Takin the Next Step

[Payn_it>>>]

Well, I'm newly married, (two months), we've paid off all 5 of our Credit Cards...all are at zero. We've combined our phones to a family plan, I have 10 Payments left on my Car, we own the other one. I'm purchasing a motorcycle. this will cut maitenance and fuel costs on our cars while allowing for a little extra fun.

what would be your next step. Investing, saving, house?

[disneysteve]

Congrats on the recent marriage and on paying off the CCs.

How are you buying the motorcycle? If not for cash, then I'd say don't do it. If you don't have a funded emergency fund, I'd say don't do it also.

Do you each have employer retirement plans (401k, 403b)? If so, are you contributing and what percentage? Do you have Roths?

Do you have a budget and know where all of your money is going?

[Payn_it>>>]

budget is sound. I know each of our bills and have each or our checks planned out a week prior to payday. We established an ING direct account. That is an established "emergency" fund. Even with a motorcycle, we are able to put $240+ into that savings. I'm not eligable for a 401k yet, and her company doesn't offer them. I have a $300,000 life ins. and we're fully covered for medical, dental, and vision by my company.

How does a ROTH work, and what would i do to start?

[disneysteve]

A Roth is a type of retirement account that you can set up with a bank, brokerage or investment firm. Currently, you can contribute up to $5,000/year of after-tax money that then grows tax-free forever. In retirement, you can draw from the account and not have to pay any taxes on those withdrawals. Each of you (you and your wife) can have one so you can put away $10,000/year.

Where would you start? That depends on how you want to invest the money. If neither of you has a retirement account and you are both young, you probably want to be fairly aggressive with these accounts. If you want mutual funds, the big 3 companies are Vanguard, Fidelity and T.Rowe Price. They each have a wide assortment of quality mutual funds to choose from. Go to any of their websites and you can get all the info needed to open an account. If you want investment advice, start a new thread and plenty of us will be happy to make suggestions.

[skydivingchic]

I think the next steps would be to put away at least 15% of your income toward retirement. Whether that be in Roth IRAs, 401ks, or both. Additionally, you need to concentrate on your EF. I'm not clear from your posts if your EF is fully funded at this point or not. If not, get it fully funded before you start saving for other stuff.

Regarding the motorcycle. Can you do your own maintenance? If not, I would be skeptical that you will save on maintenance. Getting a motorcycle serviced is expensive. Oil changes and basic maintenance run around $100 per service for me. The more involved service intervals easily run $300 plus. A new tire (which will need replacing every 10,000 to 15,000 miles) is ~$120 plus installation. A new chain is $100 (replace every ~20,000 miles). Insurance on my motorcycle is not that much cheaper than my regular vehicle insurance and I am a female with a spotless driving and riding record. Also, have you considered gear? You can certainly choose to ride however you want, but a run of the mill set of gear - jacket, pants, gloves, helmet - will easily cost $500. I'm a gear fanatic and my gear cost well over double that amount. Where do you live? Can you ride year round? If not, you will have to winterize the bike each year, and still pay insurance while the bike sits for those months. I ride, love it, and encourage others to do so. However, I have to roll my eyes every time I hear someone talk about saving money by riding a motorcycle. I ride year round and to work many days, but the bike is nothing but a luxury and an added expense. Finally, as long as you are riding NEVER, EVER let your health insurance lapse. DBF had a serious accident this summer. We would be in a world of hurt right now if it weren't for the health insurance.

[Payn_it>>>]

well for starters...the bike. its a Ducati Monster 696. its 8500 OTD. Ducati cut maitenance in half starting the first. I'm purchasing a "demo" bike, so its past the first maitenance point; 600 miles. the next is at 7500 miles. that will be about $550. i already own gear. As well, ducati's only require oil every 6000 miles and that i can handle. estimated Milage is more that twice my daily drive is currently. which happens to be waiting on a part..purchased already...and the truck i'm driving now is an 8MPG beast. so a bike will save me a ton of scratch. Financially speaking, we're set. We don't struggle at all. I'm just trying to figure out what a wise way to invest my liquid cash would be.

[zetta]

Congratulations on your marriage and Best Wishes for continued progress on the financial front!

Next steps:
1. Save 6 months expenses for your emergency fund in a savings or money market account
2. Save 15% of your income toward retirement -- in your case, put the first $10k of this money in ROTH accounts. Learn the basics of investing -- buying a no-load index fund at a brokerage would be a good place to start.
3. Finish paying off your car.
4. Save 5-15% (as much as you can manage) toward a house downpayment. Aim to put 20% down when you buy.
5. Save to pay cash when you replace your cars (5-10 years from now?)

[Payn_it>>>]

I'd say all these are great thoughts....And awesome goals...as far as learning the basics of investing goes, where do i start. What do i read, who do i ask. I took economics in HS, but when ur 16-17 years old, economics and finance is the least of your worries. CD's ROTHs, Stocks, ESOP, i'm so lost half the time.

And 6 months Income on both incomes...that'll take me years to save.


Some times its so overwhelming.

[elessar78]

And 6 months Income on both incomes...that'll take me years to save.

Yeah, but that's the process though. The logic behind the emergency fund is that when one invests money he is trying to grow his wealth. But from a lot of people's experiences, there are rainy days in everyone's life and you need a stash of cash to get you through those bad financial days. We're talking getting laid off, getting sick or injured, unexpected car repairs and what not. Happens to everyone.

Money that is invested in, say, stocks should rarely be touched once it's in there. You just need to let it sit and grow, IMO, for a looong time.

Reading books on personal finance is a good place to start. Dave Ramsey's book Total Money Makeover is a good place to start. His process is sound. I read a book called the First Book of Investing about 5 years ago. Basically goes over what the different kinds of investment vehicles are and how they work. The problem with books like that is that it doesn't give you a clear idea of where investing fits into the whole picture of your personal wealth building.

You wouldn't build a house with a weak foundation... being debt free, having a ton* of cash, educating yourself on personal finance, and developing good habits is how you get that strong foundation. Personally, I'm not there yet in all aspects but from my research that's what I've found to be true.

[Joan.of.the.Arch]

Could you sell your current vehicle to clear money for the motorcycle? Owning three vehicles without having a good back-up savings seems a little cart-before the horse.

Basically, I'm thinking that in this early stage of your economic life you should delay some luxuries in favor of making your current situation secure and to begin to make your future secure. And in this recession, I think it is even more important to have savings to fall back on.

Is your wife interested in funding the motorcycle now, or would she be more interested in common savings goals?

[am_vanquish]

And 6 months Income on both incomes...that'll take me years to save.

This is a topic that's always up for debate around here, but many believe that you actually need 6 months of EXPENSES for an emergency fund (not income). For instance, I live on about 70%-75% of my income & my EF reflects that. In the case of an "emergency" I would consider the other 25%-30% of savings would take a backseat anyway. I found this to be much more feasible for our goals. We set up the 6 months, moved on to investing, then eventually expanded the EF to 9 months after we got our investments on track.

As for what to read, I like following list, posted by zetta just last week:

Books I've found useful, and the main topic covered. I've placed them in the order I would recommend reading them. You can click on my Booknotes catagory in my blog to read my summaries of numbers 1, 2, and 6.

1. All Your Worth (getting your basic financial picture in order so you have money available to invest)
2. The Complete Idiot's Guide to Getting Rich (helps with goal setting)
3. Bogleheads Guide to Investing (explains mutual funds and the indexing strategy)
4. The Intelligent Asset Allocator (how to structure your portfolio)
5. Morningstar Guide to Mutual Funds (how to analyze and pick funds)
6. Common Sense on Mutual Funds by John C. Bogle (highly technical analysis of index investing)

This online book is also good:
Investment Guide

[jIM_Ohio]

Congrats on the recent marriage and on paying off the CCs.

How are you buying the motorcycle? If not for cash, then I'd say don't do it. If you don't have a funded emergency fund, I'd say don't do it also.

Do you each have employer retirement plans (401k, 403b)? If so, are you contributing and what percentage? Do you have Roths?

Do you have a budget and know where all of your money is going?

what steve said!

[jIM_Ohio]

Congratulations on your marriage and Best Wishes for continued progress on the financial front!

Next steps:
1. Save 6 months expenses for your emergency fund in a savings or money market account
2. Save 15% of your income toward retirement -- in your case, put the first $10k of this money in ROTH accounts. Learn the basics of investing -- buying a no-load index fund at a brokerage would be a good place to start.
3. Finish paying off your car.
4. Save 5-15% (as much as you can manage) toward a house downpayment. Aim to put 20% down when you buy.
5. Save to pay cash when you replace your cars (5-10 years from now?)

This is a good list
you mentioned you have a handle on expenses...

can you list for us
a) annual income (gross)
b) annual income (after taxes)
c) annual expenses (total)
d) monthly expenses (total)
e) amount left each month

some might want to see the details, I don't need them (yet?! LOL)

Once people see the magnitude of the income relative to expenses, it is easier to suggest the emergency fund route. For example I am investing 25% of our gross pay now, and we are still building the EF. In any give month I can free up more than $1000 if I have an emergency, and we have done that a few times recently.

[Payn_it>>>]

dang. thats a lot of reading.....guess i'd better get started.

I can't sell the car. i need it for commute on rainy days.

Any way, its pointless. we went saturday to buy it and God said no. they requested a $1000 down i'm not able to afford up front. Whats funny is they said they wouldn't want one, "we never do" they said.

Any way i was thinkin' i owe about 3500 on my Car, its paid off in October. now that the cc are gone i can put $360 a month in my ING account and still afford to pay an extra 100 twords the Car. by the time its paid off i'll be done about 3 months early. Do you think that'd be a wise decision?

[Payn_it>>>]

This is a good list
you mentioned you have a handle on expenses...

can you list for us
a) annual income (gross)
b) annual income (after taxes)
c) annual expenses (total)
d) monthly expenses (total)
e) amount left each month

some might want to see the details, I don't need them (yet?! LOL)

Once people see the magnitude of the income relative to expenses, it is easier to suggest the emergency fund route. For example I am investing 25% of our gross pay now, and we are still building the EF. In any give month I can free up more than $1000 if I have an emergency, and we have done that a few times recently.

Annual Gross - 41600
Annual Net Income - 30160
Annual Expenses -13116 (fixes set bills incl. gas and food)
Monthly Net Income - 2320
Monthly Expenses - 1562
Monthly Left Over - 758

And this doens't count the two extra "free" checks i get each year.