need advice on saving/investing

**Ima saver** · 05-12-2007, 08:44 AM

Well, I would put as much into your IRA's as allowed each year. (I reccommend a roth IRA)
Then I would save enough to open a mutual fund. I like Vanguard Index 500. You need $3000 to start the mutual fund.
I would also have about 6 months of earnings in an emergency fund.

**creditcardfree** · 05-12-2007, 01:46 PM

I agree with Ima on the Roths and emergency fund. Once you max everything out in those areas, you either save for new cars, furniture, vacations, ect so that you don't have to borrow for those. Also, could use any extra to pay down mortgage debt and student loans.

Any kids you need to help through college?

**disneysteve** · 05-12-2007, 02:27 PM

Welcome. Sounds like you are all set to move forward. You mentioned Money magazine and I think that's a great reference, so get yourself a subscription if you haven't already.

Are you getting the fully company match on your 401K? If not, up your contribution until you are.

Next, fully fund a Roth for you ($4,000/year currently). As for your husband, since he is self-employed he has some options beyond the usual. There is a SEP-IRA that I believe has higher contribution limits than a regular IRA/Roth so I'd look into that. At 45 with "very little" saved, he really needs to start socking money away as soon as possible.

You didn't state your income, but I'm guessing that the 5K in Emigrant is not an adequate emergency fund - 3 to 6 months of living expenses, so work on beefing up that amount.

**deca** · 05-12-2007, 02:49 PM

Originally posted by disneysteve View Post

Welcome. Sounds like you are all set to move forward. You mentioned Money magazine and I think that's a great reference, so get yourself a subscription if you haven't already.

I get it from the library...there's a table in the lobby where people drop off magazines for other people to take. There are always recent copies of Money to pick up.

Are you getting the fully company match on your 401K? If not, up your contribution until you are.

I'm getting the full match my employer offers, but my understanding is that I could still contribute more on my own up to 15% of my income. I will get a raise in July so I was planning to up my contribution at that point, where I wouldn't "notice" it so much. I guess that would also be a good time to start funding my IRA. Or should we keep working on the emergency fund first? Or is funding DH's IRA the top priority? See, this is where my head starts spinning.

You didn't state your income, but I'm guessing that the 5K in Emigrant is not an adequate emergency fund - 3 to 6 months of living expenses, so work on beefing up that amount.

My understanding on the rule of thumb about 3-6 months living expenses is that it's just that, expenses, right? Not 3-6 months income. Our expenses are very low. Very modest house payment, cars paid off, etc. I would feel better about getting that emergency fund up to a minimum of $10K though. Should be just a matter of a few months.

**disneysteve** · 05-12-2007, 06:43 PM

Originally posted by deca View Post

I'm getting the full match my employer offers, but my understanding is that I could still contribute more on my own up to 15% of my income. I will get a raise in July so I was planning to up my contribution at that point, where I wouldn't "notice" it so much. I guess that would also be a good time to start funding my IRA. Or should we keep working on the emergency fund first? Or is funding DH's IRA the top priority? See, this is where my head starts spinning.

Don't increase your 401K contributions. Just put in enough to get the maximum match. Then switch to funding your and your husband's Roths. The advantages of the Roths is that you have far more control over how the money is invested and the withdrawals are tax-free in retirement. Once the Roths are fully-funded, if you still have additional funds available for retirement savings, then you can go back to the 401K.

My understanding on the rule of thumb about 3-6 months living expenses is that it's just that, expenses, right? Not 3-6 months income.

Correct, expenses, not income. In other words, the amount of money you would need to get you through 6 months with no money coming in. This may even be lower than your actual expenses currently since there may be things you could cut out temporarily if necessary.

**Tree0164** · 05-13-2007, 04:13 AM

Congratulations! Hubby and I are sort of near your place. We are debt-free except for mortgage and a few car payments left. So I understand your excitement!!

I would focus on increasing your emergency a little more. Atleast 6 months of income. You should be there in a few months if you have an extra $1-$2k of current income that you can put into savings.

I would contribute to a Roth for you. You can do automatic deducation for that.

As for your husband, have him set a SEP-IRA which is for self employeed individuals.

Good luck!

**deca** · 05-13-2007, 04:43 AM

Originally posted by disneysteve View Post

This may even be lower than your actual expenses currently since there may be things you could cut out temporarily if necessary.

Right, that's what I was thinking. Student loans can be deferred, we could temporarily cut out some hobby-type expenses, etc. We could "get by" on about $1200/month, but we'd be a lot more comfortable at say $2000. So getting that fund up to 10K seems very reasonable to me.

I will look at the SEP-IRA for DH.

I just remembered I think I have a Roth account already, I think it is still open but with a 0 balance. I had a retirement account with a former employer I rolled over into the Roth, then cashed it out to make the down payment on our house a few years ago. But I think the account is still open and I could start contributing to it again anytime I want. It's at TIAA-CREF. Is there a "good" place to have your accounts set up with? I hear a lot about Vanguard. DH wants to go with USAA because we have our insurance with them already. Currently DH's IRA is at our credit union. I don't know if it's a Roth or traditional. It's not a SEP-IRA, it's just whatever the credit union set him up with when he left his last employer and needed to roll his retirement savings out somewhere.

**disneysteve** · 05-13-2007, 06:37 AM

Originally posted by deca View Post

I just remembered I think I have a Roth account already, I think it is still open but with a 0 balance.

DH wants to go with USAA because we have our insurance with them already.

Currently DH's IRA is at our credit union. I don't know if it's a Roth or traditional. It's not a SEP-IRA, it's just whatever the credit union set him up with when he left his last employer and needed to roll his retirement savings out somewhere.

I would think if you totally cashed out a Roth, that would close the account, but I'm not sure.

I don't know much about USAA and what funds they offer, so I can't comment on that. Vanguard is one of the industry leaders - great index funds, very low expenses, excellent customer service - never a bad choice.

Your husband's IRA sounds like it's a rollover, so it would not be a Roth.

**kv968** · 05-13-2007, 06:48 AM

Originally posted by deca View Post

I just remembered I think I have a Roth account already, I think it is still open but with a 0 balance. I had a retirement account with a former employer I rolled over into the Roth, then cashed it out to make the down payment on our house a few years ago. But I think the account is still open and I could start contributing to it again anytime I want. It's at TIAA-CREF. Is there a "good" place to have your accounts set up with? I hear a lot about Vanguard. DH wants to go with USAA because we have our insurance with them already. Currently DH's IRA is at our credit union. I don't know if it's a Roth or traditional. It's not a SEP-IRA, it's just whatever the credit union set him up with when he left his last employer and needed to roll his retirement savings out somewhere.

I use T Rowe Price for my IRA and would recommend either them or Vanguard for your IRA. Although TIAA-CREF and USAA could be decent options also. My rule of thumb when deciding which fund family to open an account with is which company's funds would you most want to own. Since you'd have an account with them you won't pay any transaction fees when purchasing them.

For example, if you were to open an account with USAA but liked a lot of Vanguard's funds, you'd have to pay a transaction fee using USAA's brokerage service in order to buy those funds. You could use USAA's funds without paying transaction fees and they do offer some no-transaction fee funds from different companies but T Rowe, Vanguard and Fidelity most likely aren't included in that list.

Basically, look at the funds the company itself has to offer and then make your decision from there. I'd also look at the account maintenance fees the company's charge but the funds a company has would be the driving force in making my decision of which to choose.

**scfr** · 05-13-2007, 07:37 AM

First of all, you are really on the right track and you WILL "get there from here" if you stay focused. I know it seems like you still have a long way to go, but those couples you read about in Money magazine did not get there overnight!

Once you have enough of an EF that you feel comfortable that you can weather any setbacks (and since your DH is self-employed this may be a higher amount than it would be if you both were salaried employeees --- it might even be as much as a year's expenses), then focus on setting up a tax-deferred retirement plan for the self-employed for your husband. The amount you can sock away tax-deferred is pretty hefty and your choices are basically unlimited (unlike your employer's 401K where you have a limited number of choices).

Vanguard has a Small Businesses Service Department that is extremely helpful: 800-662-2003. They will do a great job explaining your options to you.

**deca** · 05-13-2007, 09:45 AM

Originally posted by scfr View Post

Once you have enough of an EF that you feel comfortable that you can weather any setbacks (and since your DH is self-employed this may be a higher amount than it would be if you both were salaried employeees --- it might even be as much as a year's expenses)

I'm not sure about this part -- we can actually get by on my income alone, so I don't feel that we are more vulnerable by DH being self-employed. I feel we are less vulnerable -- he can't get laid off, as he did from his last job.

**Ima saver** · 05-13-2007, 10:16 AM

I agree with Steve. You don't need to put anymore into your 401 than your company matches. Take the rest and open Roth Ira's for yourself and your family. When those are fully funded ($4000 each), then you can work on a sep ira for your husband.

I would then open a mutual fund at Vanguard with your next $3000 savings. I have had a small mutual fund with USSA and it has not grown at all. (It is for my granddaughter)

**Ima saver** · 05-13-2007, 10:17 AM

I mean to say for your husband, not your family. sorry!

**disneysteve** · 05-13-2007, 12:05 PM

Originally posted by Ima saver View Post

I would then open a mutual fund at Vanguard with your next $3000 savings. I have had a small mutual fund with USSA and it has not grown at all.

Ima - I would want to know what type of fund you have with USAA and how it has performed relative to it's peers in the same asset class. Just because it hasn't grown doesn't automatically make it a bad fund, though if it is, you should consider moving the money elsewhere. However, if it is just invested in an investment class that hasn't performed well lately, it might be perfectly appropriate to leave it there.

need advice on saving/investing