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Old 01-28-2013, 11:12 AM   #1
Confused about dryer sheets
 
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Well I've been reading quite a bit of stuff in here since I discovered this place yesterday. Really have been enjoying it.

I'm 28 years old (29 this year). I'm very new to everything investing/money wise. In May of 2011 I was laid off from my job and discovered financially, was no where near living the way I should have been. I was desperate for a new job with benefits for my daughter. I took on one that paid around 60% less and ended up sending my fairly new pickup back to the bank that my loan was threw. I had bought a home in 2009 and was in constant talk with them on trying to figure something out that I could be doing. The only bill I was paying was my daughters child support and even went without power for a spell of time. The mortgage loan bank were not helping at all(even though they said they were working on it and were swamped) and out of no where I received a notice of foreclosure. This was a big surprise to me being as I was constantly calling/emailing them trying to get updates without any luck. We had been hit by a big hail storm a few months before I received the notice and had just received a check from the home insurance company to repair roof and a bunch of other things. I ended up using that check to escape being foreclosed. On top of all this I was in the middle of settling a visitation schedule threw the court system because I wasn't happy with being only able to see my daughter when it was convenient for her mother(and she didn't want it any other way). I had put most of the lawyer fees associated with this on a credit card. My girlfriend(same as now) and I were expecting and found out it had Anencephaly. This was not only a financially hard time in my life but also very emotional. We decided to carry out the pregnancy and had a stillborn boy. We received quite a bit of support and the funeral home didn't charge us for their services. I found a better paying job and by this point in time have begun studying personal finances, reading everything I could get my hands on and setting up a mint.com account. I knew the first step was to start paying off my debts. First I paid off the remainder of the pickup loan. Next I paid off the credit cards. I vowed to never use that credit card again(which they closed the account themselves beforehand). I still owe my lawyer money post credit card but she just charges me $100 a month with no interest. I forgot to mention at my previous job that I was laid off from they didn't match any 401k contributions and I didn't put a single penny in. The job I have now(the better paying job I mentioned) I started out contributing 5% last year(what they match), and raised it to 10% this year. The only debt I have is my mortgage loan( it is at 5.25% but with everything that happened my credit took a pretty good hit and can't refinance for awhile). My girlfriend and I are expecting again now and everything is healthy so far. We both have saved 5k in cash for our emergency fund. I have a money market saving account set-up threw Sallie Mae(1.05%). I was going to put the 10k in there but have recently come up with a new plan per reading up on it a bit. Here's my plan and let me know what you think. 5k into that Sallie Mae account and put 2.5k into a Roth IRA for her and another with same amount for me. The 5k for fast cash emergencies and if more is needed we can withdraw any Roth IRA contributions penalty and tax free. I also started a betterment.com account I haven't read of anyone talking about it on here so I'm not sure if it is well known about on here. They had a deal to put in $250 get a free $25 and I only have to put in $100 a month. They invest in ETFs and I only have to set my stocks to bonds allocation(they charge .35% for anything under 10k). I started this account basically just to invest into something(possibly my own business venture.. Who knows just wanted to have the money as an option for anything). It's currently set at a 65/35 allocation and have it set as a goal for 6 years and 10k but I could change that to be longer maybe. I just know I wanted to get it started. I am worried I have all this money spread out too much but I'm not sure.

That all might be a bit confusing to read, sorry. Writing off my phone. If anyone has any questions or advice feel free to ask and it's nice cyber meeting all of you!
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Old 01-29-2013, 07:15 AM   #2
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Sounds like you have worked really hard to dig out of some tough circumstances! Keep up the good work --

Welcome to the Forum --
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Old 01-29-2013, 08:50 AM   #3
Confused about dryer sheets
 
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Thanks MilitaryMan.
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Old 01-29-2013, 12:50 PM   #4
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Originally Posted by militaryman View Post
Sounds like you have worked really hard to dig out of some tough circumstances! Keep up the good work --

Welcome to the Forum --
I concur with militaryman that you deserve high praise for digging out of a big hole. Congratulations and keep up the good work!

I don't agree with some of your proposed investments, although I also don't see anything glaringly wrong with your ideas. Basically my take is that your financial situation is still too precarious to make the kind of immediate large commitment to retirement savings that your plan envisions. I hope you will get feedback from other forum members with different opinions, since it's certainly possible to make a case that there's no time like the present to start getting ready for retirement.

If I were you, I would continue making 401k contributions. Whether it's at the 5% level that you were using last year or the 10% level that you're using this year would depend on whether you can afford 10% and still pay your monthly bills with a healthy margin left over for emergencies.

I would forget about contributing to a Roth IRA for now. If I'm understanding your financial circumstances correctly, you have eliminated all of your debt except for what you owe your lawyer. It's nice that you are getting generous payment terms, but the fact remains that you are still in debt to your lawyer and need to make sure you will be able to pay it off. You don't give an estimate of your monthly expenses, but your emergency fund strikes me as completely inadequate for someone with monthly mortgage payments to make. In addition you are expecting a child (again, congratulations! and here's hoping everything goes well) with the increase in monthly expenses likely with another mouth to feed. Finally, your biggest handicap right now is a low credit score that is preventing you from refinancing your mortgage at a much more favorable interest rate. The only way to accomplish this will be to continue paying your bills on time and hope that your credit score rises fast enough to refinance while rates are still low. All in all, your circumstances suggest that you should continue funding your emergency fund rather than turning your attention elsewhere.

I had never heard of betterment.com until reading your post. As far as I can tell from a quick internet search, they are a legitimate company. However, I doubt that they are the best choice for you. As I understand it, their fees are on top of the ETF or mutual fund fees that you will have to pay regardless. I would put my money in Vanguard STAR fund (VGSTX) or something similar. It has only a $1,000 minimum and no obligation to make additional monthly investments.

Whatever you decide, good luck and best wishes to your family.
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Old 01-29-2013, 05:00 PM   #5
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Welcome to the forum, Jaime.
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Old 01-29-2013, 09:59 PM   #6
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Two things.


1) Hello and welcome!

2) Paragraph Breaks.

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Old 01-30-2013, 12:07 AM   #7
Confused about dryer sheets
 
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Karluk -- I appreciate your feedback! Exactly the reason why I decided to write my story on here. You gave me some things to think about for sure. I live in Nebraska and the cost of living isn't much. My budget(bills/food/entertainment/everything I spend goes into my budget) per month is about $2000, and I grossed about 50,000 before my 401k contributions in 2012. I do see your point about the emergency fund and I may raise my goal with that. Best thing you said was that my lawyer should still be considered debt and allotted for. It's been out of sight out of mind for me, and I need to plan for the worst with that. I looked up that Vanguard fund on Morningstar and liked what I saw with the allocations and fees associated with it. I know you didn't recommend a Roth for now but is it possible to open that fund with a Roth? I'm also a little worried now that starting an account with Betterment was a bad idea.

Obgyn65 -- Thank you.

ShortInSeattle -- Thanks. Typed all that with my phone, I'd still be typing if I added more paragraphs. On a tablet tonight so that's my next excuse!
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Old 01-30-2013, 01:53 AM   #8
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Jaime,
Welcome to the board, and congratulations on the progress to date. It sounds like you are headed in the right direction and have the right priorities, that puts you well ahead of many folks. I'd especially like to shake your hand regarding the continued payment of your child support despite some very tough economic challenges. That's a stand-up act that isn't as common as it should be.

Like karluk, I don't see anything glaringly wrong with your plan. I understand your plan with the Roth IRA, and I don't think it's a bad idea since, as you say, you can withdraw your >>contributions<< (not your earnings) at any time if you have an emergency. Having it in the Roth might even serve as a useful tool in setting the bar high concerning what constitutes an "emergency." Still, the $5K "fast cash" emergency fund might be a bit tight depending on your expenses for the two of you, another child on the way, and life's surprises (speaking of that--did ya fix the roof?).

Regarding the "Betterment" account: It's not the worst mistake you could make at this point, there are other "advisors" that would charge you a lot more and the ETF's they've picked out are solid ones that have low fees. But the Betterment.com fees (.15% to .35%) are something you really don't need to pay. You can do all of this yourself and have a better understanding of what is going on. The appropriate Vanguard Target Retirement Fund would have a similar mix of investments and be just as easy to "set and forget". Or, pay a few dollars for a good investment book (see the FAQ files here) and spend about two hours a year re-allocating your funds and optimizing things to reduce taxes and you'll save a bit more. It's not hard. But IF you'll be tempted to start trying to time the market, buy the latest "hot" stocks or sector ETFs etc, then just leave your money with Betterment and concentrate on the rest of your life, their fees will probably be a bargain compared to the costs of doing a lot of trading and timing.

Again, welcome.
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Old 01-30-2013, 09:25 AM   #9
Confused about dryer sheets
 
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No, haven't fixed the roof. Luckily my girlfriend's dad manages a roofing company. Had him look at it and said it wasn't too bad. So I've put it off for now or until the next hail storm haha.

I read quite a bit into investing daily so I wouldn't mind reading more books at all. I'll have to check out what's recommended. I have to wait for the sign up bonus to officially clear before I pull out(betterment) otherwise I'll have to pay 25% in taxes and wouldnt have made any money at all (not that I've made a whole lot at this point). I already have my 401k threw fidelity but like vanguard quite a bit. Brokerage wise I've read seems like a million articles reviewing them and they're always different.
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Old 01-30-2013, 10:34 AM   #10
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Either fix the roof or move. I do not think you have your priorities in order, although I admire the perseverence of anyone such as you that has adversity and can get up, dust themselves off, and get back into the effort. Good luck to you.
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Old 01-30-2013, 12:41 PM   #11
Confused about dryer sheets
 
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Either fix the roof or move. I do not think you have your priorities in order, although I admire the perseverence of anyone such as you that has adversity and can get up, dust themselves off, and get back into the effort. Good luck to you.
I don't see how moving is financially logical? If a professional says it doesn't need to be done right away then I also do not see a rush in it. I've since switched insurances due to a raise in price. The new insurance is aware of prior claim and will still cover the roof at it's current value.
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