Financial Surplus...

**sweeps** · 05-10-2006, 10:19 AM

Re: Financial Surplus...

Originally posted by lucasrd

I work for one of the largest software developers in the world.

Sorry, I had to chuckle at that statement because it sounded like you were introducing yourself on a game show.

Looks to me like you're doing a great job, congrats. A few things you haven't mentioned but might want to think about are (a) a SEP IRA or similar plan for your side-business income, (b) sufficient term life insurance to cover you and your spouse in case, God forbid, something should happen to one of you, and (c) extra liability insurance to protect your assets from legal actions.

**lucasrd** · 05-10-2006, 10:23 AM

Re: Financial Surplus...

What would we need the liability insurance for? other than auto? what would be an example of what it covers???

Thanks

**sweeps** · 05-10-2006, 10:34 AM

Re: Financial Surplus...

If you own a home, there are numerous ways you could be liable: Someone slips on your sidewalk. A rock spits out of the mower while you're mowing the lawn and injures a kid. A limb breaks off a tree and lands on someone.

If you own a pet, it could bite or claw someone or damage someone's property.

While doing your side job (assuming you do web development), you inadvertently release proprietary information or customers' personal information on a web site, opening yourself up to lawsuits.

Not saying you necessarily need extra liability insurance, but just saying it's something to consider for your situation.

**34saving** · 05-10-2006, 10:53 AM

Re: Financial Surplus...

An umbrella liability policy is so cheap just about everyone with a "financial excess" should have one. (Think in the neighborhood of $250 a year for a $2,000,000 policy.) Do ya'll have a house? Are you thinking you'll both work for a long time or are you thinking that things will change when/if you have kids?

**lucasrd** · 05-10-2006, 10:59 AM

Re: Financial Surplus...

We have decided that we're going to both work full-time for atleast 10 years. After that my wife might go down to 1/2 time.

Do you think we're keeping too much in cash/CDs? Should I be putting more of that into the market?

**markio26** · 05-10-2006, 11:05 AM

Re: Financial Surplus...

thanks for posting... the car fund needs to be paid off.. the spending money seems a bit high to me... don't you have perks for travel from work? i would call vanguard... go with the index funds or mutual funds that have a low expense of .25 and a track record of 5 yrs or more of constant growth.. i would look at energy, financial services, gold, realestate.

**sweeps** · 05-10-2006, 11:10 AM

Re: Financial Surplus...

Originally posted by lucasrd

Do you think we're keeping too much in cash/CDs? Should I be putting more of that into the market?

You'll probably get a dozen different answers on that question. Honestly it comes down to your risk tolerance. Can you sleep at night with the extra risk (and extra reward) that comes with putting more of your money in stocks? If so, go for it.

Personally I think having $100K in CDs and MMAs is reasonable for your situation. But I wouldn't go beyond that. Invest the rest in mutual funds. Just make sure you're well-diversified.

**34saving** · 05-10-2006, 11:13 AM

Re: Financial Surplus...

Not trying to be picky on this, but it's pretty important to determining your financial future: Which of these applies?
1) We already have kid/kids, they are ages . . . .
2) We do not plan to have kid/kids
3) We plan to start a family when I am 35 and my wife is 36 (after 10 years of work)
4) We plan to start a family earlier than 35/36 but we will continue to work full time
Sorry this sounds the way it does . . . I can't make it sound right

**lucasrd** · 05-10-2006, 11:19 AM

Re: Financial Surplus...

We plan to have kids within 1-2 years and will continue to work full time until at least 2016 (10 yrs from now).

One comment to a post above..the Car fund is actually a savings account for a future car purchase....no auto loans as of now.

**34saving** · 05-10-2006, 12:45 PM

Re: Financial Surplus...

Assuming your 401K and your ING investment portfolios are mutual funds, you've got over $5000 a month going into the market right now. That's a 1/3 of your gross income and probably enough. (Though if you truly don't know where to put money, mutual funds are usually a good place to go. Just remember that (short term especially) they can lose money.)

It looks like you don't have a house? This might be insane for your area or situation, but you might want to consider buying two -- each worth 1/2 of what you qualify for. Rent one out and take advantage of the tax loopholes involved with real estate. (Right now I suspect you're getting nailed with taxes?) Living in 1/2 the house you could be living in will help keep your lifestyle under your income level. You'll find that's pretty important -- especially a couple of years from now. There's a HUGE psychological advantage to knowing you can quit your job any time you want to and be okay. The advantage is double when the kids come around. You guys might decide that both of you working full time is the best thing ever, but you might not . . .

Are you giving any money away?

**pyotr** · 05-11-2006, 12:56 PM

Re: Financial Surplus...

lucasrd,
Your numbers don't add up for me. If you two are making $180k/yr, assuming you pay state and federal taxes, medicare and fica, your health insurance and are maxing out your 401k ($15k/yr), you wouldn't be netting $9200/month unless you're not telling us something like you're not American. Or you get some special tax treatment like you are self-employed and have several employees or large fiscal business losses etc (but then it wouldn't make sense that you say you have such surpluses).

In any case, it sounds like you are over-estimating your financial surplus. $180k/yr doesn't amount to a lot of extra after you've paid taxes, insurances (health,dental,life,disability,home,auto), retirement(401k,IRAs,taxable accounts), college savings(529s etc.), misc (healthcare savings, dependent care etc.). My guess is that you should be able to save an additional $2000-$4000 per month after your monthly expenses (depending on how frugal you are). That should amount to $40k-68k per year in savings. If you were able to maintain this rate of savings, you'd accumulate over a million in liquid assets before you were 40 assuming decent yields on your investments. But remember to factor in time off for you or your wife once you have your kids. Chances are after you have kids, neither you nor your wife will be as productive financially until your kids are near college-age. Your primary investment decision now should be the ideal house and community in which to raise your kids - if you go too cheap, you're liable to want to move (potentially incurring large financial losses); if you go too expensive, your mortgage is liable to strangle your savings programs. I would go with 15yr mortgages only and try to keep your monthly mortgage bill well below $3000.

They key to wealth acccumulation is controlling your expenses - live frugally, avoid the country-club crowd, avoid the luxury cars, the Phillipe Pateks and other ostentatious displays of wealth.

**Ima saver** · 05-11-2006, 01:00 PM

Re: Financial Surplus...

Phillipe Pateks??

**lucasrd** · 05-11-2006, 02:10 PM

Re: Financial Surplus...

I don't know what to tell you...here's my current budget:

INCOME (after taxes, 401K contributions & medical, dental, life insurance, long-term disability, etc decuctions)
Me: $2900/mo
My side-business: $1800/mo
Wife: $4500/mo

EXPENSES:
RENT $525.00
STORAGE $50.00
PHONE/Internet/TV $100.00
CELL PHONE $85.00
ELECTRICITY $48.00
CAR INSURANCE $131.00
STUDENT LOANS $270.00
FOOD $250.00
GAS $250.00
CAR PAYMENT $204.00
LAND PAYMENT $314.00
Total Expenses $2,227.00

SURPLUS: $6973.00

**pyotr** · 05-12-2006, 09:43 AM

Re: Financial Surplus...

lucasrd,
My gut feeling is you're not with-holding enough in your paycheck for taxes, but I couldn't know your situation so whatever your accountant says (what about your quarterly taxes for your side biz?) When I started out I paid off my debts as soon as I could before I went into investing. It felt very disruptive to my sense of well-being to go into investing when my debts + interest were cutting into my net yields. I had large debts so this took a while, but after all my car, consumer loan, and student loan debts were gone, it felt like a humongous weight was off my back and I could really go all out with savings and investing. I know others prefer living in a more complicated financial situation. Student loans are deductible if your income is below a certain level but you're still paying net interest, not receiving money - again your accountant would advise you here too.

Ima, I didn't think you'd be such a stickler - patek philippe then.

Financial Surplus...