Spending Needlessly in Falls Church...

[PAW2011]

Hi, I am 35yrs old. My husband and I have two children. I am the breadwinner and the one who handles the family finances. I would like to retire within 30years (age 65). My husband works part-time and goes to school, to graduate in 2014. I have no credit cards. I have 60K in student loans (@ 3.25% interest) and a car loan of $300/month. I have 5K in a traditional IRA that I have not been contributing to. Other than my employer sponsored retirement plan, we have no stocks/bonds or investments of any kind. I have 2.5% with employer matching contributions in the plan. I make approximately 89K/yr; after taxes my monthly income is $4,200/month(!?-and still can't save! wow...). I own a property which I have contracted to sell within the next 3 years and am receiving payments from the buyer to cover all the costs associated with it. We are now renting. Our expenses are approximately $2900/month. Our goal is to buy a home within the next 9months. Our goal is to save $1K/month until then. We do not have an emergency fund and cannot seem to budget--we spend what we make. We have thought about starting a business and have thought about flipping homes. (I used to be a real estate agent and have also worked within the legal field.) I want to educate myself so that I can improve the financial health of my family. I am reading "The Millionaire Next Door" and know that I need to decrease my realized income and increase my unrealized income. How do we create a budget we can stick to(cash only)? How much should we be saving? Where should we start?

 

[Texas Proud]

Wow...

Well, I guess first off.... welcome...

I will let others answer you since you have a lot on your plate... I will only make a few comments.... take them or leave them...


First, I would NEVER leave a matching contribution sitting around... no matter what, I would figure out a way to put money into the 401(k) to get my matching.... if not, that is throwing good money down the toilet... heck, even if I had to put the money in and then borrow it.... I am ahead of the game...


Next... I would never get in the business of flipping houses without a lot of capital... you have to be able to hold onto a property for how ever long if you want to make money... I have watched a few flip shows and am amazed at the people who go in borrowing the money to flip and then having to keep lowering the price to get a quick sale... and today's market is not a place for quick sales...

Good luck...

 

[GregLee]

Our goal is to buy a home within the next 9months. Our goal is to save $1K/month until then.
... How do we create a budget we can stick to(cash only)? How much should we be saving? Where should we start?

Saving for the down payment and buying that house will partly solve your problem. Then you'll have mortgage payments as part of your month-to-month expenses, and in effect you'll be saving for your future, even if you never get around to budgeting.

My wife and I were never able to keep a real budget, and when we bought our first and only house in 1994, I thought of it as an enforced savings plan, since I had been unhappy that our saving had ground to a halt around 1990. It worked. There were some difficult times, but we got through them.

 

[PAW2011]

Wow...

First, I would NEVER leave a matching contribution sitting around... no matter what, I would figure out a way to put money into the 401(k) to get my matching.... if not, that is throwing good money down the toilet... heck, even if I had to put the money in and then borrow it.... I am ahead of the game...

Good luck...

From my first day at work I put in the max allowable, 2.5%. I agree: matching contributions is FREE MONEY. : ) I am looking into possibly putting more but I think that I should probably invest in stocks/bonds/mutual funds.

Is there a good place to research where to invest? I have heard of Vanguard Funds but I am not sure where to start.

 

[harley]

I would recommend the bogleheads forums as a great starting place for learning about investing. They have book recommendations and tons of threads about various types of investments. It's a good place to start.

The only recommendation I'm going to make is that you develop an emergency fund. If you're the breadwinner and y'all live month to month, spend a little time thinking about what would happen if you lost your job or got hurt and couldn't work for a while. I recommend one year's worth of necessary costs (food, rent, insurance, taxes, things like that), especially since you don't have any credit cards to fall back on. I know a number of people that have been out of work that long or longer. Also, figuring out your necessary costs will help you see which parts of your budget are required and which parts are optional. That might help you tighten down a little if you want to increase your saving rate. Good luck finding a reasonably priced home in Falls Church. One of the most expensive cities in the country. I say this as a former Arlingtonian.

 

[Texas Proud]

From my first day at work I put in the max allowable, 2.5%. I agree: matching contributions is FREE MONEY. : ) I am looking into possibly putting more but I think that I should probably invest in stocks/bonds/mutual funds.

Is there a good place to research where to invest? I have heard of Vanguard Funds but I am not sure where to start.

Guess I misread your post... it made it appear that you were not putting money in the 401(k)... good for you that you are...

I would assume that your plan allows you to invest in stock mutual funds... never heard of one that did not....

 

[serie1926]

PAW2011, welcome to the board.

Step #1 your husband goes to work fulltime. Step #2 enroll in FPU at your local church.

Real Debt Help - Get out of debt with Dave Ramsey's Total Money Makeover Plan - daveramsey.com

 

[lemming]

You say you are a real estate professional. You have a property that is under a lease purchase? Are you betting against the NOVA market that much?

That property is going to be a problem when you try to buy another personal residence. And Falls Church is spendy territory.