Finance, retirement, college fund- please help me improve

[cookie1wood]

Hi,
I am 34 and married with one child and my wife is 30yrs old. 10 yrs of marriage under our belt(thought this information might be important for any help offered)

I am trying to improve my overall finances and credit and retirement as well as start a college fund for my 6 yr old. I am interested in any help any one is willing to give me to point me in the right direction. Here are some details about where I am at right now. Thank you all so much for all your help, expertise and intelligence.
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My debt information:

I was in major credit card debt 5 yrs ago and went to a nonprofit consumer credit counseling service sponsered by united way and they will all be paid off come december after being in the program for 5 yrs.

I do not own a house, however I would like to be in one by the end of 2007. Right now I live in a Mobile Home in a Mobile home park and owe $16,128 on it. I have been trying to sell it but no luck so far. I rent the land the mobile home is on.

I have a car loan that will be paid off in july 2007. The payments on this are 378.41 a month
I have a personal loan through the same bank which is 107.41 a month

I also have a loan through a company called beneficial that I pay 227.42 a month
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Savings

I have two open savings accounts however there is no balance in them.

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Retirement

I am putting 5% my company's 401k and my compnay matches to 4%. I was invested very aggressively and just called my company's financial advisor and reallocated my funds per her advice. My rate of return up to now has been between 7 and 8%. I also have a pension which I am fully vested in.

My wife also has a 403b with her company that she invests 4% in aggressive stocks.

My Son's College Fund

As of right now I do not have a college fund for my son.

[sweeps]

First congrats on paying off so much of your debt.

Can you be more specific about these "aggressive" and "very aggressive" stocks you've been investing in? 7-8% return is not that great if you're truly aggressively invested. Normally at age 30-35 you should have a portfolio along the lines of this:
25% large cap U.S. stocks
25% small cap U.S. stocks
25% international stocks
10% emerging markets
15% bonds and real estate

Also based on your projections, are you on target to meet your retirement needs? You don't mention how much you have saved for retirement, when you think you'll retire, and how much per year you anticipate you'll need in retirement. If you need to save more (I'm guessing the answer is yes), you can open a Roth IRA at a company such as Vanguard and Fidelity. After your car is paid off, you could direct that money towards your Roth (or bump up your 401k/403b contributions if that is a better option).

A common choice for your son's college fund is a 529 plan through your state. However, more information is needed because some 529 plans are good, some are bad. A Coverdell Savings Account is a possibility too. Or in some cases, a family is too far behind in saving for their retirement that they should just focus on that instead of saving for college. (As the saying goes, you can borrow for college, you can't borrow for your retirement.)

[LuxLiving]

You also don't give us any idea of your utilities, regular bills, groceries and income. Those factors might be helpful in pointing you in a certain direction. Your wife works, does this mean you have two cars? One paid off? Insurance for both of them? Plans for replacing them? I'm assuming you are going to be needing transportation still.

[pearlieq]

I think your first priority right now should be to continue all of your regular debt payments, and begin to scrape together a small savings fund--maybe around $2,000 to $3,000. That would be enough to cover most catastrophes such as big car problems, major home repairs, etc. That way you won't have to go into debt if something happens (and it ALWAYS does).

I think your retirement contributions are OK for now. You're taking advantage of the company match, which is good. Your asset allocation should be fairly agressive. I tend to prefer a simpler, easier approach to investing. I like targeted funds, which you choose based on the date you want to retire. If you intend to retire in or around 2030, you would pick that fund, and the fund managers will balance and re-balance your portfolio as the years go on. If your 401k is with a reputable brokerage house, you might want to look into those.

Another simple solution is a variation on the "Couch Potato Portfolio" where you would subtract your age from 100. The number you get equals the amount of your portfolio that should be invested in a broad stock index fund. The remaining portion would be invested in a bond index fund. It's not flashy, but it will get the job done.

Once you accumulate your 2-3k savings, I would keep your retirement savings as they are and focus your money on paying down your debt. You can either start with the smallest bill and pay extra on that until it's paid off, and then move on to the next biggest bill, etc. Or you can start paying on the bill with the highest interest rate, then move on to the one with the next highest rate, etc. You'll save more money if you pay by interest rate, but paying off some of the smaller bills first tends to give people a lift and make them more motivated. The choice is yours.

Once the debt is under control, you can start accumulating more savings, and begin to think about beefing up your retirement contributions. Once your retirment contributions are where you'd like them to be, then you can start thinking about college for your son.

I know it's hard to hear as a parent, but his college fund needs to be pretty low on the priority list. When college time comes around, there are tons of options to cut costs and to get financing. There are no loans or grants for retirement!

Good luck to you! You're asking the right questions and are setting yourself up for a good future. And congrats to you for sticking with the debt program all these 5 years. I bet it feels great to be almost done!

[Ima saver]

I have to agree with pearl, your son's college fund should be low on your list of priorities. You need to establish a savings emergency fund and work toward paying down debt. Next, you should open a roth ira for both you and your wife.

[disneysteve]

Originally Posted by pearlieq

college fund needs to be pretty low on the priority list. When college time comes around, there are tons of options to cut costs and to get financing. There are no loans or grants for retirement!

I totally agree. Right now, you have monthly loan payments or over $700/month, not counting whatever you pay on the mobile home.

Your first priority should be getting out of debt and establishing a good emergency fund. Then to increase your retirement savings. Putting away 4% is a great start, but there is no way you will accumulate enough at that rate to retire comfortably.

I'd forget about college savings for now.

[creditcardfree]

I agree with the emergency fund route and putting off college for now.

You are doing your child a favor by getting your house in order first.

You can always borrow for college, but not for retirement.

[Broken Arrow]

I fully agree about what has been advised so far, but before even that, I would make sure to that you have a budget set up and running. That is, you haven't already done so.

[Lori63]

[quote=pearlieq.

I know it's hard to hear as a parent, but his college fund needs to be pretty low on the priority list. When college time comes around, there are tons of options to cut costs and to get financing. There are no loans or grants for retirement!
[/QUOTE]


Please believe this-there is alot of college money options out there. If you work on the other issues now you won't regret it.

[Tree0164]

Hi Cookie Welcome to the boards.

You have gotten some great advice so far. Show us your budget and we probably can make even more suggestions.

I would pay off the two personal debts and then focus on the mobile home.

You mentioned that you want to be in a house by late 2007-not sure unless you can be very agressive in saving for a downpayment after your debt is paid off.

College that needs to be last priority right now.

[scfr]

Regarding the 2 savings accounts that you now have, if you are paying fees on them for low balances, I would recommend closing one of them and just keeping one.

[cookie1wood]

Thank you all so much for your advice it is greatly appreciated