need help deciding what to do with my $

**kork13** · 04-08-2019, 09:23 PM

I'm of the opinion that this sort of answer is almost always some form of "all of the above," unless you prefer to power through & focus solely on one thing at a time (which is more emotionally challenging, IMO).
Step 1: Ensure that you're living solely on your income, with room to spare. This shouldn't be overly difficult on a $120k/yr income, and will make your husband's sabbatical a non-event.
Step 2: Max the retirement accounts, regardless of what your husband does -- you'll need to if you reliably want $2M+ by age 60.
Step 3: Some of everything. Max your retirement. Pay off your car immediately. Save the remainder of the $110k & call that your vacation home -- should be enough to either buy it in full, or at least serve as a 60-70% downpayment (with your provided numbers, I'd recommend a cap of ~$150k for the 2nd home...which can pretty easily buy 2-3bd/2ba/1200+ sqft in/around Orlando). Send the rest (~$1500/mo) to DD's 529, which will get you to the desired $200k by graduation 10 years from now.

That really gives you everything you want with minimal delay (unless I misunderstood your situation...I assumed the $2k-$3k is above & beyond what you're putting on your current home). Seems like an easy win to me -- you're doing great!

**Jluke** · 04-09-2019, 02:48 AM

I thought DD could go to college tuition free if she went where (you/your husband?) teach?

max retirement accounts. It also reduces your taxable income so you are paying less in taxes and saving for retirement.

Otherwise you have a lot of big expenses coming up between now and 10 years when DD graduates college.

House: 188k plus interest in 4 years
college: 160-200k in years 6 to 10
FL house: call it 200k after buying, furnishing, travelling there, etc.

Maybe you need to consider a 529.

Depending on how important the Florida house is you might have to cut back on extra mortgage payments.

do you plan to carry both houses in retirement?

if not that is quite a windfall if you sell the New England house.

Otherwise the 111k isn�t much given your expectations for the next 10 years.

Also, given the short amount of time it may be risky to fully invest that money needed soon

**Snydley** · 04-09-2019, 05:48 AM

Thanks for the replies:
Kork13:
"Step 1: Ensure that you're living solely on your income, with room to spare. This shouldn't be overly difficult on a $120k/yr income, and will make your husband's sabbatical a non-event.
Step 2: Max the retirement accounts, regardless of what your husband does -- you'll need to if you reliably want $2M+ by age 60.
Step 3: Some of everything. Max your retirement. Pay off your car immediately. Save the remainder of the $110k & call that your vacation home -- should be enough to either buy it in full, or at least serve as a 60-70% downpayment (with your provided numbers, I'd recommend a cap of ~$150k for the 2nd home...which can pretty easily buy 2-3bd/2ba/1200+ sqft in/around Orlando). Send the rest (~$1500/mo) to DD's 529, which will get you to the desired $200k by graduation 10 years from now."

We can't live on just my 120K right now and pay ahead on our mortgage. Our mortgage + extra principal payment, taxes, and insurance = $4,800/month. For more info on monthly expenses: our car payment is $347, electric $140, comcast $225, furniture payment (interest free) $147, child care $83, so total bills $5714/month. We are bringing home $13,817/month. Then we typically spend another $5,200 average per month on all other stuff- food, going out to eat, house repairs, vacations (we go to Florida every spring, DH currently on golf vacation in Myrtle Beach, we are spending 2 weeks lakefront in NY this summer).

I do like some of your step 3. The car payment- we will pay $1,500 total in interest for the car at the end of 5 years, but why pay that when we are making only 2% max with the $ in savings. We have to keep at least 50K in savings-type accounts, my DH needs a decent emergency fund for his peace of mind.

Also, I don't "need" to max the retirement accounts to get to 2mil by age 60 because of how much our employers contribute..but I feel like we are paying too much in taxes for no reason and potentially losing out on more investment gains.

I'm really hesitant to start funding a 529 now because I need the $ in 6-10 years. I'm wondering if it's smarter to just buy 20K in IBonds each year from now on and earmark that for college. I Bond are no risk (correct?) and right now at 2.83% they are basically growing with inflation so I'm not losing $. This way, by the time she starts in the fall of 2025 I'll have $140K in I bonds to use, and maybe I could just plan on paying the rest monthly from my paycheck since the New England house will be paid for and if there is a Florida house it shouldn't be a big mortgage.

Jluke:
"I thought DD could go to college tuition free if she went where (you/your husband?) teach?" If accepted at the university where I work, she would get 90% off tuition and I'd still have to pay room and board- this costs about 30K in total right now. This school has a very solid reputation (it was never considered Ivy League caliber) yet now it's incredibly hard to get in (part of the whole admissions insanity going on)...and I will not allow her application to state that I am a faculty there (she would then be at an unfair advantage) so she'll be in the general applicant pool. I'm planning that she won't wind up going there.

"max retirement accounts. It also reduces your taxable income so you are paying less in taxes and saving for retirement." I tend to agree here. I need to run the numbers to see how much not adding that extra 12K to our 401K/403b, lowering our taxable income, etc is costing us.

"do you plan to carry both houses in retirement? if not that is quite a windfall if you sell the New England house."
No, when I retire (15 years?) we will sell the New England house and I'm counting on it being a windfall as it's 2100sf plus a full in law apartment in the basement on a corner 0.3 acre lot 16 miles from Boston- hopefully it will be worth 800K+. We also own a small waterfront home in upstate NY and we'll live there for part of the summer, maybe rent in the Adirondacks for part, then live the rest of the time in Florida.

**disneysteve** · 04-09-2019, 07:07 AM

There is a whole lot going on in this post. I'll try to pick it apart a bit and I'm sure I'll have more to add later but I'm getting ready to head out of town for a conference.

Originally posted by Snydley View Post

I'm 44, he's 50 we have 1 child who is nearly 12 (6th grade).

Our house is worth ~625K, we owe $188K and are paying at a rate that will have it paid off in 4.5 years (2 years before my DD starts college). What's the interest rate?

We have no other debts besides one car loan at $350/month. And a furniture loan apparently. 0% or not, it's still a debt. How much do you owe on the car?

We have ~480K in retirement accounts: we + employers contributed 50K to the accounts in 2018. What percentage of gross income are you contributing (not counting employer match)?

DH was thinking of quitting his job and taking time off. WHY? He's 50. You didn't say "retire". Who just randomly quits work to take a break? You already said he changed his mind but I'm curious what he was thinking here, especially since you said you can't afford to live on your income alone and keep paying everything as you are.

I really do not plan to spend 70K+ to send her to a private college. Keep in mind that almost nobody pays sticker price. Our daughter's school was just over 50K and we paid about 30K. Today, there are very few schools in the 70K range though I realize you do have 6 more years before she starts so prices will rise some.

I expect to be promoted and make 160K by the time I'm 48. That's great, but none of your planning should count on that happening.

we'd like to ultimately own a 2nd home in Florida (similar to Disneysteve- saw his recent post). We'll be neighbors!

Also, I'd like to have the option to retire at 60 (we set our goal as 2million in retirement accounts). If we contribute 40K/year for the next 16 years I can do this (assuming an average of 5% interest). However, we are not currently maxing what we can contribute (we could contribute an additional 1K/month). How much are you currently contributing (again, not counting employer match)?

Moving forward we should have ~2-3K extra every month to put in savings/retirement. I don't know if continuing to add to our savings accounts is the best plan due to the lower than inflation interest earned on the money. However, I'm thinking if the housing market crashes we will buy in Florida immediately and it would be great to have $$ to put down. I have the same thought. We weren't in a position financially or life-wise to buy the last time the market crashed and it was killing me to see nice condos selling for 20K. I'm not missing the next opportunity, which is why we're putting at least $1,000/month and usually more into our savings account. We're already sitting on >30K in cash in that account alone but when the time comes to buy, that will be a big chunk (or all) of our down payment.

And I may have missed it but how much do you have currently in non-retirement savings like savings account, I-bonds, etc?

**disneysteve** · 04-09-2019, 07:15 AM

Originally posted by Snydley View Post

I will not allow her application to state that I am a faculty there (she would then be at an unfair advantage)

That's certainly a personal decision but if it's built into the system for family of faculty members to get preferential consideration, then you and she wouldn't be doing anything at all wrong by including that information. That's entirely different than bribing officials to let your kid in. If she's interested in going there and understands and appreciates the financial benefit, I'd say to go for it.

**Snydley** · 04-09-2019, 08:20 AM

Originally posted by Snydley View Post
I'm 44, he's 50 we have 1 child who is nearly 12 (6th grade).

Our house is worth ~625K, we owe $188K and are paying at a rate that will have it paid off in 4.5 years (2 years before my DD starts college). What's the interest rate?3.5%

We have no other debts besides one car loan at $350/month. And a furniture loan apparently. 0% or not, it's still a debt. How much do you owe on the car? $16,309 (I think with the $1,500 built into this- so ~$14,800). Furniture will be paid off by the summer.

We have ~480K in retirement accounts: we + employers contributed 50K to the accounts in 2018. What percentage of gross income are you contributing (not counting employer match)? DH is at 10%, I'm at 11.5%

DH was thinking of quitting his job and taking time off. WHY? He's 50. You didn't say "retire". Who just randomly quits work to take a break? You already said he changed his mind but I'm curious what he was thinking here, especially since you said you can't afford to live on your income alone and keep paying everything as you are. Long story. He was going to take 4 months off to enjoy this coming summer then look for another job (avid golfer and fisherman and sometimes has really grueling work schedules, missing weekends, etc). He anticipated it then taking some time to find another position because he doesn't want to commute into Boston so he'd be more limited in his search- now hopefully switching to another site with a short commute.

I really do not plan to spend 70K+ to send her to a private college. Keep in mind that almost nobody pays sticker price. Our daughter's school was just over 50K and we paid about 30K. Today, there are very few schools in the 70K range though I realize you do have 6 more years before she starts so prices will rise some. Lots of schools are 70K+ with room and board now, at least the small private ones. Where I work is 70K+ per year for undergrad. My alma mater is currently 73K/year. Wouldn't I pay sticker price? Don't they expect you to take home mortgages to pay tuition? I'm not familiar with how it works but I assumed we'd get no $.

I expect to be promoted and make 160K by the time I'm 48. That's great, but none of your planning should count on that happening. Very true.

we'd like to ultimately own a 2nd home in Florida (similar to Disneysteve- saw his recent post). We'll be neighbors!

I'd have to take you to dinner (haha) - I've made so much $ from your posts alone in the last 8 years.

Also, I'd like to have the option to retire at 60 (we set our goal as 2million in retirement accounts). If we contribute 40K/year for the next 16 years I can do this (assuming an average of 5% interest). However, we are not currently maxing what we can contribute (we could contribute an additional 1K/month). How much are you currently contributing (again, not counting employer match)? In 2018 I contributed $13,657, DH $13,488.

Moving forward we should have ~2-3K extra every month to put in savings/retirement. I don't know if continuing to add to our savings accounts is the best plan due to the lower than inflation interest earned on the money. However, I'm thinking if the housing market crashes we will buy in Florida immediately and it would be great to have $$ to put down. I have the same thought. We weren't in a position financially or life-wise to buy the last time the market crashed and it was killing me to see nice condos selling for 20K. I'm not missing the next opportunity, which is why we're putting at least $1,000/month and usually more into our savings account. We're already sitting on >30K in cash in that account alone but when the time comes to buy, that will be a big chunk (or all) of our down payment. Great- maybe we should hope for a crash but my retirment accounts will drop with it.

..and to answer your following post, we currently have 111K in savings accounts/ I bonds.

**Snydley** · 04-09-2019, 08:26 AM

Originally posted by disneysteve View Post

That's certainly a personal decision but if it's built into the system for family of faculty members to get preferential consideration, then you and she wouldn't be doing anything at all wrong by including that information. That's entirely different than bribing officials to let your kid in. If she's interested in going there and understands and appreciates the financial benefit, I'd say to go for it.

The tuition benefit is for all employees of the school. If on the application you merely check if you are an employee or not, I am ok with that being included. However, there's no doubt in my mind that the children of faculty are admitted at higher rates than the children of less "influencial" staff, even if the strength of the application is the same. This is unacceptable to me. I'm greatly pained watching the middle class dissolve while the more affluent families get unfair advantages across the board in this country.

**disneysteve** · 04-09-2019, 08:30 AM

Originally posted by Snydley View Post

DH is at 10%, I'm at 11.5%

Hmm. So all together, retirement and non-retirement, what % of income are you guys saving? You're light on the retirement end but you also have money going into cash and bonds and extra debt repayment which is all part of savings.

What I'm wondering bottom line is if you're saving enough overall or if maybe your budget could use a little tweaking. Without sitting down and totally crunching the numbers you've posted, my gut impression was that your spending is a bit on the high side but again, I didn't actually add things up.

**HundredK** · 04-10-2019, 06:49 AM

Can I ask why you choose to pay ahead on the mortgage while still carrying auto debt, presumably not interest free? Wouldn't there be more cost savings in wiping that out first?

**Snydley** · 04-10-2019, 12:08 PM

Disneysteve- Yes I'd say lately our spending is a little on the high side. Too much going out to eat and trips probably. I don't know what % of our actual income we are saving.

HundredK- We were carrying that auto loan thinking we needed to boost savings and no we don't need to so we should pay it off and save the $1,500 interest.

**disneysteve** · 04-10-2019, 12:31 PM

Originally posted by Snydley View Post

Disneysteve- Yes I'd say lately our spending is a little on the high side. Too much going out to eat and trips probably. I don't know what % of our actual income we are saving.

This is one of the single biggest threats to building wealth no matter how much you earn. The "latte" factor is real regardless of income. It doesn't matter how much you make. It matters how much you keep.

Sit down with your husband and take a good hard look at the numbers. Decide how much you want/need to be saving to reach your goals and them base your spending on what remains. And the first step is knowing where your money is currently going; how much are you saving right now?

Just to give you a reference point, we make 206K, so well less than you guys. We also have one child though she graduated college last year so those expenses are done for us, not still to come. We are currently saving a minimum of 31% of our gross income. I literally just got a raise this week that takes me up to almost 247K and I'm estimating that we'll be able to push our savings rate up to 37%. I'm sure we'll spend a little bit more but honestly not much, maybe a couple hundred a month if that.

From the sounds of it, you guys could be a little more mindful of your spending and boost the savings up. That would make it much easier for your DH to go to part-time and get you to your retirement target number sooner. It would also help solve the college funding question and put you in a better position to make that Florida home a reality. It's all about priorities and having goals and a plan to reach them.

**HundredK** · 04-10-2019, 12:42 PM

Originally posted by disneysteve View Post

This is one of the single biggest threats to building wealth no matter how much you earn. The "latte" factor is real regardless of income. It doesn't matter how much you make. It matters how much you keep.

So much truth in this. So much.

**disneysteve** · 04-10-2019, 01:13 PM

Originally posted by HundredK View Post

So much truth in this. So much.

It's very easy to fall into the trap of increasing spending as income increases. Get the nicer car. Upgrade the cable package. Join the gym. Put the kid in dance class. Stay at the better hotel on vacation. Eat out more often and at more upscale restaurants. Go for the iPhone 10 instead of the 8. Some little things, some big things, but before you know it, that raise is gone and you're no better off financially than you were before you got it. Instead, when you get that 3% raise, increase your 401k contribution. Start paying an extra $100/month on your mortgage. Beef up your emergency fund. You can still set aside some of the higher income for fun stuff but put most of it toward building a better future.

**corn18** · 04-10-2019, 02:50 PM

We were getting caught in this trap. Debt paid off, $1M in retirement accounts, income of $700k/year. Let's buy a BMW and a trip to Africa. And furniture. And and and. We are back in control now and set to save $700k of our $1.237M gross income this year. Most of that is going into a MM account to have the option of paying off our current house.

I just canceled my Hulu and DTV Now accounts. And a game subscription I had. May end up cancelling my home alarm monitoring and Peloton subscriptions as well. It all adds up.

need help deciding what to do with my $