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My son just got married ...
Old 11-08-2007, 07:48 PM   #1
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My son just got married ...

and he and his wife got about 45k in wedding presents. They asked advice about what to do with their money. They both earn a nice income, my DIL has regularly been saving for retirement (she's 30) and my son (age35) who just started earning some real $ is starting to put away for retirement.
Given the craziness of the market now should they:
1. Put 45k to their 6.25% mortgage
2. Put it into some short term CD's and see if the market settles down
3. Put it into the market now.
If into the market, the bulk of it would be in taxable accounts.
Your thoughts will be appreciated.
Larry
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Old 11-08-2007, 07:58 PM   #2
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and he and his wife got about 45k in wedding presents.
Your thoughts will be appreciated.
Larry
Get an annulment and then have another wedding?

Ha
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Old 11-08-2007, 08:04 PM   #3
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I vote for the mortgage. But then I'm used to mortgage interest on a principal residence not being tax deductible.....

Heck, I still vote for the mortgage. Own your home sooner.....
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Old 11-08-2007, 08:12 PM   #4
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All of the above.
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Old 11-08-2007, 08:24 PM   #5
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I think the mortgage payment would be so cool. A little payment early in a mortgage shortens it remarkably!! What a great gift for newlyweds.
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Old 11-08-2007, 08:34 PM   #6
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45k

I'm all for paying bills (such as a mortgage), but if they have credit card debt with high interest rates, that should be paid first.

If no credit card debt, I think they should put the money in short term CDs and learn the ropes of investing. They're just starting out...they shouldn't be in a hurry.
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Old 11-08-2007, 09:28 PM   #7
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I'd say an emergency fund with part of it---maybe 15K or 20k, which could be in the form of relatively short-term CD's. 6 or 9 months, no longer than 1 year.

Then pay off any credit card debts costing them interest.

Since they are newlywed, take at least some of it for real presents to themselves---maybe $5k for splurge.

If they want to get some practice investing, learning the ropes there if they need to, take maybe $10 or $15 for a small account to learn with.

If there is still some left, put it toward the mortgage.
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Old 11-08-2007, 10:56 PM   #8
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Congratulations on your son's marriage!

Some good ideas already put forth by others, so apologies if I duplicate any.

- Establish the emergency fund if the couple doesn't already have the cash to establish one. They should base the fund on at least 3 mo of base expenses according their budget although 6 mo would be much better.

- Pay off any high rate credit card balances - then ditch the credit cards if they haven't already!

- Consider paying down the mortgage if they plan to stay in the house a while. If they are subject to company transfer and will move frequently they may not want to invest so much into home equity.

- If they have an emergency fund, have paid off the credit cards, and decide not to pay down the mortgage, then have them put the money into six month Treasury notes thru the Treasury Direct program if they live in a state with income tax. If their state has no income tax a CD from an FDIC insured bank will be fine.

- I would avoid putting new money into the market right now. They will have plenty of opportunities to buy funds on sale during the next several years.

In any event, they have a great problem of figuring out what to do with $45K!

Good luck to them - RJS
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Old 11-08-2007, 11:14 PM   #9
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$45K for a wedding present! Wow! What are they, mobbed up? Cash envelopes in a pillow case. I got like $500 bucks and a bunch of kitchenware from my wedding.

Anywways, for my investment advice.....drum roll please....

Buy gold and silver. Dollars are worthless nowadays.

Take it to the bank.
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Old 11-08-2007, 11:52 PM   #10
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I would first pay off all credit card debts if any, then establish an emergency fund (especially important since we seem to be heading towards challenging times economically speaking) and then if there is something left, pay down the mortgage.
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Old 11-09-2007, 07:35 AM   #11
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I would not forego maxing out retirement plan contributions for 2007 because when Jan 1, 2008 rolls around any unused room in contributions will disappear. It reads like both are working, so that means they should be putting $15,500 + $15,500 into 401k's and $4,000 plus $4,000 into Roth IRAs if eligible. That's $39,000 a year that could possibly go into retirement plans. They may need to contribute almost 100% of their remaining paychecks in 2007 to get to this point.

Whether they put their 401k and Roth contributions into a CD, short term bonds or the market will depend on their chosen asset allocation and written investment policy statement and not on what some parent or random message board posters write.

If they can't max retirement plans, then I would suggest using the money to max the plans in 2008. Put it in a money market until 2008 then get it going into Roths and 401ks then.

Then credit card debt, then emergency fund. Forget about the mortgage.
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Old 11-09-2007, 07:49 AM   #12
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Pay consumer debts
Max out tax deferral opportunities
Stocks v. Mortgage: do a search and read the 200,000 posts here on that topic.

Problem for young people with putting a windfall into a mortgage or long term stock investments is that it feels like kissing your sister/brother. Whoopee! Got all this money! Put it in the mortgage or stock market and.... well... life's no different from how it was before. So I suggest setting aside $5K for a great vacation next year with the wedding money and investing $40Kfor a 20 year horizon.
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Old 11-09-2007, 08:15 AM   #13
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How much did the wedding cost?

Audrey
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Old 11-09-2007, 08:50 AM   #14
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Get an annulment and then have another wedding? -Ha
Ha you old romantic you!! That was GREAT! I wonder how many times you could get away with that?
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Old 11-09-2007, 09:33 AM   #15
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If they are paying PMI on the mortgage, consider raising the equity stake in the mortgage to eliminate that expense - but do the math. Beyond that, follow Rich's advice and search for the many threads on paying down the mortgage.

And keep an emergency fund - that can save a lot of money as it can help keep you from making bad decisions, or missing an opportunity due to lack of available cash.
-ERD50
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Old 11-09-2007, 12:05 PM   #16
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45K!!!!!!!

I think the DW and I need to tie the knot again. And again. And again.
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Old 11-09-2007, 12:16 PM   #17
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Problem for young people with putting a windfall into a mortgage or long term stock investments is that it feels like kissing your sister/brother. Whoopee! Got all this money! Put it in the mortgage or stock market and.... well... life's no different from how it was before.
Never quite thought of sibling-kissing like that before...
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Old 11-09-2007, 06:32 PM   #18
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I would first pay off all credit card debts if any, then establish an emergency fund (especially important since we seem to be heading towards challenging times economically speaking) and then if there is something left, pay down the mortgage.
This option would get my vote, but I agree that they should use a bit of it for something like a vacation or special purchase -- probably no more than 10% or so.

What a great start! Hope they have a long, happy life together!!
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Old 11-09-2007, 09:35 PM   #19
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Thank you for all of your replies including those from the ER comedians. The practical suggestions given will prove to be a good framework to begin discussion.
I did not pay for the wedding as the brides parents took care of that, so I do not know the exact cost of the wedding but while not cheap they got a great deal from the caterers because this it was the last Saturday night the catering hall had available for 07'. There were 150 people at the affair. I guess they have generous friends and family - I and the DW are fortunate enough to have been able to give them a sizeable present.
Thanks again
Larry
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Old 11-10-2007, 05:03 AM   #20
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Assuming no consumer debt, my recommendation would be to put half on the mortgage and DCA the other half into the market over the next 12 months.


Ah, better idea. Go to Vegas, bet it all on black. If they win, they can put 45k on the mortgage AND invest 45k
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