Where to put my extra money?

[ChrisH]

My wife and I finally made the plunge and had a home built after throwing away about $30,000 in rent. We've just paid our first mortgage and now we're trying to decide what to do with the money we save each month.

Mortgage: $165K @ 5%
Car: $12K @ 0%
Savings: $500/mo

We cleared our credit card debt a year ago, so the only debt we have that has any sort of interest is our home. Should we pay off the car sooner even though it is 0% interest? Should we put our extra money into a mutual fund or maybe a Roth IRA? Should we pay extra on our mortgage?

We really don't know where to get started. My wife is a teacher so she is involved in the TSR (or TRS) retirement plan, but I have yet to start on retirement myself at the age of 29.

Just looking for some suggestions on where to start. To pay things down now or invest.

[KTP]

If you have your EF at 6 months or more, then definately the Roth IRA before paying off the 0% car IMO.

No credit card debt or anything besides the deductable home mortgage?

[ChrisH]

Originally Posted by KTP

If you have your EF at 6 months or more, then definately the Roth IRA before paying off the 0% car IMO.

No credit card debt or anything besides the deductable home mortgage?

I'm sorry, but what are you referring to when you say "EF"?

I did forget about my wife's student loans, but she works at a Title 1 school, so the state will pay off her student loans after her 5th year of teaching there (currently in her 3rd). I think I may actually call and see if we can get some of the loan payments deferred or lowered until the state pays off the student loan.

We only have a couple of credit cards, but they never have more than $100 on them and we keep them payed off. We did have about $10,000 in credit card debt, but we just finished getting those all payed off last year.

So to answer your question, the mortgage ($1350/mo), car payment (2 years left @ $540/mo), and student loans ($215/mo) are all we have. I just don't consider the student loans an issue if the state is paying it off in two years.

We just got our first time home buyers tax credit from the government and half of that is going into an emergency fund (online savings account). The rest is going towards the home. We also have $2,000 set aside to cover any unexpected property taxes at the end of the year. If there are any that is....

[disneysteve]

Welcome, Chris.

EF = Emergency Fund. The standard advice is to keep a minimum of 3 months and ideally 6 months or more worth of expenses (not income) in a safe account like a high yield money market.

Do you have any employer-sponsored retirement plan like a 401k or 403b and, if so, is there a company match? If there is a match, that's free money. Don't pass it up. If there is no match, I'd open a Roth and fund that.

[ChrisH]

Ok, well it seems the first order of business is to put a little more into the EF.

As far as Roth IRAs are concerned I read good things about Vanguard. They have many different ones to choose from and I'm finding it difficult to narrow the list down.

[disneysteve]

The first step is to decide how you want to allocate your money - how much to stocks, how much to bonds, etc. Then you can work from there. You can go as simple as choosing a target retirement fund that automatically adjusts the allocation to get more conservative as you get closer and closer to retirement age. You could do a little more work and choose a few index funds like their Total Stock Market fund, Total International fund and Total Bond fund, in percentages that you feel are appropriate. You will probably only choose one fund to start because all but 1 or 2 of their funds have a $3,000 minimum. In fact, you may have to build up your Roth funds in a regular savings account until you have the $3,000 to open the Vanguard account. If you have any questions at all, post them to this forum. Lots of helpful people here.

[LivingAlmostLarge]

Do you have savings for home repairs, car repairs, property taxes, etc?

I find I have a very little play room after I budget everything out.

[ChrisH]

I suppose that is my problem. I don't know how much to invest in stocks/bonds, etc. I'm completely inexperienced with the market and clueless.
I'm just looking to retire when I hit 65 and the magic number is $1 million. I guess it's just a psychological thing

I don't know exactly what our risk tolerance would be, but I'd say we tend to not be too risky with our money. But at the same time I would like average or slightly above market average returns. I guess that would put us in the middle or slightly above it.

And yes, we do have an emergency fund set aside. In fact, my car is in the shop as we speak . I'll be glad when my wife's car is paid off and I can have my turn at a new car! We insist on keeping our cars for no less than 10 years and nothing longer than a three year finance.

I'm just lost, because right now we're saving money, but I don't think we're utilizing our savings very well. If we don't stick it in a IRA or something else, it will end up getting spent on the home or travel.

[disneysteve]

Originally Posted by ChrisH

I suppose that is my problem. I don't know how much to invest in stocks/bonds, etc.

I don't know exactly what our risk tolerance would be

If we don't stick it in a IRA or something else, it will end up getting spent on the home or travel.

You and your wife need to sit down and list your financial goals. There is another thread with a link to a risk tolerance analysis that you can do.

Whats your risk score?

There is nothing wrong with spending some of your earnings on things around the house and on fun stuff like travel. You just need to work it into your overall savings and budget planning. You can't put all of your spare money into retirement and you can't spend all of your money on immediate stuff like travel and home decorating.

There are numerous sites online where you can investigate asset allocation plans. I think Vanguard's site has info on that.

[ChrisH]

Looks like my risk tolerance score is 48. I guess I'm about average. I'll take a look on Vanguard's site and see if I can find some better information to help guide me to the right fund.