overwhelmed by the options

[Mdarius]

Hi. I'm new here, but I'm kind of old to start thinking about all this. I now have some discretionary income thanks to a great job and paying off debt. For the first time I feel like I can save money without taking food off my table. The problem is, I'm afraid to do it wrong. I'm self employed for the first time and entrepreneurship has pitfalls I'm beginning to encounter and I know there are more I've not foreseen.

If I just put money in a savings acount, am I earning enough interest?
If I use an IRA am I locking away money I'll need in an emergency?
I still have a little debt, do I dump all my money into it before I really start saving?
Stock market?? AAAIIIIIYYYEEEEEEEEE!!! Say 10 nice things!
401k, Roth IRA, traditional IRA, Money market accounts, will someone speak English? Are we all supposed to just know what all the options are and how they work?

My situation (only bother reading this if you are going to ask me about it):

I have a daughter starting college and 3 more lined up behind her. I have about $5000 of unsecured debt at roughly 5% interest and $3000 a month I can choose what to do with. I have an additional (I consider reasonable) debt load in car payments = about $16,000. My current savings is meager (I couldn't live on it for a month), and my 401k was used up as an emergency fund to survive on when unemployed. We rent a modest home and don't indulge in unnecessary expenses like cable, expensive hobbies, memberships, or expensive family vacations. I feel like with better discipline and budgeting we could save an additional $200 - $500 a month on our expenses...maybe...my kids have grown 5 inches in the last year...EACH! How do you stay ahead of that??? And I could sell an unecessary (ouch!) vehicle and get about $3000 more in cash.

Anyway, that's my story and current status. I'm open to recommendations and education. Thanks for playing!

[humandraydel]

401k, Roth IRA, traditional IRA, Money market accounts, will someone speak English? Are we all supposed to just know what all the options are and how they work?

Well...yes you are. But once you learn it, you'll know it for the rest of your life. That being said, you don't have to learn it all at once.

In your situation, I would continue to save in a savings account until you've built up a 6 month (or 12 month) Emergency Fund (EF). While you do that you can research and learn how to invest and what your options are. Then start contributing to retirement accounts. One good thing about being self employed is you can contribute large amounts to retirement - something like $50k compared to the normal $17.5k.

[Eagle]

Hi. I'm new here, but I'm kind of old to start thinking about all this. I now have some discretionary income thanks to a great job and paying off debt. For the first time I feel like I can save money without taking food off my table. The problem is, I'm afraid to do it wrong. I'm self employed for the first time and entrepreneurship has pitfalls I'm beginning to encounter and I know there are more I've not foreseen.

If I just put money in a savings acount, am I earning enough interest?
If I use an IRA am I locking away money I'll need in an emergency?
I still have a little debt, do I dump all my money into it before I really start saving?
Stock market?? AAAIIIIIYYYEEEEEEEEE!!! Say 10 nice things!
401k, Roth IRA, traditional IRA, Money market accounts, will someone speak English? Are we all supposed to just know what all the options are and how they work?

My situation (only bother reading this if you are going to ask me about it):

I have a daughter starting college and 3 more lined up behind her. I have about $5000 of unsecured debt at roughly 5% interest and $3000 a month I can choose what to do with. I have an additional (I consider reasonable) debt load in car payments = about $16,000. My current savings is meager (I couldn't live on it for a month), and my 401k was used up as an emergency fund to survive on when unemployed. We rent a modest home and don't indulge in unnecessary expenses like cable, expensive hobbies, memberships, or expensive family vacations. I feel like with better discipline and budgeting we could save an additional $200 - $500 a month on our expenses...maybe...my kids have grown 5 inches in the last year...EACH! How do you stay ahead of that??? And I could sell an unecessary (ouch!) vehicle and get about $3000 more in cash.

Anyway, that's my story and current status. I'm open to recommendations and education. Thanks for playing!

Welcome to the forums

Based on the age of your kids I'd guess your age is somewhere between mid-40's to mid-50's. That means you have 15-20 years before you turn 65. What is your goal for retirement?

Re: 401k, Roth IRA, traditional IRA, Money market accounts, will someone speak English?
For a 401k regarding self-employment start here: http://money.cnn.com/retirement/guid...401k.moneymag/

Regarding a Roth IRA or traditional IRA check out these frequently asked questions: http://www.wellsfargoadvantagefunds....nt/ira/faq.jsp

3 questions to get the creative juices flowing….

1. What does your budget look like? What are your expenses for June 2014?

2. How do you track your expenses?

3. Do you plan to help or do your kids expect you to help them with college?

Welcome to the forums again. You've come to the right place.

[Mdarius]

Welcome to the forums

Based on the age of your kids I'd guess your age is somewhere between mid-40's to mid-50's. That means you have 15-20 years before you turn 65. What is your goal for retirement?

Re: 401k, Roth IRA, traditional IRA, Money market accounts, will someone speak English?
For a 401k regarding self-employment start here:

Regarding a Roth IRA or traditional IRA check out these frequently asked questions:

3 questions to get the creative juices flowing….

1. What does your budget look like? What are your expenses for June 2014?

2. How do you track your expenses?

3. Do you plan to help or do your kids expect you to help them with college?

Welcome to the forums again. You've come to the right place.

Thanks!
Retirement goal: Um, can I actually do that? I am in my early 40's and I currently have no retirement savings and no faith in our government or faith that I have figured out how to survive in our economy. (Let's not turn this political though!) I expect to work until I'm dead. I'd like to have enough financial knowledge to develop a realistic goal though. It seems every time I start to build my savings I'm hit with a life event, drain the savings and go farther into debt. Recommended reading or resources?

1. My budget:
See next post for a summary. My budget breaks it down to specific suppliers or specific expense lines. My actual debt payments use the excess funds to pay it down. In one year we have gone from $22,000 of usecured debt to $5,000, with some debt payment vacations to support car problems, Christmas and family trips. My salary just increased by $2500 / month, thus the new introspection and all the questions.

2: Tracking expenses:
In my budget spreadsheet I have the values for the actual expense. 90% of expenses occur directly from the checking account or on a debit card. As the month progresses we can review the withdrawals and enter actual spending against planned expenses. A column calculates the difference and indicates by color over or under. Finally there is a cell that calculates how much I need to have in my account to cover upcoming expenses for the month to track if we are on target or not. We don't use it religiously. I typically only track if I feel we are sliding off target, or our financial situation changes, and once quarterly to ensure my numbers are realistic. Our lack of discipline in the past prevents me from using credit cards for points. Monthly actuals are within +/- $200 of planned.

3. My kids expect to pay for their own college expenses and have from the time they could understand what it was. I expect them to get scholarships. We are helping her with a promised $300 a month and bought her a good car. (She did get a scholarship with a 3.98 GPA and earned college credit in High school, just missed the track scholarship) Realistically we will contribute to our kids success on a case by case basis, and possibly help them redefine "success" based on their choices.

Now the internet knows more about me than anyone else. I feel a little vulnerable, but I'm willing to put it out there to get some help. Thanks for your support.

[Mdarius]

Trying to attach an image...

Well, I'm struggling with an image and can't figure out how to embed a table without more effort, so I'll try to make this legible:
Expense group Budget
Income 13,800
All Insurance -1,054
Car -480 2 car payments
Charitable contribution -1,480
College and kids savings -975 This is new as of this month
Flex expenses -532 Slush, easily cancellable expenses, lunch, etc.
Fuel -450
Household expenses -1,800 groceries, clothes, entertainment, etc.
Internet -40
Minimum Debt pymt -180
Phone (5 phones) -250
Rent -1,600
savings -520 This is new as of this month
Storage units -175 Could do a garage sale and reduce, but can't eliminate.
Taxes -2,200
Utilities -300
Grand Total +2,244 -11,556

[Eagle]

Trying to attach an image...

Well, I'm struggling with an image and can't figure out how to embed a table without more effort, so I'll try to make this legible:
Expense group Budget
Income 13,800
All Insurance -1,054
Car -480 2 car payments
Charitable contribution -1,480
College and kids savings -975 This is new as of this month
Flex expenses -532 Slush, easily cancellable expenses, lunch, etc.
Fuel -450
Household expenses -1,800 groceries, clothes, entertainment, etc.
Internet -40
Minimum Debt pymt -180
Phone (5 phones) -250
Rent -1,600
savings -520 This is new as of this month
Storage units -175 Could do a garage sale and reduce, but can't eliminate.
Taxes -2,200
Utilities -300
Grand Total +2,244 -11,556

Re: Expenses & Income

If your income is 13,800 you should also (on paper or in your budget) allocate every dollar towards some expense. Consider using www.mint.com to track your expenses. We've used it for years and pay everything via credit card or debit card though for visibility on our expenses.

In looking at the above data that leaves $2244 in your budget not allocated towards any expense. Perhaps split this amount between savings $1122 and debt $1122 until you have built up at least say 10k in savings?

You can either reduce your expenses or increase your income. Preferably both. Looks like your income has increased!

The opportunities for reductions I can see from the above budget are:

A) How much do you like your insurance provider? When was the last time you got a car/rent insurance quote?

B) Sounds like you have a large family. What is the breakdown of the $1800 towards groceries, clothes, entertainment, etc.?

C) What provider do you have for your cell phone service? Might want to check into changing/upgrading your plan? We were paying $175 for 5 lines, unlimited minutes, unlimited texts, and 10gb of data through AT&T. Cancelled one of the lines so now with 4 lines we're paying $160 or less.

Good job in saving towards kids college, adding to savings account, and eliminated a good chunk of your debt.

[Mdarius]

Re: Expenses & Income

If your income is 13,800 you should also (on paper or in your budget) allocate every dollar towards some expense. Consider using mint to track your expenses. We've used it for years and pay everything via credit card or debit card though for visibility on our expenses.

In looking at the above data that leaves $2244 in your budget not allocated towards any expense. Perhaps split this amount between savings $1122 and debt $1122 until you have built up at least say 10k in savings?

You can either reduce your expenses or increase your income. Preferably both. Looks like your income has increased!

The opportunities for reductions I can see from the above budget are:

A) How much do you like your insurance provider? When was the last time you got a car/rent insurance quote?

B) Sounds like you have a large family. What is the breakdown of the $1800 towards groceries, clothes, entertainment, etc.?

C) What provider do you have for your cell phone service? Might want to check into changing/upgrading your plan? We were paying $175 for 5 lines, unlimited minutes, unlimited texts, and 10gb of data through AT&T. Cancelled one of the lines so now with 4 lines we're paying $160 or less.

Good job in saving towards kids college, adding to savings account, and eliminated a good chunk of your debt.

Thanks!
This breakdown is to demonstrate the flexibility. Currently that $2244 is going to debt, except this month. With the new income and new college expenses I'm a little unsteady on where the money really needs to go by the end of the month, so I'm reserving the extra payment until the next paycheck comes in, just to make sure I can cover unplanned expenses. We are still gathering college $$ facts, and haven't moved her in to the dorms. We'll help her get kicked off successfully and let her work it out later. I do get to name her first child if I contribute over $10k to her college career though. I'm thinking...Zeponah.

Has Mint gotten better? I used it a couple years ago and constantly had problems where it couldn't login to a provider's site or was locking up my passwords.

A) Insurance: I review at least semi-annually. It's in the best place I know how to get it to for now. Obamacare hit me in the shorts and I'm paying a lot of money for negligible coverage now whereas last year I was paying 1/12th the cost for the same coverage. I'm glad it's good for some people. You're welcome. It's lousy for me. I have some supplemental insurance that might be optional, but with 4 kids and a $12,000 deductible I feel like I need ER insurance. Geico is good to us from a cost standpoint for cars and I need a new renter's insurance policy. Life insurance is term at a pretty good rate for my spouse and I.

B)The $1800 is not broken down. All fixed expenses (Bills, automatic withdrawals, etc.) come from my checking account and all household expenses come from my wife's account (The $1,800). Basically, if it's not listed in the budget it comes out of the $1800. We each have a card for the other and that's our high level "Envelopes" planning. We have done a breakout to get to the $1800 number, but keeping it general allows for more fluid give and take from discretionary "envelopes". It covers everything not fixed or required, including vehicle expenses other than fuel. I think there's a savings opportunity here, but it will require more discipline than we are currently using. I think nationally $1800 isn't bad for all flexible household expenses for a family of 7 (My mom lives with us and we cover a portion of her expenses in our budget.) But could be wrong. Anybody have any data on this?

C)$175 for 5 lines!! I'm with AT&T also. I have the same plan and pay $250!!! I even have a national account discount! Grrr..... I check that quarterly to see if I can save any money. It could be....nope. I can't account for the difference. I'll have to look at that again.

Thanks!

[Mdarius]

Separate post to break out the discussion: when it comes to savings vs. debt reduction, I'm seeing a lot of soft rules and opinions out there. My personal feeling is that by not having an emergency fund you are setting yourself up for more debt (school of hardknocks). BUT - to develop an emergency fund you have to delay getting out of debt. I can be done in 3 months if I stop saving. It will take me 6 months or more if I siphon money off to savings at various recommended rates. What's the logic behind the decisions on how to split the discretionary income?

[Petunia 100]

The problem with planning to work until you die is...you may not have that option. What if you become disabled? What if you lose your job and are unable to replace it with one paying so well? Better to plan ahead to provide for your own needs. Currently, you are spending on many wants and generously donating to chartity, while betting that your income will never be interrupted. That's a risky bet.

[Eagle]

Retirement goal: Um, can I actually do that? I am in my early 40's and I currently have no retirement savings and no faith in our government or faith that I have figured out how to survive in our economy. (Let's not turn this political though!) I expect to work until I'm dead. I'd like to have enough financial knowledge to develop a realistic goal though. It seems every time I start to build my savings I'm hit with a life event, drain the savings and go farther into debt. Recommended reading or resources?

It is possible. If you are in your early 40's you have 25-30 years to plan for. Assuming you'd like to retire by 70…

Recommended reading or resource:

3 of my favorites are...

The Total Money Makeover : A Proven Plan for Financial Fitness by Dave Ramsey (I'd probably start with this one)
The Richest Man in Babylon by George S. Clason
The Millionaire Next Door by Thomas J. Stanley

[Eagle]

Thanks!
This breakdown is to demonstrate the flexibility. Currently that $2244 is going to debt, except this month. With the new income and new college expenses I'm a little unsteady on where the money really needs to go by the end of the month, so I'm reserving the extra payment until the next paycheck comes in, just to make sure I can cover unplanned expenses. We are still gathering college $$ facts, and haven't moved her in to the dorms. We'll help her get kicked off successfully and let her work it out later. I do get to name her first child if I contribute over $10k to her college career though. I'm thinking...Zeponah.

Has Mint gotten better? I used it a couple years ago and constantly had problems where it couldn't login to a provider's site or was locking up my passwords.

A) Insurance: I review at least semi-annually. It's in the best place I know how to get it to for now. Obamacare hit me in the shorts and I'm paying a lot of money for negligible coverage now whereas last year I was paying 1/12th the cost for the same coverage. I'm glad it's good for some people. You're welcome. It's lousy for me. I have some supplemental insurance that might be optional, but with 4 kids and a $12,000 deductible I feel like I need ER insurance. Geico is good to us from a cost standpoint for cars and I need a new renter's insurance policy. Life insurance is term at a pretty good rate for my spouse and I.

B)The $1800 is not broken down. All fixed expenses (Bills, automatic withdrawals, etc.) come from my checking account and all household expenses come from my wife's account (The $1,800). Basically, if it's not listed in the budget it comes out of the $1800. We each have a card for the other and that's our high level "Envelopes" planning. We have done a breakout to get to the $1800 number, but keeping it general allows for more fluid give and take from discretionary "envelopes". It covers everything not fixed or required, including vehicle expenses other than fuel. I think there's a savings opportunity here, but it will require more discipline than we are currently using. I think nationally $1800 isn't bad for all flexible household expenses for a family of 7 (My mom lives with us and we cover a portion of her expenses in our budget.) But could be wrong. Anybody have any data on this?

C)$175 for 5 lines!! I'm with AT&T also. I have the same plan and pay $250!!! I even have a national account discount! Grrr..... I check that quarterly to see if I can save any money. It could be....nope. I can't account for the difference. I'll have to look at that again.

Thanks!

No problem.

Lol @ Zeponah comment. Honestly, IMO you don't have money to help your kids out. You have very little saved up for an emergency and hardly any retirement savings. Consider encouraging the kids to go to community college for 2 years then transfer to a larger 4 year school. It's good that the oldest is a good student. That is always helpful in getting scholarships. As an alternative to a 4 year school they could go to the local community college for 2 years, live at home, work a part-time job, and reduce the chances of having to take out loans. I think sacrificing your finances (emergency fund or savings, retirement, investments, etc.) for your kids education is a risky choice. Help as you can. But prioritize your financial life. They have double the time you have to save for retirement, invest, and pursue careers.

Mint has improved significantly in the last year to 2 years IMO. It helps if you use major banks like Wells Fargo or Chase. Credit Unions and smaller financial institutions usually don't provide access to Mint.

A) Yeah seems like you have things sorted our there.

B) We spend $600-700 for a family of four. I guess $1800 doesn't sound unreasonable.

C) Yes check into it. We were paying $225-230 a month before that with 3 data plans. Totally worth it IMO

D) What is the breakdown of the charitable contributions? Church?

[LivingAlmostLarge]

Income $13800

Savings
Kids - $975 - don't bother you need to focus on retirement, no loans for retirement
You - $520 - what is this for?
= $1495 = 10.8%

Expenses
Tithe -$1480 10 = 10.7%
Taxes - $2200 = 15.9%
Insurance - $1054
Car - $480
Flex - $532
Fuel - $450
Household - $1800
Internet - $40
Cell Phones -$250
Rent - $1600
Storage - $175
Utilities -$300

= $10361

excess = $13800-$10361-$1495 = $1944 excess

What do you owe on the cars? Assume you should be saving 15% for retirement means $2070/month retirement so would be line item #1.

I'd take the current savings of $1495/month + $500 = retirement. Excess $1500 directed to Car payments then EF. Your EF might need to be $30k or 60k with a burn rate of $10k/month. You could also use the $1500 to cash flow college but I'd look at retirement savings first.

Do you have plans to buy a house? Also to sustain a rate of $10k/month you will need to have $120k/year or $3M. Let's say you really only need $60k and lower taxes you only need $1.5M. But to save that will take awhile.

Depends on your goals.

[feh]

Anyway, that's my story and current status. I'm open to recommendations and education. Thanks for playing!

Personal Finance 101: see link in my signature
Investing 101: http://www.bogleheads.org/wiki/Bogle...g_start-up_kit

In short - time to do some reading!