24, Short and long term goals, advice appreciated

**Gailete** · 12-31-2017, 02:36 PM

My first question is why in the world do you want to put $10K on your gf finger? It isn't the size of the diamond, but it is how you both feel about the ring. My engagement ring doesn't even look like one. I had always wanted a ruby ring and we were at a jewelry store looking at some estate jewelry and noticed it at the same time. We both loved it. It cost $450, was used, but my size and I loved it. 16 years later I still love it. I wouldn't want anything else, my wedding band is a plain gold band. The ring my husband wanted we had seen in a jewelry catalog but it was rather pricey. One day when traveling for business I had free time to wander around town and found his exact ring at yet another estate sale at a jewelry store. It was his exact size and was 1/4 the price of new. For less than $1K we had our wedding jewelry and were and still are very happy with them.

I guess that is what I'm trying to say. Before you set a price in your head or plunk down a penny, be sure that she will be very happy with the ring set. When push comes to shove it may only cost you a thousand or two. But for sure, she needs to be part of the process. My campus sis in college got engaged while she was there. Her boyfriend had picked out a really ugly ring that she was supposed to be wearing for the rest of her life. I got married to a guy that went out and bought me an engagement even after I told him I didn't want one. The next day he told me that he had gotten it for me and the first thing he said about it was "you probably won't like it"! Why in the world would any guy buy an engagement ring that he thinks she won't like? It was to satisfy his vanity, not mine. Part of why I have strong feelings about engagement rings. I have worked with ladies that had $20-30K on their ring fingers and none of their rings looked like anything special, just bigger than normal diamonds stuck on a ring. And of course how very careful they had to be with them.

Don't get sucked into the hype of an engagement ring should be equal to a certain amount of months pay or any of the ads that jewelry stores make.

Do what feels right to both of you. If she wants a $10K ring and you can afford it and want to give it to her, then by all means go for it.

**Jluke** · 12-31-2017, 03:31 PM

At least you are planning for everything and your estimates are pretty realistic.

But you are also burning through money you haven�t even made yet.

Maybe it�s different because you are military and have a lot of well earned incentives (thank you for your service).

Is it safe to assume that your housing expenses will be near $0?

The four runner is a bit extreme of a purchase. How long will you be paying $1000 per month?

One last thing to remember is that you might make 100k gross but you are only bringing home a little more than half of that.

Hope to get your feedback and additional information to help.

**snafu** · 12-31-2017, 06:17 PM

Welcome to SA. Good on you at age 24, setting goals and interested in financial planning. Perhaps you'll order a used copy of David Bach's The Automatic Millionaire or audio, The Millionaire Next Door, Danko to move you forward.

I hope you understand there is a lot of pure fact involved in making financial decisions but adding emotional factors can send you off the rails. As emotions are added, the more results can be skewed and they are always predicated on outside, economic factors.

Smart to have clear goals; you are in a relationship whose status will increase with an engagement [$ 10K]. 2019 saving for wedding [party funded $ 125. per plate + liquor for relatives & friends celebrating your joyous event]. 3rd event will be Honeymoon costs. High end, new vehicle about $ 50 K all in.

We'll never convince your fianc� but the value of a diamond is the salesman's commission. It's based on a story created by DeBeer's to sell jewelry. There is only paltry, re-sale value. Ask cash value for you selling a 1 carat, good clarity, good cut, diamond in an 18K gold setting, at a pawn shop or re-seller to better understand. People who are interested in building wealth would chose a ring that looked good but cost less.

Any sums invested in a retirement plan in your 20's is a huge advantage of long term compounding. It's critical to take advantage of any employer contribution, it's Free money! Understand the choices offered and the management expense.

I'm sure you understand that buying any vehicle is a 'depreciating asset.' Each year and each mile reduces the value of the vehicle. On the other hand, for the most part, buying a single family home will appreciate in value if you arrange finances to avoid PMI [expensive mortgage insurance], get the lowest possible interest rate and learn how an amortization table works.

**BendegitBran** · 12-31-2017, 07:15 PM

Gailete: I fully understand that putting that money into a ring is not for everyone. It's something important to me, even if it's not for the most mature/responsible reasons. I'm glad you found a ring for such a steal that worked for you, but I think if I didn't spend the money I'm planning on spending, I would be bummed about it later on in the relationship. She's been involved in the process and has helped guide me towards the style she wants, and I just didn't let her look at prices when we were looking.

Jluke: Not only should my housing costs be zero, but I should actually be making money on top of my base pay when my girl and I combine BAH. BAH is also completely tax free, so that 6,000 a month in housing is actually 6,000. The base pay is the only thing that's taxable. I would be paying 1,000 a month for probably 25-30 months. If I put 10,000 down. If I waited longer, I could probably put 15-20 down and either pay 1000/month for a shorter time, or have a more reasonable monthly payment. I'm not dead set on rushing out and buying it, but I do really want it haha. I'm a patient guy and I can wait, the soonest I would get it is Dec of 2018.

Snafu: Good insight, and yes there is definitely some emotion driving some of these decisions but I would like to think that it's grounded in at least mostly good planning and decision making. But obviously I've still got lots to learn, and that's why I'm here trying to get different opinions!

Thanks all for the replies and advice!

**Gailete** · 12-31-2017, 09:16 PM

I will never say that I understand how our armed services compensate. You just seem to have an extraordinary income for a 24 years old. I have heard so many news reports of how poor service personnel are and that they need food stamps etc. to make ends meet. Just commentary and as I said very hard for me to understand what all you guys get. Just commentary.

I'm an old lady so to speak, with less days left to live than I have already lived and I have seen a lot of life during that time. I could literally be your grandmother, so just some items that I have learned in life. If there is one thing I know is that even the best laid plans can go astray. That doesn't mean that I am against planning. It is very important to plan, and remember that plans and goals written down have a better chance of happening than if they aren't. I went back to school at the age of 30 with two kids a a horrible husband that I wanted to leave and I didn't want to have to do it by way of welfare. I became an RN and 14 years later I left my job in intense pain and never when back. At around 45 and Just weeks after having gotten remarried, I was on the disabled list and still am due to severe RA. Going on 16 years at this point. If I had been able to continue working my SS at this point, now that I am 62 and could go on early retirement would probably have been double what I get now which is barely above the average amount. Let me tell you, average SS isn't something you can live on comfortably.

I wish I had been able to save more for retirement. And that is something to focus on. First and foremost in these years of good income, put as much as you are allowed into your retirement funds. As well as your emergency fund. I hate to mention it, but you have picked a career with a high chance of death or disability so having money to live on in that case, or for your family. I am sure that through the service you have good benefits in those areas, but the more the better as you don't always have what you need. With my disability and horribly decreased income as well as husband with health issues, I have to pay for a cleaning lady, we have to pay for lawn cutting, and snow shoveling which we have gotten a massive amount of snow this past week. These are things that no one even thinks about when figuring what they need to live on if injured. I know I never did. But somehow we have to find a way to come up with that money to deal with things that we never can.

Unless you are planning on having kids right away, and how will that work with your gf plans? But do you need a 3 bedroom house? CA is expensive for housing as you know, so to keep that mortgage down when you do buy, go in with a big enough down-payment that you won't have to pay PMI. It will help keep your payments down which is always a good thing as is a 15 year mortgage as opposed to a 30 and NO Adjustable rate mortgage. Those can be killers. Don't forget when buying a house that there are a lot of extra expenses at that point, paying for the fire insurance, utility bill fees, if new construction, curtain rods, blinds, towel racks, etc. oh yeah, furniture, lawn equipment. and the list goes on. I have bought and sold several houses and I always forget these 'little' expenses.

Things always cost more than you expect them to. If you decide to use cloth diapers the dryer inevitably breakdown. Or you think it might be a good time for a baby and then find that triplets are on the way and someone has to quit working. Or you get a record snowfall and the propane guy didn't bother to fill up your tank so in the midst of bitter cold, record snow, there is no heat in the house for the last 2-3 days. It would be so nice to be able to go to a hotel and wait it out. True story - I'm currently living it. This is why having extra money is a good thing to have and a reason to to not spend everything you earn. You are in a remarkable earning position that you could spend a lot of it frivolously, or set up a good spending and saving plan, so your future is provided for.

I hope all goes well with you and I do thank you for your service.

**corn18** · 01-01-2018, 04:10 AM

Best I can tell you are an O2 over 2 years? What is your MOS? I assume you have completed TBS but are you now in training for your MOS (pilot?)?

My first recommendation is slow the heck down. Fresh out of college, great money flowing in, getting married and moving. That's a lot of moving parts and a huge money pit that you cannot imagine. Been there, done that.

First, don't spend $10k on a ring. Argue all you want, it is stupid.

Second, don't buy a new car. Do you own a car now? You don't see it now because all you see is shiny new car, but cars are a demoralizing depreciating asset that kills your net worth.

Third, rent when you arrive in CA. That market is nuts and you're going to PCS in 3 years anyway. Plus you have to deal with keeping you and your new wife (please stop calling her your "girl"). I spent 20 years buying and selling houses in my military career and I wish I had just rented the whole time. Or better yet, live on base housing. I thought base housing was for the poor people. Best deal going if you can get it.

Sorry if I sound like a curmudgeon. Actually, I'm not sorry, I'm just old enough to not care. Find a LTCOL or COL that you trust and respect and have this conversation with them. Been there, done that means a lot in the Corps.

Corn

**scfr** · 01-01-2018, 09:48 AM

I think it's great that you are already thinking about these things and trying to come up with a good plan at the age of 24. And kudos on being debt-free already!

corn18 has given you some really terrific advice, in a way that he is especially qualified to give.

You asked if it was OK to leave in savings money that you plan to spend in the next year? The answer to that is YES!

My biggest, most heartfelt piece of advice is this: A huge piece in the "long-term financial success" picture is for you and your life partner to work together as a team.
If the 2 of you have already agreed that you are going to get married, then sit down with her and come up with a financial plan TOGETHER. A lot of us married couples here at Saving Advice calculated our year-end net worth and compared to where we were last year and where we want to be long-term. Although we commented here on the forums as individuals, I'm sure that many of us had year-end financial conversations with our spouses. I know I did. Why don't the 2 of you sit down and act as if you are already married and talk things out? Do you know each other's net worth (assets - liabilities)? Have you discussed a post-marriage budget?

If you are not sure how to being the conversation, David Bach's book "Smart Couples Finish Rich" (yes, that is why my user name is scfr) has been re-written for 2018. Getting that book and going through it together wouldn't be a bad place to start.

My suggestion is that you have the big discussions together first, possibly by going through the book together, and THEN revisit you plans regarding the engagement ring, wedding, honeymoon, car, and housing. Once you have a more clear picture of where you want to end up long term, as a couple, I think the smaller questions (such as how much to spend on an engagement ring) will come more clearly in to focus.

Keep us posted, please!

**MonkeyMama** · 01-01-2018, 10:26 AM

Originally posted by corn18 View Post

First, don't spend $10k on a ring. Argue all you want, it is stupid.

Second, don't buy a new car. Do you own a car now? You don't see it now because all you see is shiny new car, but cars are a demoralizing depreciating asset that kills your net worth.

Agreed with Corn on these points. I grew up in San Francisco area. We did not have any money to spend on $10k weddings, rings, cars, etc. (because real estate was so expensive, even to rent). We did buy a condo because it worked out to be cheaper than renting. That is something I would consider in HCOL markets in California. I don't know how the numbers work today, but just another angle to consider. If renting is cheaper and you don't plan to stay in California for the long haul, I'd just rent. A big part of getting into a condo, for us, was that we could do it much more quickly (and reasonably) and then earn equity towards a house purchase. 1000% the best financial decision we ever did. I've never wished if only we had more expensive cars or rings during that time. We have always been very financially comfortable because we chose to spend a couple of years focusing on our financial security before we dropped the second income to have kids.

I think 10% TSP is fine. Starting young, consistently contributing 10% to retirement will serve you very well for the long run. I personally have never contributed any less than 10%. It works if you have that mindset. (It doesn't work so well if you do 10% now and then 0% or 5% later).

For money you need in the short term, cash is fine. Once you get beyond short-term expenditures like home down payments and wedding costs, I would consider funding a ROTH IRA. The thing about ROTHs is you don't have to tie up money in a ROTH until retirement, so gives you a little flexibility. Is just way more tax efficient than any non-retirement option. (I personally wouldn't put a penny into any taxable investment account until ROTHs are maxed out). I think this is not useful advice in your here and now, but is something to consider for the future once you get more settled.

**BendegitBran** · 01-01-2018, 05:28 PM

Corn: I am 02 over 2, MOS is 7599, working my way through flight school (currently about 7-9 months from getting winged and going to the FRS). I hear you on the ring. No arguments. My thought on the car is in CA I'm going to be doing a lot of things that my old beat up Honda Accord isn't capable of doing. Not trying to be argumentative, but my understanding was that the car is only depreciating if you want to sell it someday, right? If I drive the thing till it's wheels fall off in 20 years, then it didn't really depreciate at all? Please advise. My assumption was that if you do base housing, you give up BAH. If that is true, I could rent in town, somewhere in between Pendleton and NBSD so neither one of us has a crazy commute, and pocket about 4,000 in extra BAH. Something I've been thinking is putting that money into an account earmarked for putting down a huge down payment or buying a home in cash someday when we know where we want to live after the military.

scfr: I will order the book today! She is currently on deployment right now, and so I'm really holding off on a lot of the more in depth conversations. She needs to focus on her work until she comes home in May, but you are absolutely correct that we need to really sit down and have this conversation. I don't know all of her information, but she is 23, making about 1,000 more than me a month, and at the end of deployment will have just under 40,000 in cash. She also contributes 10% to her TSP. I had more debt after college (about 20k) and so it took me significantly longer to pay off then her.

MonkeyMama: I was under the impression that there are hefty fee's to pull your money out of a ROTH IRA before retirement age. Is this not the case? Or are there IRA's that are specifically for short term uses, and if so, do the majority of banks/investing firms have them (USAA for example?)

Thanks everyone for your replies, your insight is hugely helpful!

BB

**MonkeyMama** · 01-01-2018, 06:18 PM

Originally posted by BendegitBran View Post

MonkeyMama: I was under the impression that there are hefty fee's to pull your money out of a ROTH IRA before retirement age. Is this not the case? Or are there IRA's that are specifically for short term uses, and if so, do the majority of banks/investing firms have them (USAA for example?)

ROTHs have very different rules than other retirement accounts. The penalties are only on the earnings that you make on the ROTHs (if you withdraw those earnings). The initial contributions can be withdrawn at any time without any penalties. If you are already saving enough for retirement, then you can treat a ROTH more like a regular investment account. & of course, the longer you keep it in there and the less you touch it the better. ROTHs have that catch where you can tax shelter your money for your lifetime, and so it has that double whammy of a motivation for you to keep it untouched. But I just don't think it makes any sense to deal with taxable accounts (way more complicated for taxes) if you are already saving enough for retirement and can utilize a ROTH.

You can open a ROTH at any financial institution probably. Yes, USAA has ROTH IRAs.

To be clear, it's not "short term" and I wouldn't use a ROTH for cash or money you know 100% that you will spend in the short run. I would use for longer-term investing.

**BendegitBran** · 01-01-2018, 06:59 PM

And in your opinion what is long term but not retirement? Is something I plan on spending in 8 or 12 years long term? Such as money for a down payment on a home? Or for a transition out of the military where finding employment might take a while, or there's a significant pay cut that would take a few years to recover to my original salary.

Thanks!

**MonkeyMama** · 01-02-2018, 04:59 AM

Originally posted by BendegitBran View Post

And in your opinion what is long term but not retirement? Is something I plan on spending in 8 or 12 years long term? Such as money for a down payment on a home? Or for a transition out of the military where finding employment might take a while, or there's a significant pay cut that would take a few years to recover to my original salary.

Thanks!

Any money you don't 100% need in the next 5-10 years I'd consider tying up in a ROTH. Or 8-12 years if you think that is how long it will take you to save up a down payment on a home. I wouldn't put a home down payment in a ROTH because you 100% will need that money to buy a home, right?

**disneysteve** · 01-02-2018, 05:40 AM

Originally posted by BendegitBran View Post

my understanding was that the car is only depreciating if you want to sell it someday, right? If I drive the thing till it's wheels fall off in 20 years, then it didn't really depreciate at all? Please advise.

This isn't correct. How long you keep the car or what you do with it has nothing to do with the fact that it depreciates.

Depreciation simply means that it loses value over time.

If you buy a car for 25K and keep it for 10 years and then it's only worth 2K, it depreciated by 23K. The most rapid depreciation typically occurs within the first 2 years for a brand new car which is why so many of us advise against buying new cars. On average, a new car will lose 35% of its value in the first 2 years. Of course, the lifespan of the car is way more than 6 years so it isn't proportional to the age.

The sweet spot is usually to buy a car that is 2-3 years old, has already taken that big depreciation hit, and then drive it until it dies.

**breathemusic** · 01-02-2018, 08:31 AM

I think you should definitely be putting more into retirement. Personally I suggests 15%, more if you can swing it. But given that you know you're saving for some pretty big future expenses, I'm guessing you want to be building up your savings for those expenses as well.

I would agree that $10K is high for a ring, but I also think that if you wanna splurge on it... sounds like you'll have the money. But basically, focus on a ring you both like and not the price tag. If it ring ends up costing less than $10k, great and that doesn't mean you "didn't spend enough."

For the car, if there's a specific type of car you want based on performance, I think that's also fine, but what other's have noted is valid. You might be able to get one that is a year or 2 old with low mileage and still run it into the ground, but save some money by not buying brand new. However, I'm also of the opinion that if you have the funds, buying a new car every once in a while never killed anyone. Is it the most frugal financial decision? Nope, not at all. The point behind making splurge expenses is to do it sparingly and not make it a regular spending habit to blow money on overpriced things.

Personally, I suggest renting no matter what when you move. As others have noted, military folks move often. Last thing you need to worry about is constantly buying and selling houses as you move around. It's stressful, and the closing costs will probably eat you alive over time and make it not worth it. If you're dead set on buying, at least rent when you first move to take some time to get the lay of the land and be able to shop at your convenience and not feel like you need to deadline for buying (assuming a month to month lease or something that isn't impossible to break).

Overall, you seem to be making good money and spending significantly less than you're making, so you're on track to build up some great savings. But definitely bump up the retirement savings more. The earlier you do it, the more compounding you get and the money works for you. Not to mention, the future is never guaranteed. Injuries happen, jobs are lost, promotions can stall, etc. Save now while you can and it's easier. If you're eventually wanting kids, they cost money. Right now, your expenses are low!

24, Short and long term goals, advice appreciated