Am I on the right track? 66G a year

**Ralph** · 12-29-2007, 06:09 PM

I'm a fan of cheap cars (old Hondas) as a money saving tactic, but then again I'm 50.

**Tree0164** · 12-30-2007, 02:56 AM

Your car loan sticks out to me as well-how many more months of that payment. Can you sell it and buy an older car

**tabbycat31** · 12-30-2007, 06:56 AM

your phone seems expensive, any way to cut down on that (ie do you need a cellphone AND a landline, can you ditch one or the other, or go with calbe or internet phone service which tends to be cheaper than landlines)

**project15** · 12-30-2007, 01:59 PM

Where does the other $993 per month go?

**Scanner** · 12-30-2007, 02:10 PM

docstudent:

$120,000 student loan will translate into about $1400/month financed over 10 years.

Your salary will be 68 + 15K = 83K.

I would maintain same lifestyle and pay down debt with the differential you make. Allow for taxes - you wno't be able to sink all of the extra 15K into your debt. . .maybe allow for an extra 10K/year.

That would be an extra principal payment of $800/month.

**docstudent** · 12-30-2007, 03:09 PM

Thanks for the input, I am trying to find a way to invest and pay down my student loan. At the moment, I have $0 in credit card debt with access to $30,000 of available credit. My credit score is about 730, and I am planning to purchase a condo in the Los Angeles area by the end of next year.

Currently, I am putting $300 a month in my 403b account, however, I was told to put the money in a mutual fund. If I take the money out, I have to pay a 10% penalty, and I have about $14,000 in the account and I opened it in June of 2002. My plan was to keep the money there for 20 years, but I made that decision as a young and inexperienced 24 year old. I have access to the money, but I have no intention to use it. Is it wise to keep the money there for an extended period of time? Should I stop putting money in the account and fully invest in the mutual fund, is 3% interest a big waste in the long run?

I have a STRS account and have about $24,332 - $429 Pre-Tax deduction

Secondly, I have $10,000 in my savings account, I put the money in a 80-DAY CD, and it is earning about 5.2%, and I should earn about $120 and it matures in mid-January, most likely, I am going to put the money in a 12- month CD for a rate of 4.85%, is that a good idea. I want to keep the money in low risk investments, is there a better investment?

In Mid January, I am going to take $2,500 and invest in a Fidelity Mutual Fund, and I plan to invest $300 per month, is this a good idea.

I maintain about $2,500 in my checking account in case of an emergency. If I land the right job after graduation, my income is guaranteed to increase greatly. That should bring my take home income from $3600 a month to
about $5,000.

I am leasing my automobile and I am due to turn it in by early May. I enjoy my luxuary car, but I am willing to downgrade- I MUST!! I plan to save $1,000 a month- starting in February, and should have about $10,000 in my checking account by August of 2008, should I treat myself to a European vacation- a graduation gift, I estimated I could spend a month there about spend about $3,500 in all- be critical, thanks!

**Scanner** · 12-30-2007, 04:03 PM

My credit score is about 730, and I am planning to purchase a condo in the Los Angeles area by the end of next year.

This means further debt. Do you have the 20% downpayment?

Currently, I am putting $300 a month in my 403b account, however, I was told to put the money in a mutual fund. If I take the money out, I have to pay a 10% penalty, and I have about $14,000 in the account and I opened it in June of 2002. My plan was to keep the money there for 20 years, but I made that decision as a young and inexperienced 24 year old. I have access to the money, but I have no intention to use it. Is it wise to keep the money there for an extended period of time? Should I stop putting money in the account and fully invest in the mutual fund, is 3% interest a big waste in the long run?

Okay, a little lesson - a 403(b) or a 401(k) is just a type of account, one that is earmarked for retirement. It grows tax-free and is employer sponsored. It can be theorectically any kind of vehicle the employer offers. Money markets and mutual funds are the most common.

Yes, at your age, it should be in some form of equity mutual fund(s) to get a maximum return over the years. But that depends on your market tolerance too - can you tolerate a loss for 3-8 years?

I have a STRS account and have about $24,332 - $429 Pre-Tax deduction

I am not sure what a STRS account is - is this for your downpayment on the condo?

Secondly, I have $10,000 in my savings account, I put the money in a 80-DAY CD, and it is earning about 5.2%, and I should earn about $120 and it matures in mid-January, most likely, I am going to put the money in a 12- month CD for a rate of 4.85%, is that a good idea. I want to keep the money in low risk investments, is there a better investment?

If this is for a near-term goal, yes, CD's are appropriate.

In Mid January, I am going to take $2,500 and invest in a Fidelity Mutual Fund, and I plan to invest $300 per month, is this a good idea.

It depends - there is all kind of mutual funds - from short term bond to emerging markets. It depends on your goal.

I maintain about $2,500 in my checking account in case of an emergency. If I land the right job after graduation, my income is guaranteed to increase greatly. That should bring my take home income from $3600 a month to
about $5,000.

Okay

I am leasing my automobile and I am due to turn it in by early May. I enjoy my luxuary car, but I am willing to downgrade- I MUST!! I plan to save $1,000 a month- starting in February, and should have about $10,000 in my checking account by August of 2008, should I treat myself to a European vacation- a graduation gift, I estimated I could spend a month there about spend about $3,500 in all- be critical, thanks!

I think you need to sit down and decide what your priorites are, no judgement from me (seriously, don't mistake my tone - you have all kinds of ideas).

I would start with a blank piece of paper and decide the following:

1. How important is retiring my student debt?
2. What kind of car do I need?
3. How important is a European vacation to me as a last fling before entering the workforce?
4. What kind of downpayment will I need for a condo?
5. What about my retirement?
6. What kind of emergency savings do I need?

Once you have some goals straight, you can come back to us. I don't think we can help you set your goals.

You sound like a "general saver", which is great. . .but you don't sound like you have any concrete goals.

**docstudent** · 12-30-2007, 07:28 PM

Thanks for the feedback, I am trying to organize my finances and start the New Year off with solid investment strategies.

First off, I am 31 and have been employed in the education field for the past eight years. I plan to retire at age 53, after 30 years of service, however, I have a great deal to do in the future to guarantee a sense of comfort in my retirement years. My primary goal is to purchase a condo/home, and invest in the stock market. As I noted earlier, my income is going to increase and I wanted to begin investing in Mutual Funds. I want to keep my 403(b), which I have about $14,000 in total and I contribute $300 a month (pre-tax). I have had the account since 5/02, the question is, should I stop contributing and use the money to invest in a Fedility Mutual Fund, I am leaning towards Fedility Freedom or Fedility Value Discovery Fund. Both require a $2,500 initial investment, and I plan to contribute $250 a month, is that a good idea? In addition, I have $10,000 in savings, which I put in a high yield CD month to month. I have money in a Teachers' Retirement System, I have $24,332 in one account, and $11,463 in another account. The money can be accessed if I decide to leave the profession or at retirement, I contribute about $429 a month and the amount will increase based upon my salary. My income should rise from $3,600 take home to about $5,000. What should I do with the extra money, where should it be invested. I will have the downpayment for my condo by 10/08, I am looking for a condo in the range of $300,000 to $375,000, I hope that clarifies my situation. I just need a sense of direction of what to do with my finances to secure me a solid future.

**autoxer** · 12-31-2007, 05:33 AM

Originally posted by docstudent View Post

First off, I am 31 and have been employed in the education field for the past eight years. I plan to retire at age 53, after 30 years of service, however, I have a great deal to do in the future to guarantee a sense of comfort in my retirement years. My primary goal is to purchase a condo/home, and invest in the stock market. As I noted earlier, my income is going to increase and I wanted to begin investing in Mutual Funds. I want to keep my 403(b), which I have about $14,000 in total and I contribute $300 a month (pre-tax). I have had the account since 5/02, the question is, should I stop contributing and use the money to invest in a Fedility Mutual Fund, I am leaning towards Fedility Freedom or Fedility Value Discovery Fund. Both require a $2,500 initial investment, and I plan to contribute $250 a month, is that a good idea?

The mutual funds sound like a good idea, but why do you want to stop contributing to the 403? The 403b saves you tax money, I know you don't want to pay a penalty for taking money out of it, but if you wait until you are 65 years old, then there won't be a penalty. Use other accounts to support you from age 53 to age 65, then draw down the tax deferred accounts. Can you choose mutual funds with the 403b money?

Originally posted by docstudent View Post

In addition, I have $10,000 in savings, which I put in a high yield CD month to month. I have money in a Teachers' Retirement System, I have $24,332 in one account, and $11,463 in another account. The money can be accessed if I decide to leave the profession or at retirement, I contribute about $429 a month and the amount will increase based upon my salary. My income should rise from $3,600 take home to about $5,000. What should I do with the extra money, where should it be invested. I will have the downpayment for my condo by 10/08,

Is the $10k in a CD going to be your condo downpayment? Are you going to save the money for the downpayment from income between now and then?

Originally posted by docstudent View Post

I am looking for a condo in the range of $300,000 to $375,000, I hope that clarifies my situation. I just need a sense of direction of what to do with my finances to secure me a solid future.

Sure a luxury car or european vacation aren't out of reach, but they will certainly work against your goal of retiring at age 53. You will need a lot of money to retire that early, and you have a ton of student loan debt and you are planning on adding a ton of mortgage debt. Put those debt payments into your budget and see how much there is left to save. Good Luck.

**docstudent** · 12-31-2007, 07:04 AM

I want to keep the $10,000 in my savings in case of an emergency. I will have enough money for a downpayment by 10/08. I do not have any input as to where my money goes in my 403b account, and since it is only gaining 3%, I thought it would be better to invest in higher yield area. I plan on opening the account with $2,500 and contribute $250 until I retire. Is 53 to early to retire after 30 years of service in a professional field? How will that impact my retirement plans, or should I plan to work until age 65, to me that is not practical and I am willing to do anything to make my goal of 53 and out a reality, thanks! How much would you contribute to a Mutual Fund each month at the age of 31? Should I put $500 opposed to $250?

**InDebtInDC** · 12-31-2007, 07:21 AM

My thoughts:

1) Draw out the student loans for as long as possible. The interest rate on student loan is probably the lowest of all your debts. Plus you have the option to defer if you go back to school or become unemployed. No other type of lender will be that generous to you.

2) I would drop the car if possible. Pick up a slightly used Toyota for the best value.

3) Your income sounds like a lot of money, but it's not for the area. See if you can get more money or relocate to an area with a lower cost of living but relatively high salary (if such an area existed).

4) The emergency fund is a good idea. Keep the balance in a low yield account for safety and easy access.

5) Can you roll over your 403(b) into an individual IRA? If so I would consider that an option. If not, check with your provider to see what kind of investment accounts you can get with your 403(b).

6) Consider cutting or reducing cable and phone as suggested above.

7) Your insurance sounds high as well. You may want to drop the unnecessary coverages.

8) Food I don't recommend you cut unless you're eating out a lot. Cut down gas and entertainment as much as possible.

Try to max out your pretax contributions if possible. Pay the minimum on all of your debts. Try to max out your Roth IRA before your income gets too high. Whatever you have left you can invest however you like.

I recommend an index fund for low cost.

As for how much you shoud put in, as much as you possibly can without going into debt or making yourself sick.

**tripods68** · 12-31-2007, 09:18 AM

Let add my two cents about your STRS 101.

Your STRS retirement of $429 a month is based on 8% of your monthly earnings and its broken this way: 6% goes to your Defined Benefit Contribution (DB), and 2% remaining goes to your Supplemental (DBS). This helps fund your retirement pension (STRS) when you are ready retirement at age 53. You can ONLY take out your 100% of your contributions when leave or terminate your position through refund. But you can always purchase back those years. Since you have been a member of STRS, I would advice to live it alone, if you decide to leave teaching all together. The buyback cost when you go back teaching again is somewhere around 16% to 20% depending your age; the closer your age to retirement the higher the cost. At the same time, both DB and DBS earn a guaranteed interest 6% per year. That pays more than most banks currently offers their customer on high yield CDs.

Here's another you should think about as an alternative towards building your retirement. Most Traditional Defined Contribution does not offer inflation protection. THis is significant in many way, because as you know, Inflation deteriorates purchasing power each year. WHen you are retired with STRS, you will receive a COLA increase per year. At the same time, when your retirement checks lose of less than 80% of your purchasing power, you STRS check will increase to to maintain at least of above 80% of purchasing power. This is a very significant feature of STRS built in the retirement formula.

Having said that---CalSTRS allows you to purchase service credit (up to 5 years) at a cost. The younger you are, the cost of buying is lower and vice versa. The cost is also determined by your monthly earnings. The higher your monthly earning the higher the cost. But at the end, purchasing service credit enhances your retirement checks, with inflation protection and purchasing power added.

Good Luck in planning for your retirement!

**Scanner** · 12-31-2007, 04:19 PM

Let me add something of observation and I think many of us older that you have here have a little wisdom to offer in that we have "been there, done that, have the t-shirt."

It seems that you are attempting to buy into a higher lifestyle.

Certainly, 83K + benefits/year isn't chump change.

But I think you may be falling into the trap of when you earn more money, you are trading up for a higher lifestyle.

As I said, 83K/year isn't chump change. . .but neither is 120K balance on your student loan.

I am not a big fan of student loans. I know others here advise you extend them out (refinance a longer term) but I don't like them for this reason - it's generally a non-dischargable debt (exceptions apply).

If you have an auto loan and for some reason you default, the REPO man shows up and takes your automobile back. You get a black mark on your credit. Or you do like Rocky did in the movie - you give the car and the payments to someone else and walk away.

Your student loans reminds me of a bad illness that you keep medicating and it just gets worse. You can't make payments. . .they put you in "Forebearance." What forebearance? Well, it's the "purgatory" between default and "in payment." Your balance collects capitalized interest (grows) but you don't ahve to make payments.

Then, when you come out of forebearance (if), then you have a higher loan payment.

If you default, well, your debt is never discharged. . .they just attach wages. They're the Federal Gov't after all. . .it's not like your local bank loaned you the money.

Believe it or not, when America gets on China about human rights, they have countered with America that we have no business lecturing them on human rights when we start so many of our young heavily in debt because of education.

Anyway, I'm stradding two subjects here. . .student loan debt and buying into the "good life."

I would take pause of how much you want to buy in and what's important to you. I know many people think "it can never happen to me" but trust me, I have seen many of my own colleagues wear their student loan debt like the proverbial albatross around their neck.

Happy New Year to you and the forum.

**autoxer** · 01-02-2008, 06:42 AM

Originally posted by docstudent View Post

I want to keep the $10,000 in my savings in case of an emergency. I will have enough money for a downpayment by 10/08.

Saving up a 20% downpayment in just 10 months isn't easy... Is it a gift or inheritance?

Originally posted by docstudent View Post

I do not have any input as to where my money goes in my 403b account, and since it is only gaining 3%, I thought it would be better to invest in higher yield area. I plan on opening the account with $2,500 and contribute $250 until I retire.

It would be wise to find a higher yield investment, but a regular mutual fund might not be the best choice if the money is going to be invested until retirement. You could put money into a roth IRA while your salary is still below the limit. And the money could grow without being taxed...

Originally posted by docstudent View Post

Is 53 to early to retire after 30 years of service in a professional field? How will that impact my retirement plans, or should I plan to work until age 65, to me that is not practical and I am willing to do anything to make my goal of 53 and out a reality, thanks! How much would you contribute to a Mutual Fund each month at the age of 31? Should I put $500 opposed to $250?

I wouldn't say 53 is too early, but it will take some more serious planning to make it happen. You may want to sit down with a good financial planner, to figure out a retirement number. A goal of how much you will have saved up, so that you could live off the nest egg. My retirement number is somewhere around $2M or $3M, and I can run calculations to figure out how big my nest egg will be with a certain level of contributions and a certail level of appreciation. But there are a lot of unknowns, so you should revisit it every year so you can make adjustments to keep yourself on track.

Am I on the right track? 66G a year