NEED YOUR HELP: Open-minded and Looking Into My Financial Options

[OpenMinded4Growth]

Hi All,

First and foremost, I would like to thank you all for your dedication and honest responses in regards to helping one another with saving advice. I'm humbled to stumble upon this site.

With that being said, I will attempt to break down my current financial situation with as much clarity as possible:

Monthly Income (AFTER taxes):
(1) 1st job: $2450
(2) 2nd job: $1600
TOTAL: $4050 per month in INCOME

* I have worked 2 FT jobs in the past but I'm doing this for a LONGER TERM (2-3 years) to increase capital and complete personal goals. The WORST decision I made in the past was to quit my 2 FT job set-up in the past because I thought "I had all the money I would need." Little did I know that my reckless mindset toward money eventually manifested in my behaviors *

Small background leading up to now: In the past 4 months, I have paid off a $2268 CC bill, a $1918 CC bill and a $1788 CC bill via aggressive savings, leveraging income tax return and making money through independent marketing gigs (thank goodness for my network!).

Rent: $750/month (NO utilities)
Sallie Mae: $500/month ($62k TOTAL for Bachelor's and Master's degrees)
Verizon FIOS: $87/month
Verizon Wireless: $122/month
Gym: $43/month
Transit: $64
Groceries/Food: $300/month (I know, I need to cook more but I have 2 FT jobs)
Haircut: $50/month
Miscellaneous: $200 (Allocated for various expenses)
TOTAL: $2116 per month in EXPENSES

* I sold my car because I live near NYC (transit, buses, ferries, access to a friend's vehicle when needed, etc *

Income - Expenses: $1934 remaining per month

With $1934 remaining per month, here are some of my goals:
(1) Pay off at least 75% of my student loans in the next 2-3 years.
(2) Keep 2 FT positions for the next 2-3 years (I have great flexibility with my 1st job to work 40 hours in 6 days which gives me at least 6.5 hours to sleep in between each job; 2nd job is overnight 11p - 7a at a hotel front desk with OFF days being Tuesday and Wednesday). My 1st job, my 2nd job and my gym are within 5 minutes of each other walking; it takes me 2 train stops to reach all 3 from my house (convenience and a blessed arrangement).
(3) Invest in (1) residential income property in an urban area with my cousin; we will be eventually targeting a property in an urban neighborhood in transition (we aren't willing to pay anymore than $20k for it, renovations under $10k, and flip the house together).

Lastly, I know this is a lot of detail, but I aimed to set the most transparent stage of my finances so I can evaluate all options and make the best decision with my money. I am 29 y/o without children and a girlfriend (I have an understanding female friend ), so I want to maximize the next 2-3 years on the financial end. Most of all, I can and will admit my financial mistakes in the past; I am now convicted to make that long-term change in my thinking to activate positive behaviors.

So, I say all of this to ask you all: What would YOU do with nearly $2000 per month with the information that I have provided?

Thanks for your consideration and I humbly look forward to your collective responses!

[lorraineb]

Have you ever flipped houses before? If not, it isn't nearly as easy as they make is seem on TV and there are huge risks if you aren't a home inspector yourself and know all the issues you'll need to take care of on the flip. This is especially true with lower end houses. If you don't know what you're doing, it's a great way to lose a lot of money fast.

[Petunia 100]

So, I say all of this to ask you all: What would YOU do with nearly $2000 per month with the information that I have provided?

Well, with part of it, I'd be maxing my IRA. Roth, traditional, or some of each. Do either of your employers offer retirement plans with any sort of match? If yes, I'd take advantage of that too. Never leave free money on the table.

[Baby_nurse]

Most of your plan, such as paying off your student loan bill, is good.

Your house flipping plans, however, are not.

If you start with a house that you are willing to go up to 20k in, lets just say that range the only thing you will find is stuff with major structural damages that you will be required to correct before you can flip it. From your post, it doesn't sound like you will have the time, nor the experience, to work as the contractor on the home, which is what you would need to do to keep your costs down. You'll also have to factor in the costs of re-permitting and inspections if the house turns out to need more extensive work like new electrical or plumbing before you can obtain a certificate of occupancy.

A budget of 10k for renovations amounts to new paint, carpet and appliances.

Having flipped a couple houses in the past, I can say that you are not in the position to do it at this time or with those budget constraints. I was lucky. I'm married to an architect and my BIL is a general contractor. We did nearly ALL of the work ourselves and it still cost is more than any of those little flipping shows let on.

Is there money to be made in flipping? Yes. If you do it right, if you have enough money to do it correctly in e first place and if you have the patience to wait for the right time to get the profit.

[phantom]

Is there a reason why you want to have 75% of your loans paid in 2-3 years? I think it sounds like a good goal, but I also think it sounds really arbitrary. So, long as you have a good reason for making that your top priority, I'd begin by pulling out a loan calculator and figuring out how much extra a month it will take to accomplish that. $500/month alone certainly won't do it, but without knowing your interest rates, I can't say what will.

Getting retirement savings started would right next to student loan repayment on my priority list. Like Petunia, I'd take advantage of any retirement plans offered through your employers than have a match and max out an IRA. I can't say exactly how I'd balance retirement and student loan repayment without knowing more about your student loan interest rates and what matches are available to you.

I would only try flipping houses with money that you can afford to lose, because it can be very risky, and a lot of people do lose money trying it. So, I would wait until your retirement savings is on track and you've taken a huge chunk out of your student loans before saving up to try flipping a house. I might also wait until you're down to 1 job to try it. Finding contractors or doing the work yourself both take significant time. Finally, I'm not sure how you plan on working with your cousin to flip a house, but I'd be very cautious about combining your money with his to buy a house to flip.

[OpenMinded4Growth]

Have you ever flipped houses before? If not, it isn't nearly as easy as they make is seem on TV and there are huge risks if you aren't a home inspector yourself and know all the issues you'll need to take care of on the flip. This is especially true with lower end houses. If you don't know what you're doing, it's a great way to lose a lot of money fast.

Thanks for pointing this out, Lorraine. I am going to respond to everyone else about flipping houses too, but it did seem like the flipping houses process was a little easier. Nothing worth investing in is easy to me, but I am not experienced in house flipping and I am not competent as a home inspector. Before the two jobs, I was an avid HGTV "Income Property" watcher, but I am aware that these housing projects are nightmares behind the scenes and tend to stretch the project end date and budget due to some undiscovered problem that will force the contractor to "be creative" and stretch the budget lol. Somehow, hearing this reinforced from the users in this forum has DEFINITELY made me think twice about this pursuing this, for now. For this, I must say "thank you" for helping me think more realistically about this goal everyone.

[OpenMinded4Growth]

Well, with part of it, I'd be maxing my IRA. Roth, traditional, or some of each. Do either of your employers offer retirement plans with any sort of match? If yes, I'd take advantage of that too. Never leave free money on the table.

Yes, I do believe both of these jobs offer retirement plans with employer matching. Would you 100% match for BOTH jobs or just one job?

I would also like to set-up a Roth-IRA account as another investment vehicle. Since I am 29 y/o, it is important for me to start being more assertive in my investments and employee retirement programs. To date, I have not matched 100% to my first job's employee retirement program because I gained more money in my checks that I used for debt payments. Now that my credit card debt is paid off, I can comfortably commit to the 100% match and not leave free money on the table.

[OpenMinded4Growth]

Most of your plan, such as paying off your student loan bill, is good.

Your house flipping plans, however, are not.

If you start with a house that you are willing to go up to 20k in, lets just say that range the only thing you will find is stuff with major structural damages that you will be required to correct before you can flip it. From your post, it doesn't sound like you will have the time, nor the experience, to work as the contractor on the home, which is what you would need to do to keep your costs down. You'll also have to factor in the costs of re-permitting and inspections if the house turns out to need more extensive work like new electrical or plumbing before you can obtain a certificate of occupancy.

A budget of 10k for renovations amounts to new paint, carpet and appliances.

Having flipped a couple houses in the past, I can say that you are not in the position to do it at this time or with those budget constraints. I was lucky. I'm married to an architect and my BIL is a general contractor. We did nearly ALL of the work ourselves and it still cost is more than any of those little flipping shows let on.

Is there money to be made in flipping? Yes. If you do it right, if you have enough money to do it correctly in e first place and if you have the patience to wait for the right time to get the profit.

Based on what you just explained (and thank you for such a thorough explanation), I am NOT in the position due to inexperience, lack of time, inability to DIY and I do not have the experienced personnel yet to trust with such an investment to keep costs down as much as possible.

Just out of curiosity, when is the best time to consider house flipping?

Again, thank you for your help!

[OpenMinded4Growth]

Is there a reason why you want to have 75% of your loans paid in 2-3 years? I think it sounds like a good goal, but I also think it sounds really arbitrary. So, long as you have a good reason for making that your top priority, I'd begin by pulling out a loan calculator and figuring out how much extra a month it will take to accomplish that. $500/month alone certainly won't do it, but without knowing your interest rates, I can't say what will.

Getting retirement savings started would right next to student loan repayment on my priority list. Like Petunia, I'd take advantage of any retirement plans offered through your employers than have a match and max out an IRA. I can't say exactly how I'd balance retirement and student loan repayment without knowing more about your student loan interest rates and what matches are available to you.

I would only try flipping houses with money that you can afford to lose, because it can be very risky, and a lot of people do lose money trying it. So, I would wait until your retirement savings is on track and you've taken a huge chunk out of your student loans before saving up to try flipping a house. I might also wait until you're down to 1 job to try it. Finding contractors or doing the work yourself both take significant time. Finally, I'm not sure how you plan on working with your cousin to flip a house, but I'd be very cautious about combining your money with his to buy a house to flip.

Admittedly, my goal to pay at least 75% of my student loans in 2-3 years is somewhat arbitrary. I did not crunch numbers to an exact science and I did not factor in interest rates; I only looked at my principal balance amount.

Below, I will provide you a snapshot of my principal balance for all loans combined ($62,504.55).
(1) $22,183.48 Principal / 6.125% Interest
(2) $36,287.54 Principal / 6.125% Interest
(3) $3,711.00 Principal / 6.8% Interest
(4) $595.00 Principal / 6.8% Interest
* Does this information help? *

In terms of retirement savings, I believe both employers offer 100% match. If this is the case, would you max out in both employer matches? Additionally, I do plan to open a Roth IRA and max this out, too.

What have you heard about Orange Savings Accounts? I do plan to put a certain percentage (not sure how much is prudent right now) in this account every 2 weeks. I will still hold a regular checking account so I can gain access to liquid cash fast, but I will be leveraging the Orange Account to automatically draw money from my paychecks into this account (without me actively knowing/remembering) and checking on the account from time-to-time.

In terms of house flipping, I firmly disqualify myself from this idea lol. The wealth of knowledge and congruence of responses from everyone has made me think more critically about this process (and that's the type of feedback that I was/am looking for).

[lorraineb]

If you don't have the time, but want your money to work for you (long term), then I would suggest getting index funds and maxing out a roth IRA. If you do have time, then I would pursue more active participation investments (like flipping, but something that you have the time for and the knowledge to make it work). Personally, I antique -- always on the lookout for antiques being sold for less than their value and flipping them as a way to "invest" a portion of my money. Sitting down and thinking through where you are an "expert" will help you in this area, or it is worthwhile taking the time to become an expert in an area that you have interest.

[OpenMinded4Growth]

If you don't have the time, but want your money to work for you (long term), then I would suggest getting index funds and maxing out a roth IRA. If you do have time, then I would pursue more active participation investments (like flipping, but something that you have the time for and the knowledge to make it work). Personally, I antique -- always on the lookout for antiques being sold for less than their value and flipping them as a way to "invest" a portion of my money. Sitting down and thinking through where you are an "expert" will help you in this area, or it is worthwhile taking the time to become an expert in an area that you have interest.

I will definitely do more research on what index funds are and maxing out a Roth IRA. I would definitely like to get the ball rolling on several investment vehicles because our employers and the government are no longer looking out for these interests; it is up to us to invest into our future.

In the future, when I reach my goal of working 2-3 years on both FT jobs, then I would like to evaluate how much liquid money I have available and first get more knowledgeable about real estate/flipping. It is definitely a subject of interest, but I like how people on this site advocate for self-knowledge first before hiring expertise.

[woodie96]

Definitely take advantage of any match that you can. A 100% match doubles the amount of money in your account. It's like hitting the good stocks.

IMHO

[BMEPhDinCO]

Admittedly, my goal to pay at least 75% of my student loans in 2-3 years is somewhat arbitrary. I did not crunch numbers to an exact science and I did not factor in interest rates; I only looked at my principal balance amount.

Below, I will provide you a snapshot of my principal balance for all loans combined ($62,504.55).
(1) $22,183.48 Principal / 6.125% Interest
(2) $36,287.54 Principal / 6.125% Interest
(3) $3,711.00 Principal / 6.8% Interest
(4) $595.00 Principal / 6.8% Interest
* Does this information help? *

In terms of retirement savings, I believe both employers offer 100% match. If this is the case, would you max out in both employer matches? Additionally, I do plan to open a Roth IRA and max this out, too.

What have you heard about Orange Savings Accounts? I do plan to put a certain percentage (not sure how much is prudent right now) in this account every 2 weeks. I will still hold a regular checking account so I can gain access to liquid cash fast, but I will be leveraging the Orange Account to automatically draw money from my paychecks into this account (without me actively knowing/remembering) and checking on the account from time-to-time.

In terms of house flipping, I firmly disqualify myself from this idea lol. The wealth of knowledge and congruence of responses from everyone has made me think more critically about this process (and that's the type of feedback that I was/am looking for).

My thoughts: First, great job paying off those CC, that'll help a ton (I assume the only debt left is the student loan stuff above?)

Second - check how long you have to be with each company to be "vested" and actually get the match - my last job was 5 years, I was there 2, I only got what I invested, not the match. If they are both immediate or less than the time frame you've set for yourself, then match both and put the rest ($5,500) into a RothIRA. After that, I think the idea you have of a savings account (or two, or three...whatever you need) is good, but the "Orange ING" is now part of Capital One and rates are dropping - look into Ally, SmartyPig, Discover, Sallie Mae, etc instead.

Finally, pay off that $595 loan next month, make it simple there. Then do as much as possible into a 2012 RothIRA (since you can contribute to that until tax day in April) - you can also flip these two orders. I would then pay (up to) $1,250 to that $3xxx loan and get it gone - you should be able to do all three of these by the end of August. Then you'll have plenty of time for the 2013 Roth (7 months - $5,500 = ~$785 per month). The rest will then be 401k and savings.

Good luck!

[~bs]

Seems like your expenses are pretty well in check. Any way you can make more money? 2 full time jobs making only 4k per month is not ideal imo. At age 29, you can handle it, but as you get okder, things may cjange. What are your degrees in? You cant find a job in yourfield and location that will pay you 4k per month?

[OpenMinded4Growth]

My thoughts: First, great job paying off those CC, that'll help a ton (I assume the only debt left is the student loan stuff above?)

Second - check how long you have to be with each company to be "vested" and actually get the match - my last job was 5 years, I was there 2, I only got what I invested, not the match. If they are both immediate or less than the time frame you've set for yourself, then match both and put the rest ($5,500) into a RothIRA. After that, I think the idea you have of a savings account (or two, or three...whatever you need) is good, but the "Orange ING" is now part of Capital One and rates are dropping - look into Ally, SmartyPig, Discover, Sallie Mae, etc instead.

Finally, pay off that $595 loan next month, make it simple there. Then do as much as possible into a 2012 RothIRA (since you can contribute to that until tax day in April) - you can also flip these two orders. I would then pay (up to) $1,250 to that $3xxx loan and get it gone - you should be able to do all three of these by the end of August. Then you'll have plenty of time for the 2013 Roth (7 months - $5,500 = ~$785 per month). The rest will then be 401k and savings.

Good luck!

Yup, the only debt left is the federal student loans. Yes, I am definitely proud of knocking out those CC's. I still have the cards open (I heard it was bad to close CC accounts even after debt is paid in full), but I have reduced my credit limit to $500 on each of those cards.

The first thing I plan to do this morning at work is to consult with HR about the vestment structure pertaining to the employer match (for both jobs). Your strategy is sound; it is prudent not to match 100% if full vestment is leagues away (typically capped at 5 years for a lot of companies). I have only been at my job for 18 months. Combined with my 2-3 year goal for 2 FT jobs, I would fall short of full vestment if both jobs call for 5 year FT employment.

I appreciate the small (but BIG) details outlined for the 2012 Roth IRA. Question: What if I already received my return for 2012? Would I still be able to contribute to a 2012 Roth IRA under this circumstance?

I agree that I should plan vigorously to pay off the $595 loan next month and then concentrate financial efforts on the $3711 loan + 2013 Roth IRA max. At 29 y/o, the time is now to start paying close financial attention to my retirement allocation (I have compromised this area in the past) while still building liquid savings in the process. In your honest opinion, what entity would you trust with your Roth IRA?

Again, thank you for your advice.