Where to park $50k for a 30 year old homeowner

[TexasHusker]

Have you seen the demand for a Lamborghini Murcielago in a stick shift? If you can even find one it commands a huge premium over the E gear versions. The Ferrari F430 in a stick shift which is the Gallardo's main competitor are double the "F1 auto" form car. Eventually all italian stick shifts will dry up and the low mileage clean examples left will command quite the premium. Just like any investment their are risks but I have already seen a few cars similar to mine with much higher mileage (25k+, mine has 4k) sell for more money than I payed for mine just a year ago. My car would make me $15k in profit if I sold it in the current market. I would have went Ferrari. In fact, I had a 2007 Ferrari F430 (F1 paddle shift) and I liked that a bit better than the current Lamborghini I have however the prices for the stick shift cars were already heavily inflated. The Gallardo is the next best thing. Another car that will be a car to buy is going to be a low mileage clean example of an Aston Martin DBS in a stick shift. Plus these cars are a blast to drive!

Sounds like you've done your homework.

[scfr]

Here's how I suggest you spend the proceeds from the sale of the Porsche to help you reach your goal of being debt-free by age 35:
1. Pay off the Maserati (since you are going to keep it).
2. Use the remainder to pay for the wedding. If the remainder is $6K, then your wedding budget is $6K. You sound like an ambitious go-getter. It can be a really fun, team-building challenge working with your life partner to see just how far you can stretch your dollars. Since you both work less than full-time, and the wedding isn't for over a year, you'll have plenty of time to come up with creative ways to keep the costs down while still creating a lovely wedding. Sit down and come up with a budget together, scour garage sales or thrift stores or dumpster dive for decorations, make things like the dress or cake or invitations yourself, etc, etc. A wedding is a big day, but it's just one day. All the important stuff comes after the wedding when you spend the rest of your lives together. You don't need to spend $35K to get a marriage off on the right foot!

More long-term, I suggest you consider the following:
1. Think about what percentage of your net worth you want tied up in non-financial assets (residences, vehicles, watches & jewelry). Right now, if my calculation is correct, your net worth is comprised of roughly 1/4 financial assets and 3/4 non-financial assets. I'll be diplomatic and just say that is weighted rather heavily toward the non-financial side.
2. Think about what "risk" really means. Currently it appears that about 25% of your net worth is in just one vehicle. To me it seems that you are not very broadly diversified.
3. Take a realistic look at your career and earnings, and ask yourself if it is something you'll be able to continue indefinitely. Are at least 1/2 of your co-workers 45 or older???
4. To lighten things up a bit, here's another fun mid-term goal to consider: Shoot for "Admiral Share" status at Vanguard so that your expense ratio decreases. The expense ratio for VWINX is 0.23% but the expense ratio for VWIAX is only 0.16%. Same fund, you just pay less in expenses.
5. You mentioned that you need to work on your budget. Why not sit down with your fiance and come up with a joint budget and then implement it now? No need to wait until after the wedding. It will be a good way to make sure that your priorities and goals are in synch before the wedding.

And FYI, a HSA is a Health Savings Account. You can only open one if you have a HDHP (High Deductible Health Plan). What type of medical insurance do you and your fiance currently have?

Good luck as you continue the journey. And welcome to the SA forums.

P.S. scfr = Smart Couples Finish Rich (currently planning where to go with my husband, aka my amazing partner in all things including financial, to celebrate our upcoming 25th anniversary)

[TexasHusker]

I'll be the dissenter and tell you to avoid all of the IRS endorsed vehicles - IRAs, 401Ks, etc, if you want to grow your wealth. These vehicles were invented for Everyman, and Everyman isn't getting rich and never will. Whatever the gubmit is incentivizing me to do, is often to my detriment and for the gubmit's benefit.

At their best, these vehicles provide paltry growth, in exchange for a heavy price - locking your money away until retirement, and an extremely limited option of "investments" (using that term generously). Wish I had figured this out at 30 instead of 40.

No thanks.

[Singuy]

I'll be the dissenter and tell you to avoid all of the IRS endorsed vehicles - IRAs, 401Ks, etc, if you want to grow your wealth. These vehicles were invented for Everyman, and Everyman isn't getting rich and never will. Whatever the gubmit is incentivizing me to do, is often to my detriment and for the gubmit's benefit.

At their best, these vehicles provide paltry growth, in exchange for a heavy price - locking your money away until retirement, and an extremely limited option of "investments" (using that term generously). Wish I had figured this out at 30 instead of 40.

No thanks.

With an income in the high 300s, the fastest way to get rich is to not spend and stay debt free.

[Attitudeofawinner]

Thank you for your high quality response. Please allow me to share my thoughts in regard to everything you said!

Here's how I suggest you spend the proceeds from the sale of the Porsche to help you reach your goal of being debt-free by age 35:
1. Pay off the Maserati (since you are going to keep it).

I'm highly considering this option as It is a depreciating asset and I do have a lot of equity in my home even when you factor in the home equity balance, I'm still under 60&% LTV.

2. Use the remainder to pay for the wedding. If the remainder is $6K, then your wedding budget is $6K. You sound like an ambitious go-getter. It can be a really fun, team-building challenge working with your life partner to see just how far you can stretch your dollars. Since you both work less than full-time, and the wedding isn't for over a year, you'll have plenty of time to come up with creative ways to keep the costs down while still creating a lovely wedding. Sit down and come up with a budget together, scour garage sales or thrift stores or dumpster dive for decorations, make things like the dress or cake or invitations yourself, etc, etc. A wedding is a big day, but it's just one day. All the important stuff comes after the wedding when you spend the rest of your lives together. You don't need to spend $35K to get a marriage off on the right foot!

I think this would be a great idea but I doubt she will go for it. We talked about having a wedding at my house as we have 2.25 acres of land. Maybe I'll rehash that situation as I was the one who wasn't exactly all for it either.

More long-term, I suggest you consider the following:
1. Think about what percentage of your net worth you want tied up in non-financial assets (residences, vehicles, watches & jewelry). Right now, if my calculation is correct, your net worth is comprised of roughly 1/4 financial assets and 3/4 non-financial assets. I'll be diplomatic and just say that is weighted rather heavily toward the non-financial side.

Regardless of the tax benefits, I personally prefer to put payoff my home before I put large amounts of money into other options. It's a personal choice from a serenity stand point. Once that is paid off my next set of goal post 35 years old will focus on broadening my diversification into a much higher % of portfolio assets as well as land and real estate.

2. Think about what "risk" really means. Currently it appears that about 25% of your net worth is in just one vehicle. To me it seems that you are not very broadly diversified.

I bought it prematurely only because it was the right car at the right price and I did not want to pass it up. So far I haven't been wrong as it has already appreciated in value and I didn't expect to see that for 5+ years. A Jay Leno type will buy this car one day and won't care what number the check starts with or ends with.

3. Take a realistic look at your career and earnings, and ask yourself if it is something you'll be able to continue indefinitely. Are at least 1/2 of your co-workers 45 or older???

My career was established at a very young age. From a stress and effort level on a scale of one to ten I would say the job is a three. For others I'm certain its much higher but I have a knack for it. Most people range from their mid 40's all the way up to the high 60's that do what I do. It's stable, and I could do it as long as I want to without much worry of it ending.

4. To lighten things up a bit, here's another fun mid-term goal to consider: Shoot for "Admiral Share" status at Vanguard so that your expense ratio decreases. The expense ratio for VWINX is 0.23% but the expense ratio for VWIAX is only 0.16%. Same fund, you just pay less in expenses.

Right now I have VWINX setup as a 3k monthly auto investment. If I parked the Porsche money into it I would be in admiral shares as soon as it sells but if not then it will happen sometime in 2017. I may park additional unspent money in this fund on a month to month basis once all my other obligations are satisfied for said month.

5. You mentioned that you need to work on your budget. Why not sit down with your fiance and come up with a joint budget and then implement it now? No need to wait until after the wedding. It will be a good way to make sure that your priorities and goals are in sync before the wedding.

So when I say a budget. I know every expense I have on a month to month with my bills. What I don't have is when I wake up and grab a coffee on the way to work, or when I order lunch delivery to work and have a receptionist sign my CC slip and look at what I actually spend. This is where I'm not frugal. My Chase Sapphire Rewards card gets a workout on a daily basis with small expenses that add up!

And FYI, a HSA is a Health Savings Account. You can only open one if you have a HDHP (High Deductible Health Plan). What type of medical insurance do you and your fiance currently have?

This is something I do not focus on which I'll chalk up to age and immaturity. I honestly do not know what "plan" I picked from my employer. It's from Harvard Pilgrim and I have a health ins card in my wallet. As for my fiance, she pays monthly to state health ins. She will be on mine once we are married. That is one of the few things she pays from her part time job along with her cell phone and small spending. I pay for food, her car insurance, and other small things. She costs me very little and is a sweetheart.

I certainly plan to take a closer look at both of health insurance details.

Good luck as you continue the journey. And welcome to the SA forums.

P.S. scfr = Smart Couples Finish Rich (currently planning where to go with my husband, aka my amazing partner in all things including financial, to celebrate our upcoming 25th anniversary)

Thank you again for all your insight and I look forward to hearing anything else you have to contribute!

[corn18]

I'll be the dissenter and tell you to avoid all of the IRS endorsed vehicles - IRAs, 401Ks, etc, if you want to grow your wealth. These vehicles were invented for Everyman, and Everyman isn't getting rich and never will. Whatever the gubmit is incentivizing me to do, is often to my detriment and for the gubmit's benefit.

At their best, these vehicles provide paltry growth, in exchange for a heavy price - locking your money away until retirement, and an extremely limited option of "investments" (using that term generously). Wish I had figured this out at 30 instead of 40.

No thanks.

We all know your thoughts on the market. What would be really cool is if you completed the thought and offered advice on what to do vs. the market.

[scfr]

Regardless of the tax benefits, I personally prefer to put payoff my home before I put large amounts of money into other options. It's a personal choice from a serenity stand point. Once that is paid off my next set of goal post 35 years old will focus on broadening my diversification into a much higher % of portfolio assets as well as land and real estate.

I understand and respect the desire to have a paid-for home. We paid ours off in our right around age 40 and if I had it to do all over again I'd do the same.

My career was established at a very young age. From a stress and effort level on a scale of one to ten I would say the job is a three. For others I'm certain its much higher but I have a knack for it. Most people range from their mid 40's all the way up to the high 60's that do what I do. It's stable, and I could do it as long as I want to without much worry of it ending.

That's good to hear, and it's great that you have a reasonable assessment of your expected career longevity. So many higher paying jobs have short lives. I know a former pro football player who made up to $1M a year ... for only 3 years, and then his career was over. Fortunately he was smart enough to invest a bunch of his earnings in his wife's growing business. He now works for her and they seem to be happy and set for the long term.

So when I say a budget. I know every expense I have on a month to month with my bills. What I don't have is when I wake up and grab a coffee on the way to work, or when I order lunch delivery to work and have a receptionist sign my CC slip and look at what I actually spend. This is where I'm not frugal. My Chase Sapphire Rewards card gets a workout on a daily basis with small expenses that add up!

OK, this seems to be an area where you could really reap the rewards of investing some time and energy. With a budget, you plan how you are going to allocate your money before you spend a dime. That way there are no surprises when the credit card statement arrives. Based on what you just said, you might want to just start out with a mini-budget for monthly discretionary spending (any spending that isn't on a "need" and isn't a fixed monthly bill). Discretionary spending might include: food & beverages consumed outside of the home, clothing that isn't necessary for work, entertainment (things like movie or event tickets), etc. You can probably estimate what you are spending now by looking at your credit (or debit) card statements and ATM withdrawal records. Then, set a budget for yourself, and once you have spent that amount for the month you're not allowed to spend any more! For example, if you currently spend $400 a month on discretionary spending, you could set yourself a budget of $240 (40% reduction). Then you need to track your daily spending and stop when you hit your monthly limit. It's pretty rewarding coming up with less expensive alternatives to get what you want. It's financial creativity! Having a budget is about learning to spend consciously rather than unconsciously and making sure that your spending is in line with your values.

Going back to that serenity that you mentioned you want from having a paid-off home ... Whatever you save each month on your discretionary spending, you could use to make an extra principal payment toward your mortgage! And then, voila, your spending is aligned with what you value most (peace of mind over a fancy coffee drink).

[TexasHusker]

We all know your thoughts on the market. What would be really cool is if you completed the thought and offered advice on what to do vs. the market.

I think I have covered that exhaustively in various other threads. My advice to you, however, is to stick to your plan.

If the OP is interested, I'm sure he will PM me.

[corn18]

I think I have covered that exhaustively in various other threads. My advice to you, however, is to stick to your plan.

If the OP is interested, I'm sure he will PM me.

So, you will take the time to tell hime what not to do in this thread, but refer him to other posts to discover the secret to real returns. Helpful as always.

[TexasHusker]

So, you will take the time to tell hime what not to do in this thread, but refer him to other posts to discover the secret to real returns. Helpful as always.

I think I've been pretty forthcoming and transparent with my investment strategy. Put on your readers and use the search tool.

[corn18]

I think I've been pretty forthcoming and transparent with my investment strategy. Put on your readers and use the search tool.

OP, please do a search for your answers. It's too much trouble for us to post answers to your questions.

[Attitudeofawinner]

scfr,

Thank you for the very insightful post. I have tried to put away my CC and withdraw a given amount I have allowed myself to spend on a week to week however I could never stick with it. I guess when the emotional side of my brain kicks back in over time I say to myself "I have a large enough income to not have to deal with the and have the luxury to swipe when I want." This is not the attitude I should have but just like anything else in life it takes dedication and if the cost outweighs the value then the bad habits kick back in. A lot of people do this when they lose weight and put it back on again.

I suppose I already knew 99% of these things and this website will be a way for me to stay better focused on self control. After all, whatever you focus on expands! Thanks for everyone who took the time to contribute!

[GoodSteward]

scfr,

Thank you for the very insightful post. I have tried to put away my CC and withdraw a given amount I have allowed myself to spend on a week to week however I could never stick with it. I guess when the emotional side of my brain kicks back in over time I say to myself "I have a large enough income to not have to deal with the and have the luxury to swipe when I want." This is not the attitude I should have but just like anything else in life it takes dedication and if the cost outweighs the value then the bad habits kick back in. A lot of people do this when they lose weight and put it back on again.

I suppose I already knew 99% of these things and this website will be a way for me to stay better focused on self control. After all, whatever you focus on expands! Thanks for everyone who took the time to contribute!

That's a dangerous freedom to allow yourself IMO. You sound like you're very intelligent, and I think it is awesome you do so well. However, what I noticed was that your income was going up, but you projected an Avg of less than the current years income over the next 5 years. What do you do for a living? How much risk is there to that income falling apart? That would make a big difference in how you would be advised.

If there is a lot of risk of your income depleting, or the area you are working in going bust, right now would be ideal to do as Singuy said and just save your money. Too often I hear the back story of a young guy doing very well, living it up, and then the career he is in dries up and he goes bust trying to maintain.

[Attitudeofawinner]

That's a dangerous freedom to allow yourself IMO. You sound like you're very intelligent, and I think it is awesome you do so well. However, what I noticed was that your income was going up, but you projected an Avg of less than the current years income over the next 5 years. What do you do for a living? How much risk is there to that income falling apart? That would make a big difference in how you would be advised.

If there is a lot of risk of your income depleting, or the area you are working in going bust, right now would be ideal to do as Singuy said and just save your money. Too often I hear the back story of a young guy doing very well, living it up, and then the career he is in dries up and he goes bust trying to maintain.

My work is commission and has always trended up each year but I always like to be conservative for future planning. It will never dry up, I'm a valued employee and if I were to be unemployed my phone would ring ten fold with new opportunities. It sounds cocky and I apologize if it comes off that way however I left on my own account a job when I was 25 and had multiple offers and "special deals" within 72 hours. I would not like to disclose what I do as I feel this thread would go sideways in an instant.

[GoodSteward]

I would not like to disclose what I do as I feel this thread would go sideways in an instant.

Fair enough. It is your business after all. You just really had me curious.

Something I learned early on in life is that nobody is irreplaceable. I was friends with the owner of a business and thought I had nothing to worry about. He was misinformed of his tax obligations, and suddenly found himself broke. He had to let go of almost everybody and hire on family to work for free until he could build up. It might not be anywhere near where you are, but the lesson for me is the same. Assuming makes a fool out of us all eventually. If I were you, I would first work on building up your financial house by avoiding many extras. You may think you are not replaceable, but you can only control so many factors of your life. One wrong move and you could ruin your reputation, or be in an accident and become disabled. I am not wishing anything on you, but it is wiser to always remember things could change. Prepare for that.

Either way, I think you are still way better off than your average Joe and you're coming to places like this to get advice (or gloat....I guess we'll see how long you are here to know which it is :P ) so Cheers!