Late 20s new mom :)

[early_retirement_or_bust]

Hi everyone! I am a late 20s new mom who's engaged to be married. I just started back working, and did NOT taking saving seriously in my early 20s (I left sooo much money on the table that I could absolutely kick myself now). I started back work as a contractor for an automotive company to get serious about saving for the lifestyle I want. Realistically, I see I cannot retire young if I'm not putting in the necessary work now.

• My projected income: Over 50k (after I work for a year; just started in August).
• IRA (including rolling in a former 401k): $8,000
• Current 401k (through my current job): $600 (I contribute 10% weekly in pre-tax dollars)
• Simple IRA (from a former employer): $1,000
• Emergency Savings: $2,000
• Investments: $2,000
• Own a home outright (only paid $7,000 though...where the rest of my savings went; plan to make this an income property and save $ for my son).

^^ Pretty paltry, I know. And you guys are gonna really kick me when you see my "debt."

• Never had student loans (pretty book smart and earned a full scholarship)
• Car: $24,000 (and still own another car that I could sell for $4k-$5k...just wanted something newer/safer for me and my son)
• Credit Cards (collectively): $2,500
• Other small debts: $600 (maybe...likely way less)

That's it. My guy pays everything else. Sooo I should be saving a heck of a lot more! I am open to any sound advice. For one, I realize I need to consolidate some of my accounts and get an investment strategy going. I have been trying a lot of things to see what works because I feel a little lost, honestly.

Thanks for reading my spiel!

 

[howaldryan]

Welcome! I love a lot of Dave Ramsey's personal finance strategies which is where my opinion will come from.

For your income, the car is a huge part of your yearly salary. You can get a very reliable car for 10k or less. I think that car debt will hold you back from accomplishing your savings/ER/other financial goals.

I would try to boost your emergency fund closer to 3-6 months and knock that other debt out.

Other than that, being in my 20's as well, I am glad others are planning for the future so young.


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[rodi]

I think a lot of us (including myself) did not take saving seriously when we were young. While I contributed to my 401k - I had no savings (and some debt) in my 20's. I didn't get serious about saving until my 30s.

Welcome to the forum. We'll be happy to be your cheering squad as you start the path to FI.

 

[haha]

Hi everyone! I am a late 20s new mom who's engaged to be married.

Thanks for reading my spiel!

Congratulations on your baby and your marriage!

Ha

 

[Bamaman]

Congratulations on being in your 20's and having a desire to save. The best thing is that you have time as your ally.

I'm more of a believer in Suze Orman than Dave Ramsey. Save over the long term. Educate yourself on personal finance, and make good investment decisions. Take advantage of all matching 401K funds and invest all you can in Roth IRA's.

Always live below your means. If you can afford a new car, buy one that's used. If you can afford to buy a house, buy a much lesser house and fix it up.

But my best suggestion is to make sure your fiance has the same personal and financial goals that you do. It's a two person/income strategy that can get you to the point of early retirement. He must also do a mirror image of what you're doing.

Good luck on your future marriage.

 

[Katiek]

Welcome! The fact you're thinking about this puts you ahead of lots of people your age, so you're already doing better than you think.

I usually recommend this for pre-retirement,, but even at your age it will be helpful to really track your spending and see what you're spending on each category. See if you can identify careless spending that you can eliminate without really hurting your lifestyle. As already indicated, living below your means helps in lots of ways. Not only does it let you save more, but needing less to live on helps give you lots of options.

Try to increase your saving rate a little bit each year. Little steps are less painful.

You'll see a lot of people here are fans of low cost index funds for investing. Over the long term, fees add up and with a little research you'll find it's easy to manage your investments yourself. Be wary of investment advisers that sell complicated financial products that promise absolute security and top returns.

Lots of parents get caught up on spending for kids. It's natural to want to give them the best and make sure they have every opportunity. But some of the best things you can give them are examples of how to be financially responsible and the assurance that you can take care of yourself in the future.

Make sure you understand your fiance's spending and saving habits. If you have different approaches and he's more of a spender, make sure you independently pursue your financial goals and be active in your joint financial planning. Don't leave things to just one party in a marriage and then get hit by big surprises financially.

Stick around and you're like to learn a lot. Feel free to ask any questions you have - lots of helpful people here.

 

[early_retirement_or_bust]

Wow you guys are so insightful and non-judgmental. Thanks!

In hindsight, I should have bought a used version of my car. Luckily, I do have a zero percent interest rate.

My fiancé and I save separately and collectively. He invests way more than I do and also owns several properties. I'm trying now to work to get to where he is.

The reason I'm counting my income separately is that I feel I need to step my game up. And I don't want to rely on him for everything.

Also as far as my son's education: I am also saving to send him to specialized programs and good schools now (even as a toddler). I figure it'll pay off for him when it's time for college. I'd also like to start a very aggressive investment account for him as a baby to help him accumulate money in the long run. I don't feel it makes sense to try to save in a bank account or CD today's dollars for his college. Any suggestions are greatly appreciated here


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[2017ish]

Welcome, and congrats for starting to plan. Just one quick observation from your debt list:

...

• ... still own another car that I could sell for $4k-$5k...just wanted something newer/safer for me and my son)
• Credit Cards (collectively): $2,500
• Other small debts: $600 (maybe...likely way less)

...

Why not sell that other car (assuming it isn't appropriate for hauling the bambino around) and use the proceeds to erase all non-car debt? Plus, you remove the operating cost from your monthly expense.

[You've already bought the new car, so won't get into that.]

 

[early_retirement_or_bust]

Welcome, and congrats for starting to plan. Just one quick observation from your debt list:







Why not sell that other car (assuming it isn't appropriate for hauling the bambino around) and use the proceeds to erase all non-car debt? Plus, you remove the operating cost from your monthly expense.



[You've already bought the new car, so won't get into that.]

I thought about doing something nice and giving it to family. But I could do a lot with the extra $4k-$5k. ... I just can't decide.


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[Katiek]

For saving for your son's schooling, look into a 529 program. If your state's program isn't good, or doesn't have good investment options, you can consider another state's with better investment opportunity (although you may not get the same state tax break).

Glad that your future husband has good saving and financial habits. So much easier when people have a shared outlook on what they value.

 

[jIMOh]

Hi everyone! I am a late 20s new mom who's engaged to be married. I just started back working, and did NOT taking saving seriously in my early 20s (I left sooo much money on the table that I could absolutely kick myself now). I started back work as a contractor for an automotive company to get serious about saving for the lifestyle I want. Realistically, I see I cannot retire young if I'm not putting in the necessary work now.

• My projected income: Over 50k (after I work for a year; just started in August).
• IRA (including rolling in a former 401k): $8,000
• Current 401k (through my current job): $600 (I contribute 10% weekly in pre-tax dollars)
• Simple IRA (from a former employer): $1,000
• Emergency Savings: $2,000
• Investments: $2,000
• Own a home outright (only paid $7,000 though...where the rest of my savings went; plan to make this an income property and save $ for my son).

^^ Pretty paltry, I know. And you guys are gonna really kick me when you see my "debt."

• Never had student loans (pretty book smart and earned a full scholarship)
• Car: $24,000 (and still own another car that I could sell for $4k-$5k...just wanted something newer/safer for me and my son)
• Credit Cards (collectively): $2,500
• Other small debts: $600 (maybe...likely way less)

That's it. My guy pays everything else. Sooo I should be saving a heck of a lot more! I am open to any sound advice. For one, I realize I need to consolidate some of my accounts and get an investment strategy going. I have been trying a lot of things to see what works because I feel a little lost, honestly.

Thanks for reading my spiel!

Having your house paid off so young will make many more decisions going forward very efficient. I paid my house off at age 39 and envy you doing that 10 years younger. The peace of mind for you and your family is very valueable... turning it into an income source is also a different strategy which can help along the way.

Welcome

 

[early_retirement_or_bust]

For saving for your son's schooling, look into a 529 program. If your state's program isn't good, or doesn't have good investment options, you can consider another state's with better investment opportunity (although you may not get the same state tax break).

Glad that your future husband has good saving and financial habits. So much easier when people have a shared outlook on what they value.

I'm looking into this. I thought it was limited to only my state (which has a crappy plan). Thanks!


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[early_retirement_or_bust]

Having your house paid off so young will make many more decisions going forward very efficient. I paid my house off at age 39 and envy you doing that 10 years younger. The peace of mind for you and your family is very valueable... turning it into an income source is also a different strategy which can help along the way.



Welcome

Thanks! Still plan to buy a better home for my family, but buying easy-to-rent properties for now.


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[splitwdw]

I thought about doing something nice and giving it to family. But I could do a lot with the extra $4k-$5k. ... I just can't decide.


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This is an easy decision. Do not give this vehicle to a family member. You aren't in a position financially to do this. Get yourself out of debt and think about your child first.

 

[Walt34]

This is an easy decision. Do not give this vehicle to a family member. You aren't in a position financially to do this. Get yourself out of debt and think about your child first.

+1 on that.

Op, you're way ahead of the game even thinking about all this in your late 20's.

 

[38Chevy454]

Just being aware and making a small effort now is way ahead of most folks at your age.

As for the second car, I would agree good idea to sell that and pay off your non-car debts. Any leftover money you can use to start the 529 account for your son, so think of that as your helping a family member out!

Stick with the plan, good that your fiance has the similar financial sense as you. Given you are both younger, time is your best ally toward accumulating a nice savings and meeting your early retirement goals.

 

[Standard Staples]

I'm only a couple years older than you, and I also have a young son. I considered opening a 529 for him, but I saw a lot of drawbacks:

1) Performance. Based on my research, most 529 plans do not perform well. Compared to the broader market, I didn't see matching or better growth.
2) Fees. Many 529 plans have fees that eat away at the already underserved growth.
3) Flexibility. The money in a 529 is handcuffed for educational expenses, lest you pay taxes/penalties. What if he gets a full ride scholarship? What if he decides to join the military and take advantage of the GI Bill? Apart from saving for it, there are a wide variety of ways to fund college (loans, scholarships, etc.). I don't see the point in locking the money for one specific purpose, especially when there isn't a federal tax break on it. Some states offer tax incentives, but they aren't incredibly generous. Also, not everyone automatically goes to college. What if your child has an amazing idea for the next great startup, and he needs some seed money?

For my wife and I, it made more sense to simply start a standard brokerage account, earmark it as his college fund, and contribute regularly. I'm confident it will grow larger than a 529, I'll have more control over the money throughout the process and I'll have way more control over how the money is ultimately spent.

Your mileage may vary, but that's my opinion after a good bit of thought and research.

All that being said, one other piece of advice that someone gave me a long time ago, that I'm happy to pass along: you can't borrow in to your retirement. By this, I mean that you should get all retirement ducks in a row before you start thinking about college expenses. I don't say this to diminish the value of education or to put your son at the bottom of your priorities, but rather to say that you will be very well served to put your retirement goals first and let the other pieces fall in to place over time.

 

[early_retirement_or_bust]

I'm only a couple years older than you, and I also have a young son. I considered opening a 529 for him, but I saw a lot of drawbacks:

1) Performance. Based on my research, most 529 plans do not perform well. Compared to the broader market, I didn't see matching or better growth.
2) Fees. Many 529 plans have fees that eat away at the already underserved growth.
3) Flexibility. The money in a 529 is handcuffed for educational expenses, lest you pay taxes/penalties. What if he gets a full ride scholarship? What if he decides to join the military and take advantage of the GI Bill? Apart from saving for it, there are a wide variety of ways to fund college (loans, scholarships, etc.). I don't see the point in locking the money for one specific purpose, especially when there isn't a federal tax break on it. Some states offer tax incentives, but they aren't incredibly generous. Also, not everyone automatically goes to college. What if your child has an amazing idea for the next great startup, and he needs some seed money?

For my wife and I, it made more sense to simply start a standard brokerage account, earmark it as his college fund, and contribute regularly. I'm confident it will grow larger than a 529, I'll have more control over the money throughout the process and I'll have way more control over how the money is ultimately spent.

Your mileage may vary, but that's my opinion after a good bit of thought and research.

All that being said, one other piece of advice that someone gave me a long time ago, that I'm happy to pass along: you can't borrow in to your retirement. By this, I mean that you should get all retirement ducks in a row before you start thinking about college expenses. I don't say this to diminish the value of education or to put your son at the bottom of your priorities, but rather to say that you will be very well served to put your retirement goals first and let the other pieces fall in to place over time.

I currently have a standard brokerage account...should I convert this into his fund? It's with TD Ameritrade. I would want to choose ETFs wisely now though--no single-picking random stocks.


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[early_retirement_or_bust]

I will sell the second car--you guys are right: My son comes first.


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[Katiek]

I currently have a standard brokerage account...should I convert this into his fund? It's with TD Ameritrade. I would want to choose ETFs wisely now though--no single-picking random stocks.


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I think one of the suggestions was to invest for your own retirement, and if at the time your son is ready for school, he needs money (doesn't get a scholarship) and you are on track for your own needs, then you can help him. But if there have been unexpected setbacks along the way, you can use the money for your retirement and rely on financial aide/work-study jobs etc. for college expenses.

Sine your son is still very young, you'd likely invest in a stock heavy portfolio for both purposes, so you don't really need a separate fund for school investments.

 

[Standard Staples]

I think one of the suggestions was to invest for your own retirement, and if at the time your son is ready for school, he needs money (doesn't get a scholarship) and you are on track for your own needs, then you can help him. But if there have been unexpected setbacks along the way, you can use the money for your retirement and rely on financial aide/work-study jobs etc. for college expenses.

Sine your son is still very young, you'd likely invest in a stock heavy portfolio for both purposes, so you don't really need a separate fund for school investments.

+1. You can mentally earmark certain components for your son if you choose, but I wouldn't worry about making it "his" right now. There's just no need to do so.

 

[early_retirement_or_bust]

I have seriously been taking everything you guys have offered up into consideration. Immediate changes I've made:
--I upped my pre-tax 401(k) contributions from 10% to 15%. The agency offers a paltry 1% (but it counts!), bringing my total contribution to 16%.
--I am paying down my credit cards weekly. Goal is to be down to $1,000 collectively by the end of November.
--I have increased my IRA contributions to $200 monthly, with plans to increase this as time progresses.
--I have listed my car for sale.


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[early_retirement_or_bust]

I'm either going to go with a Roth IRA or ESA for my son. I'm going to defer starting one, however, until my own numbers are in order. I'm going to continue saving my dollars and invest in him later, once my own retirement is on steady ground.


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[ReadyAimFIRE]

I only have one thing to add...GOOD FOR YOU!! Having this attitude and drive to put the necessary steps in place is the majority of the battle. Then, as you bring down your debt you can put that money to work on your next set of plans.

Congrats on your progress and direction.

 

[Walt34]

I have seriously been taking everything you guys have offered up into consideration. Immediate changes I've made:
--I upped my pre-tax 401(k) contributions from 10% to 15%. The agency offers a paltry 1% (but it counts!), bringing my total contribution to 16%.
--I am paying down my credit cards weekly. Goal is to be down to $1,000 collectively by the end of November.
--I have increased my IRA contributions to $200 monthly, with plans to increase this as time progresses.
--I have listed my car for sale.

That's great news!