Home Planning

[Payn_it>>>]

ok well i can start my 401K on october 1st. Thats the next quarter and when enrollment is through work. i just talked to HR and she said she'd spend as much time on it with me as i'd like about a week or two prior to enrollment.

[Payn_it>>>]

so goals look like this.

To set a dead line...Started by October 1st...(eventhough saving is going on now)

Start 401K
6 month EF goal = $22,326
30% of $200,000 = $60,000

At that point all three goals are meet. Lets start the maddness

[MonkeyMama]

6 months income as we stand now is. about 22K. I like the sound of that, but is this a realistic goal in this day and age? how do you suggest a family with no kids and nearly no debt raise 22K in emergency funds and 37K for a home and a 401K.

Well, first you need some patience.

Rent a more modest apartment, don't drive newer cars (if it's too late for that - keep them for 10-20 years), and spend many years saving. It's easier when you are young and you don't have extra mouths to feed. Trust me!

I actually live in Sacramento, so I could give you a good idea of costs of home ownership for the region.

I agree with 20% down. We put 25% down on our current home (around age 24?). We were saving for that down payment since we were teens. Even though we bought our first home even younger, it boggles my mind when people think they can save for a house in 1 or 2 years. It takes TIME to save up a 20% down payment on a home.

Mortgage payment would run about $900/month at 6%. Insurance will run you about $1k per year, and property taxes would be about $1850 per year, though add $1k per year plus HOA fees if you buy in a newer area. I will assume yes, if you are looking in Roseville. Tack on about $1k for mella roos (they tack it on to property taxes).

PITI (mortgage, property taxes, insurance, HOA, everything) would run you about $1250 per year.

In some situations, you can have some serious tax savings owning a home, but I don't expect you would get much of any tax benefit, in this case. Your mortgage interest and property taxes would probably not be enough to itemize.

In this home market, I don't see what the rush to own is. Take your time and save your pennies. Don't ignore retirement in the process.

Good Luck!

[jIM_Ohio]

so goals look like this.

To set a dead line...Started by October 1st...(eventhough saving is going on now)

Start 401K
6 month EF goal = $22,326
30% of $200,000 = $60,000

At that point all three goals are meet. Lets start the maddness

If you make $44k per year, that number can trigger lots of other things.

$44k gross salary (is 44k your annual expenses or your annual pay- that was not clear to me above)

6 months income as we stand now is. about 22K. I like the sound of that, but is this a realistic goal in this day and age? how do you suggest a family with no kids and nearly no debt raise 22K in emergency funds and 37K for a home and a 401K.

set a goal to save $8800 per year

have about $4400 per year go into 401k (10%)
have about $4400 per year go towards house in a savings account

you know you need $60k for house so that suggests you will be saving for 10-15 years to get house (at current savings rate). Much of the pressure we put on ourselves is we expect things sooner, once you can get over the timing of getting what we want, saving becomes easier.

The EF and house down payment are "one" savings account with more than one goal- once that account has $22k in it (6 months expenses) then you might consider opening some CDs or similar to gain more interest on the savings.

As you get raises, add them immediately to the savings account (for the house). If you get a $2400/raise (200/mo), realize that $240 of that is already going to 401k (10%), spend about $20-40 of it, then bank the rest of it until you get the house.

If your raises are coming as soon as you suggest, most of the house savings comes from the raises.

[Payn_it>>>]

If your raises are coming as soon as you suggest,

HOPE. I can's suggest anything on my end. I can guarentee that my wife gets reular raises cause its a family business. On my end...work is good and steady. I've built job security and comfort. But i'm always learning and prepairing for the unexpected.

What other ways can i invest my money. When i get a grand is it recommended to roll some of that over into investments to help build it. What about stocks and bonds and all that. (I took econ my senior year, but at 16 you honestly don't give a whoot. Wish i'd payd a little more attention now.)

[Payn_it>>>]

whoops...meant to answer this....

44K is annual take home. annual grose is right around 64000

[jIM_Ohio]

HOPE. I can's suggest anything on my end. I can guarentee that my wife gets reular raises cause its a family business. On my end...work is good and steady. I've built job security and comfort. But i'm always learning and prepairing for the unexpected.

What other ways can i invest my money. When i get a grand is it recommended to roll some of that over into investments to help build it. What about stocks and bonds and all that. (I took econ my senior year, but at 16 you honestly don't give a whoot. Wish i'd payd a little more attention now.)

If 64k is your gross pay
and 44k is your net take home
what are your EXPENSES?

Save 20% of gross (so that is $12,800 per year)

$6400 of that is 401k (pre-tax)
$6400 of that is savings for emergency fund and house

Your emergency fund is based on EXPENSES. This means if you take home 44k and save 12k, I know your expenses (each year) are about $32k. This is because 12k of that money is being saved and not spent, so you don't need to plan for the emergency where you cannot save.

$32k yearly expenses is about 3k per month, so 6 months is 18k (not the higher number shown earlier) which might help achieve the goals faster.



When learning about investing, I would focus on two things

1) what are your goals
2) what are your risks and tolerance for risks?


For example you have a family business which in some ways reduces risks (risk of layoffs is low) and in some ways increases risks (you depend on family and its possible this is a risk).

Nothing is risk free. If someone says something is risk free, you need to look for the risk they did not mention.

Risks to think about
market risk- the market taking value of your investment up and down
inflation risk- the risk that $1000 saved today can only buy $500 worth of goods in 24 years.
interest rate risk- the risk that changes in interest rates change the value or return you get on the investment.

there are many more... stocks have high market risk, but low inflation risk and interest risk
savings accounts have high interest rate risk and high inflation risk, but low market risk
inflation bonds have low inflation risk and low market risk, but high interest rate risk

and so on- no one investment is the holy grail. You need to think about risks before you think about investing- that way you know the risks you take and you know WHY you take those risks.

The risks you take to retire now are different than the risks you take with money you want to save for a house. Focus on risks and it will help you choose the right investments (if you know the risks of the investments you choose).

[Payn_it>>>]

ok so i need to find my monthly expenses and plan for 6 months savings on that not 6 months EF on my monthly Income?

[Payn_it>>>]

Montly expenses now are $2820 not counting our monthly savings. EF=$16920
Montly expenses after October 19(carpaid off) would be $2466 EF= $14796

It just seams that monthly expenses are so vague. all i can bank on is the hard stuff, but every once in a while you have all that random stuff from car registration to tires and birthdays and christmas...

[jIM_Ohio]

ok so i need to find my monthly expenses and plan for 6 months savings on that not 6 months EF on my monthly Income?

right

the purpose of the EF is to buffer yourself in case of job loss or if you cannot work- for example what happens if you break your arm and cannot work for 6 months, or what happens if wife is in a car accident and cannot work for 6 months.

Your emergency fund (EF) is a way to hedge those risks.

If you look at expenses, you need to save 6 months of needed expenses
for example cable TV might not be a needed expenses, where as your rent and car payments are needed expenses.

If you can do anything to keep expense "footprint" low, that is a good way to get high savings.

1) your expenses will be low
2) the amount you need to save will be low as a result of low savings
3) because expenses are low, you have more disposable income to save

[jIM_Ohio]

Montly expenses now are $2820 not counting our monthly savings. EF=$16920
Montly expenses after October 19(carpaid off) would be $2466 EF= $14796

It just seams that monthly expenses are so vague. all i can bank on is the hard stuff, but every once in a while you have all that random stuff from car registration to tires and birthdays and christmas...

Best way is to add a car repair item to budget

if you spend $600 on cars each year, add a $50/mo line item to budget
add this to savings EVERY month when you get paid. When car goes to shop, dip into savings to pay for it. In the meantime that money collects interest.

[Payn_it>>>]

Ok i get the theory. The things needed to maintain living...
Rent
Carpayments
CC bills(If any)
Utilities
auto Insurance (i don't pay out for Medical)
Food and Gas

the cable, DSL, cell phones even could theoretically go. it might be an inconvenience but we could make it with out.

[Payn_it>>>]

Oh and i thought you might like to know that i'm enrolled in the ESOP where i work. i have to have been employed for 6 years to become fully vested, but i'm half way there.

[jIM_Ohio]

ESOP=employee stock purchase?

I would count that as part of the 20% savings
but I would not count it as part of the 10% for retirement

if the stock is doing well that might be a way to get house down payment?

[Payn_it>>>]

yes. i have to read into when i can cash out or if there's penalties and such. best part is that i don't pay into it at all.

Thats a really great idea as far as the down goes. Say we wait 5-7 year and see where we are perhaps we'll be able to pull out of the esop to give it that little more push.