Need Advice Please!!

**sniper260** · 03-24-2014, 07:30 AM

Hopefully there are a few of you guru's out there that like to play with numbers and can help out here! Personal finance fascinates me.. I'm always trying to learn all I can and play with numbers. Hopefully I gave some of yall some computing fun to play with today and see what kind of advice you can come up with on the directions I need to go...

Thanks for any input!

**sniper260** · 03-24-2014, 09:12 AM

ttt - I'm craving input from other guru's...

**autoxer** · 03-24-2014, 12:12 PM

You are doing great with the Roths and TSP, but it seems odd to be contributing to a 529 plan, while carrying all of that student loan debt.

The house mortgage interest rate seems high. If you have equity in the house and a good credit rating, you should be able to refinance that much lower.

When you met with your investment adviser, did they review with you the expense ratios of the funds that you are investing in? The amount paid in fees can really add up over the long term.

**sniper260** · 03-24-2014, 01:12 PM

Originally posted by autoxer View Post

You are doing great with the Roths and TSP, but it seems odd to be contributing to a 529 plan, while carrying all of that student loan debt.

The house mortgage interest rate seems high. If you have equity in the house and a good credit rating, you should be able to refinance that much lower.

When you met with your investment adviser, did they review with you the expense ratios of the funds that you are investing in? The amount paid in fees can really add up over the long term.

yep the student loan debt adds up to right at 24k still... I have been very intent on getting a 529 working though because of the time value of money. I figured if I can build it up and get a good amount sitting in it then it would benefit me more in the long run because the time value could work for the next 20 years or so..

The house interest rate is high because it is a mobile home. I bought it when I was single, I know its stupid to buy a trailer house... But it was the easiest way I could live as cheap as possible to free up income to pay down debt. It has helped tremendously because we have gotten out of and paid off more than 100k in debt in the last 3 years or so... With that said, it has been on my mind to get this mobile home up for sale asap and get out from under it because I am gaining no equity in this house... Just not sure what the next move should be yet.. The housing market is horrible where I am because the oil field moved in and prices sky rocketed. If I bought a house now, when the oil field moves out, that house is going to drop in value a lot...

expense raitos we did talk about. I decided on all class A funds because over the long hual they are cheaper than class C funds. Fee's are paid up front on the class A shares vs class C having a yearly fee. It is all American Funds that I am starting my investing with..

**autoxer** · 03-24-2014, 03:23 PM

Originally posted by sniper260 View Post

expense raitos we did talk about. I decided on all class A funds because over the long hual they are cheaper than class C funds. Fee's are paid up front on the class A shares vs class C having a yearly fee. It is all American Funds that I am starting my investing with..

While Class A funds (front loaded) may be cheaper than Class C funds (level loaded), I fear that your investment advisor is simply a mutual fund salesman. If they are pushing loaded mutual funds, then they don't really have your best interests in mind. They were likely pushing these options, because they get a sales commission for selling them. There is another option of buying no load mutual funds, but your advisor doesn't benefit from selling them, so they won't offer them to you. The load fees and expense ratios may seem small, but they can have a huge impact on how much you end up with. If you want to post a ticker symbol of the fund, then we could probably offer you an alternative with a much lower cost.

**sniper260** · 03-24-2014, 04:28 PM

I'm invested into:

American Funds SMALLCAP World A

American Funds Gr and Inc Port A

PL Growth LT 529 MT A

They are each a portfolio diversified into several different things.

**sniper260** · 03-24-2014, 04:45 PM

What I'm understanding is a broker isn't going to sell you funds that they can' make any money from.... so Iin that case I really can't go through a Raymond James or Edward Jones to get into funds....

Do you go straight to American funds and open an account with them and just do your own investing in their fund and skip the middle man Edward jones? Or get an account with vanguard, Scott trade, ameritrade, etrade type place to invest without any advice?

From what I've learned the Edward Jones or such companies your paying for the advising part... If you didn't need the advisor and knew what to do you don't need a company like that...

God I wish I could learn more about all this!!!!!!!

**autoxer** · 03-24-2014, 05:49 PM

American Funds SMALLCAP World A (SMCWX) has a 5.75% sales charge and an expense ratio of 1.13%

American Funds Gr and Inc Port A (GAIOX) has a 5% sales charge and an expense ratio of 0.70%

PL Growth LT 529 MT A (CPGAX) has a a front load of 5.75% and an expense ratio of 0.90%

The front load is paid when you purchase the shares and the expense ratio is the ongoing management expense every year.

Originally posted by sniper260 View Post

What I'm understanding is a broker isn't going to sell you funds that they can' make any money from.... so Iin that case I really can't go through a Raymond James or Edward Jones to get into funds....

Do you go straight to American funds and open an account with them and just do your own investing in their fund and skip the middle man Edward jones? Or get an account with vanguard, Scott trade, ameritrade, etrade type place to invest without any advice?

From what I've learned the Edward Jones or such companies your paying for the advising part... If you didn't need the advisor and knew what to do you don't need a company like that...

God I wish I could learn more about all this!!!!!!!

I don't think you need a broker or investment advisor. It may seem like they know how to invest, but the truth is if they were expert investors, they would be living off of their investments, not working for sales commission. Instead of paying someone to try and pick the best stocks, your best bet is to buy an index fund that owns the whole index. For example the Vanguard Total Stock Market Index Fund (VTSMX) doesn't have any load fee and only has an expense ratio of 0.17%.

**Goldy** · 03-24-2014, 07:32 PM

First off, you are in pretty good shape in my opinion and you make enough money that you should not have any issue shedding this last remaining debt.

I am going to simplify your budget a bit.

Take Home: 6,000/mo
Expenses: 3,000/mo (I rounded up, don't forget to have some fun)
Investments: ~1500/mo for roths and TSP
Emergency fund: 500/mo
Debt repayment: 1000/mo

I would think about stopping contributions to the mutual fund and 529 plan. I didn't think you could fund a 529 plan without a child, you might want to check into that if you haven't already. You are saving at a good rate for retirement so I would focus on the emergency fund for your downpayment on the next house and student loan repayments. In the rough budget I outlined above I allocated 1000 to the student loans. If you pay off the small one and roll what you would be paying it into the new payment you can hammer out loan #2 in about 6 months. At that time I would roll that payment (1000+107+120) into loan #4. After another 4 months your car loan will be paid off so you can add another 200 to the student loan. This loan will be paid off in about 6 months.

After 12 months you will only have one loan left and its only costing you $60 a month so I would now shift the focus (and funds) to beefing up your EF for a downpayment or paying on your house if you decide to stay where you are. Your EF will already be at 7k by this time too thanks to your 500/mo contributions. After that I would then go back to non-retirement investing.

**riverwed070707** · 03-25-2014, 06:45 AM

How old are you? I agree its a bit strange to contribute to a 529 without a child and I'm not entirely sure you even can. Depsite the legalities and tax beneifts I think it would be better to keep that liquid and make it work for you now, plus you never know what obstacles you might encounter having kids -- not trying to be a debbie downer but if you have trouble getting pregnant and for example need IVF, it would be better to have regular cash and investment savings than a pile of money that can only be used for college. Additionally, I'm a firm believer that while its nice to pay for college for your kids, you need ot take care of yourself first... get the rest of your debt taken care of, get saved up for and buy a house, get your retirement in order, THEN start saving for college. The 529 limits how you can spend your money and circumstances change. Additionally, who is the custodian of the account? I mean I know you two plan to spend forever together but right now she's a girlfriend and if you are both contributing to this investment account, what happens if you split before said kid is even conceived? We always want to think the best but you should plan for the worst and I don't think a joint investment for a kid that is yet to be is a good move.

Your expenses are totally reasonable for your income but I agree with the PP. Knock out that debt while still funding your efund, then refocus on investing, especially if you are young-ish. If youre older my advice might be a bit different.

Originally posted by sniper260 View Post

I want to know how much I should contribute to this stuff each month,
what else I should look into adding and doing as well... Heres a rundown of my situation, we are all different, and by no means to I feel like I have anything to brag about here, Im just seeking advice from others that know more than me...

I sat down with an investment advisor a few weeks ago and we started getting this set up, I still need to get with a financial planner or a few and see who I like best too...

Monthly bring home net - +-$6000 for me and my gf both together.

Student Loans:
1- $3398 @ 6.21% - Payment $120
2- $6564 @ 5.25%- Payment $107
3- $6822 @ 3.68%- Payment $60
4- $8022 @ 5.35%-Payment $124

House:
$38,000 @ 6.75%- Payment $454

Vehicle:
$2000 @ 0%- Payment $200

This is all the debt we have. My car is PAID FOR! The gf's vehicle was paid for but she got in a wreck ad had to get a new one - insurance check covered all but 2k.. so we have that dang car payment now.

Household Bills:
Electricity-$80-300 (depending)
Phone- $60
Food-$250
Internet-$58

My car diesel - $250
Her car gas - $100

ID Theft Protection- $6.75
Car Insurance - $53

Medication- $20
Tabacco- $80

***And this is our monthly budget*** Total - $2,242.75 (calculated with HIGH electric bill)

Emergency Fund $1,418 - Add $200 Month
My Roth IRA - $5,000 - Add $411 Month
Her Roth IRA - $12,000 - Add $411 Month
FERS Retirement - Matches certain percentage of top three consecutive highest monthly incomes out of my career...?
Thrift Savings Plan - $36,000 - employer matches 5% - Add 10% pretax per month ($633 a Month)
Mutual Fund - $357 - Add ? Month??
Virginia 529 Plan - $235 - Add ?? Month??

Roth IRA's get maxed out each year.... The rest I am up in the air about... How much to add to each investment per month??? How much "FUN MONEY" should we set aside each month to spend on us for fun??? How much do we need in the emergency fund? What else should I stick money into for investing?

We have paid off a TON of debt, and worked so so hard trying to get stable and plant the garden... The smallest student loan is going by by in the next month... we are paying it off so its gone, it also has the highest interest rate...

We do not have kids yet... the 529 plan is all just a "get ahead of the game as much as possible before hand" investment...

We life about as cheap as we can get...

So 6000 bring home minus bills and Roth IRAS gives us $2,935 left over at the end of the month... Then we still need to fund mutual fund and 529 plan from there with a certain amount...

So basically working with $2,935... How much should we have fun with, how much goes to mutual fund? how much goes to 529? etc etc??? what else should I do???

Give me yalls thought... We are wanting to end up being able to save for a down payment on a house, stick some away for down payments on vehicles when that time comes around...

Student loans need to go... they are a waste of money, I make too much to be able to deduct anything on income tax's - they are just costing me money and nothing else... That will free up more income too once they are gone...

Let me know what yall think.. Hopefully there are some smart people here!!

**autoxer** · 03-25-2014, 07:30 AM

Originally posted by Goldy View Post

I didn't think you could fund a 529 plan without a child, you might want to check into that if you haven't already.

You don't need a child to have a 529 plan, you just have to designate a beneficiary. You could set one up for a spouse, brother, sister or even a parent. They are also transferrable, so if your child doesn't need it all for college, you could transfer it to a niece or nephew.

The part that I don't understand is trying to save for unknown future higher education expenses instead of just using the money to pay down the current college loans.

**snafu** · 03-25-2014, 08:54 AM

Are you open to different choices? Cancel ID insurance unless you have a special reason. Better to rotate through the four major credit reporting agencies for their FREE report [end of March, June, Sept. Dec.] to make sure everything is correct. If you have a Discover credit card, they now list your FICO score on every statement.

Does you employer restrict which Mutual Funds you can buy? The EJ or RJ services are too expensive for small investors. They've sold you fee based Mutual Funds with high Management Expense Ratio [MER] which silently transfers value from your account every month to pay their fees.

Would you be willing to read The Wealthy Barber [Chilton], The Millionaire Next Door [Danko] likely available from your library or a used book store/on-line seller.

Nine lessons in wealth-building from The Millionaire Next Door

http://www.getrichslowly.org/blog/2011/02/09/nine-lessons-in-wealth-building-from-the-millionaire-next-door/

My favourite book is The Automatic Millionaire [Bach], a quick read with a plan that works for everyone.

Both Fidelity and Vanguard Mutual Funds offer an excellent selection of easy to buy, no sales fees and low MER which translates to better value for you than Raymond James or Edward Jones representatives have offered. Even if you don't change your current holdings these are the standard to compare any new addition/purchase. If you read this forum you'll see we mention Vanguard Index as the basic holding over and over because it works so well.

You may be in a unique housing situation but a mobile home is like a car, guaranteed to depreciate and lose value every year. While folks with high FICO score pay 3.5% interest on their mortgage you are paying 6.75% [nearly 7%] on a depreciating asset ouch!

I suggest that you focus on paying off your highest interest Student Loan while continuing to pay the others as required. When that's paid move to the next using the $ 120. freed up. I don't think it's legal to do a Plan 529, plenty of time later.

Finally, [sorry for being so long] start a savings program for 20% house down payment. I'd pinch pennies until they squealed to get to that 20%.

**sniper260** · 03-25-2014, 09:35 AM

All good advice! I will have to sit down and re read it all again when I get home. Yes you can have a 529. It's in my own name thenwhen it is time I can transfer it into my kids names... so it's mine... we are getting closer and closer to making the girlfriend a fiance... we just want to be decently OK financially before we get married and it's all for good... that way once married we have much less to no financial debt burden.

I agree the 529 isn't an important deal yet and no its not a priority.... just opened one up to have a little money sit in really..

What vanguard funds is it that I would want to invest into and use besides the index???? There's so many to pick from and how and where do I go to learn this kind of info?? What do I watch? I'm all into it for learning just don't know where to go to learn all I can..

I've already had it on my mind to read the millionaire next door... I've heard a lot about that book.

Vanguard, the hardest issue is opening account is a min of $3k... can't just stick money in to it... gotta save up to open the account...

so much I need to learn. Thank god there are a few of you that are active on here and helping out... there's not a huge gathering of people on finance forums anywhere... it's a select few that are really interested in discussing finance. I appreciate all yalls help and need all the help I can get!!!

please fill me in on vanguard mutual find and stuff I need to look into!! I don't have much money in with the broker type people yet so it's not going to hurt me to open accounts with vanguard and such either.

Student loans are our first priority - then emergency fund - for now these two things are what we are really working on....

**snafu** · 03-27-2014, 05:36 AM

Please understand managing your money effectively, in your own best interest is a learning process, slow, methodical, one step at a time. You need to make a flexible plan and do your best to stick to it. Life throws up constant challenges, the economy shifts, interest rates go up, Bond values go down, the stock market seems like a roller coaster some times. I suggest you focus on the remainder of 2014...for now.

You didn't mention whether your or GF/ Fiancee's employer offer any type of retirement program. Is there any matching money for a retirement program? This is FREE money but it likely has restrictions. You need to capture any FREE money, know the details and follow their restrictions. How did you come to choose your particular MFs?

'American Funds SMALLCAP World A (SMCWX) 5.75% sales charge, MER @ 1.13%
American Funds Gr and Inc Port A (GAIOX) 5% sales charge, MER @ 0.70%
PL Growth LT 529 MT A (CPGAX) has a a front load 5.75% MER @ 0.90%
The front load is paid when you purchase the shares and the expense ratio is the ongoing management expense every year.'

http://www.bogleheads.org/forum/index.php is a discussion forum about Vanguard Funds. A no fee, low cost USA Index Fund is a good starting point. Vanguard, Fidelity and most other MFs [ Mutual Funds] have a program called DCA [Dollar Cost Averaging]. Once you have accumulated sufficient funds to open your initial account, you agree to automatically pay them a set amount, on a specific day of each month just like you pay a cell phone bill. Some months the per unit cost will be higher, buying you less units, some months the unit cost will be lower buying you more units dependent on the stock market index. As your income increases you can increase the amount of your set amount. At some point in the future when you fully understand what you are doing you can make changes to include a foreign fund for example.

At our house we use flip chart sheets [attached to the back of the bedroom door] to create a graph of major bills like your SLs. Focus one to be paid off as quickly as practical while paying the rest as required. You may prefer your computer's spread sheet. You also need to chart savings tracks concurrently for an Emergency Fund and possibly retirement accounts whose priority rests, for the time being, with employer funded matching sums.

sorry so long winded

Need Advice Please!!