Would like some guidance for 2016

[wvhillbilly]

Hello all! New here. I would like to ask for some help getting/staying on track for the new year.

My wife and I are personal finance newbies.

I will paint a small picture of my current state of affairs

I am married, no children. We both work. We are in our Mid/Late 20's

Income - Household totals gross ~about ~$95,000/year. My hours fluctuate a lot every week based on needed overtime for product demand. She is salary.

Debt - I have a mortgage, no PMI, payment of $871.36 escrow included. 30-year-fixed at 4.125% with a balance of $141.093.

I have an auto loan payment of $300/month, 2.39% Interest, balance of $13,253, the note maturity date is November 2020 & TFS does not allow principal only payments.

I took a $10,000 unsecured personal loan in September due to the downstairs of our house flooding from rain water. We had inside ripped apart, interior french drains installed, and refinished. 2.99% Interest for 12 months, payment is $848.04 but we have been paying $1,000/month. Balance is $7,066.

Cash - Checking Account balance is $10,812
Savings account balance is $10,003

Investments - I have none

Retirement - Wife has none.
I have a company 401k balance is $21,558, I randomly selected from the options of investments, I doubt it's properly allocated. I know very little about it.
I have a company pension. Balance $9,000. Options are Aggressive, Moderate, and Conservative. I have it on Aggressive.
I started a Vanguard ROTH IRA mid-way through 2015. Balance $5,571
$1,683 in Total Stock Market ETF (VTI)
$820 in Total INT Stock Index ETF (VXUS)
$325 in Total Bond ETF (BND)
$212 in Total INT Bond ETF (BNDX)
$2,529 In Money Market / Uninvested

From reading other posts here I can tell I will love the community
Please request any more information if you need it to advise
Any kind of advice moving forward will be greatly appreciated.

Edit: If it matters for anything, I don't know? but my credit score is 817. Maybe I could refinance my car to someone that would let me make extra payments?

[Jluke]

Welcome

Good to see you have ROTH and 401k. Max the ROTH and contribute at least what you employer matches in 401k - or more.

Your wife needs retirement accounts too. Get a ROTH if her employer doesn't offer 401k, etc.


I would also explore options to minimize your interest paid on the mortgage. Assuming you are not selling the house in the near future.

Either pay extra each month or Refi to a shorter term - 10, 15 or 20 year. If you haven't already do an amortization schedule for the mortgage to see interest amounts.

Ride out the car loan - minimal interest but yes not being able to pay extra sucks.

[wvhillbilly]

Welcome
I would also explore options to minimize your interest paid on the mortgage. Assuming you are not selling the house in the near future.

Your wife needs retirement accounts too. Get a ROTH if her employer doesn't offer 401k, etc.

Hi Thanks!

What do you mean by "near future" ? I will say we do not plan to retire in this home. It is a 2-level home on a hillside. We are young and dumb and bought too quickly without really thinking it out. It would be very hard to maintain as we get older. Our dream is to buy a flat property and build a brand new home of our design. I don't know if this will ever actually happen.

My wife just graduated college in May started her job in July, we actually don't know what her employer offers as far as retirement. She's a teacher and wanting to transfer to a different county ASAP so we didn't even bother looking into it yet.

[wvhillbilly]

Well 2 days in and all that is suggested is I pay extra on my mortgage and my wife start a retirement account. I didn't realize I was doing so well, lol.

How different from my own ROTH IRA should my wife's be? So that we don't overlap or 'have all of our eggs in one basket' so to speak. Any suggestions on where we should open her ROTH IRA and what to invest in?

[scfr]

1. Insurance Checkup: How is your coverage? It sounds like maybe you weren't covered for the flooding that occurred. If you have gaps in insurance that can't be fixed, consider upping your emergency fund so that if you face another problem like the flood, you can pay cash instead of needing to take out a personal loan.

2. Wife's IRA: You already chose Vanguard for yourself, so there must be something about it you like. If your wife feels the same, it's fine for her to go with Vanguard too. (I'm a Vanguard fan myself.) It is OK if your funds are the same.

3. Establish Risk Tolerance: You say that you chose "Aggressive" for your employer-sponsored plan, yet your Roth IRA investments appear to be very conservative given the high percentage in the MMF. Try to figure out what your true risk tolerance is as a couple, then choose an asset allocation and stick with it across the board and over the years. This will require being very honest with yourselves and ignoring how others say you "must" invest. There is no shame in being either aggressive or risk-averse. The problems start when people think/say that they are very risk-tolerant but then panic and pull out when the market tanks. It is also a problem to invest in a very conservative manner but rely on high returns to reach your goals.

4. Always communicate with your spouse and remember that the two of you are a team.

Good luck.

[autoxer]

Well 2 days in and all that is suggested is I pay extra on my mortgage and my wife start a retirement account. I didn't realize I was doing so well, lol.

How different from my own ROTH IRA should my wife's be? So that we don't overlap or 'have all of our eggs in one basket' so to speak. Any suggestions on where we should open her ROTH IRA and what to invest in?

They don't have to be different, if they are already diversified. Between my wife and I, we have 5 different retirement accounts and they are all invest the same way. The mutual funds themselves provide the diversification.

How is your cashflow? Are you saving an appropriate percentage of your income? Get into the habit of tracking your net worth periodically and it will be easier to make and achieve long term goals.

[Jluke]

Cash - Checking Account balance is $10,812
Savings account balance is $10,003

Why so much cash in your checking account? Move some of it to a savings account. I assume you have a savings account that gives you at least 0.75% interest (Capital One 360 Savings). I have also seen people reference Ally Bank on here for a good return (1% maybe). I currently have $1.95 in my checking account.

Are you planning on having kids?
Do you have Term Life Insurance for you? for your wife?
What is your vacation/travel budget?
How much are you saving each month?

The near future I mentioned on how long to live in the house would factor in IF you decided to refinance your mortgage. If you're going to be there more than 5 years, then you might benefit with a refi. Of course, paying extra now will have a similar effect and you can always resort back to the required payments, should you have to worry about other expenses in the future (day care, etc).

[wvhillbilly]

1. Insurance Checkup: How is your coverage?
2. Wife's IRA: It is OK if your funds are the same.
3. Establish Risk Tolerance: your Roth IRA investments appear to be very conservative given the high percentage in the MMF.
4. Always communicate with your spouse and remember that the two of you are a team.

1. Our home owners policy does not include Flood insurance, that stuff is expensive. The internal french drain system we had installed has a lifetime warranty. My EF is the $10,000 savings account. I went with the loan instead of emptying the EF because I was scared something else might happen shortly after and I'd be SOL. Employer provided health/dental/vision are fine. Full coverage on both vehicles.

2 & 3. I went with Vanguard because it seems to be a favorite of many in these Forums. Something about low fees? I have a high percentage in MMF because that's where the money goes when I contribute. I haven't spent it because I'm unsure what to buy. The 4 funds I'm in currently I just guessed but I'm scared to put the rest of the money into them in case they're bad choices. I really need to take the time to try to understand asset allocation & risk tolerance so I can fix my ROTH and 401k investments.

4. I agree but at our house, the finance department is 100% all me. She has no desire at all to worry, learn, or think about it. Both of our checks go into my Checking account and she trusts I'm handling it correctly.

[wvhillbilly]

Why so much cash in your checking account? I assume you have a savings account that gives you at least 0.75% interest.
Are you planning on having kids?
Do you have Term Life Insurance for you? for your wife?
What is your vacation/travel budget?
How much are you saving each month?
If you're going to be there more than 5 years, then you might benefit with a refi.

I decided a $10,000 EF was good enough and now that it's full I didn't really know what to do with the extra. My USAA Savings Account pays 0.15%. All of my bills are set on AutoPay out of my checking, I don't know which bill will hit when so I do like to leave a buffer in there to avoid ever having an overdraft.

We'll have kids some day. I'm not sure what Term Life Insurance is exactly, I know we don't pay for any. We don't have a vacation/travel budget, or any budget actually. We don't save a lot, we kind of break even every month other than sometimes I'll work a ton of overtime and I get a bonus twice a year that will put us ahead. I used my bonuses this year on maxing out that ROTH IRA for 2015.

We don't care at all for our house, we settled quickly out of excitement and didn't take the time to consider living on a steep hillside sucks. I told you my dream would be to find a property and build a house, but I would be very happy with moving anywhere flat within 5 years.

I've never thought about it until now you ask; i realize we really don't track our spending at all.

[Jluke]

So now you have a few assignments:

budget: make one yourself or try You Need A Budget , Mint, etc.

amortization schedule for mortgage: available in excel.

term life insurance: reasonable way to get a lot of insurance if you die.

You have the right ideas, just need to focus your efforts and get a good system for tracking spending/savings

[wvhillbilly]

They don't have to be different, if they are already diversified. Between my wife and I, we have 5 different retirement accounts and they are all invest the same way. The mutual funds themselves provide the diversification.

How is your cashflow? Are you saving an appropriate percentage of your income? Get into the habit of tracking your net worth periodically and it will be easier to make and achieve long term goals.

Okay, it's obvious I have a lot of reading to do on all of this. I do not track my income/spending at all, we just swipe the Discover IT card whenever we want something, it Auto-Pays in full every month and we never think about it.

I just checked Discover website, my average balance at the end of every month in 2015 was $1,500. We use it on everything except bills and utilities. So that's haircuts, entertainment, food, fuel, clothes, etc.. This is shocking to me.

[autoxer]

Okay, it's obvious I have a lot of reading to do on all of this. I do not track my income/spending at all, we just swipe the Discover IT card whenever we want something, it Auto-Pays in full every month and we never think about it.

I just checked Discover website, my average balance at the end of every month in 2015 was $1,500. We use it on everything except bills and utilities. So that's haircuts, entertainment, food, fuel, clothes, etc.. This is shocking to me.

I like to use Mint for analyzing my spending, but there are many different ways to do it. I was never good at using a budget to make the day to day decisions, but I can see trends in Mint and if any category starts creeping up, I can react. I noticed that my spending on food in 2015 was up dramatically from 2014, but I'm okay with that, because we have been eating a lot healthier. I also noticed that my spending on entertainment was down dramatically which was a conscious decision, because I let it get out of control in 2014.

I've been tracking net worth for 10 years, and tracking cash flow for 2 years, and those spreadsheets have really helped me ratchet up my savings rate. Once you have a clear long term goal, you don't feel like you are depriving yourself when you cut back on certain things, it just feels like you are empowered and making decisions about your future.

[Braje]

Term Life life insurance that pays a benefit in the event of the death of the insured during a specified term it is not permanent.

I would fund an IRA for your DW you can still do 2015 contributions up to 4/15/16.

You can get a much better interest with an on-line back acct.

You said you can't do principle only payment on the car. What happens if you just send in a larger than $300 payment?

[Seek_FIRE]

Leverage Technology to Meet and Exceed Financial Goals

The simplest way to reduce stress in your financial life is to build a sound plan with accurate projections. To this end, technology is immensely helpful. Whether you use a spreadsheet or a tool like OnTrajectory or some other website -- you have to get everything out in front of you so you can make smarter decisions. Once you do that, then implementing your disciplined retirement strategy becomes critical.

[DScott]

Leverage technology to meet and exceed financial goals!

The best advice I can give is to build a sound plan with accurate projections. To this end, technology is immensely helpful. Whether you use a spreadsheet or a tool like OnTrajectory or some other website -- you have to get everything out in front of you so you can make smarter decisions. Once you do that, then implementing your disciplined retirement strategy becomes critical. Good Luck my friend!