How is my neice doing financially? Please help! (pay, financing, credit)
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Hey all. Would like some advice to offer my neice. She severed ties with her parents years ago, due to some family drama. I have had kept in contact with her over the years and try to keep a watchful eye on her. She is 33, is in a committed relationsip for over 10 years. She does not want to get married to her partner as she has seen what it did for her parents.
Anyway, as I am not financially saavy, I thought you experts could offer your expertise.
She was a late starter in regards to savings, investments..etc.
Her(shes 34) and her boyfriend(he's 40)bought a home in the ATL area (townhome) back in 2004 for 220,000. As we know the real estate market is the way it is, she owes about 210,000 on the place.
She makes about 45,000 a year-boyfriend makes about 40,000. She has worked with ATL schools for 6 years. He has a small business but no health insurance, and no savings as she tries to save for both of them
She has about 20,000 in a fixed account for teachers (separate from state sponsored pension) She has another account (investement annuities diversified) about 6,000 in that. She contributes over 1200 a month now for about 10 months out of the year.
They went into a lot of debt when they bought their home (over 20,000) but that debt has almost been paid off--about 2000 in cc debt.
She has a car pymt about 350 a month. His car is paid off. Hers will be paid off in 16 months or possibly sooner once they pay of the credit cards, they plan to pay down car payment and be debt free minus mortgage.
I really dont know how to advise her. She asks me if she is doing well, and I do not know how or what to say. I am not one to talk as I have had a lot of financial problems in the past year.
One thing to consider, does she have an "emergency fund"?
Seperate from retirement and regular checking/savings to pay the bills. In case there is a medical, employment or other emergency. I always suggest clients have 3-6 months of expenses (mortgage, insurance, credit cards, car, gas, utilities, etc) in a seperate account that they do not touch expcept in cases of extreme need (NOT vacations or new toys). There are a lot of good no fee savings accounts like ING Orange that have a good interest rate.
Other than that, being nearly debt free and building that retirement fund seems to be going well. Its a great start for a 34 year old.
After the emergency fund (or if they already have one) they can start thinking of boosting savings for retirement or paying down the mortgage early. Hopefully they have no pre-payment penalty and they can save serious interest by paying the mortgage off early. If you need financial calculators to show how much those extra payments can save, send me a DM or email and I can send you a few.
What I have taught my kids
Basic #1 is the emergency fund for 3 months of expenses.
Basic #2 elimate all non-mortgage debt
Basic #3 extend emergency fund to 6 months of expenses
Basic #4 save for that next big purchase (vacation, car replacement, home downpayment if it was a situation where she was a renter, etc) so don't have to use debt when the time come.
Then agressively save for the rest (retirement, paying down mortage, etc).
Be sure she is maxing out her contributions to retirement (401k and IRAs).
To be honest, it sounds as though she's doing a hell of a lot better than most other people. I mean, she's a home owner, or will be soon enough. For a teacher, actually, she's doing pretty well. Definitely could see better habits in certain areas, but it's not like she's anywhere outside of the median.
great tips you all! Please keep posting. Once I get a good humber of tips I will print it out and give it to her. So, what is standard a 3 month emergency savings or 6 month?
great tips you all! Please keep posting. Once I get a good humber of tips I will print it out and give it to her. So, what is standard a 3 month emergency savings or 6 month?
3-6 depends alot of level of income, re-employment opportunities, current budget obligations, etc.
3 is mimimum and 6 would be ideal.
That is why I say 3 months for the initial goal, then go focus on debt reduction, then come back and gain the next 3 months to get you to 6.
Just think of your own life... if all income stopped today, how much would you need to survive and how long would it take you to find a job of equal pay?
A great reference is Dave Ramsey. His advice would line up real close to the various opinions you are seeing here. Here is the link to his website. Also, check out the local radio stations, he has a call-in advice program in most cities on the local talk show station. Very practical advice.
He is legitamate and not trying to sell useless things. There are many legitimate sources, but also many that just try to see - he is one of the legit voices.
She does not want to get married to her partner as she has seen what it did for her parents.
shes 34
her boyfriend(he's 40)
[They??] bought a home in the ATL area (townhome) back in 2004 for 220,000.
she [they??] owes about 210,000 on the place.
She makes about 45,000 a year-boyfriend makes about 40,000. She has worked with ATL schools for 6 years. He has a small business but no health insurance, and no savings as she tries to save for both of them
She has about 20,000 in a fixed account for teachers
She has another account (investement annuities diversified) about 6,000 in that.
She contributes over 1200 a month now for about 10 months out of the year.
about 2000 in cc debt.
She has a car pymt about 350 a month.
His car is paid off.
Hers will be paid off in 16 months or possibly sooner once they pay of the credit cards,
they plan to pay down car payment and be debt free minus mortgage.
Are they both on the home title?
Are the both on the mortgage?
What is the mortgage interest rate?
Have they considered refinancing?
Does she have disability insurance?
Does he have disability insurance?
Does she contribute $5000/year to a Roth IRA?
Does he contribute $5000/year to a Roth IRA or a traditional IRA?
Does she have life insurance?
Does he have life insurance?
He needs to get health insurance.
Tell her to get married for tax purposes. She can decide on a prenup.
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