Berimbauone
New member
Wow, this guy has it together. Congrats on that. I'm also a new hire so I will follow this post with interest.
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New employee advice and where to save money
- Thread starter C5R UZR
- Start date
BeaverState
Member
Our Employee Services Department recently sponsord retirement training for us. One of the suggestions of the presenter was to investigate insurance from waepa.org vs. FEGLI. They are set up for Government employees and charge about half the cost. Leaving you that money to put towards your TSP. Of course, once your TSP gets large enough you may not need life insurance at all. Effectively, making you self insured.
pyriel
Active member
Hi C5R,
First of all, i'd like to congratulate you with your financial endeavor. Many seasoned investors here are probably jealous with your accomplishments (i'm one of them). keep up the good work.
Good job on the credit card management. I do the same with mine. I got one for personal use and one for my business. I opted for the mileage rewards since i love to travel.
You mentioned that you are looking in getting traditional IRA instead of throwing it in and maxing your TSP. How is traditional IRA ( I assume you will be getting into mutual fund) better than TSP? You mentioned that you like the flexibility but with expenses associated with it, for me, i decided to max my tsp instead of playing around with mutual funds. The immediate 5% gains plus the tax break (which allows you to throw it in to ROTH IRA later), I just couldn't pass it on. But then again, its not for everyone since i fall into the highest tax bracket so the more tax break i get the better. Scott trade is pretty good but if you ever move your traditional IRA as much as people move their TSP here I will wish you luck with the expense ratio on that.
As far as your truck purchase is concern, sorry but there is no help for you unless you tie that in with some kind of business to get the tax breaks you need. I have a truck that is fully paid by my business and the fuel, insurance, and maintenance on it are all tax deductible.
As for your financial advisor, i'd fire him for recommending bonds instead of other things due to your age. What is he thinking? Pick a 20 year period from the 1920s to the present time and you will see that stocks have always made more money than what he is recommending. You have time on your side. Now, bonds are good, please don't get me wrong, but the reason why financial advisor advocates that is because of safety. If you continue to be aggressive in managing your retiremetn portfolio, then you shouldn't have to worry too much of that. Just look at what people are doing here on this board... We all jump in to the G fund whenever we think there is trouble ahead;-) You should be able to do the same but you can't keep doing that with regular mutual funds (i'm referring to your traditional IRA)
As for real estate question you have, take the 5/1 if you know for sure that you will only be there for several years. Why, if the RE goes up within those timeframe then you can sell it for a higher price. However, if the RE goes down, then you can refinance to lock it in to 30 yrs or 15yrs with lower interest rate. You can sell your home after two years and you will not have to pay any tax for your gains;-) So, if you know that you plan on selling your home, my suggestion is to buy a fixer upper that has potential for improvement. Buy Jay Decima's book (Fixer Upper). Its a great book and one that I read and re-read many times. Why fixer upper? Fixer upper gives you better yields than new home purchase. Jay's book will show you the numbers steps by steps and you will be buying a house cheap. By doing this, you are then able to keep more of your money invested somewhere else. Now, if you prefer to get a brand new home, then that is also good as well. I'm a landlord, and right now, with your current status as a renter, you are making your landlord rich;-)
Pyrie
First of all, i'd like to congratulate you with your financial endeavor. Many seasoned investors here are probably jealous with your accomplishments (i'm one of them). keep up the good work.
Good job on the credit card management. I do the same with mine. I got one for personal use and one for my business. I opted for the mileage rewards since i love to travel.
You mentioned that you are looking in getting traditional IRA instead of throwing it in and maxing your TSP. How is traditional IRA ( I assume you will be getting into mutual fund) better than TSP? You mentioned that you like the flexibility but with expenses associated with it, for me, i decided to max my tsp instead of playing around with mutual funds. The immediate 5% gains plus the tax break (which allows you to throw it in to ROTH IRA later), I just couldn't pass it on. But then again, its not for everyone since i fall into the highest tax bracket so the more tax break i get the better. Scott trade is pretty good but if you ever move your traditional IRA as much as people move their TSP here I will wish you luck with the expense ratio on that.
As far as your truck purchase is concern, sorry but there is no help for you unless you tie that in with some kind of business to get the tax breaks you need. I have a truck that is fully paid by my business and the fuel, insurance, and maintenance on it are all tax deductible.
As for your financial advisor, i'd fire him for recommending bonds instead of other things due to your age. What is he thinking? Pick a 20 year period from the 1920s to the present time and you will see that stocks have always made more money than what he is recommending. You have time on your side. Now, bonds are good, please don't get me wrong, but the reason why financial advisor advocates that is because of safety. If you continue to be aggressive in managing your retiremetn portfolio, then you shouldn't have to worry too much of that. Just look at what people are doing here on this board... We all jump in to the G fund whenever we think there is trouble ahead;-) You should be able to do the same but you can't keep doing that with regular mutual funds (i'm referring to your traditional IRA)
As for real estate question you have, take the 5/1 if you know for sure that you will only be there for several years. Why, if the RE goes up within those timeframe then you can sell it for a higher price. However, if the RE goes down, then you can refinance to lock it in to 30 yrs or 15yrs with lower interest rate. You can sell your home after two years and you will not have to pay any tax for your gains;-) So, if you know that you plan on selling your home, my suggestion is to buy a fixer upper that has potential for improvement. Buy Jay Decima's book (Fixer Upper). Its a great book and one that I read and re-read many times. Why fixer upper? Fixer upper gives you better yields than new home purchase. Jay's book will show you the numbers steps by steps and you will be buying a house cheap. By doing this, you are then able to keep more of your money invested somewhere else. Now, if you prefer to get a brand new home, then that is also good as well. I'm a landlord, and right now, with your current status as a renter, you are making your landlord rich;-)
Pyrie
Frixxxx
Moderator
At 21, risk is not your major issue, investing long-haul will always reap rewards. There are tax deferred & taxable investments. But what you may want to do is a Life-Planning worksheet. Setting goals on a time-line that allows you to make decisions financially will always be a plus.
Also, get a budget in place.
free one:
http://militaryfinance.umuc.edu/planning/fin_budget_build.html
But everyone I talk to say to get a copy of software that can aid you. I heard Bill Gates has something that helps you track your "money". Or you can choose a "quick-N-easy" alternative. Either way you can pay your bills online, track your net worth, and utilize the tax services that come with each.
Good Luck!
Oh -> A fun way to look at what age you could be a millionaire:
http://www.fintrend.com/ftf/calculators/Millionaire_Calculator.asp
ATCJeff
Well-known member
You can put your money anywhere you want as long as you do not exceed the $15,000 IRS limit and the Roth limits.
TSP is the most efficient as far as fees, but you are very limited to your choices and the noon dead line for IFT. The noon dead line is really not a concern for you.
You can open a Traditional IRA, Roth IRA, and a Individual Account with Scottrade. Also, don't be afraid to call you Scottrade Rep ad ask these questions. Granted he is pushing Scottrade but he can give you ideas too.
I know some nice Missouri gals that would like to meet you.Keep up the good work.
Small correction. IRS for 401K this year is $15,500.
FundSurfer
Well-known member
No, that is better than Upromise or any other similar. Too bad your aunt isn't in the same town. If she helped you find the house, her commission would be 3%.
Show-me
Well-known member
You can put your money anywhere you want as long as you do not exceed the $15,000 IRS limit and the Roth limits.
TSP is the most efficient as far as fees, but you are very limited to your choices and the noon dead line for IFT. The noon dead line is really not a concern for you.
You can open a Traditional IRA, Roth IRA, and a Individual Account with Scottrade. Also, don't be afraid to call you Scottrade Rep ad ask these questions. Granted he is pushing Scottrade but he can give you ideas too.
I know some nice Missouri gals that would like to meet you.
Keep up the good work.
Gilligan
Member
C5R UZR,
Welcome to federal civil service and the MB. I wished that I had your financial IQ when I was 21. At the rate that you are building your portfolio, you will be financially independent at 45.
Real estate can be a great investment, it paid off for your grandparents. I suggest checking out our in-house real estate expert, Pyriel, he has several good post in the Real Estate section. Houston presently has about a 5% appreciation rate, with its increase in jobs, the housing supply vs demand should keep that rate up there. If you buy a $150k house and invest $7,500 for down and closing, your cash on cash return should be 100% on appreciation ($150,000 X 5% = $7,500). Houston is booming north of IAH, just be careful of low lying areas. Houston had a major flood in 2000 or 2001, even sections of I-10 were underwater.
http://www.tsptalk.com/mb/forumdisplay.php?f=43
Welcome to federal civil service and the MB. I wished that I had your financial IQ when I was 21. At the rate that you are building your portfolio, you will be financially independent at 45.
Real estate can be a great investment, it paid off for your grandparents. I suggest checking out our in-house real estate expert, Pyriel, he has several good post in the Real Estate section. Houston presently has about a 5% appreciation rate, with its increase in jobs, the housing supply vs demand should keep that rate up there. If you buy a $150k house and invest $7,500 for down and closing, your cash on cash return should be 100% on appreciation ($150,000 X 5% = $7,500). Houston is booming north of IAH, just be careful of low lying areas. Houston had a major flood in 2000 or 2001, even sections of I-10 were underwater.
http://www.tsptalk.com/mb/forumdisplay.php?f=43
Well, I maxed 06 with what I made working part time, and I knew I'd make 4000 in 07, so I just put that in when I did all of my investing in March.
There is no doubt that I come from a fairly well-off family. I have certainly had many more financial blessings than most. I was given 17,000 to buy a car when I graduated high school. I chose to save it, since I liked my current vehicle - and I was able to trade the old one in for one I like even better two years ago with hardly any out of pocket cost.
As a child, I was ever the entrepreneur. I have always been really good at saving money and cutting out unnecessary costs. I'm a bargain shopper who hardly ever pays retail. I also buy auto parts used, use them for a few more months, and then sell them for profit. Finally, I lived at home for the five months between graduation and full-time employment to reduce costs. The month before I got hired, I was earning like $2700/month and only spending like $500.
My grandparents paid for my education - God bless them! My other grandparents (who gave the car money) had a family trust with land that was sold about a year ago. Unable to find another property to invest in, they decided to liquidate it, so I got my portion as a shareholder.
While I have been given so much, I feel it is my responsibility to treat it as if I had painstakingly worked for it. It is my obligation to do the very best with it, in the hopes that I will leave even more for those family members to come. I try not to take it for granted, and I realize that I probably won't have much else given to me, so I need to make the best of what I have. It sounds easy enough, but there are so many options and variables. I don't really like to get into the personal details, because people treat me differently. Most of my friends don't know anything about the money, and they really don't need to. For those of you who strictly believe that handouts are crap, and you should work for everything yourself, I understand the sentiment. There are many lessons to learn that I probably missed, but I hope you will respect the fact that I am not ignorant and throwing it away, that you will agree that I've got some good priorities.
As to the $18,000 salary, thankfully it is only for the 7 weeks in training. Marion Blakey and the FAA are responsible for my salary, and I can't do anything to change it for now. The saddest part is that most students here are eligible for food stamps and welfare benefits. Things should improve in August, like I said.
But does anyone know about IRA's? Can I put money in a Roth and a traditional this year? Is there a good alternative to the TSP with more options, or is the TSP really pretty efficient? I'm kind of thinking like a 60% I fund, 25% S Fund, 15% C fund mix whenever I do get started with it.
Frixxxx
Moderator
Buy a house then use it as a rental..BE A TYCOON.....If you are saving all the right money and can use it then, 20% of the median house you list....140,000 would be 28,000 plus 800 in closing costs (look around...you can find them). But I'm having a hard time with your salary. 18,000? your payment on the house with tax and insurance would be ~ 714/month.
If I am doing the math right - 18000 MINUS FICA/Medicare 12000 ~ 1000/month.
1000 -714 = 286
Not alot to live on!
ATCJeff
Well-known member
Never, ever buy a car/truck unless you get free financing(have to buy new). The last two I bought, 98 Winstar 0% & 07 F150 0%. It's free money. However, when I buy a car/truck, I keep them until they die! I'm 42 and have only owned 4 cars in my life.
BTW, if you like Ford. Their giving away their trucks! 0% and now they have a kick back also. Think it's around $1500. I had someone on the inside and was able to negotiate a better price on the outside then he could offer.
BTW, if you like Ford. Their giving away their trucks! 0% and now they have a kick back also. Think it's around $1500. I had someone on the inside and was able to negotiate a better price on the outside then he could offer.
Thanks for the advice. A few things to add. My broker was a one-time fee hired advice giver. I wanted that so that there would be no conflicts of interest. He is not making any money off of my investments. Of course if things continue to go well, I may go back in a few years to rebalance, but that's just more incentive for him to give me honest advice.
As to the real estate advice, I'm not really sure what I want to do yet. I will probably be buying a smaller house, and if I have a wife and kids in a few years, may look to upgrade. I agree that ARM's would not be wise if I pay the loan off according to their schedule. But if I am going to sell the house and upgrade in those 5ish years, it is a consideration.
My aunt is a realtor, and said she could get me a referral fee that she would just send right back to me. I think she said it would be 1%. Is that similar to what you were talking about doing with upromise?
On the truck, it doesn't make much sense to pay a 8-10% loan when I have the money in the bank making 5%, but if there is another solid investment that I could withdraw from monthly to make the payments, that earns better than the loan interest, that works too. I doubt there is anything that has a consistent return, and I'm not sure it's worth gambling on the market. I could also put half in the market, and decide based on the returns whether to pay it each month out of the remaining MMA (house fund at that point) or pull it out of the market.
Also, that portion of the MMA is earmarked for my next vehicle, so I wasn't planning on paying myself back. If I can afford to, I'd love to keep the savings, but I don't think my budget will allow it.
As to the real estate advice, I'm not really sure what I want to do yet. I will probably be buying a smaller house, and if I have a wife and kids in a few years, may look to upgrade. I agree that ARM's would not be wise if I pay the loan off according to their schedule. But if I am going to sell the house and upgrade in those 5ish years, it is a consideration.
My aunt is a realtor, and said she could get me a referral fee that she would just send right back to me. I think she said it would be 1%. Is that similar to what you were talking about doing with upromise?
On the truck, it doesn't make much sense to pay a 8-10% loan when I have the money in the bank making 5%, but if there is another solid investment that I could withdraw from monthly to make the payments, that earns better than the loan interest, that works too. I doubt there is anything that has a consistent return, and I'm not sure it's worth gambling on the market. I could also put half in the market, and decide based on the returns whether to pay it each month out of the remaining MMA (house fund at that point) or pull it out of the market.
Also, that portion of the MMA is earmarked for my next vehicle, so I wasn't planning on paying myself back. If I can afford to, I'd love to keep the savings, but I don't think my budget will allow it.
FundSurfer
Well-known member
Here are a couple quickies:
Figure you have to be in a house for 3+ years in order to recoup the cost of buying - taxes, points, etc. If you are looking at 5 years, I'd look to buy sooner than later. You may want to purchase something that you can work to improve the value of if you are handy. Also, if you pick entry level in a neighborhood that is not declining, your property may be a good rental prospect once you look to upgrade. (see the real estate discussions) If you think this might be a possibility, I wouldn't go the ARM route because interest rates are more likely to go higher than lower at this point.
If you go looking to buy, there are several programs out there that will put money back into your pocket by letting them help you find a realtor. I used Upromise,com and got $800 toward my kids college education. You probably don't have kids yet but you could still use the program, potientially even for yourself if considering graduate level degrees down the road. I think the money is transferrable so you could start out with yourself and switch if not going to use it.
Education tax deffered 529's also a possibility.
As to the truck, you'd probably be able to get a loan for 8-10%. If you loaned the money to yourself via the MMA, you'd be gaining 3-5%. The problem with this is that many folks don't pay themselves back very well. If you are as committed as you sound then I'd go for it. Be sure to make payments back to yourself to replace the cash you "borrowed".
Lastly, the "tax efficiency" your broker talked to you about is more likely to put higher commissions in his posket than really save you money on taxes. Ask yourself what percentage of your earnings are actually going to be taxed? It is a really low number unless you have over a million in the bank. At your age you are much better off using longer term higher yielding financial vehicles. You have time to absorb the ups and downs. (I had a financial advisor wannabe suggest something very similar to me and I showed him the door and I'm older than you by a few years.)
Figure you have to be in a house for 3+ years in order to recoup the cost of buying - taxes, points, etc. If you are looking at 5 years, I'd look to buy sooner than later. You may want to purchase something that you can work to improve the value of if you are handy. Also, if you pick entry level in a neighborhood that is not declining, your property may be a good rental prospect once you look to upgrade. (see the real estate discussions) If you think this might be a possibility, I wouldn't go the ARM route because interest rates are more likely to go higher than lower at this point.
If you go looking to buy, there are several programs out there that will put money back into your pocket by letting them help you find a realtor. I used Upromise,com and got $800 toward my kids college education. You probably don't have kids yet but you could still use the program, potientially even for yourself if considering graduate level degrees down the road. I think the money is transferrable so you could start out with yourself and switch if not going to use it.
Education tax deffered 529's also a possibility.
As to the truck, you'd probably be able to get a loan for 8-10%. If you loaned the money to yourself via the MMA, you'd be gaining 3-5%. The problem with this is that many folks don't pay themselves back very well. If you are as committed as you sound then I'd go for it. Be sure to make payments back to yourself to replace the cash you "borrowed".
Lastly, the "tax efficiency" your broker talked to you about is more likely to put higher commissions in his posket than really save you money on taxes. Ask yourself what percentage of your earnings are actually going to be taxed? It is a really low number unless you have over a million in the bank. At your age you are much better off using longer term higher yielding financial vehicles. You have time to absorb the ups and downs. (I had a financial advisor wannabe suggest something very similar to me and I showed him the door and I'm older than you by a few years.)
Welcome CR5 UZR! $66K in investments and a financial advisor at 21? When I was 21 I had about $66 dollars to my name after I paid my rent. It bought me gas, macaroni & cheese and beer. What the heck happened to you? Kids these days. 
Kidding. I won't even touch your question. I'll leave it for the financial experts. You seem to to have your act together much, much earlier than ... well, anyone. I doubt Warren Buffett got off to such a start. Best of luck!
Kidding. I won't even touch your question. I'll leave it for the financial experts. You seem to to have your act together much, much earlier than ... well, anyone. I doubt Warren Buffett got off to such a start. Best of luck!
Happy Independence Day!
I am taking advantage of the holiday to catch up on my financial decisions. I ran across this site in some searches, and I was hoping you guys could answer some questions for me.
Background: age 21, single, Texas (no state income tax), debt free, just started with the FAA under the AT pay plan 6/11/07 (current salary: 18k, starting Aug. 1 40k, max over the next 2 years: 54k), eligible to retire at age 45, 6/2031
I use a credit card for almost all of my expenses and pay it off in full (30-60 day grace period accumulating 5% interest in a MMA) each month
Current holdings: $66000 in a taxable investment portfolio that I had created in March; it is performing well and I am happy with its diversity. My strategy is low-cost ETF’s, buy and hold. I also established a Roth IRA which I maxed out for 2006 and 2007 (5500 due to limited earned income in 2006). Finally, I have $40,000 in a MMA which is currently earning about 5.3%.
My questions/concerns:
I am very serious about stuffing away as much for retirement as early as possible to take advantage of the compounding effects. My goal is 20% pre-tax income. I am trying to decide if the TSP is the most efficient investment vehicle for my first year. I will not get ANY matching contributions until June 2008. I realize the fees with the TSP are fairly low, but I would like the flexibility to pick my stocks/ETF’s rather than being stuck with the limited selections offered with the TSP. I was thinking about putting the money I would normally put in the TSP into a traditional IRA. Can I max. contributions to both a traditional and a Roth in the same year? If not, is there any other pre-tax contribution vehicle I should consider or is the TSP really the best choice even without the match?
Once I get the match, I’ll certainly go up to at least 5% TSP. I will be able to start making 2008 IRA contributions in January (I’m guessing that’s right). I would normally plan on maxing the IRA’s (withdrawals from the MMA) Jan. 1 and paying the MMA back over the year. Assuming the 40k above though, I’ll be putting about 8,000 for the year in retirement accounts. ~1,000 of that has to go to the TSP (5% for last half the year). The rest can go to the Roth, TSP, or IRA (if I open one based on above). Any advice on where to send it?
My financial advisor recommended I put SHY (Lehman Bros. 1-3 year treasury bonds) in the Roth. I don’t understand why I am putting such a low yield investment in the Roth. Yes, it is consistent, but it seems like I would want something with a higher return to accumulate tax free. Any thoughts? He said it was for tax efficiency. One of my biggest concerns is that I am getting dividends every month that I just have to let sit in my account (for a year) until I can make my next contribution to avoid paying another transaction fee. Money in the cash account is only earning .5%. I have Scottrade, so it will cost $7 to sell and $7 to buy something else. I was planning on waiting until January when I put in 2008 contributions to sell and buy something else in one transaction, but for $7, I might as well do it now. I think the gamble that new investment could earn that $7 back by Jan. is a good one. I haven’t really looked at what I would want in the Roth, though. I was thinking a Brazil/Mexico, type international ETF (maybe ILF).
Buying a truck: I’ve got a nice car, which I bought with cash used about 2 years ago. I’d like a truck (used around $17,000) in addition sometime in the next year or so. I was planning on paying for it out of the MMA. Any other recommendations on putting my money to work more efficiently than paying cash on it?
Buying a house: I’m going to rent an apartment for a few months, if not a year or two, mainly to get a feel for the area, but with the tax-savings of a mortgage, the freedoms of a home (tooling on the racecar in the garage), etc, I am very seriously considering purchasing a house shortly. Houston real estate is fairly affordable. I have seen homes similar to what I would like in the $120-160,000 range. I plan on paying for the closing costs and down payment with the money market (thus why it is not invested in the stock market currently). Between that and the truck, the MMA will probably be considerably smaller. Is there any other avenues I should consider other than a 30-year fixed mortgage with a 10% down payment? Explain your reasoning. If I know I will only be in the house for a few years, I was thinking maybe a 5/1 ARM might work well, but I have just scratched the surface in the fine print of these things. If the 5/1 is a cheaper interest rate than the 30, and I know I’ll be selling in less than 5, is it the smart move? I know some people borrow from their TSP’s, and there is also provisions for first time home buyers to withdraw funds from IRA’s penalty free. Does anyone have arguments for or against doing so?
Finally, to me using a credit card and paying off in full with the grace period is like free money, because you earn interest on the money you would use to pay for the purchase in the MMA. There’s also the 1% cashback. I’m looking into cards that have 2-5% on grocery and gas purchases. I might try to split and use both. Do you guys have any other “free money” tricks that are fairly easy to enact?
I know that’s a lot of ground to cover, and many circumstances will probably change before everything is enacted, but I like to operate with a working plan that I will mold and change as necessary to accommodate the life events (marriage, family, promotion/location change)
I am taking advantage of the holiday to catch up on my financial decisions. I ran across this site in some searches, and I was hoping you guys could answer some questions for me.
Background: age 21, single, Texas (no state income tax), debt free, just started with the FAA under the AT pay plan 6/11/07 (current salary: 18k, starting Aug. 1 40k, max over the next 2 years: 54k), eligible to retire at age 45, 6/2031
I use a credit card for almost all of my expenses and pay it off in full (30-60 day grace period accumulating 5% interest in a MMA) each month
Current holdings: $66000 in a taxable investment portfolio that I had created in March; it is performing well and I am happy with its diversity. My strategy is low-cost ETF’s, buy and hold. I also established a Roth IRA which I maxed out for 2006 and 2007 (5500 due to limited earned income in 2006). Finally, I have $40,000 in a MMA which is currently earning about 5.3%.
My questions/concerns:
I am very serious about stuffing away as much for retirement as early as possible to take advantage of the compounding effects. My goal is 20% pre-tax income. I am trying to decide if the TSP is the most efficient investment vehicle for my first year. I will not get ANY matching contributions until June 2008. I realize the fees with the TSP are fairly low, but I would like the flexibility to pick my stocks/ETF’s rather than being stuck with the limited selections offered with the TSP. I was thinking about putting the money I would normally put in the TSP into a traditional IRA. Can I max. contributions to both a traditional and a Roth in the same year? If not, is there any other pre-tax contribution vehicle I should consider or is the TSP really the best choice even without the match?
Once I get the match, I’ll certainly go up to at least 5% TSP. I will be able to start making 2008 IRA contributions in January (I’m guessing that’s right). I would normally plan on maxing the IRA’s (withdrawals from the MMA) Jan. 1 and paying the MMA back over the year. Assuming the 40k above though, I’ll be putting about 8,000 for the year in retirement accounts. ~1,000 of that has to go to the TSP (5% for last half the year). The rest can go to the Roth, TSP, or IRA (if I open one based on above). Any advice on where to send it?
My financial advisor recommended I put SHY (Lehman Bros. 1-3 year treasury bonds) in the Roth. I don’t understand why I am putting such a low yield investment in the Roth. Yes, it is consistent, but it seems like I would want something with a higher return to accumulate tax free. Any thoughts? He said it was for tax efficiency. One of my biggest concerns is that I am getting dividends every month that I just have to let sit in my account (for a year) until I can make my next contribution to avoid paying another transaction fee. Money in the cash account is only earning .5%. I have Scottrade, so it will cost $7 to sell and $7 to buy something else. I was planning on waiting until January when I put in 2008 contributions to sell and buy something else in one transaction, but for $7, I might as well do it now. I think the gamble that new investment could earn that $7 back by Jan. is a good one. I haven’t really looked at what I would want in the Roth, though. I was thinking a Brazil/Mexico, type international ETF (maybe ILF).
Buying a truck: I’ve got a nice car, which I bought with cash used about 2 years ago. I’d like a truck (used around $17,000) in addition sometime in the next year or so. I was planning on paying for it out of the MMA. Any other recommendations on putting my money to work more efficiently than paying cash on it?
Buying a house: I’m going to rent an apartment for a few months, if not a year or two, mainly to get a feel for the area, but with the tax-savings of a mortgage, the freedoms of a home (tooling on the racecar in the garage), etc, I am very seriously considering purchasing a house shortly. Houston real estate is fairly affordable. I have seen homes similar to what I would like in the $120-160,000 range. I plan on paying for the closing costs and down payment with the money market (thus why it is not invested in the stock market currently). Between that and the truck, the MMA will probably be considerably smaller. Is there any other avenues I should consider other than a 30-year fixed mortgage with a 10% down payment? Explain your reasoning. If I know I will only be in the house for a few years, I was thinking maybe a 5/1 ARM might work well, but I have just scratched the surface in the fine print of these things. If the 5/1 is a cheaper interest rate than the 30, and I know I’ll be selling in less than 5, is it the smart move? I know some people borrow from their TSP’s, and there is also provisions for first time home buyers to withdraw funds from IRA’s penalty free. Does anyone have arguments for or against doing so?
Finally, to me using a credit card and paying off in full with the grace period is like free money, because you earn interest on the money you would use to pay for the purchase in the MMA. There’s also the 1% cashback. I’m looking into cards that have 2-5% on grocery and gas purchases. I might try to split and use both. Do you guys have any other “free money” tricks that are fairly easy to enact?
I know that’s a lot of ground to cover, and many circumstances will probably change before everything is enacted, but I like to operate with a working plan that I will mold and change as necessary to accommodate the life events (marriage, family, promotion/location change)
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