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frigidfire86 posted 9/8/2013 14:55 PM

My H is in the military and makes about $4,000 a month. I am a college student using his GI Bill, but I do have a small student loan from a few years ago (he also has one). The only other debt we have is our house, which is currently being rented out since we're overseas. I've read a ton of articles online and talked to a couple financial advisors, but I've gotten different advice. We have about $13,000 in savings for emergencies. Is that enough? Should we have more? We have mutual funds we contribute $700 a month ($350 to his, $350 to mine). Is that enough or should we up it? We have a youth savings account for our daughter too. It isn't much and we only put $25 a month into it, but it's something. I don't know if we could give more to her account or if we should put more in our mutual funds/savings account. What about student loans? They aren't big ($3000 and $1000). Should we just pay them off or keep up with the $50/month payment for each? I guess mine is deferred again since I'm in school, so we're really only making one $50 payment instead of two right now. I have a credit card with a small limit that I haven't used in years. My H doesn't have one at all anymore. Is it good or bad thing to not have one or never use it?

Sorry about all the questions. We aren't the two smartest people when it comes to finances.

ETA: Currently our bills are, at most, $2500 a month. I'd have to sit and do the math to know the exact number though. Oh, and our rental income is $750 a month ($85 after our mortgage is paid). I'm not really sure what we're supposed to do with that money either.

[This message edited by frigidfire86 at 3:00 PM, September 8th (Sunday)]

Lucky2HaveMe posted 9/8/2013 15:47 PM

Everyone's finances are different and personal. What may be good for one doesn't fit with another. My best advice is get yourself a financial planner. Make sure they are certified (CFP). They will look at your entire financial health, goals, etc and make recommendations based on your comfort level (conservative investing, moderate, risky).

The best thing we did when our first son was born was to hook up with our CFP. She helped us save for college, retirement, disability, etc.

[This message edited by Lucky2HaveMe at 3:48 PM, September 8th (Sunday)]

Dreamboat posted 9/8/2013 16:15 PM

Based upon Suze Orman's advice, you should have 8-10 months saved as an emergency fund so that you can cover your bills if you are out of work.

As far as the student loans, it depends upon how much interest is being charged. If it is less than 3% then pay the minimum because that is an excellent rate. If it is more than 5-6% then try to pay of as much as you can each month to avoid paying extra interest.

thewife0404 posted 9/8/2013 16:37 PM

Like someone said earlier everyone's situation is different. I see that you are a military family and that is in itself a special category. I would recommend that you become a USAA member if not already...they provide multiple layers of financial management (much of which is FREE)and they specialize in the military. Just from what you have posted I would say you are well on your way...keeping your debt low is always smart. Because if the interest rate today, I would say pay the student loan off(one not in deferment) and put what you were paying monthly back into your savings. That will save you a few hundred/yr. I also think its great that your are teaching your 6yr old about money already. I would not put more into her account...your first priority should be preparing for your retirement. Please call USAA, they are awesome!

jrc1963 posted 9/8/2013 16:40 PM

I don't have any specific advice, but I wanted to say you are doing an awesome job just thinking about money already.

Dark Inertia posted 9/8/2013 17:13 PM

OK... I think I am a little confused about your numbers. Is the $2500 after your mortgage, rent, and utilities are paid? Does this include groceries, gas and misc? $13,000 is a good amount to have as an emergency fund, but in your situation it is short. At a minimum the experts recommend that you put 6 months worth of savings into emergency savings, so if your bills are about $2500 a month then you are short about 2k (calculator says you should have $1500).

Assuming that $2500 covers ALL of your expenses (groceries, rent, mortgage, insurance, gas, etc) then you should have at least $1500 worth of disposable income. I would throw that money into some sort of savings or investments, whichever you think is a priority.

I am a bit of a savings nut. We have a savings fund for emergencies, and then we have a savings fund for fun stuff, a savings fund for short term things, etc. The type of bank account that we have allows us to put money into a traditional savings account, and then a nontraditional "reserve" account. In that reserve account I can go online and allot any amount to whatever I want. For example, this summer in my reserve I had a Wishlist for new bicycles, and then a reserve for my fiance's dental bill that we are having to take care of in the future.

If you have the ability to use credit cards in a careful manner, then I would encourage a cash back card. I have a cash back card, and have already earned over $150 worth of cash back for normal, everyday expenditures from this year alone. My SO's travels card has $200 worth of miles on it that do not expire. But we PAY IN FULL every month. The rewards are not worth it if one is carrying a balance.

Your student loans they are very small. I would be inclined to pay them off, but that is just me.

When it comes to your daughter have you looked into a 529? I believe that is still the best they have to offer in terms of saving for education, but I would double check on that. I think a 529 is worth looking into, and I would definitely contribute more than $25 if you are able to.

I second USAA. Great company, but their credit cards are meh. There are better card offers. They have a pretty good website, too, I think you can create your own budget on their site.

I would also look into HSA's if you have a high deductible insurance plan. A lot of company's will put money into your HSA if you open one up. For example, when I started my HSA I started with only $50 (pretaxed dollars). When I set it up with my job they deposited $500 into my account, and they do that every year!! So basically, they give me $500 a year just to have a health savings account. Companies vary, some may give less, some more, some none at all, that was just my job's policy.

Originally my intention was to use my HSA to cover those nasty, unexpected medical expenditures that sometimes pop up, but after doing research online I see that a LOT of people use it as just a vehicle for a way to invest pre taxed dollars. Fortunately I do not have a lot of medical issues, and shouldn't have to use it... but I would definitely look into an HSA.

Hope that helps!

[This message edited by Dark Inertia at 5:28 PM, September 8th (Sunday)]

thewife0404 posted 9/8/2013 18:52 PM

Dark...the military does not have healthcare cost while on active duty, so no HSA. They have very unique financial needs.

circe posted 9/8/2013 19:25 PM

Great advice so far, so all I'd have to add to it is save more than you think you need for your daughter - the college savings accounts are good, and some of them allow you to cover other life choices instead.

Dark Inertia posted 9/8/2013 19:36 PM

Dark...the military does not have healthcare cost while on active duty, so no HSA. They have very unique financial needs.

Yeah, it occurred to me after I edited, but I thought it is good info to have for beyond military life. :)

[This message edited by Dark Inertia at 7:37 PM, September 8th (Sunday)]

sad12008 posted 9/8/2013 21:24 PM

Seconding the "get with USAA" recommendation. Seriously...if by some freak chance you aren't with them, I can tell you unequivocally that we've had nothing but outstanding experiences as USAA members and I was an idiot not to join the first opportunity I had. We've had to file claims, done all manner of banking with them, and insure through them...rates are great and service is stellar. I have been blown away by how well we have been treated as customers.

No kickbacks were received for that endorsement.... however, they will save you money. In addition, they offer financial check-ups and all kinds of other financial advising. Hopefully you already know this.

I'd definitely pay off the H's student loan...there's no way you're going to get a return higher than what he's likely paying in interest.

frigidfire86 posted 9/9/2013 01:11 AM

Our goals would be to retire as early as we can, buy some land after H retires from the military, travel Europe as much as humanly possible, and put our daughter through that order.

We already use USAA for almost everything. I've talked to their financial planners several times, but I've been frustrated each time. Although they've told us how much we should have in our emergency fund (and I've gotten different numbers each time), every time I've talked to them they constantly try to sell us life insurance. We don't need it. We each already have two policies, which I've told them, and they still push us to get more. And then I get the "why aren't you using USAA for homeowners insurance" questions. Well, because it costs more through USAA and we got a better rate elsewhere. Again, they push to have us switch to them. Everything else about USAA I love, but not the financial planning that I've only had irritating experiences with.

To make it easier, I'll break it down.

- Monthly Income: $4000
- Monthly Bills (house, life & auto insurance, food, gas, phones, internet, student loans): $2500
- Monthly Allotment For Mutual Funds: $700
- Monthly Savings Allotment: $50
- Daughter's Monthly Savings: $25

That leaves $725/month for random expenses and travel. We travel A LOT now that we're in Europe, but we don't spend $725 a month to do it. I know we could do something with the extra, I just don't know which area to apply it toward.

I like being able to save for our daughter, but it's not the most important thing on my list. Plus, she'll have part of my H's GI Bill she can use and the few thousand we've already saved for her.

My H has brought up, several times, paying more on our house. I don't know if that's a good idea or not. Although paying down that loan would be nice, we're planning on selling it after we're back in the states and the mortgage is currently being paid by renters, so I don't see the point. Would you pay extra toward the principle?

I think we'll pay off his student loan and use that $50 for....what exactly? Retirement? Savings?

Thanks for the advice thus far.

[This message edited by frigidfire86 at 1:16 AM, September 9th (Monday)]

Dark Inertia posted 9/9/2013 13:08 PM

As someone who use to work for USAA, I can attest that the people on the phones are required to, at a bare minimum, refer a product. They have some good products, and some meh products. It is not across the board good the way it is use to be. It is still one of the best companies to be involved with. You are going to get a different set of opinions to anyone that you talk to on how much to have in savings. The general rule of thumb is at least six months, but really it is what you feel you are comfortable with. I personally feel comfortable with three months, but that is me. I would also consider your daughter's education low priority compared to whatever other savings you have. If you goal is to retire early then I would put as much as possible into savings and investments. Generally you want a healthy portfolio of all kinds of things: stocks, bonds, CDs, savings accounts, etc. The idea is to diversify your money, and invest in something that will help make you more (as opposed to sitting in a savings account with a measly .001% interest).

[This message edited by Dark Inertia at 1:17 PM, September 9th (Monday)]

sisoon posted 9/10/2013 23:02 PM

Life insurance is critical for you, especially because your child is so young, so USAA may not be overselling.

If either of you were to die suddenly (sorry, but you have to consider awful things with a young child), the insurance needs to be enough to throw off enough income to make up any shortfall in your household income.

$500K may sound like a lot of insurance, but right now you'd be lucky to get $20K in annual income from a $500K nest egg. If that's less than you need from insurance, you probably need more insurance.

Since you're in college, why not take some economics? It's bull as science, but it sounds like you'd get some useful knowledge from a basic course or 2.

homewrecked2011 posted 9/10/2013 23:37 PM

There is an excellent book -- How to Get out of debt, stay out of debt, and live prosperously by Gerald Mundis. The reason I like this book is the living prosperously 1/2 of the book.

His book goes right along with debtor's anon whose theory is to pay off your debt gradually as you increase your savings so that you don't have to debt.

I think it might answer alot of your questions...

Also, it is wonderful that you handle your finances so well...My inlaws retired at 48 because they saved and saved and saved....

Another book, Debt- Proof Living by Mary Hunt is very good also.

Also, if you don't want to use your credit card, but you want to show good credit, I got a secured card at the bank. I gave them 600, and the activity is reported monthly. I'm not in debt, because it's secured.

stronger08 posted 9/11/2013 01:57 AM

I worked in finance for 32 years prior to retiring a year ago. I don't know if that makes me an expert but I'll give it a shot. First off you need to keep in mind that you and your H are very young. That's a good thing yet you need to look ahead at the big picture. You mention that you contribute monthly to a M/F. But the type of fund your invested in can have far reaching pain/gain down the line. Its only natural to want some sort of security as far as your invested money is concerned. But at your young age you need to be invested in an aggressive capital appreciation fund. The risk is higher and so is the reward. At the very minimum you should be seeing double digit returns from your fund these days. If your not I would reevaluate your investments. When I was your age I was 100% invested in stocks as they historically pay a higher rate of return. At 35 I started to diversify. The formula I used was to decrease my risk every 5 years accordingly. So at 35 years old I took 25% of my savings and moved it into a secure fund. At 40 I moved another 5% at 45 another 5% etc. I'm now 51 and have a portfolio of 60% equities and 40% bonds. You get the picture.

Also its good to remember that your money needs to work for you. Not you working for your money. In that I mean you just have to look at the numbers. If you have debt that you pay a low interest rate on I'd pay the minimum if my investments were paying me more. IE if I'm paying 5% interest on my debt but am getting a 10% percent rate of return on my investments. I'd pay the minimum on the debt at 5% and put more money into my investments paying me 10%. Therefore netting me a positive return of 5% on that cash. Compound that annually and over the years it adds up to some big bucks. I'm also of the school of 50% of your expenses in savings. This should get you by in case of loss of income. Also at your age life insurance is a good idea as the costs are low as long as your in good health. Finance is fairly easy. All you have to do is the math. You put money where it benefits you more. Naturally you need to revisit your objectives as your financial conditions change. If you have more, save more. If you have less reconsider where your putting your money. As I said just do the math and its pretty easy.

frigidfire86 posted 9/11/2013 08:17 AM

Life insurance is not something I am worried about. I have $1.1 million for myself and my H has $1.5 million, that is including life insurance through the Army and policies we have separately. I'm pretty sure it's enough, although if I'm wrong please let me know.

I took economics my first year in college and hated it. I struggled through it and my non-English speaking professor didn't help much. I have zero desire to do that class again.

I'll look into the books that were recommended.

High risk makes me so damn nervous. I hate the idea of losing what we've worked so hard to save, but I do understand that it makes sense to do high risk/high rewards at our age. How do I switch from mutual funds to something else? Just call USAA and have them do it? I know absolutely nothing about stocks, bonds, CDs, etc. Dumb it down for me amd explain what each are, how they differ, the risks, how much each have the potential to grow, and everything else you can think of please.

sisoon posted 9/11/2013 18:16 PM

Just some random thoughts....

Life insurance looks OK to me, since you'd have other resources if you needed them (military benefits, SSI).

I think you need to consider that life is high risk financially no matter what you do. At any unpredictable time, the assets you have may be depressed in value, and if that happens, you could be hurt. Right now, given the low interest rates, I don't think there's any safe investment - you can guarantee principal getting returned, but a dollar put into a CD today is very likely to be worth less in a year or 2 or 5 than it is today.

At the same time, your sitch s very good. Most families bringing in 4K/month live a lot closer to the financial edge, but you can save money now and save for retirement and travel. Besides, you've got a military safety net (unfortunately the net has big holes, but it's still a lot better than private industry at this point), and you've got an asset that's throwing off at least some cash, and it's probably appreciating in value, too.

That means you don't have to take as much risk as most people have to take to make sure you've got enough $ to support yourselves in the style you want.

BUT - you either have to choose a financial advisor and turn your finances over to him/her, or you have to learn enough to evaluate recommendations or DIY. It's a lot of math, and you don't sound confident, but it' not bio-physical research, and you CAN learn what you need to know. In fact, given the way you've laid this out, you may even enjoy the work of managing your finances.

Also, I wonder if you're not emphasizing saving for your daughter's education enough. If she's talented in academics, she could benefit from a hefty investment, as in an expensive school.

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