Starting out: Thoughts? Advice?

[Blue Leader]

Hello people! My wife and I are just starting out on this journey called life after college. (23, I’m 24) I have recently thrown off the loose spending bug I caught in college and actually decided to grow up (somewhat) and get responsible with finances.

I thought I’d share where we are and see what financial advice we could glean from anyone who cares to reply. So that being said, here’s where we are.

We have recently both increased in pay quite a bit, compared to the first 7 months of marriage. (~$51k before taxes combined)

We just bought a house. ($200k, 5% down, 2-1 buy down, 30 year fixed at 6.45%) The house is #2 of proposed 1600 houses in a new subdivision at the forefront of where the city is moving. (hopefully GREAT investment potential) We will be finishing the basement ourselves to gain sweat equity.

No CC debt. (woot!)

No car debt.

I have about 30k in school loans. She has about 20k but they are deferred as she’s in grad school. (Her grad school is paid for by employer)

We will soon have about $1,500 in an online savings account.


Our first 7 months we lived on basically nothing after bills and food were bought, so we are still living a frugal lifestyle we plan on maintaining.

After reading this massive post, do you have any advice or thoughts for us? We feel we are doing a good job, but I thought I’d see what some of you financial gurus have to say!

[sweeps]

You're doing a fine job. Comments:
1. Try to beef up that savings account. (Is it a high-yield savings account paying 4.5% or higher?)
2. Your wife's student loans... are they subsidized or unsubsidized? If unsubsidized, deferring them is just postponing your payments while interest accrues.
3. Are you saving for retirement... either a 401k through work, or a Roth IRA at a brokerage or mutual fund company.

[Knows Money]

From your post, it doesn't appear you have any debt other than your home. As long as you're not living paycheck to paycheck, I would say continue the path you're on, contributing to emergency savings and a retirement plan. Develop a budget so you don't get side track on all the things traps young couples (or even old) can get into. Even make a budget line item for entertainment and fun. I would definitely say be sure that you're savings is a high interest yield - ING Direct, Emigrant are great. And look into freebies websites like Mypoints.com - every time you open an email from them, you get 5 points - rack up points and you can get FREE gift cards, and not for cheezy stuff either. Bath and Body Works, Red Lobster, Home Depot, Old Navy.

I sense that you want to bring more income to the house so you don't ever feel squeezed. Perhaps you two have a hobby that you can do together to bring in some additional income.

Student Loans can be tricky. If they are unsubsidized, I'd almost tell you to put something toward the interest that is accruing. The good think about the loans, if they are federal, you can fix your payments based on income and hardship in case something comes up. But it seems like you and your wife are on a good path.

[anonymous_saver]

This is what I would do if I were you:

(1) Have the 2 of you contribute up to your employers' match into your 401(k)/403(b)/retirement plans.

(2) Save up one months worth of an emergency fund at 4.5%+.

(3) As long as your student loans are both under 8%, I would then use extra money towards increasing your emergency fund up to 3 months worth.

(4) I would then contribute the max into Roth IRA's (as long as you qualify) for each of you. I like Vanguard personally. Once your IRA's are maxed out for a year continue putting that extra money towards an emergency fund (probably up to the 6-8 month level).

(5) Once your emergency fund is complete, and as long as you are maxing out your IRA's. I would then either try to put extra money towards your school loans (or home if it is at a higher interest rate) or increase your 401(k) contributions at this time. One thought is when you reach this level is to "just" increase your 401(k) contributions by 1-2% every time you get a pay increase.

Just some thoughts to think about!

[jIM_Ohio]

anonymous saver has some good advice... I would modify 4) and 5).

1) invest into 401k up to match
2) invest into Roth IRA up to yearly max ($4000 for 2007, $5000 for 2008)
3) get emergency fund up to 3 months expenses

4) no need for an 8 month emergency fund unless one spouse or other is prone to unemployment or variable income

5) pay down student loans or contribute more to 401k depending on cash flow needs. I would suggest investing more at such a young age.

[boefixepa]

I like to add to everyones great suggestions....study up on financing.

Your money or your life....
Rich dad poor dad....
Automatic Millionaire...
Money 4 life....
The Richest Man in Babalon...

I am sure others will add to this list. I find when you aquire a different mindset about money and what it is....well you tend to look at people like they are crazy when they try to play to the 'Jones' game.

[loanstar]

i don't think you need much advise, you seem to have a pretty good plan: interest on your loans is fixed and unlikely to hike in the short term, you also don't have any credit card debt.
I'd say you're doing pretty well!

[Tree0164]

Here is what I would do in your shoes:

1) Save up an emergency fund of atleast 6-8 months of expenses
2) You and your wife should be contributing to retirement
3) Start paying off those student loans- not sure if they are private or not but getting them paid off would what I would do.

[Blue Leader]

Wow. I don't check this forum for a few days and I have a ton of great insight waiting for me...nice!

Thank you all for your input! We are both maxing 401k's to the employers matching limit. I opened a roth IRA a couple months ago...just started off with $50 a month to see how it will affect us. I think I'm going to increase to $100/mo soon.

I need to read some of these books I keep seeing mentioned.

I also recently opened a high yeild saving account with amtrust direct. %5.36 for 3 months.

Now let's just hope the '92 maxima passes the 200k mark with no problems.