Joined: 25 Feb 2016
Location: Rhode Island
30, New Career, Future Planning
First post here - trying to make sure I'm making good financial decision!
30 year old who has finally been working in a career for about a year. Before that I worked in retail management and was living mostly paycheck to paycheck.
My fiance and I take home roughly $1,000 a week a piece. We own a home with a mortgage no higher than our rent payments were - and it's likely a 'forever home' aka 'big enough to grow into.'
She pays the mortgage I pay the rest of our bills we split 'fun' stuff like dinners etc.- it leaves me with about $500 a week to do *something* with.
I've been putting $200/week into building an emergency fund that is currently $5500. $200 go into a savings account labeled "Capital Expenses" (currently at $1000)which I plan on using for home improvements, car down payments when needed, etc. and $100 goes into a 'Discretionary' Savings Account that I plan on just spending on anything I want (about $500 atm).
I currently have no investments/retirement plans.
So my question is basically whether my plan going forward is a sound one.
Once my emergency fund = 6 months of total household bills I will divert that money. $100/ week into an account so I can put the max amount in a ROTH IRA (which from doing research online I like the sound of the Vanguard 500 Index fund) every year. The other $100 can either be split 50/50 between Cap Ex and Discretionary OR I could keep an account for other specific goals (down payment on a boat or something).
In June I can open a 401K through my employer - they only match 25% on first 4% of income, but it's better than nothing - so I can put 4% into that without really noticing. So 401K will be able to open in June and ROTH IRA around this time next year.
*She is roughly in the same position, other than having no 401k option at work and already having a ROTH IRA at around $40k. My Emergency Fund and Capital Expense Savings account covers both of us - she just pays the mortgage, puts money in her ROTH, and has her own Discretionary Savings Account.*
I have no particular goals in mind - just to continue to be comfortable into retirement, which we are more than comfortable now.
Does this seem reasonable? Am I saving enough and for the right things? I think I gave enough information, but if you need more please let me know.
I appreciate any feedback.
EDIT: We have no student loans, credit card debt or anything either.
Thu Feb 25, 2016 5:18 pm
oldguy Senior Member
Cash: $ 715.00
Joined: 21 May 2006
quote: I've been putting $200/week into building an emergency fund that is currently $5500. $200 go into a savings account labeled "Capital Expenses" (currently at $1000)which I plan on using for home improvements, car down payments when needed, etc. and $100 goes into a 'Discretionary' Savings Account that I plan on just spending on anything I want (about $500 atm).
I currently have no investments/retirement plans. I have no particular goals in mind - just to continue to be comfortable into retirement, which we are more than comfortable now.
Does this seem reasonable? Am I saving enough and for the right things?
Yes, you're saving enough. But IMO you should quit saving and start investing. Most of the accounts that you have labeled as "savings" are actually "assigned spending" (car DP, home improvements).
Say that the two of you can save/invest $10,000/yr. If you put it in savings for 30 yrs you will have $300,000. Conversely, if you put $10,000/y into an 11%/y fund, it will be $2,200,000. (the power of compounding pretty awesome - and the time to use it is when you are young.) I'm pretty sure that you won't want to retire on only $300k.
We seldom let our EF get above $5000, we invested anything over that. The SP500 accounts totaled over a million when we retired. Remember, 401 $ is your money too - even tho it the tax/penalty to tap it is huge. I would max the 401k ($18,000) - the match is nice but no need to let it be a limit - my 401k had no match - and it still grew to almost a million.
But the main thing is to get your money working in 11%/y accounts - doesn't matter what accounts you keep it in - roth, taxable, 401 - $2.2M is still $2.2M.
Thu Feb 25, 2016 6:07 pm
Cash: $ 3.90
Joined: 28 Jan 2016
Location: South Carolina
Oldguy has the right of it, as usual, but I'm a little more invest happy. The emergency fund should be 3-6 months of living expenses. WIth a 2 income family 3 months is more than enough. You might be able to justify less if you are working a very stable and safe job.
You should be investing 15-20% of your income as saving for retirement, more if you'd like to retire early. While my wife was working, we lived on my income and banked all of hers (plus about 15% of mine). Since your just getting started you might want to look into Weathfront or Betterment who are the leading robo-advisors. I believe Wealthfront has a $500 minimum with no fees until you reach $10k. Betterment charges 0.35% annually provided you set up and auto-deposit of at least $100/month, but they make up for the higher inial charge with lower rates once you invest over $100k. You might also want to look into the Personal Capital app to help you keep track of net-worth. I love logging in daily to see my numbers ticking up.