Need saving advice

[flaversaver]

I'm about to turn 32, live in San Diego, have no debt except for a used car loan (14k remaining). Have about 10k in cash (literally) hiding around the house that I plan to keep for an emergency fund. Roth IRA with Vanguard is fully funded for this year, but I am behind for my age as I just started it. I own my own business and its finally starting to make money and I make around 72k (pretax) a year which could rise to 6 figures in the next year or so. Also looking into a company supported retirement plan but thats another story.

I've got a $500 check that I have not deposited yet that was a gift. Trying to decide what my next step is. Do I throw it into the checking account? Open a high yield savings account? Throw it in a CD? Maybe stock investments? Maybe another vanguard fund?

I'm currently single and dating. I'll never get married (personal choice) but would love to settle down and buy a condo with a long term girlfriend in the next 3 years.

What should I do? I want my money to start working for me.

PS - I'm a Ron Paul supporter and strongly believe that if he gets the White House in 2012, then we'll see the economy come back, so I want to be prepared for a dollar rise and a bull stock market.

[bjl584]

First,
I wouldn't bank on a Ron Paul win.
Second,
You said that you want to buy a condo in 3 years. Do you have any money saved for a downpayment? 20% down is rule of thumb. That may be a little high in a market like California, but you need a substantial downpayment. I'd start saving for that.

[BMEPhDinCO]

First - don't keep that much cash around your house, it's loosing money and it's not covered by insurance in case of a fire/bad thing happening! Go to a bank that has a higher interest rate (>0.7%) and open an account. This will now be your emergency fund. If you want cash, keep <$500 at the house. As long as your account has an ATM card and check writing, it's as easy to get to as your cash and safer (I like Ally Bank, for example).

Second, if you are self-employed, use that $500 to open a SEP-IRA for yourself. Then add money to that as your secondary retirement plan, it also helps with SE taxes. Along with that, make sure you are keeping track of your taxes and paying the right amount at the right time, it can be harder with your own income.

With $72k pre-tax, you should bringing in around $3,800 a month - what does your budget look like for that? If you can save $800 a month, in 3 years you could put almost $30k down on a condo (20% for a $150k place). If you can save another $500 a month, you can invest that in dividend paying stocks or bonds. If you believe Mr. Paul will change the economy for the better, you want to buy now while it's low.

As your income rises, keep living on less and invest and save the rest - perhaps consider looking to buy another property in 5 years with the savings you have built up (3 years to condo, 2 years for investment property savings). Figure out how much you need to live on and if you can find passive income streams for that, you will be in great shape!

[flaversaver]

I wouldn't buy a condo until I had someone to buy it with (ie - significant other). And 20% of 500,000 is 100,000. Not gonna happen on my salary. San Diego housing prices must be the highest in the country.

Any other ideas? Should I pay off my car (not upside down)? Go into stocks?

PS - Ron Paul will win the nomination. He is incorruptible. Don't let the main stream media convolute your vote with their slander and misinformation which is disgusting. Investigate journalism is dead unfortunately.

[Kooshiball]

Originally Posted by flaversaver

I wouldn't buy a condo until I had someone to buy it with (ie - significant other). And 20% of 500,000 is 100,000. Not gonna happen on my salary. San Diego housing prices must be the highest in the country.

Any other ideas? Should I pay off my car (not upside down)? Go into stocks?

PS - Ron Paul will win the nomination. He is incorruptible. Don't let the main stream media convolute your vote with their slander and misinformation which is disgusting. Investigate journalism is dead unfortunately.

This is depending on how much is the interst rate on the car loan (I assume not that much). If rate is too high (like 8% or higher), then should pay off that loan (Or may be refinance). If not (5% or less) then, you just keep paying the monthly payment and invest in something else. But, I would recommend you to educate yourself before going into any investments especially this state of economy (Understanding global economic condition not only US but other countries are essential for succesful investing). You can get books and check the investment forum like this one.

I think you should wait to buy the house or condo since California housing market will decline even further according to millions of shadow inventories and historical median home price and income ratio.

Good luck!

[flaversaver]

The interest on the car loan is 5.99% via a local credit union. And the loan was only for 19k as I purchased a used car. I owe around 14k and now have equity. Payments are only $300/month and I could sell it in a heartbeat if I had to.

[disneysteve]

Originally Posted by flaversaver

And 20% of 500,000 is 100,000. Not gonna happen on my salary.

I agree that won't happen on your salary. You can't afford a 500K home. On a 72K income, you should be looking in the 175-210K price range. If your income rises to 100K, then you can move up to about 300K tops.

The interest on the car loan is 5.99% via a local credit union. And the loan was only for 19k as I purchased a used car. I owe around 14k and now have equity.[/quote]

You say "only" like 19K wasn't a huge amount to spend on a used car. If you have positive equity, I'd sell it in a minute. Replace it with something in the 5-7K range and cut your auto debt by half or more. You could even take some of your cash and put it toward the next car. The less you have to borrow the better.

I'm curious about something - do the girls you date know that you have no intention of ever getting married? How do you go about sharing that information?

[charlieh]

It may be good to keep your car loan just for credit building purposes as you plan to buy a home in the future. As for the 500 sounds like you need to start saving for the future. Maybe direct stock purchases through a company would be a good idea. Or, seeing as you are young and seem to plan to remain technically single for some time, you could consider some riskier investments. But, clearly starting a dedicated savings for your future condo purchase is a must.