Bob Loblaw needs help

[Bob Loblaw]

Hi. I am new here. I would like your help.

Starting savings/investing from zero.

Some stats: Married with children, homeowner, 457 plan (no company matching), pension, no 529s yet, 401(k)s with former employers, no debt (other than mortgage).

Our savings dwindled due to wife not working for 5 yrs (stay-at-home mom), and needing to dip into savings whenever my income didn't cover expenses. Wife has now started working again, so there is hope. Just want to get out of the hole, and have some more financial security.

Do I start by putting whatever I can into a high yield savings account, and then when I reach a certain amount, put that amount into a mutual fund? I know you probably need more info, so what else can I supply you with?

Thanks in advance.

[SteveBlissLaw]

Love the name. One of my favorite shows of all time lol

[Bob Loblaw]

Originally Posted by SteveBlissLaw

Love the name. One of my favorite shows of all time lol

Ha ha. I'm waiting on the movie.

[bjl584]

It sounds like you should start by creating a budget. The problem has been that you were forced into dipping into your savings to pay the bills when your salary didn't cover it. That indicates that you were living above your means. Is this still the case? You need to cut your expenses so that you are able to save 20% of your household income.

[clintdavis]

I would start out by saving up an Emergency Fund of 6 month's worth of your household expenses. Beyond that, you would want to start investing into a Roth-IRA and then a traditional IRA, with a good diversity of growth stock mutual funds. Then you will want to set up ESA's for your kids' college. You can put up to $2,000 per child/per year that grows Tax Free. If you want to save more than $2,000 per child, then you would use 529's.

If you would like some help establishing your goals and laying out a detailed plan to achieve them, I'd be glad to help. Check out our website and let me know if I can be of service. Thanks!

[Hector]

Originally Posted by Bob Loblaw

Our savings dwindled due to wife not working for 5 yrs (stay-at-home mom), and needing to dip into savings whenever my income didn't cover expenses. Wife has now started working again, so there is hope. Just want to get out of the hole, and have some more financial security.

stay at home mom is a lot more work than going to so called job for 8 hours a day.

[Hector]

Originally Posted by bjl584

It sounds like you should start by creating a budget. The problem has been that you were forced into dipping into your savings to pay the bills when your salary didn't cover it. That indicates that you were living above your means. Is this still the case? You need to cut your expenses so that you are able to save 20% of your household income.

20% rule is not appropriate for everyone. You just cant assume that person is living beyond his means just because he is not saving 20%. Income is an import factor too. When I checked last time, average household income in this country was just above 50k.

[bjl584]

Originally Posted by Hector

20% rule is not appropriate for everyone. You just cant assume that person is living beyond his means just because he is not saving 20%. Income is an import factor too. When I checked last time, average household income in this country was just above 50k.

My assumption that he was living above his means has nothing to do with his savings rate. It has to do with his spending rate. He obviously was spending more than he was earning or he wouldn't have drained his savings to 0. His savings rate was negative during this time. To get back on track he will will need to create a budget that gets his spending rate more inline with his income and allow him to save (preferable around 20%, which is the rule of thumb for retirement savings.)