Hi I'm New! - AMA

labro · February 2016

So I started posting on the board here this week after a couple Knotties mentioned how active this one was. So much for The Nest being totally dead.

I'm 28 yrs old, married, and I work as a contract manager. H and I met online on a dating site about 5 years ago and hit it off from there. We've been married just over a year (our anniversary was in October). We have a dog (a lab/border collie mix named Cinders, she's my avatar photo) and we've been homeowners since June 2013.

Anyway, I'd say the thing H and I struggle with in our relationship is money. He's a big time saver and I like to spend. My dad was an officer in the military and while we didn't grow up exactly wealthy, life wasn't hard either, and I benefited from his excellent money management skills without learning a lot from them. (as a kid, I pay much better attention now!) H on the other hand had a pretty tough childhood - think food stamps, un and under-employment, instability. He came out of it with a very very strong mindset that he never wanted to struggle and fight like he saw his parents fight. Luckily my ILs are still together and have a strong marriage now, but I think what he saw growing up has really affected him as an adult. We've made a lot of changes and adjustments, most notably in the last year and I think I've come a long way as far as managing money, curbing my spending, and focusing on the long-term not the short term.

In 2015 we both completely paid off our student loans (goodbye 6% plus interest!) and in January, we increased our 401k withholding in order to meet the maximum amount currently allowed by the end of the year. I opened up a Roth IRA and I'm working on maxing it out for 2015 and then 2016. My goal this year is to pay off my car loan. We unexpectedly had to replace a car after I was in a major wreck in November. We had the option to use cash to buy the car, but instead put the cash towards paying off the remainder of our student loans and taking out a car loan instead because I was able to get a 0.99% interest rate on a car loan compared to the 4-6% interest rates we were paying on our student loans). Once the car loan is gone, I'm not sure what we'll do with the extra income. I'm debating between major housing renovations, putting more money towards the principle balance on our mortgage, investing? It's kind of a big question mark in my mind at the moment.

So anyway, ask me anything! I can't wait to get to know you all more!

brij2006 · February 2016

Welcome!

julieanne912 · February 2016

Hi!

smerka · February 2016

Welcome! I have a question. When you say you are maxing out your 401k, are you really putting $18,000 a year into it or just putting up to the employer match?

smerka · February 2016

I seriously don't mean it as obnoxiously as that sounded. I hear people say they are maxing out their 401k all the time and I have always wondered what they mean by that. Because if it is 18,000, I am obviously doing it wrong. And BTW, I love your dog

bmo88 · February 2016

Welcome! Sounds like you guys are off to a great start. Congrats on paying off your student loans.

I agree with @smerka, are you actually maxing it out at the $18,000 level or just the employer match? That will influence my suggestions.

Also, a few other questions:

Do you have an e-fund built up with cash for 3-6 months of expenses?
Do you have any other debt?
Where are you at with paying off your mortgage?

Xstatic3333 · February 2016

Hi! Sounds like you guys are doing great! Adorable pup, too.

hoffse · February 2016

Welcome!

Depending on the interest rate on your mortgage, I would invest the extra money after making sure you have a decent cash e-fund/cushion. I'm into debt leveraging when it makes sense though. The stock market has had a historical average return of 10% - obviously some years are awesome and some years are a bust (2016?), so it's not guaranteed. But when you're looking at a 3-4% mortgage, I would invest instead, especially if the mortgage interest lets you itemize on your tax return and deduct other things like property taxes and charitable contributions.

Actually, I would bump up charitable contributions before paying off a low-interest mortgage early.

The caveat to this being that if this is your forever house and you plan to retire early, making sure you mortgage is paid off at some point before you retire makes sense.

I'm not particularly debt-adverse though.

Edit: And yes, your dog is adorable!

labro · February 2016

@smerka No worries on obnoxious! I definitely didn't read your tone that way.

As to your's and @bm088's question. I mean maxing out as in we're both putting in 18k before employer match. My employer match is average...I think 50% up to 6% and H's is similar.

Yes we have an e-fund. It covers us for 3 months without changing our current spending, but would last at least if I quit making extra car payments, cut out all the fun stuff (eating out, entertainment, vacation, etc.). I think I'd like to increase our e-fund to 6 months based on our current budget (including all the "extra" stuff), but it's not strictly necessary.

Our only other debt is my car loan. I'm aggressively paying it down and should have it gone by December.

Mortgage wise I think we could be doing better because we've just been paying the minimum amount. We put down 20% when we bought the house though and our home has increased in value by $45k since we purchased it so I think we're ok here. Interest is somewhere around...3.2% I think? How sad is that that I don't remember?

We purchased our house at $175k (worth $230k on Zillow...not that I take that seriously but it's a nice number to see). Our current mortgage balance is $133k. Even considering the money we've put into the house since buying (new HVAC, lots of outdoor expenses), I think we're still at a net gain if we were to sell it for what the Internet says it's worth.

The thing is is I don't think our house is our forever home. I love it. I love the garden, and I've put a lot of work into making the yard and the interior of the home our own. But if/when we have kids, I don't think we'll have enough space. We do technically, it's a 3 bed/2 bath home, but I just don't see our home as being great for kids. I pretty regularly teeter totter between looking at selling our house in 3-5 years and buying another, or not selling it, but buying a second property and renting this one out. I think it has great rental potential mostly because our mortgage each month is so incredibly low and we'd be able to rent it for almost double what we pay in.

JoanE2012 · February 2016

Welcome!

hoffse · February 2016

It sounds like you guys are in great shape - IIRC your incomes didn't exempt you from contributing directly to a Roth, so maxing out the 401(k)s means you ought to be contributing plenty to retirement.

So I think it really depends on how debt-adverse you are. Personally, I haven't ever been able to get worked up about paying off a mortgage early. Believe me, I've actually tried to get into the ultra-debt-free mindset, and I'm just not able to mentally get there because the math doesn't work for me.

To figure out what your effective interest rate is, you have to back out the tax benefits too. H and I happen to be in a pretty high tax bracket, and we probably would not be able to itemize to deduct our state income taxes, property taxes, and charitable contributions if we did not have a mortgage. That makes our mortgage interest deduction even more valuable. So once I figured all that in, I was looking at such a piddly interest rate that I didn't see the point in paying it off early, provided we had a decent e-fund and/or job security.

We also don't plan to stay in our house forever. We're thinking 10 or so years, so we really don't have an incentive to pay off our mortgage early. All we would be doing is putting money in the "bank" of our house to roll it into a second house later.

Anyway, that's where I come from with it. Others on this board are the exact opposite and aim to have their house paid off very early. For them, the absence of debt is a goal worthy of giving up other uses for that money. Neither approach is necessarily right or wrong, it's just different strokes and all that.

hoffse · February 2016

I'll also add... even if you are a natural spender, you're pretty damn good at saving too! Give yourself some credit for that. I hope your H gives you credit for that too. It's not easy to work against your natural tendencies.

I also think that it's not worth making yourself miserable just for the purposes of being a "saver" if your savings are already adequate (or on track to be adequate) for your lifestyle and goals. Money exists to be spent either now or in the future, so I think it's OK to live a little when you can afford it.

In the same vein - and I swear I'm not trying to harp on this - I think you guys are in the position to start thinking about giving some (or more) away to organizations you feel strongly about. Obviously your family finances need to be in a good place before you start doing too much of that, but charitable giving is really important. By any measure you guys are financially successful - time to get that checkbook out!

blondie42107 · February 2016

Welcome!

PurpleBookmark · February 2016

Welcome!!

CuriousKiddosMama · February 2016

Welcome!!!! I would probably invest some and use the rest to pay off the mortgage or update the house. In a 2 income household a 3 month emergency fund of your normal expenses is a pretty good one to me, so I wouldn't add much to that just because of that. I may be a bit more interested in paying off the mortgage because we just did that, and I have to say it feels amazing. We are investing more for our retirement, for our kids college, and like hoffse said, we are able to live like no one else and give like no one else. Are you investing at least 15% of your income for retirement (sorry, don't remember numbers). If not I would up that and the do something for the house.

als1982 · February 2016

Welcome, and congratulations on doing so well financially! When it comes to thoughts on next steps, you're going to find a range of opinions here. Personally, we're working equally hard at becoming completely debt free (including our mortgage) by our mid-30s AND front loading our retirement savings. We don't have kids yet and are really good at avoiding lifestyle creep, which makes this easier. We want to work hard and save now so that in a few years we have more flexibility to make major lifestyle and career changes, or even retire early. I think a good place to start is to have some serious conversations about what you want your futures to look like and how you can use money as a tool to get there.

NicA617 · February 2016

hi! I love your dog. i have a black lab too, they're the best!

jessica490 · February 2016

Welcome!

brij2006 · February 2016

As far as the next steps, I would get even more aggressive at paying off the car and have it done even sooner.

Your retirement sounds like you're in good shape. Just be sure you're putting in at least 15% of your income.

Since your Efund is in tact, then I would plug away at the mortgage.

You guys are doing great, and I'm going to assume a great income as well. Kuddos.

Also, I'm anti-debt, so I will always recommend to get rid of payments. After that, give and save like nobody else.

kyrgyzstan · February 2016

After an inheritance last year, I could buy a house in cash, but I'd rather take on debt at low interest rates (including my car) and let my investment accounts ride. I could maybe get on board with one extra payment a year, but probably not beyond that.

labro · February 2016

Thanks everyone! Do we do pictures here? Here's a better/more recent photo of Cinders. She's such a goof!

@hoffse Charitable giving is something we definitely need to talk about. I give here and there to a couple organizations that are important to me but the amounts have been small. I think once we've reached the point of paying off the car loan, I can open up the conversation of creating a line item in the budget to donate once a month.

And thank you! I don't FEEL like a great saver. I had soooo many years of bad habits and H helped pull me out of that. I still don't feel perfect and the hard part has been having everything be so transparent. I got too used to not having to be accountable with my expenses and now I am and I still feel like I'm adjusting.

@als1982 I definitely feel you on wanting to front load now. I'd like to have the option if/when we have kids to not have to go back to work right away if I can. So I'm hoping to load up on retirement savings now to make up for potential years in the future where I'm either not saving to the same extent or at all.

csuave · February 2016

Welcome and I love the dog pictures!

We talk a lot about making sure you get the company match on 401K but given that charitable giving has been brought up I think it is a good reminder to find out if your company will match your giving and how much. It is a great way to make your charity dollars do even more good.

short+sassy · February 2016

Welcome to the board! It's great to see another Knottie convert jumping right in. You and your H seem like a good match, money-wise. He has led you to be more of a saver and I suspect you have led him to live a little more and enjoy some of your all's hard earned money now, instead of socking every dime away.

Love the pic of your dog. He is such a cutie! My puppers has a ball in her mouth almost any chance she gets.

Hi I'm New! - AMA

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