 18, 24, or 36 month terms. $1,000 minimum investment. (.5% - 2.27% APY depending on length of the term)

-Traditional IRA with no minimum balance, no monthly fees, and max yearly contribution is $5k right now.

-Roth IRA with same terms as traditional except that taxes are paid now instead of at the time of withdrawal so I can withdrawal contributions tax-free and penalty-free any time but my contributions are also not deductible.

-Holiday Club Account with a $5 minimum balance and .25% APY. No service fees and no withdrawal fees. This is pretty much just to save for Christmas gifts, etc.

I was thinking that I want to open a regular money market and contribute more than the $1,000 minimum but not the $5,000 it would take to open a 'super' money market. Then I would like to open a Roth IRA with maybe $2,000 and hopefully make it to the full $5,000 in allowed contributions by the end of the year. Finally I would get DD a couple youth certificates at $25 for 6 month terms and open a holiday club account with a few hundred to $1,000 for Christmas savings and possibly a vacation early next year.

Does this sound like a good plan? I guess I should also mention that we do have a regular savings account with about one month of earnings stashed away as an emergency fund. So thoughts or advice please? Thanks in advance!
Sara, 27, married to Shane, 31, mom to Gemma, 6, and Ashlyn, born 8/7/10

Running for my health and sanity!
PR's: 5k-25:05 (old PR 25:10), 5M-45:03 (old PR - 47:22), 10k - 52:00 (approximate - training), HM-2:25:58 (ran a 2:17:36 during marathon), Full- 4:49:25 (old PR -5:49:40), 50k-7:05:56, 50M-13:31:14, 100k- 18:59:31 (old PR 20:56)
(All of these PR's are going down this season!)

My Pregnancy Chart: http://www.fertilityfriend.com/home/1c6297
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June 11th, 2010, 10:51 PM
Lynsann's Avatar Platinum Supermommy
Join Date: Oct 2005
Posts: 8,867
I think you know way more about this stuff than I do. It sounds like you have a good plan. I think there are some girls that can give you ideas on specifics. If you have any leftover, send it my way.
Mommy to Ava (5/24/06) and Kai (5/11/09)
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June 14th, 2010, 11:09 AM
ImperfectMommy's Avatar Mega Super Mommy
Join Date: Aug 2008
Posts: 3,158
Personally, I would build up my emergency savings first and foremost. We have ~7 months built up and are hoping to get 8-12. BUT once we hit the 6 months worth of savings we drastically cut how much we were putting toward our emergency fund and then focused that money into our Roth IRA's. I'd look at the types of jobs you and your DH have. Are they secure? If so, you may only need/want around 6 months worth of Emergency Savings. If they're not very secure, I'd try and get a good years worth! Now I'm talking bare bones per month here, obviously if you both lost your jobs you'd cut out cable, internet, etc. and only need to pay mortgage, groceries, insurance, car payments, etc. So that is the amount you'd need per month, not the amount you currently spend per month. KWIM?

If after that is built up you still have month, then I'd dollar cost average the remaining money into your Roth IRA. Don't just plop the entire amount in there at once, you'll want to divide it throughout the year - after the initial investment. When I opened my Roth IRA through Vanguard I had to make an initial deposit of $3,000 to get it started, then I could put as little as I wanted per month into it. If you're going to open an IRA, I'd go through a discount brokerage firm (like Vanguard, TRowe Price, etc.) instead of your credit union. Your credit union won't give you a very good percentage rate, whereas you decide where your money goes at a brokerage firm and you can get better payouts.

Another thing, do you have term life insurance? Does Shane? It's not always necessary for you to both have it, but if so you may want to set some money aside for that if you don't already have it. I, personally, don't have life insurance on ME because I'm a SAHM and if I were to die my DH wouldn't need the money. However, if he died I'd be screwed, so we have a big insurance policy out on him that would give me enough money to live for 15-20 years w/o working. Not that I wouldn't work that long, but I'd still like to not work while the kids are little. Plus it would give them money for college.

I wouldn't open a Holiday Club account since I've heard some bad things about those in the past, BUT I would set aside a little money for Christmas every month. We have our savings account at ING online and they let you set up multiple savings accounts w/in your one account, so we have a separate "Christmas" savings account that we put $85 into every month, this gives us $1,000 when Christmas rolls around. We use it for gifts and traveling, since our family lives a ways away and it costs a lot for us to drive there, etc. If you think you've found a good holiday club that won't screw you out of any of your money, you could go for it. Just make sure they don't require you put in a set amount every month/year because if you find yourself in an emergency and unable to put in that money, you could get penalized.
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June 17th, 2010, 09:40 PM
sara~b's Avatar Platinum Supermommy
Join Date: Aug 2006
Location: Pittsburgh PA
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Thanks Lauren! Our jobs are very secure. DH has been with his company 4 years now and there are no signs of them slowing down. I have a certification that only 4 or 5 other people within my company have plus a slew of other certifications so it's a pretty safe bet they won't let me go without some kind of MAJOR infraction.

We only have basic cable which is like $12 a month, internet is $30-ish per month and Netflix is $9 per month. DH's salary pays the mortgage, utilities and his debts. I pay the internet, Netflix and my debts. We split the groceries (he pays one week, I pay the next). Between our joint savings (which only I contribute to) and his checking (he leaves all his 'leftover' money in it) we probably do have 3 months worth of savings that would pay our bare necessities.

So I'm thinking I would like to open a money market with like $3k-ish and call that our 3 month fund and then leave our current emergency fund in our regular savings/checking accounts as money for if we had a car accident and needed to pay a deductible, etc.

Of course, none of this savings is going to happen until we see exactly how much we do end up getting and then we are going to pre-pay the taxes on it, pay off ALL credit card debt (I already paid off 5 CC's so there's not a whole lot left there), pay all medical bills that we're just making payments on, pay off his student loans (only $500 left), and pay up our car insurance for the rest of this term.

Then whatever is left will start with funding the savings/money market. After that I want to open a Roth IRA. Whatever else (if there's anything else) is left will go to paying off the next debt on the list.

If I manage to do all of this then the only debts we will have left will be: my student loans, 2 personal loans I had from remodeling my last house, my car, his car and the house. If we snowball the minimum payments from our paid off debts onto these last few I think we could be debt free (except for the house) in 2-ish years. And if I really reign in our spending and put most of our expendable income into paying off debt then we can probably do it in about a year.

I just want to make sure I maximize this unexpected money and funding some better savings accounts is my top priority after paying off our CC's. I have life insurance and disability insurance through work, as does DH so getting extra will be my next 'goal' after the remodeling loans and the car is paid off. Chances are if either one of us is going to bite it, it will be work related as we both have semi-dangerous career fields so I feel comfortable not having big insurance policies outside of work just yet.

So how does that sound? I feel like a dog chasing it's tail! I'm just going in circles here!
Sara, 27, married to Shane, 31, mom to Gemma, 6, and Ashlyn, born 8/7/10

Running for my health and sanity!
PR's: 5k-25:05 (old PR 25:10), 5M-45:03 (old PR - 47:22), 10k - 52:00 (approximate - training), HM-2:25:58 (ran a 2:17:36 during marathon), Full- 4:49:25 (old PR -5:49:40), 50k-7:05:56, 50M-13:31:14, 100k- 18:59:31 (old PR 20:56)
(All of these PR's are going down this season!)

My Pregnancy Chart: http://www.fertilityfriend.com/home/1c6297
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June 19th, 2010, 11:27 PM
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Join Date: Mar 2005
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Sara, everything looks good on your end, I think you are right to put some into an account for a liquid e fund

Lauren, I want you to be very careful about saying that just because you are a SAHM that you dont need life insurance. If you died, on top of what he would have to pay for your funeral, your DH would have to pay someone to keep your kids and do the work you do for them at home everyday. I agree that you dont need as much on yourself as you do on your DH, but adding you for a smaller amount wouldnt cost much more monthly and would be a great asset later.

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June 28th, 2010, 04:26 PM
mommy2Breana+Brandon's Avatar Platinum Supermommy
Join Date: Dec 2006
Location: PA
Posts: 39,401
I think you are doing everything you can do.

i would start a money market account if I were you

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