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For such a question I should probably get "professional advice"...but I thought people here might be able to at least help with some opinions.
I would like to know when and how we could get to a point where we could feel free to invest more aggressively - perhaps a rental, even stocks...anything that would allow us to see how money can work for us (if only a little bit) instead of us working for the money.
We are looking at a financial situation that looks largely like this:
1. First, we both stayed in grad schools forever - for hardly lucrative professions. 47 (husband), 39 wife, respectively.
I never had a student loan, my husband had a bit but paid it off years ago. As such, we started late with the savings for retirement.
We currently have only about 120,000 in retirement plans between the two of us. (We do expect to have a bit of inheritance from our parents later in life, maybe 300,000-400,000 total,....but we are not taking this into account).
165,000 family income, 2 kids.
No debt.
Will most probably soon buy a house with 20% down and a mortgage of about 1300 monthly, planning to pay double on it so we can pay it off in 8-10 years max.
I am currently contributing 15% in my retirement plan (including employer matching) and husband contributes 10%.
We have about 22,000 in a 529 for our kids and 43,000 in cash (savings) which is set aside for the down payment on a house in a year and a half or so; by then we should have significantly more.
Our monthly expenses (included the yearly ones spread out over 12 months) are in such ways that at the end of the month we are left with about 3500-4000 $ discretionary income.
Once the house is bought, we will again have much less cash set aside, but assuming the income flow will remain the same (which is likely to)...
I wonder when we could get to a point where we could invest more aggressively, above and beyond the safe investing in retirement plans (like mutual funds, etc) or 529's.
For now, my little dream is to just buy a rental (here or overseas) and simply see it churn some money back to us - as little as it might be.
I would never dream of quitting my day job - which happens to be one I love, except that the load is often way more than I care for.
However, I would like to get increasingly less dependent on an employer. I hate the idea of a "full-time salary" in exchange of the most precious commodity I own - my time on this Earth. I love spending it smelling the roses more than working on the job I love. I also don't believe in the saying "find a job you love and you'll never have to work a day in your life".
I found that regardless of how much you love an occupation, if it is done under an employer who will invariably stick heavy loads on you for efficiency-related purposes - you will have enough of it soon enough.
So for just once in life, I would love to see some money coming from something that simply doesn't require my presence.
Any opinions? Am I expecting too much?
Doing or thinking anything wrong? How could we do better?
Thank you much for any opinion you might be able to share with us.
Sounds like you have tax deferred retirement accounts that have a six figure balance and you actively contribute to. Since you are both at least 20 years away from retirement why wouldn't a portion of your assets intended for retirement be invested more aggressively? Most tax deferred savings vehicles offer at least one broad stock index fund, throw at least half your account balance in there and call it a day.
I agree the time is now to start looking at an alternate income stream. From your post it seems you are in a good position. You have no debt, a nice start in retirement savings, a good chunk of cash in the bank and plans for your children's future education costs. It sounds like you just need to get over the mental hurdle of "investments are risky."
If you're looking for an investment property, now is a good time to buy IMO. Prices are depressed and rents are high. I don't see the prices fluctuating much because of the job economy. Jobs are the drivers for people to buy homes. If they're not comfortable with their job scenario, they won't buy and instead choose to rent. Hence the rental market has increased.
In 2009 I bought my first investment property. It has been cash flowing nicely and I'm getting about a 12% return on the money I invested. There were some bumps early on, but it's doing well now. Prior to buying, I did a lot of research to make sure I knew what I was getting myself into. Like anything new though, the hardest part was the first step. Once I made the decision that this was the right move, it was full steam ahead. Looking back, I'm glad I made the jump and I would definitely do it again. I've been looking at online listings just to keep me informed of what's going on in my local market, because I plan on buying another soon.
My advice, whatever you're looking at doing is to first research it. Go to your library and read up and become educated in the subject matter. Speak to others who have done it and learn from their experience. Then put a plan together, because fail to plan - plan to fail. Run the numbers to make sure it will be profitable and leave yourself an exit strategy in case your well laid plans don't pan out.
Also I would look at contributing more to your retirement plans. For your age, it doesn't seem like enough. I'm not sure if your current jobs has a pension plan, but a larger sum in your retirement plans will definitely supplement a pension and social security.
Syracuse, one of the things we did was auto-invest. Take 2500 bucks of that 43000, and send it to a brokerage house and buy a mutual fund that's sort of middle of the road. My favorite is OAKBX, Oakmark Equity and Income fund.
And every month, automatically deposit a set amount -- say 250 -- into that fund. Set it, and forget it.
For such a question I should probably get "professional advice"...but I thought people here might be able to at least help with some opinions.
I would like to know when and how we could get to a point where we could feel free to invest more aggressively - perhaps a rental, even stocks...anything that would allow us to see how money can work for us (if only a little bit) instead of us working for the money.
We are looking at a financial situation that looks largely like this:
1. First, we both stayed in grad schools forever - for hardly lucrative professions. 47 (husband), 39 wife, respectively.
I never had a student loan, my husband had a bit but paid it off years ago. As such, we started late with the savings for retirement.
We currently have only about 120,000 in retirement plans between the two of us. (We do expect to have a bit of inheritance from our parents later in life, maybe 300,000-400,000 total,....but we are not taking this into account).
165,000 family income, 2 kids.
No debt.
Will most probably soon buy a house with 20% down and a mortgage of about 1300 monthly, planning to pay double on it so we can pay it off in 8-10 years max.
I am currently contributing 15% in my retirement plan (including employer matching) and husband contributes 10%.
We have about 22,000 in a 529 for our kids and 43,000 in cash (savings) which is set aside for the down payment on a house in a year and a half or so; by then we should have significantly more.
Our monthly expenses (included the yearly ones spread out over 12 months) are in such ways that at the end of the month we are left with about 3500-4000 $ discretionary income.
Once the house is bought, we will again have much less cash set aside, but assuming the income flow will remain the same (which is likely to)...
I wonder when we could get to a point where we could invest more aggressively, above and beyond the safe investing in retirement plans (like mutual funds, etc) or 529's.
For now, my little dream is to just buy a rental (here or overseas) and simply see it churn some money back to us - as little as it might be.
I would never dream of quitting my day job - which happens to be one I love, except that the load is often way more than I care for.
However, I would like to get increasingly less dependent on an employer. I hate the idea of a "full-time salary" in exchange of the most precious commodity I own - my time on this Earth. I love spending it smelling the roses more than working on the job I love. I also don't believe in the saying "find a job you love and you'll never have to work a day in your life".
I found that regardless of how much you love an occupation, if it is done under an employer who will invariably stick heavy loads on you for efficiency-related purposes - you will have enough of it soon enough.
So for just once in life, I would love to see some money coming from something that simply doesn't require my presence.
Any opinions? Am I expecting too much?
Doing or thinking anything wrong? How could we do better?
Thank you much for any opinion you might be able to share with us.
I think the sentence that for once in your life you want to see money that does require your presence.Something for nothing is accompanied by high risk usually. Have you ever done a budget or plan on retirement. Its work. One of the best things i have heard lately is the guy who said most people spend more time plannig their athan on fiancial matters.Good Luck
I think the sentence that for once in your life you want to see money that does require your presence.Something for nothing is accompanied by high risk usually. Have you ever done a budget or plan on retirement. Its work. One of the best things i have heard lately is the guy who said most people spend more time plannig their athan on fiancial matters.Good Luck
Yes...for once in my life I'd love to get something for "nothing".
Though all those people with capital gains in their hands wouldn't exactly agree that the gains are for nothing. They would tell you that they busted their butt and denied themselves a variety of things/experiences at some point in their lives to amass the capital that is now giving them something for nothing. (save of course those who were born with serious nest-eggs).
I know virtually nothing about investing, other than that it's good to have extra cash lying around so that you can invest it as opposed to keeping it in a savings account. I did however see my parents buying a few real estate pieces in their life which now supplement the miserable pensions they ended up with from the jobs they worked under a communist regime. Those were very smart moves they made as they are now doing quite well. Had they not bought that real estate they would be virtually screwed today.
I find it amazing to see how a few apartments that they own today can generate income without them lifting a finger (the assumption is that they lifted enough fingers when they earned the money to buy the apartments).
They are nowhere close to rich but they are OK in old age because of these apartments. And yes, they are overseas.
I agree the time is now to start looking at an alternate income stream.
It sounds like you just need to get over the mental hurdle of "investments are risky."
If you're looking for an investment property, now is a good time to buy IMO. Prices are depressed and rents are high. I don't see the prices fluctuating much because of the job economy. Jobs are the drivers for people to buy homes. If they're not comfortable with their job scenario, they won't buy and instead choose to rent. Hence the rental market has increased.
In 2009 I bought my first investment property. It has been cash flowing nicely and I'm getting about a 12% return on the money I invested. There were some bumps early on, but it's doing well now. Prior to buying, I did a lot of research to make sure I knew what I was getting myself into. Like anything new though, the hardest part was the first step. Once I made the decision that this was the right move, it was full steam ahead. Looking back, I'm glad I made the jump and I would definitely do it again. I've been looking at online listings just to keep me informed of what's going on in my local market, because I plan on buying another soon.
My advice, whatever you're looking at doing is to first research it. Go to your library and read up and become educated in the subject matter. Speak to others who have done it and learn from their experience. Then put a plan together, because fail to plan - plan to fail. Run the numbers to make sure it will be profitable and leave yourself an exit strategy in case your well laid plans don't pan out.
Also I would look at contributing more to your retirement plans. For your age, it doesn't seem like enough. I'm not sure if your current jobs has a pension plan, but a larger sum in your retirement plans will definitely supplement a pension and social security.
Oneasterisk,
First, thank you for your input. The reason why I talked about "one day" is because I don't think we are quite at the point where we could go ahead and simply buy an investment property. We are still saving for the down payment on a house...so we will need to add to those 43,000 in cash over the next couple of years or so, so we can HAVE at least 20% down or else. Or else the bank will surely not give us a loan because we DO have a short sale behind us. Before this mess, which was abruptly caused by my husband losing his job to the recession, having to move the family cross-country, not being able to sell our then townhouse and seeing it depreciating like crazy under our very own eyes...so before that, we had a phenomenal credit score.
Once the short sale happened it dropped, of course...but we hope to get it back up soon given that we have absolutely no debt of any sort, we always pay everything in full, and we live significantly beneath our means.
When we can legally buy a house again (in a year and a few months) we plan on buying a house that will be a lot below what we could qualify for.
Right now calculators tell us we could qualify for a max of 800,000 (which is, of course, insanity). We will be looking at 300,000 with 20% down. Of course, we don't know what kind of interest rate we would get or if the bank would even want to give us a loan at all given the short sale experience in our past...but what we are doing now is the best anyone could do to fix the "blemished" past.
We do plan to increase our contributions to our retirement plans starting Fall - but I wanted to know if in the meantime, I could do something beyond setting aside safely for retirement; and yes, more aggressive.
I don't think we have enough cash lying around to invest aggressively (such as buying an investment property...you need lots of cash down), but it sounds like taking a little chunk from the money currently reserved for the down-payment on the house, and investing it like Tallysmom suggested, with continuing monthly contributions... that might be a little step ahead for now.
If you are familiar with rentals, I would say go with what you know!
DON'T have any rentals away from where you are living! You have to pay contractors for everything or someone to take care of things. Sometimes it is a simple problem that you can resolve yourself. Maybe a clogged drain on a holiday weekend and a plunger will do the trick. Maybe you need to give a key to a renter or whatever.
If someone in your family is "mechanical" and can fix things, all the better! Repair people charge $100 just to knock on your door these days (minimum charge).
Also I would advise you to get new or fairly new rentals. The EPA is hot on the trail of homeowners and this is scary! Old homes have asbestos, lead paint, and who knows what all. They may require an "environmental cleanup" to scrape old paint, replace a floor which contains asbestos, or do other work.
Also if you get a newer rental, it will have better insulation and lower utility costs. This will save the renters money - then they can more easily pay their rent.
And it costs a young fortune to remodel anything these days. $10k for a bathroom, $20k for a kitchen, or more. Go to Home Depot (Home Deplete Your Bank Account) and look at the prices.
Also check the rentals in your area. See what price range there is a shortage of. See which rentals are sitting empty.
Then run a background check on any potential renter. If you get a druggie in there who runs a meth lab, you get another environmental cleanup! I've heard of landlords tearing down the house because it was cheaper than a cleanup.
Search google.com for the words...
tenant screening
Also you may have a local landlords association. They get together and share lease/rental forms, tenant screening information, and other handy tips for landlords. Search google.com for your state and the words landlord association. Like...
Sounds like the OPs have done well for themselves and family. I must say, $300k-$400k inheritance strikes me as more than "a bit of an inheritance!" although it's wise of them not to count on it or count it in.
My thought, sometimes there isn't a real good place to make money and you have to just circle the airport. I agree than owning rental property isn't for everyone (sure wasn't for me, as I learned I don't like "the complication factor" in life) but if OPs can accept complications and do the homework suggested by more experienced people, it might be a good idea.
Sounds like the OPs have done well for themselves and family. I must say, $300k-$400k inheritance strikes me as more than "a bit of an inheritance!" although it's wise of them not to count on it or count it in.
We are certainly not counting on that. We both love our parents (and our in-laws too, funnily enough :-)) and we want them around as long as possible. That amount would probably be closer to 300,000 than 400,000, and might even be less by the time it ends up in our hands...who knows... but it doesn't even matter. It may or may not be there later in life for us - only time will tell.
I don't know much about real estate either but for whatever reason, it sounds like the most secure, tangible investment for me. Maybe because I see my parents doing OK in retirement exactly because of those few units they rent out. I also know some friends of theirs who came to the US in their late 40's and did amazingly well by buying some apartment units...
Then again, our current jobs are very nice in a variety of ways - though none pays spectacularly - but between the two of us it's something; so we would have to make sure the investment doesn't suck time and energy away from our current jobs that feed us, all while allowing some left over every month.
I just wanted to feel like we are starting to build a bit of something ourselves. We stayed late in school for largely non-lucrative fields and most of what we have accomplished so far - which would probably not be all that much for many - is because I am frugal. My American husband is a little less so (after all, he grew up in the age of spending and credit cards) but he slowly got on board over the past 6-7 years.
I didn't know anything about investing (I still don't) because I grew up under communism, but I DID HAVE the minimum common sense to figure out that there must be something fishy when you charge credit cards to your heart's content just because they allow you to.
I also realized that those years under communism had largely two types of effects on women my age: some went ballistic consumers when the markets opened and became high-maintenance, gold-digger types...others kept the mindset they grew up with which allowed them to understand that life can be perfectly beautiful with just basic necessities, do-it-yourself approaches, cooking from scratch, and many other cheapskate strategies. I chose the latter path and it is amazing how handy all those years of communism came in when we figured out we need to accelerate savings and just say no to fancy stuff.
It may perhaps be best to just open an account with a brokerage firm - my husband says Ameritrade ?? - and start from there...
I still don't know what they mean when they say that you should manage your own money instead of paying brokerage fees. Would I still be paying brokerage fees with a discount broker?
I certainly would not have the time to check the money and move them all over every day/week, etc. I want to forget about them but still see them growing (well, hopefully). I am reading more now so I can understand.
My field is so far away from the world of business and money management ...(that's what humanities and social sciences will do to you)...that I often feel handicapped about the whole thing.
The only practical thing I was able to take out from the years I spent studying is that this world is set up in such ways that if you don't learn to "join them" you're in trouble because the "beat them" approach doesn't work; and you will end up being "beaten by them", often severely.
Last time I checked on the "Occupy Wall Street" revolution, it was still pitiful.
Thanks so much again.
Last edited by syracusa; 04-16-2012 at 07:13 AM..
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