What are your most effective investment strategies

[Jackal1]

No matter what happens to the tax laws and rates there is one guarantee. Saving now will alway lead to more then not saving.

[bababua]

Honestly tons of great ideas. My plan has always been diversification. 401k, Roth, CDS, IBonds and always save a little more then you think you can. Stay consistent if at all possible. Depending on your age break up your savings into a pie and put them in one of the mentioned savings strategies.

[Annikan]

You have to pay yourself first each month. It's difficult when you have kids, I know that first hand. But it doesn't pay to stretch yourself out financially on all that extra tutoring and classes and the most expensive summer camps, if you aren't saving for your own retirement. Also, I'm just guessing based on the budget you posted previously--you probably make too much to contribute to a ROTH IRA--If you make more than 186,000 in a year, you can't use a ROTH. You can use a traditional IRA, but that's similar to a 401K in that you pay taxes when you withdraw at retirement. I don't know if you get bonuses in your industry, but my husband does and it's significant compared to his base salary. We force ourselves to live off my salary + his base, although it's very vert tempting to include his bonus when making financial decisions like how much house we can afford, how much we spend on vacations and our kids, etc. When he gets his bonus (usually at the beginning of a new year), we sit down and make a plan for the entire amount.

This year, we allocated as follows...this is the after tax actual $ amount:

- 1/5 on home improvement (we have some updating we need to do so we're doing 1/2 this year and will do the other 1/2 next year)
-1/5 on contributions to the kids 529s
-1/5 on investments (since my husband works in banking, he has limits on types of investments he can do)
-we pay his 401k max in full so he has a slightly higher paycheck for the rest of the year
-we pay 1/5 into the house. We're trying to get the house paid off in the next 5 years. In the past 5 years, we've paid off 50% of it because we put a big chunk in every year at bonus time.

We already have cash savings for 6 months-1 year of unemployment, so we don't need any more savings....but if you don't have at least 3 months, you need to do that. We don't have any car or student loan debt, just the house, so if you have debt of any kind, your formula might vary, especially if you have any high interest debt.

We are pretty frugal people. And living in a high COL area, it is so tempting to want to blow part of that on a week long trip at Beaches in Turks and Caicos, or to get a house that's maybe a little more expensive than we can comfortably afford. I would like to have an LV handbag at some point in my life. My husband loves nice cars, and used to have a BMW m3 before we had kids. He would love to have one again, or a Tesla. But we've agreed as a couple that being financially responsible is more important and now that we're in our late 30's, I can really see that the next years are going to fly by and we want to be prepared.

My dad was a saver, and always lived frugally. We would always encourage him to live it up more but he just wanted to save for the future. Well, he got cancer and passed away at 57. My brother and I were in college, I still had a sister in HS, my mom made only 1/3 of what my dad made. We could have been financially devastated. But luckily, my dad had been frugal. He was able to leave my mom enough to continue supporting us, and herself. And now he's been gone 14 years and my mom is retired and still okay financially due to my dad's frugality. That experience really taught me a lesson. I would rather drive a beater car every day of my life and be able to ensure my kids are okay, than to have designer handbags and a luxury car now. You know? And we aren't rich, so having both is not an option, haha. You seem like you are in a similar income range.

[ansky]

Originally Posted by Annikan

We already have cash savings for 6 months-1 year of unemployment, so we don't need any more savings....

Wow this is a first. I can't recall ever hearing the words "we don't need any more savings". You need to consider more than just unemployment living expenses. How about major medical expenses that insurance may not cover? How about a car? I was involved in a car accident last week and my car was totaled. It was an old car so the amount the insurance paid out for it was minimal. I now have a $25,000 expense for a new car that I was not planning for. Luckily I'm a good saver and can buy the new car in cash.

[Annikan]

I don't want to put too much info into a public forum on City-Data, but we have enough in cash to where, yes, any more just sitting in the bank and not making us money somewhere else in investments doesn't make sense. If we somehow needed more than the amount we have saved, we'd sell stock.

Yes, we are prepared for needing to buy a car (we only buy cars cash), or a large medical expense, or a huge house related expense.

[foodyum]

I would add life insurance to the mix. Especially if 1 spouse makes the bulk of the income. Would have been prudent for annikan's dad unfortunate illness. 6 months- 1 year in cash savings should be enough with 25k being a drop in the bucket for a car.

[bababua]

Originally Posted by Annikan

You have to pay yourself first each month. It's difficult when you have kids, I know that first hand. But it doesn't pay to stretch yourself out financially on all that extra tutoring and classes and the most expensive summer camps, if you aren't saving for your own retirement. Also, I'm just guessing based on the budget you posted previously--you probably make too much to contribute to a ROTH IRA--If you make more than 186,000 in a year, you can't use a ROTH. You can use a traditional IRA, but that's similar to a 401K in that you pay taxes when you withdraw at retirement. I don't know if you get bonuses in your industry, but my husband does and it's significant compared to his base salary. We force ourselves to live off my salary + his base, although it's very vert tempting to include his bonus when making financial decisions like how much house we can afford, how much we spend on vacations and our kids, etc. When he gets his bonus (usually at the beginning of a new year), we sit down and make a plan for the entire amount.

This year, we allocated as follows...this is the after tax actual $ amount:

- 1/5 on home improvement (we have some updating we need to do so we're doing 1/2 this year and will do the other 1/2 next year)
-1/5 on contributions to the kids 529s
-1/5 on investments (since my husband works in banking, he has limits on types of investments he can do)
-we pay his 401k max in full so he has a slightly higher paycheck for the rest of the year
-we pay 1/5 into the house. We're trying to get the house paid off in the next 5 years. In the past 5 years, we've paid off 50% of it because we put a big chunk in every year at bonus time.

We already have cash savings for 6 months-1 year of unemployment, so we don't need any more savings....but if you don't have at least 3 months, you need to do that. We don't have any car or student loan debt, just the house, so if you have debt of any kind, your formula might vary, especially if you have any high interest debt.

We are pretty frugal people. And living in a high COL area, it is so tempting to want to blow part of that on a week long trip at Beaches in Turks and Caicos, or to get a house that's maybe a little more expensive than we can comfortably afford. I would like to have an LV handbag at some point in my life. My husband loves nice cars, and used to have a BMW m3 before we had kids. He would love to have one again, or a Tesla. But we've agreed as a couple that being financially responsible is more important and now that we're in our late 30's, I can really see that the next years are going to fly by and we want to be prepared.

My dad was a saver, and always lived frugally. We would always encourage him to live it up more but he just wanted to save for the future. Well, he got cancer and passed away at 57. My brother and I were in college, I still had a sister in HS, my mom made only 1/3 of what my dad made. We could have been financially devastated. But luckily, my dad had been frugal. He was able to leave my mom enough to continue supporting us, and herself. And now he's been gone 14 years and my mom is retired and still okay financially due to my dad's frugality. That experience really taught me a lesson. I would rather drive a beater car every day of my life and be able to ensure my kids are okay, than to have designer handbags and a luxury car now. You know? And we aren't rich, so having both is not an option, haha. You seem like you are in a similar income range.

Sounds like me. Good stuff you are obviously on the right path as I hope I am. Looking to retire at 55 and I seem to be on my way.

[Rollingon]

Thanks Annikan. Your words resonate with my beliefs.

[CaptainNJ]

Originally Posted by foodyum

I would add life insurance to the mix. Especially if 1 spouse makes the bulk of the income. Would have been prudent for annikan's dad unfortunate illness. 6 months- 1 year in cash savings should be enough with 25k being a drop in the bucket for a car.

yes, once you have children then it is on you to do what you can to at least get them to college and preferably further. i have 2 20 year term life insurance policies. they were cheap and will make sure that my family is covered in case i drop dead.