Unique Situation

[moneyhungry66]

I'm looking for some general financial advice. Hoping someone can point me in the right direction.

A little background:
Im 38.
Recently started a business two years ago and going extemely well.
Pay myself around $600k a year.
I'm setting up a 401k this year and going to max it out at 49k.
I have 1 year of expenses saved.
I have 0 debt except for my house.

I also have 200k on hand.

I have 3 kids (10,7 and 1) who I need to save for college. Nothing saved to date.
I currently have around 70k in retirment.

Considering I make quite a bit and going to be maxing out 401k yearly what else would be wise investments? I'm looking for long term and short term. What the best use of my money? Pay my home off quickly? About 550k left on it. Invest in the market?

Thanks in advance.

[Petunia 100]

I'm looking for some general financial advice. Hoping someone can point me in the right direction.

A little background:
Im 38.
Recently started a business two years ago and going extemely well.
Pay myself around $600k a year.
I'm setting up a 401k this year and going to max it out at 49k.
I have 1 year of expenses saved.
I have 0 debt except for my house.

I also have 200k on hand.

I have 3 kids (10,7 and 1) who I need to save for college. Nothing saved to date.
I currently have around 70k in retirment.

Considering I make quite a bit and going to be maxing out 401k yearly what else would be wise investments? I'm looking for long term and short term. What the best use of my money? Pay my home off quickly? About 550k left on it. Invest in the market?

Thanks in advance.

Congratulations on starting such a successful business!

I could tell you what I think you should do, but how do you know if my advice is sound or not? I suggest you begin learning about personal finance and investing, so that you can make your own choices, and feel confident that they are prudent.

Here are some sites to get you started:

http://www.morningstar.com/cover/start-investing.aspx

http://www.bogleheads.org/wiki/Main_Page

https://personal.vanguard.com/pdf/s700.pdf

[disneysteve]

I'm setting up a 401k this year and going to max it out at 49k.

I have 3 kids (10,7 and 1) who I need to save for college. Nothing saved to date.

I currently have around 70k in retirment.

The contribution limit for a 401k is $17,500, not $49,000. Once you've put in $17,500, you're going to need to use another vehicle for retirement savings. Since you own your own business, I'd suggest a SEP-IRA. That has higher limits and you can have that along with your 401k. You can also fund a traditional IRA (you make too much for a Roth) but then you can immediately convert to a Roth (stupid law but that's what it is). That lets you put away another $5,500/year for yourself and $5,500 for your spouse.

As for college, you need to think about how much you want to provide for them. Do you want to pay 100%? 50%? Or some other amount? 529 plans allow the money to grow and be withdrawn tax-free for qualified college costs. Savingforcollege.com is a great site to learn more.

I'm very curious what type of business you started that in just two years is generating such great income.

[Petunia 100]

The contribution limit for a 401k is $17,500, not $49,000. Once you've put in $17,500, you're going to need to use another vehicle for retirement savings. Since you own your own business, I'd suggest a SEP-IRA. That has higher limits and you can have that along with your 401k. You can also fund a traditional IRA (you make too much for a Roth) but then you can immediately convert to a Roth (stupid law but that's what it is). That lets you put away another $5,500/year for yourself and $5,500 for your spouse.

The employee contribution limit is 17.5k, but the total employee/employer limit is 51k (not 49k). S/He can open a SEP Ira as well, but the 51k limit still applies.

[disneysteve]

The employee contribution limit is 17.5k, but the total employee/employer limit is 51k (not 49k).

Thanks. I didn't realize that. So being self-employed, he can do both the employer and the employee contributions? That's cool.

[snafu]

Welcome to SA. Congratulations on creating and operating a successful business in such a sort time frame. I support Petunia's recommendations. A quick read is The Automatic Millionaire [Bach]. You've not mentioned your age but some financial decisions are based on priorities. We know there are options for your children's education but you will need to rely on yourself for your & DW's senior years. Is your wife a part of any retirement plan?

This likely seems un necessary but I suggest you track spending for 3 days to understand clearly where it all goes.

[disneysteve]

This likely seems un necessary but I suggest you track spending for 3 days to understand clearly where it all goes.

I agree. This isn't unneccesary at all. And I think you should do it for 30 days, not 3 (unless that was a typo and you meant to say 30). It doesn't matter how much you earn. If you aren't in control of your spending, you can still go broke. There are people making far more than you who lose everything. The news is filled with stories of celebrities and pro athletes going broke despite earning millions. Of course, this doesn't mean you have to be buying store brand corn flakes and no-name toilet paper. You can have your luxuries - you certainly earn enough to pay for them. You just need to be sure you have a plan and you're following it.