Savings questions!

musac15 · August 2013

Hi guys!

Ok, so...if you remember my last post at all - DH and I have now merged finances, paying all our of bills jointly, etc. It's going well, we've made a budget, and are trying to stick to it. We have about $1500-3000 a month "extra", depending on how much OT I work and bonuses DH gets.

The plan at this point is to

Create an E- Fund with about a $15,000 balance
Pay down student loans ($60,000...ugh)
Save for IVF
Pay off car (owe under 10K, 0% interest)
Put extra money towards mortgage

Does this sound like an acceptable order of things? My biggest worry is that we keep spending our E-Fund (on things we need, but not necessarily strictly emergent). What types of accounts do you keep your emergency fund in? Just a regular savings, or something that grows interest faster?

After the student loans and car are paid off, we will start saving more for retirement. Right now we both have 403B's through work, but that's about it. It is a pretty real worry though - DH is 37, I'm 27 - he just started saving last year at all for retirement. So we're trying to make up for lost time! That's probably a whole separate post, though!

Thanks ladies!

brij2006 · August 2013

Hi Musac15. I'm a regular on this board also. :-)

We are somewhat in your same boat, so this is what I would recommend.

- 3-4 months expenses in E-fund. Our E-fund is in a separate investment through our financial planner. This way we aren't tempted to borrow from it.
- Pay off car.
- Pay off student loans.
- Invest more.
- Safe for IVF.

Now, we aren't to the IVF point, but our fertility testing and treatments are 100% OOP. So we have been saving and paying for that as we go.
I would first focus on getting your E-fund to a comfortable amount. Even though Dave Ramsay says to have $1,000 in it, then focus on the debt. So others may disagree with me on this.
Once your E-fund is at a comfortable amount (say $5k), then apply that monthly amount toward paying off your car. Even though it's at 0%, it is likely a large enough payment to make a difference when it is applied toward your student loans next.
So next, snowball the car payment and e-fund amount toward your student loans.
Then I would beef up your investments. Mostly because you can re-do your monthly budget based on no longer having your student loans or car payment to pay for, and on having more of your paycheck taken out for retirement. This will also help you set up a new budget to allow for expenses of a child too. Without being at the expense of your retirement.

Lastly, save for IVF. I know it stinks to think that it could be a couple more years. But your H's age does not factor into fertility (unless it's MFI). So that isn't something to be too concerned about. I only say this, because you are 27. Which isn't an age to begin getting concerned about. So I would personally focus on the other debt first, to better set yourselves up for the future with children.

Another option would be to bump up your retirement now, then re-do a budget with the new monthly income. Especially with your H's age. We did this a few months ago, then re-did our budget and debt snowball. Since retirement is very important to us.

Good luck!

lifeonthehill · August 2013

Your plan looks good to me. 15 thousand sounds like too much to start off with for me as an E fund. We saved 3 thousand and have now started the student loans. But you need to save an amount that you are most comfortable with.

I agree with PP that maybe doing retirement now would be best. H and I are in our early 20's and are already looking forward to contributing to his as much as possible.

Good Luck!

musac15 · August 2013

Thanks for the thoughts! We'll aim for $5000 in our e-fund, then try to find some way to invest/save it so we don't keep borrowing from it. Our goal is 15K in the e-fund, because our expenses every month - all of our budgeted money to spend - is around $4500.

@brij2006 - The car payment is $400 a month (really it's 300, but we increased it to 400 to pay it off faster. You have a good point about the snowballing. I've been doing that with my student loans for the last year or so, but didn't really think about the car payment. DH's car is paid off, so the only other debt we have is the mortgage and student loans. We also have some insurance coverage for IF, so we can probably still carry on with that plan as is (IVF next summer if not already PG on our own).

I think we'll do e-fund & car...then increase our retirement contributions. I'd love to have student loans knocked down big down by next summer...but it means working a lot of OT...so be it, I suppose. I'm so tired of paying the damn things! Ugh! They started over $90,000 though..so at least I've seen some progress in the last 3 years.

Thanks guys!

Ducktale · August 2013

musac15 said:

Thanks for the thoughts! We'll aim for $5000 in our e-fund, then try to find some way to invest/save it so we don't keep borrowing from it. Our goal is 15K in the e-fund, because our expenses every month - all of our budgeted money to spend - is around $4500.

@brij2006 - The car payment is $400 a month (really it's 300, but we increased it to 400 to pay it off faster. You have a good point about the snowballing. I've been doing that with my student loans for the last year or so, but didn't really think about the car payment. DH's car is paid off, so the only other debt we have is the mortgage and student loans. We also have some insurance coverage for IF, so we can probably still carry on with that plan as is (IVF next summer if not already PG on our own).

I think we'll do e-fund & car...then increase our retirement contributions. I'd love to have student loans knocked down big down by next summer...but it means working a lot of OT...so be it, I suppose. I'm so tired of paying the damn things! Ugh! They started over $90,000 though..so at least I've seen some progress in the last 3 years.

Thanks guys!

Paying $30,000 in 3 years is a huge accomplishment and you should be proud of that. Everyone has different preferences on what to pay off first. If it were me, I would do the $5000 efund, the start contributing something to retirement, even if not much. I would also pay down the debt with the highest interest rate first (calculate how much money you spend on interest...it's a lot of money I feel as though I am wasting). But that again, is a personal preference. Dave Ramsey recommends taking pretty drastic measures to save money, that you may want to think about, considering your goals are somewhat on a timeline (IVF). But it sounds like you have made fantastic progress and are on the right path.

another KT · August 2013

Many people on this board think paying off your mortgage early is a good plan, but in general homes are worse investments than your retirement.

von1976 · August 2013

I would honestly put paying off the car last. I know it's a debt, but it's not costing you anything at 0% APR. The interest rate on the student loans would determine where I put them in order, but assuming they are somewhat low:

1. Build E-fund
2. Pay down student loans
3. Build IVF fund
4. Pay down mortgage
5. Pay off car

YMMV, but that's what I would do. And I would only pay the minimum on the car, there's really no reason to pay it off early. It goes without saying that you should be contributing to a retirement fund, and increase your contributions as you go, all while working on these other goals.

Ducktale · August 2013

another KT said:

Many people on this board think paying off your mortgage early is a good plan, but in general homes are worse investments than your retirement.

I agree with this. Depending on your interest rate, but I would be much more focused on your retirement account than paying your mortgage off early. I also agree that I would not worry about paying off a 0% loan at this time. Considering your other goals, that would be a low priority.

takmjs · August 2013

I would personally say, in this order:

1) Build up e-fund

2) Retirement

3) Student loans

4) Save for IVF

5) Extra on mortgage

6) Car loan

We have about half of our e-fund in our checking account (that gets a much better rate than savings for our bank), and half in mutual funds. That way, we have access to it quickly from the savings account, should it be something we need money out for immediately, yet the mutual funds are building up a higher interest rate.

I think retirement is super important, especially considering your ages. As you know, compound interest is very powerful, so start NOW. I would say try to do at least 10% of your pay, or as close to that as you can while still achieving these other financial goals.

I say go with the highest interest rate things first and leave the car loan for last. I also have a 0% car loan and have thought about paying it off, but have forced myself not to, because I want that money to gain interest in my own accounts rather than in Toyota's.

With saving for IVF, maybe put that amount in your emergency fund with the expectation that x-amount will be used for IVF (depending on how much you've saved for IVF). If you end up getting pregnant on your own, then it will be in your emergency fund.

katlizabeth · August 2013

I only skimmed answers here...but I'd figure out when you're planning to do IVF and put that as a priority-only because I think kids are a priority over paying off student loans early, mortgages, etc. just my two cents.

als1982 · August 2013

I'm fairly new but here's the order I would go, very similar to @takmjs:

1) Build up e-fund

2) Retirement

3) Car loan

4) Save for IVF

5) Student loans

6) Extra on mortgage

It's never to early to start planning and saving for retirement. With compounding interest, you can reasonably expect your contributions to double every ten years. So the earlier you start the better! Plus, once you add a child into the equation you're going to add one more major expense to the list. So, I would start prioritizing that now.

Wulfgar · August 2013

Here is what I would do since you already have 15k in emergency fund:

1) Car loan, with 1500-3000 you can have this paid off in 5 months or so.
2) Student Loans with half of the money and IVF savings with the other half.
3) Once student loans are paid off then attack a fully funded emergency fund and extra on mortgage.

It sounds like between the two of you, if one did lose a job you should be able to balance your budget without having a fully funded emergency fund for at least a little while.

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