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Old 08-09-2015, 11:16 PM   #1
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I need it all...

Howdy,

New to this site. I know absolutely nothing about anything and would love to get into the grind and learn anything I can.

I'll try to give some details about myself.

I'm in my early 30's, married. My wife is around the same age as me. We have a baby girl on the way due end of November.

My income is around 54k/year and my wife's income is around 45k-ish
We rent - about 1k per month.
I own my car, fully paid off.
My wife has a car, fully paid off.

I have about 30k in my savings. I have about 3k in my checking that I just leave in there for just in case money. Nothing in a 401k or Roth or anything else. I think my wife has about 10 or 12k in her 401k from work.

My wife has some debt. i'd say about 10 to 13k between medical bills, credit card debt from college and student loans.

I think i'm about to lose my job in the next month but I should be able to collect unemployment and I think I'll get a package. Basically 9 weeks of pay and then unemployment after that.

I only save about 200 dollars per week. this goes directly into my savings (automated)

So hopefully the above info is enough to get me started. again, I think i'll be losing my job in a month so that's a 54k a year pay cut.

I don't know what the next steps are. Should I take what we have in our savings and pay off all of our debt? Should I get into investing? Should I start a Roth IRA? I don't know what the heck to do.
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Old 08-10-2015, 02:16 AM   #2
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Hi. I think you should:

1. Find a new job.
2. Make a monthly budget.
3. Ensure the baby comes home safely.

You guys made 100k a year, have low housing and transportation expenses, and somehow have no savings. You're spending it all somewhere. Was it fun?

It's time to get serious about understanding your cashflow, first. The good news is you guys have little debt and historically good income. You can do great, but you need to get more analytical about your outflow first, so you have enough info to figure out what actions to take.

I think you should not start thinking about the other ideas you listed until you've accomplished all of the above.
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Old 08-10-2015, 06:21 AM   #3
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Hi. I think you should:

1. Find a new job.
2. Make a monthly budget.
3. Ensure the baby comes home safely.

You guys made 100k a year, have low housing and transportation expenses, and somehow have no savings. You're spending it all somewhere. Was it fun?

It's time to get serious about understanding your cashflow, first. The good news is you guys have little debt and historically good income. You can do great, but you need to get more analytical about your outflow first, so you have enough info to figure out what actions to take.

I think you should not start thinking about the other ideas you listed until you've accomplished all of the above.
Much appreciated for the feedback.

I agree, we are spending it all somewhere. I know my wife makes payments on her debt each month so thats's where a good chunk of her money goes. As for me, I don't have a buffer. I don't go crazy with spending, but the more I read what I wrote, I think I do........ Hmmmm.

I at least want to stick out this job until I'm let go so I can get my package if that really does happen and have that unemployment come in case it takes me a bit to find a job....

I think having a monthly budget is important. I read online this envelope method. You allocate all your money into envelopes so you have nothing left in the end. Every bit of the paycheck goes into an envelope so there is no unnecessary spending. You have envelopes for your car, gas, food, fun, bills, savings, etc. I don't think I'm going to go to that extreme putting cash in envelopes but I'll use the idea of that to budget.

Kind of depressing. I will say this. We did live in NYC up until December. Everything is expensive in NYC.
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Old 08-10-2015, 06:28 AM   #4
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You should start looking for a job now and not wait for it to hit. 9 weeks of pay isn't enough to cover the risk of taking months to find a job since unemployment typically has a short waiting period and then only covers a portion of your prior income. You also want to make sure that you are being proactive instead of reactionary. On top of that, it takes weeks to gear up a job search and go through the interview process - probably likely the layoff would happen before you even got an offer. What's the worst that could happen? You land a better, more secure job before getting laid off?

I also say skip the envelopes - go get a program like Quicken or look into YNAB to start tracking all of your expenses correctly.
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Old 08-10-2015, 06:55 AM   #5
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I also say skip the envelopes - go get a program like Quicken or look into YNAB to start tracking all of your expenses correctly.
I agree with this. If the idea of the envelope method resonates with you, try YNAB. It is a great tool (my DW and I use it) and follows the principles of the envelope method. Visit Personal Budget Software - Finance Software for Windows & Mac where they have a description of their methodology, and videos/resources to show you how it works. Check it out to see if it's right for you.

Good luck!
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Old 08-10-2015, 03:41 PM   #6
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Welcome to the forum!

Agreed that you need to find out where the money is going. It doesn't really matter what method you use, whether it's envelopes, Quicken, YNAB, spreadsheet, or just a paper notebook. What does matter is that you identify where the money is going. Many years ago DW and I used a notebook for a few months to record every. single. penny. Although somewhat tedious it was eye-opening. This information then allows you to make informed decisions about what is important and what isn't.

And you're then well on your way to having a budget and a plan.
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Old 08-10-2015, 03:51 PM   #7
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Well, I do know where the money is going. Random little things. An iced tea here, a movie here, going to the drive-in here and there. All these little things add up. That's from my side. My wife on the other hand is throwing money at her debt on a monthly basis. So that's where her money goes.

First question - in my initial post, I said my wife has debt and mentioned I have some savings. Should we just clear out all of this debt right away. Doing so will take a big hit on the savings we have and the whole thing where I'm going to lose my job doesn't help if we do decide to pay it all off.

Second question - Let's say I get our spend situated. Then what? Just throw every single bit into our savings account?

There are so different roads to take I feel like my head is going to explode sometimes.

I also have about 10 grand in collectibles that I've been collecting over the years. Nintendo memorabilia. Electronics, etc. A lot of this stuff is rare and sells for a pretty penny. I really like these possessions but wondering if I should just sell them off and put that money in the savings.... :/
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Old 08-10-2015, 04:04 PM   #8
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...

First question - in my initial post, I said my wife has debt and mentioned I have some savings. Should we just clear out all of this debt right away. Doing so will take a big hit on the savings we have and the whole thing where I'm going to lose my job doesn't help if we do decide to pay it all off.

... :/
You are in a weird situation in that between the potential job loss and the baby-2-b, you probably should focus on building your cash reserves. I'd likely wait until you are sufficiently cash-rich to weather those changes before focusing too much on paying down debts.

In our house, the rule has always been DW's debts = My debts, and vice versa; with child on way, that probably is a good way for you to go, although opinions may differ on that..... First thing you need to do (simultaneously with getting a handle on your cashflow) is figure out your combined balance sheet. What are your consolidated assets and liabilities? How many debts does she have, and what are the terms/interest rate? How much do you have in combined rainy day funds?

Only by gathering these consolidated numbers and understanding your cash flows can you really plan.... {query--what changes to your inflow and outflows will arise from the baby? That can be big.}
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Old 08-10-2015, 04:14 PM   #9
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Originally Posted by DouglasFirs View Post
... t, I said my wife has debt and mentioned I have some savings. Should we just clear out all of this debt right away. Doing so will take a big hit on the savings we have and the whole thing where I'm going to lose my job doesn't help if we do decide to pay it all off. ....
Exactly. If you go to the store to buy food, they will want you to pay for it. They won't be impressed that you used all your savings to pay off your debt last month. Well, they may be impressed, but they will still want you to pay for your food!

You need some savings as a cash buffer. I'd STOP paying off that debt until your job situation is clearer.

What kind of interest rates on the debt are we talking about? Will your wife be able to work after the baby arrives? You need a long term plan.


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Old 08-10-2015, 04:31 PM   #10
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I'd likely wait until you are sufficiently cash-rich to weather those changes before focusing too much on paying down debts.
That would be what I would do too given the job instability right now. If you do lose the job you don't know how long it'll take to get another and in the meantime a large wad of cash is a good thing to have.

It gives you options that you won't have without it, like maybe holding out for a better job instead of being in a position of having to take the first one offered even if it has a two-hour commute or something equally bad.
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Old 08-10-2015, 05:26 PM   #11
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Time to really get to work
Not just cash but more importantly, invesent like your campania 401k compound your money. Your young enough to work it.....so, work it young man. Good luck!

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Old 08-10-2015, 05:42 PM   #12
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Time to really get to work
Not just cash but more importantly, invesent like your campania 401k compound your money. Your young enough to work it.....so, work it young man. Good luck!

Sent from my SM-N910T using Early Retirement Forum mobile app
Well, that's an entire other conversation. I know nothing about how a 401k, compounding my money, etc.

I have one book that I bought a few years ago. "I will teach you to be rich" - basically a book on what you should pay off first, etc, etc, etc. Not sure if there's other reading material about 401k, compounding accounts, etc. But I'm happy to listen to recommendations.

First thing first though, I'm going to sit down and really drill into our expenses. Not to throw another cup of gasoline on the fire, but we're looking to sell one of our old vehicles and get a new car/SUV since we have a baby on the way. We'll need it and safety is a big part of it too!
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Old 08-10-2015, 05:55 PM   #13
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$200/week is about 10% of your gross income, which is fantastic for anyone but everyone on this forum! Really, if you can up that to 15% in your early 30's you've got a shot at ER. Of course the more the better/earlier.

I agree with building up your cash reserves until the job situation is resolved. Especially don't pay down debt more than you need to. You can earmark it for retirement, but make sure it is accessible for emergency use. You could consider a Roth IRA since you can withdraw your contributions (but not growth) penalty and tax free if you need it. But cash in an online savings account making 1% is fine for a few months.

I essentially use the envelope method using Quicken. I have the asset accounts and I use liability accounts like groceries and mortgage payment. Each pay period I have Quicken automatically enter pay checks and budget amounts. The result is that Quicken reports a $0 net worth when it sums up all our accounts. Each time I record an expense it requires a liability category for the expense so that everything still sums to $0. The balance in each account is the remaining spendable amount, so it's easy to see what's available to spend. I ignore Quicken's budgeting feature. It doesn't really work with envelope-style accounts. It's easy enough to create net worth and spending reports, and the account balances are your best budget tracking tool anyway.

Once you make it through the job event, you'll want to look into investing your retirement savings into mostly equities and some bonds, using index mutual funds. You don't make anything in a savings account these days. Something like a Vanguard target retirement fund with a date that's far in the future is a very simple way to start. Plenty of info here about how to do that. That will get you started. You can move into something more complex as you learn, but that may or may not boost your returns.

Do you have any retirement account options available to you like a 401k?
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Old 08-10-2015, 06:27 PM   #14
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Many years ago DW and I used a notebook for a few months to record every. single. penny.
I still do that today and doubt that I'll ever stop. The data gathered by doing so lets you know precisely where the money is going, which, in turn, helps you understand where you might make some changes to reduce spending and boost savings. It also establishes the planning baseline for your retirement needs.

With big changes coming up in your life in the near future, I would save like crazy and build up cash in the bank. Pay on your debt as you must, but this is probably not the time use savings to to pay it off. Once you've gotten a new job and adjusted your lifestyle to accommodate the baby, then you can work on the best investments for the future, as well as making decisions about retiring your debts early.
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Old 08-10-2015, 06:53 PM   #15
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Sorry to hear about the potential job loss. That's the last thing you need with a baby on the way. I agree with others that now is the time to look for another job. No reason to wait until the layoff. By the time you find your next job, it will be about the time you expect the layoff anyway. So you want to ideally bank the entire severance and begin your next job the day after you leave your present employer.

And as for iced teas, brew them at home. You can't afford to be wasting money at coffee shops. Even now that I'm retired, I still refuse to waste money buying beverages at coffee shops. It's a ridiculous markup for something that takes minutes to make.
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Old 08-10-2015, 08:18 PM   #16
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Welcome to the Forum! This is a great place to get info, but despite the title of your thread, you don't need to worry about everything now. I echo what most people have said - build up your cash until the job situation is resolved. Don't pay down any more than absolutely necessary on debts and watch every penny you can right now. Consider all the ways you can save money.

And I also agree that now is the time to start looking for a new job. Any job search takes time, usually more than you expect, so try to get a head start on the process.

Once you get through this job transition and the baby's arrival, then you can start to worry more about investing. Most people here recommend a very simple approach, that isn't overwhelming, so when you get to that stage, there will be plenty of help here.

But for now worry about the immediate steps and don't feel overwhelmed.
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Old 08-10-2015, 09:50 PM   #17
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Welcome! May I please recommend that you do NOT rush out and buy a new car? Cars have a very bad habit of sinking people's finances into horrible places--think underwater for years with a loan.

Please share your plans for childcare post-baby. Is Your wife going to have a paid maternity leave? How will you cover daycare expense? How will your health insurance change? Do you have adequate life insurance held outside your job?

First step in gaining control is getting a budge together where each dollar is accounted for. YNAB is a program that can help you do that. I use a spreadsheet. The important thing is that you begin tracking where every dollar goes and assigning it a purpose. You might be shocked to find out how empowering it is to tell your money what to do for you. Post your numbers and we can tell you how things look. I recommend that you do not spend your cash cushion at this time. Hold onto the cash until your wife and child are home from the hospital.
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Old 08-11-2015, 04:17 PM   #18
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I have one book that I bought a few years ago. "I will teach you to be rich" - basically a book on what you should pay off first, etc, etc, etc. Not sure if there's other reading material about 401k, compounding accounts, etc. But I'm happy to listen to recommendations.
Frequently recommended books here are:

The Millionaire Teacher
The Four Pillars of Investing
How a Second Grader Beats Wall Street

The following are interesting in that they will help you understand WHY people do weird things with money. Sometimes this is a good motivator too because you'll see yourself in many of the stories they tell. And then you'll think, D'oh!

Predictably Irrational
Your Money and Your Brain
Why Smart People Make Big Money Mistakes

And if you really want to get into it deep,

Thinking, Fast and Slow It's a thick book but I found it fascinating, written by the only psychologist to win a Nobel prize in economics.
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Old 08-11-2015, 04:19 PM   #19
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Welcome to the forum. First, I would concentrate of finding a new job, if you really feel that your current job is in jeopardy. I would consider collecting unemployment as the worse case scenario.

Second, congratulates on realizing that you "know absolutely nothing about anything". When I was in my early thirties I was just beginning to realize I didn't know anywhere near as much as I once thought.

Sometimes, being forced to change jobs can be a blessing in disguise. Most/many people will stay in their current jobs just because "they have it locked in" and may never realize their full potential. (OTOH, others will job hop and are never satisfied) Be smart about any job moves (forced or not)

Example: I was in a similar position about 30 years ago. I was working for a mega corp and had never seriously considered leaving. I was making a very good salary and I thought the future at the company was bright and my job assured (locked in ). However, after more that 10 years with them, the company was forced to reduce it's workforce and initially offered a voluntary severance package. (Within 12 months, it became involuntary and almost everyone in my department was forced out) I "immediately" started to look for and found an equivalent position at another mega corp which I took. I left one job one day, took the voluntary severance package and began working at my new mega corp almost immediately.

Even though it was pretty much forced upon me, it turned out to be the best move I have ever made. I am absolutely certain by the time I retired a few years ago, I was making more than 3 times the amount that I would have been making if I had stayed the same length of time the first mega corp. YMMV

Think positive, hopefully you have developed some marketable skills and have some life and job experiences that can help you land an even better job.
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Old 08-11-2015, 06:24 PM   #20
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Pay yourself first. Decide a savings goal and then set it up that those savings come directly out of your and your wife's pay so you never see the money. If you never see it you can't spend it. IMO, at your age you should be saving at least 10%-15% of what you make together... so about $825-$1,250/month. Now keep in mind, that is the total between any 401k withholding you have from work, tIRAs, additions to savings, etc.

Once you have that done, increase your savings by 1/2 of any raises you receive and use the rest to improve your lifestyle.

Avoid credit card debt... pay off whatever you have. If you have the discipline to use credit cards and get the 2% rebates they offer and then pay them off every month then do so. If you don't have such discipline, then put your credit cards in a zip-lock bag of water and put them in your freezer.

Invest you savings in low-cost, no-load equity mutual funds or ETFs.

Get Quicken and set it up to track your assets, liabilities, income and expenses. While it will be laborious at first, to set it up, once you have it set up with automatic updates it is easy to maintain and will provide you some invaluable information. Use the budget tool in Quicken and the Lifetime Planner tool (retirement planning).

Buy a subscription to Money magazine and read it every month. Don't necessarily act on everything you read though, but you'll notice a number of underlying themes and learn.
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