How to invest and grow wealthy

[element926]

I currently don't have enough in savings to pay off the car completely...also based on a previous comment someone made they said why pay off the car when you could invest the money and make a better return. If I paid off my 22k car loan 1.75% interest I would only save about $600 in interest. I feel like I could get a far greater return in the stock market with that amount of money and just pay an increased payment to get it paid off faster.

I would agree the house / mortgage is A LOT. However, I do get $1,600 (not taxed) since I rent 2 of the rooms out. So I effectively only pay $1,600 a month in mortgage (since I pay $3,200 a month). The expected pay off date 2035 (20 years vs 30 years) saving 113k in interest by paying an extra $550 a month in principal. There is another element to this - the house is a beach house. It rents for insane money ($2300 a week during the 16 weeks of summer) and probably the same amount per month in the winter.

Definitely need to look into the IRAs to try to get a better return/tax savings.

Thoughts?

[FLA]

Forgot- read Bogle books, follow boggle head forums, read their books. When you get enough in Vanguard, you get a free session with one of their financial planners, this was immensely helpful and he even helped me set up my Vanguard Funds in my 403b, even though he absolutely did not have to.

and trust me, get LTD insurance, lol. Do I sound like your mother yet?

I guess I don't get having that much house even as an investment, even if will eventually have family. But if you think you will profit from it, you love it, then go for it

I actually had the 403b guys tell me I was oversaving for retirement, I would end up well above my current means. They suggested cutting back, save for college. Every financial thing I read said max out retirement before saving for college. I am damn glad I didn't listen to those fools. My retirement saving may very well be used monthly (without touching principle) for an unexpected disability. Don't listen to the financial planning people at work, IMO, for anything you don't already know for sure. Use other retirement calculators, not theirs.

[autoxer]

Definitely need to look into the IRAs to try to get a better return/tax savings.

Your income may be too high to deduct your ira contribution from your taxes, but as tomhole said, you can make a non-deductible contribution and convert it to a ROTH. Do you have an accountant or do you do your own taxes?

Assets:
10K savings (goal to 20K by end of year, low due to house purchase)
40K 401k (goal to 50K by end of year)
30K Vanguard S&P 500 fund (building emergency fund before I contribute again)
27K car
440k house
Total Assets: 547k

Liabilities:
22K car loan
413K mortgage
Total Liabilities: 435k

Based on these numbers, your net worth is: 547 - 435 = $112k

How much of your income do you expect to save in the next year?

[element926]

Monthly Income: 7600
Mortgage: 3200
Car: 800
Utilities: 400
Misc: 1200 (food, fun, whatever)
Savings: 2000 (saved)
(this is with full 401k contribution)

I use personal capital to try to watch my misc. expenses for savings and would love to cut my car payment out to have that to save soon. So to answer your question about 24K a year saved.

[autoxer]

So, $24k + $18k 401k, you are saving about a third of you gross income. That's a good start! Does the 7600 monthly income include what you get for renting rooms?

[element926]

Yeah, that's included. I'm also getting about 1200 a month equity in the house (14,400 a year) based on my current payment. So again, once I drop the car this will increase by 9,600 a year.

[Goldy]

I think you are off to a great start with a solid job and good questions at an early age. Sure the house might be a bit much but it has benefits of being rented pretty easily so I'm not too worried about that.

If it were me here is what I would do.

Max 401k. Check.
Contribute to Roth. Backdoor maybe
Pay some extra on the house. Check
Put as much as you can to the car. I agree that you could probably make more in the market but having 800/mo tied up in a car payment really bites.

Once the car is paid off I would increase payments to the house to get rid of PMI.

After that you can cut back on the house payments a bit and either bulk up your EF or invest more. You will be sitting well at that point.

[FLA]

Put as much as you can to the car. I agree that you could probably make more in the market but having 800/mo tied up in a car payment really bites.

Once the car is paid off I would increase payments to the house to get rid of PMI.

After that you can cut back on the house payments a bit and either bulk up your EF or invest more. You will be sitting well at that point.

I agree on car, I would just want to be done with that.

I've never used PMI, when do they stop charging it?

what happens to you and your roommates when you rent out the house?

I keep trying to think of stuff I'd do at your age and with your very good circumstances. Do you have term life insurance? cheaper if you get it young. that's all I can come up with just now. oh, except adopt a shelter dog, cheap and joyful. Oh wait, that one is MY financial plan, just slipped out, lol

[element926]

Definitely plan on getting the car paid off early next year, I want that financial freedom. I'll look into the ROTH, my only concern was putting too much money into pre-tax accounts (and not being able to take from it if necessary). That's why the Vanguard is nice, I would more than likely never touch it - but I "can" if needed.

[FLA]

Vanguard has Roths. I believe if you've had one for 5 yrs, you can then take the principle you put in, back out for any reason, no penalties. But that is only on principle, you'd get dinged if you take out proceeds.

[element926]

Gotcha, I will need to look into that!