Want to build my bankroll

[skives]

Ok so here is what I want to do. I want to basically make more money by investing but don't know how or where to start.

Here is what we have. I am married no kids. I am 29 and my wife is 23.

Annual gross income - $50k
My 401k -$45k contribute 12% plus get a small match
EF - $10k
Student loan - $35k 5.125% interest we pay whatever we have left at the end of the month on it. Usually 1k -$1.2k

I would like to build our savings not the emergency fund but savings for things like a vehicle if we need one or a down payment on a house. I don't see any of these things happening in at least 5 years. We are going to get $3.5k back on our tax refund. One should I invest this or two put it on my student loan. If I invest it I want to do it so I can get it back at any second I may want or need it. I want to grow it. Where and how should I do it?

Thanks for your help.

[bjl584]

First, adjust your withholdings to prevent you from getting such a large refund going forward.

Second, I'd be inclined to invest the money as opposed to paying down the loan. But, you say that you want to put it somewhere where you can get at it immediately should you need it. That tells me that you aren't willing to take on some risk with it. Unfortunately, the only way to make it grow is take on some risk. You have access to the money immediately if you buy stocks, but there is a chance of losing money. Your only other option is a savings account of MM account. But about the best interest rate that you can hope for today is just under 1%.

[skives]

I am willing to take risk. I guess I meant I don't want it to be tied up in a retirement account like I have to be a certain age to withdrawal or there is a penalty. Since I have the emergency fund I can use that if I need to. I am looking to invest in stocks. Is $3.5k enough to start with?

[Ima saver]

I would put the money into a good no load mutual fund, like Vanguard Index 500!

[~bs]

I also think that some money from the loan payment should be reallocated into longer term savings. The 401k money is essentially locked up, so basically you'd be relying on the 10k solely in case something happens. depending on what your household expenses are like, 10k won't do much in the event of job loss or major illness. The money you've plowed into the 401k and loan won't help in that case.

I'd recommend starting to contribute to a roth yearly. In emergencies, you can pull the contributions tax free (although you really don't want to). If you have extra money, you can just dump it into a regular brokerage account.

[scfr]

You could put the tax refund in a 5-year CD. Worst case scenario, if you had an emergency that required more than your current EF, you could cash out the CD (paying a penalty in the form of lost interest) and use it. In 5 years, you could reassess your situation and decide if you wanted to use the money for a down payment, car purchase, or keep it as part of your EF. The CD would be serving a dual purpose: saving for medium-term goals, and backup EF.

5 Year CD Rates - Compare rates on 5 year certificates of deposit.

If I were in your shoes, I would continue working at paying down the student loans early.
I would also look at upping my 401K contribution to 15% if it's allowed under my company's plan.

[skives]

I also think that some money from the loan payment should be reallocated into longer term savings. The 401k money is essentially locked up, so basically you'd be relying on the 10k solely in case something happens. depending on what your household expenses are like, 10k won't do much in the event of job loss or major illness. The money you've plowed into the 401k and loan won't help in that case.

I'd recommend starting to contribute to a roth yearly. In emergencies, you can pull the contributions tax free (although you really don't want to). If you have extra money, you can just dump it into a regular brokerage account.

So you think I should pay the minimum on the student loan?

[snafu]

I too suggest you change your withholding for 2013. Continue paying $1K towards SL and begin building an emergency fund by sweeping whatever is left into a simple savings for the short term. The DOW has gone from 13104 - 1400. which suggests a low MER Index fund offer growth if your RISK level can accept the rollercoaster ride.

Since it is NOT a retirement account, you can sell all or part of your investment [units] and expect the money to show up in your linked chequing account within two business days. Understand that you will be taxed on profit. You can add to your initial investment via Dollar Cost Averaging [DCA] which is how many of us built our portfolios and can be an effective tool for a 5 year time frame. I'd also ask about 'DRIP' which allows reinvestment of profit/payout.