Talk To Me About Insurance, Investing, Retirement, etc

[GWestphal]

Ok, so for me I make about 80K, maybe 100K if I get my promotion this month. I have no retirement, just a couple hundred in savings. No credit card debt. About 100k in student loans. A 6K used car that is paid, my camera, computers, various gadgetry are about my only physical assets. maybe $15k total.

Edit: more info, I'm almost 30, have 1 child who lives away, and and currently single. I imagine I'll get married sometime in the next 5 years if I meet the right gal. I live in the Midwest near a near a major metropolitan area, so housing is pretty reasonable compared to the coasts. I guess at this point I'd like to get free of any financial leashes (debt) and focus on building wealth so I can support my family (save for college and wedding for kiddo, maybe plan for for additional kiddos), and I like to travel. Do people go out in a blaze of glory? what does that entail? Living ritzy and doing a lot of coke before offing yourself at 55? lol I wouldn't mind pursuing my own businesses if I had no debts keeping working elsewhere.

Also, my current monthly expenses are about ~1500 but my housing is very cheap now. Realistically my monthly expenses would be safer to assume 2500-3000, so at my current salary that is 1000-1500 discretionary and if I get promoted it would be closer to 2000-3000.


Basically what should I do to handle my finances as smartly as possible from here on out? What should I save, invest, spend on? How can I make my money work for me the best?



Investing
+++++++++++++
Best Brokerages?

What account types? ..401K, IRA, Roth IRA, normal brokerage account, joint accounts made for children?

Should you always rollover 401ks into ira or other accounts as soon as possible to protect your money from being swindled if the company goes under? Also wouldn't rolling over into an account you control the allocation on possibly lead to higher yields and lower fees?

Health Savings Accounts? Sometimes you can invest in mutual funds with them I think???

Investing percent breakdowns? Stocks, bonds, treasuries, mutual funds, annuities, international etc

How much can or should I be investing? 5500 per year for IRAs, some amount in your 401K +employer match, etc

What other investing tools should be looked at 529s etc etc?

Student Loans
++++++++++++++++++++
I've got a lot of these about 100k, my only debt at this point. What's the best way to handle it? Minimum payments or hit it aggressively with everything you have and pay it off in 4-6 years. Should retirement, investment take priority over paying down student loan debt?

Estate Planning
+++++++++++++++++++
What documents should be made? Living Will, Directives, Dying Will
When should someone look at trusts?
Other things I don't even know to ask.


Life Insurance
++++++++++++++++
Is it all a rip off? Should you just invest your own money instead of buying life insurance? Most people have some term insurance? After about 55 term gets real expensive. Whole life I don't even know what to think about, it seems like a rip at all levels?

Medical, Dental, Vision Insurance
++++++++++++++++++++++++
Any tips to saving money here? Pay with an HSA if you have one? With deductibles at $2K for my employers plan, I don't even see it as a benefit, because I use less than that per year, so I would have to pay 100% anyway. Paying out of pocket make it cheaper instead of using insurance make it cheaper?



Auto, Homeowner, Renter's, Misc Insurance
+++++++++++++++++++++++++++++
Any tips or tricks to saving money here? I know bundling made my renter's free essentially in addition to my auto.

Banking
++++++++++++++++++++
Best Banks? Interest on checking and savings?
Should you keep 3 month emergency fund in liquid cash if the interest rates are essentially zero? that's money that isn't working for you.

Credit Cards
+++++++++++++++++
I personally have no credit card debt (Yay!), but what are the best cards. If you want to get the most out of credit which cards should you get? Are cards with fees ever worth it? What are perks about cards people sometimes don't realize or not utilize? Which cards to maximize money back, rewards, miles etc?


Misc
+++++++++++++++++
Flex Spending Accounts, when does this make sense? The use it or lose it aspect is very shady to me. I either spend my money tax free or I lose all of it? That seems super shady.


Housing
+++++++++++++++++
When to buy a house vs. rent? Is renting and investing the difference a better option? Is a condo with HOA ever a good investment. Modern loft condos are cooler looking but financially seem like a poor investment compared to a house. Those HOA fees never go down and mean your monthly payments are never zero.


Social Security Planning ( if it still exists)
+++++++++++++++++++++++++++
Since disbursements rise by 8% per year up to 132%, should you wait until 69 to start withdrawing? Should someone 30 or younger plan on not having social security?



If you have any other tips, tricks, points to add to the wealth management, estate planning, insurance tips to help people make/save money, please do so.

 

[Herr Kutz]

I put 80% into hookers and 20% into blow starting at age 20. I plan to lower hookers by 5% and increase blow by 5% every decade.

 

[dr150]

Go to the Bogleheads website.

Any possible flavor of question has been answered and discussed to the nth level.

 

[boomerang]

OP, are you a handy guy? If you need to do some plumbing or electrical work are you the type that digs in and gets the job done right and with ease? If your car needs brakes are you out there with the car jacked up taking care of that yourself? If you got a bad cut, are you the type to sew it up yourself?

To speed the process along I'm going to assume the answers to those questions is no. If that's the case I have an answer to your question.

Basically what should I do to handle my finances as smartly as possible from here on out?

Interview some financial advisors and get with one you feel comfortable with. Now, this advice is not met with any enthusiasm here because everybody is a self-made millionaire with multiple homes and six figure cars. (Which we all know is a bunch of shit as it applies to 99.999% if not 100% of them.)

My point, and I hope you've already got it, is that there are times that it makes perfect sense to turn to people that are experts in their field. Based on just the sheer number of questions you're asking, you are going to find on the internet, through whatever means you pursue, a multitude of answers that may or may not be good advice for your situation and will be guaranteed to confuse you and perhaps to a point where you just continue the status quo. This is your life and your future and you want to approach it in a serious manner.

Edit: You're hopefully not going to take this the wrong way. You are not telling us where you live, what your age is, what your marital status is, how many children you have and the list goes on. Nobody, can give you good advice to any of the questions you ask without knowing any of that along with a whole lot more. The fact that you didn't offer any of this information confirms that you need the help of people that do this for a living.

 

[OulOat]

Ok, so for me I make about 80K, maybe 100K if I get my promotion this month. I have no retirement, just a couple hundred in savings. No credit card debt. About 100k in student loans. A 6K used car that is paid, my camera, computers, various gadgetry are about my only physical assets. maybe $15k total.

Basically what should I do to handle my finances as smartly as possible from here on out? What should I save, invest, spend on? How can I make my money work for me the best?

You need to give more information about yourself and situation. How much money is currently available for investing (per month)? What is your life goals (do you want to retire and live a long time on your savings, or go down in a blaze of glory)? How many working years do you have left? Are you married/ with kids/ in the future? Without this information the rest we can only speculate while answering your questions below.

 

[vshah]

start by maxing out your 401k, or at minimum max out your company match.

put max amount in an IRA or Roth IRA every year. you have until april 15th to do it for 2013.

 

[Sho'Nuff]

I put 80% into hookers and 20% into blow starting at age 20. I plan to lower hookers by 5% and increase blow by 5% every decade.

No no no. You have it all wrong. He should START heavy on blow and light on hookers, and then gradually increase his hooker:blow ratio as he gets older.

Sheesh

 

[GWestphal]

more info, I'm almost 30, have 1 child who lives away, and and currently single. I imagine I'll get married sometime in the next 5 years if I meet the right gal. I live in the Midwest near a near a major metropolitan area, so housing is pretty reasonable compared to the coasts. I guess at this point I'd like to get free of any financial leashes (debt) and focus on building wealth so I can support my family (save for college and wedding for kiddo, maybe plan for for additional kiddos), and I like to travel. Do people go out in a blaze of glory? what does that entail? Living ritzy and doing a lot of coke before offing yourself at 55? lol I wouldn't mind pursuing my own businesses if I had no debts keeping working elsewhere.

Also, my current monthly expenses are about ~1500 but my housing is very cheap now. Realistically my monthly expenses would be safer to assume 2500-3000, so at my current salary that is 1000-1500 discretionary and if I get promoted it would be closer to 2000-3000.

 

[jagec]

Let's start with the simple stuff: what interest rate are you paying on those student loans? Your priorities change if you're paying 8% or 3%. One loan or several (can you pay off higher-interest loans first)?

Do you get an employer match in your 401k? There are VERY few cases where it doesn't make sense to contribute up to your 401k match. Doubly so if you have student debts, where you can use 401k contributions to reduce your AGI to the point where you can deduct student loan interest ($65k IIRC). Also max a Roth, every year. The Roth can double as your emergency fund since it can be withdrawn tax-free at any time (not everyone will agree with this philosophy).

You're on the right track...no CC debt, no overpriced house, no car payments, and a decent paying job. Start building your investments and paying off those student loans, and you'll be fine for retirement.

Yes, you want to wait until 70 before taking SS, unless you have very poor health and don't think that you'll last very long. Our generation will probably still see SOME SS, but it will likely be means tested and much less generous (read, you'll be dumpster diving for food in retirement if you rely on SS alone).

The NYTimes rent vs buy calculator is pretty good. You'd need to save up a down payment anyway...while it is still possible to buy houses with very little money down, it's a bad idea.

Unless you want to start playing the manufactured spend game, get a decent rewards card that has no annual fee. www.creditcardtuneup.com might give you some ideas.

Healthy people, especially high earners, do pretty well with a high-deductible health plan+HSA.

No need for life insurance unless you have dependents, or a mortgage that your SO can't afford on one income (try to avoid getting into this situation in the first place).

Estate planning is also somewhat unnecessary until you have dependents AND assets.

I have a boring portfolio...80% stock, 20% bonds, of stock 70% US, 20% international, 10% REIT (some would say that this is overweight). Most Vanguard, low cost index funds.

Banks...are you eligible for USAA?

 

[JEDI]

I put 80% into hookers and 20% into blow starting at age 20. I plan to lower hookers by 5% and increase blow by 5% every decade.

ding ding ding winnar!

and if u skip blow for a week and instead double up on hookers ala twin girls, you would have tiger blood and win for life!
-Charlie sheen

 

[GWestphal]

30K @ 3-3.5% and 70K @ 5-6.8%, one at salliemae, one through the state, and the 70k through directloan/myfedloan.

If I get the promotion I will have a 401k match.

Not eligible for USAA I don't think. You have to have a grandparent, parent, spouse or yourself in the military right?

 

[Vdubchaos]

Investing

Just do 401k for now until you have Emergency fund and get into habit of savings.

Few hundred dollars is NOT savings.

YOu should have 6-9 months of your expenses on the side as Emergency fund + savings.

Once you get there, think about "investing" until then DO NOT gamble.

Student Loans
++++++++++++++++++++
I've got a lot of these about 100k, my only debt at this point. What's the best way to handle it? Minimum payments or hit it aggressively with everything you have and pay it off in 4-6 years. Should retirement, investment take priority over paying down student loan debt?

YEs, Paying off Debt should be your priority. DO NOT say you don't have debt. ANY amount of money you owe that takes long amount of time to pay off = debt.

Student loans can be WORSE than Credit Card debt.

Kind of like Equity loans, people think 4-5% debt over 30 years is ok. No it's not. IT"S BAD, especially when you put your ENTIRE HOUSE on the line for 10k-30k........worse thing you can do. Even at 4-5% over 30 years you pay WHOLE lot of interest.

Focus on paying off your debt AND start saving for Emergency fund/savings.

Estate Planning
+++++++++++++++++++
What documents should be made? Living Will, Directives, Dying Will
When should someone look at trusts?
Other things I don't even know to ask.

I wouldn't worry about any of this in your current situation.

Life Insurance
++++++++++++++++
Is it all a rip off? Should you just invest your own money instead of buying life insurance? Most people have some term insurance? After about 55 term gets real expensive. Whole life I don't even know what to think about, it seems like a rip at all levels?

Is there anyone on this planet that relies on your income? Will they be in BAD situation if you die?

If you the answer is no, you don't need life insurance.

If you do need it, stay away from ANYTHING WHOLE LIFE OR UNIVERSAL CRAP.

Just get term insurance for the longest period possible!!!

Medical, Dental, Vision Insurance
++++++++++++++++++++++++
Any tips to saving money here? Pay with an HSA if you have one? With deductibles at $2K for my employers plan, I don't even see it as a benefit, because I use less than that per year, so I would have to pay 100% anyway. Paying out of pocket make it cheaper instead of using insurance make it cheaper?

you HAVE to have Medical/health insurance. Think of it as Bankruptcy protection. Even if you are healthy, you never know what happens next and when it does it doesn't take a lot to cripple you financially.

Dental and Vision insurance = rip off/not wroth getting (especially with yearly caps). This is why you have emergency fund or simply budget for 2-5k a year (if you don't use it > savings)

Auto, Homeowner, Renter's, Misc Insurance
+++++++++++++++++++++++++++++
Any tips or tricks to saving money here? I know bundling made my renter's free essentially in addition to my auto.

Don't buy new car every 2-3 years. As you car ages and gets to 3-5k range worth just drop the full coverage (assuming you are a good driver).

Not much to be saved here....

Banking
++++++++++++++++++++
Best Banks? Interest on checking and savings?
Should you keep 3 month emergency fund in liquid cash if the interest rates are essentially zero? that's money that isn't working for you.

Forget about "interest from checking/savings". Best banks = small local banks that have a good reputation.

Stay away from big banks (BOA, Chase, CITI etc)....for MANY reasons.

Credit Cards
+++++++++++++++++
I personally have no credit card debt (Yay!), but what are the best cards. If you want to get the most out of credit which cards should you get? Are cards with fees ever worth it? What are perks about cards people sometimes don't realize or not utilize? Which cards to maximize money back, rewards, miles etc?

Never get a card with annual fees.

Rewards are minimal but it is free money if you are willing to put in extra work/effort to manage it all. Also the key to rewards is discipline. Banks count on you not paying off your BALANCE every month so that Interest kicks in and completely makes your rewards worthless. So if you do get into it, make sure to pay off balance every month before interest!!!

Personally I don't use it at all.....

Misc
+++++++++++++++++
Flex Spending Accounts, when does this make sense? The use it or lose it aspect is very shady to me. I either spend my money tax free or I lose all of it? That seems super shady.

NO

Housing
+++++++++++++++++
When to buy a house vs. rent? Is renting and investing the difference a better option? Is a condo with HOA ever a good investment. Modern loft condos are cooler looking but financially seem like a poor investment compared to a house. Those HOA fees never go down and mean your monthly payments are never zero.

Stay away from HOA.

Don't buy an apartment (in the long run its a smaller investment return). And living around other people sucks.....

When to buy a house? WHEN YOU ARE READY!!!

Once you have your emergency fund and savings, start saving for 20% down payment. THAT'S when you are ready to buy a house.

Also DO NOT Let bank define your house budget. Just because they will lend you a million for a house, doesn't mean you SHOULD get one for a million.

DON'T think of your house as an investment. Approach it from "a place to live" LONG TERM......and hope it pays off, but don't count on it.

Social Security Planning ( if it still exists)
+++++++++++++++++++++++++++
Since disbursements rise by 8% per year up to 132%, should you wait until 69 to start withdrawing? Should someone 30 or younger plan on not having social security?

Yes, Social security will be gone by then and I'm not sure why we even pay for it now.

Max out your 401k contribution at work. Some people say to put in as much as possible...I don't. I simply put in as much as my employer will match (3%).

Social Security Planning ( if it still If you have any other tips, tricks, points to add to the wealth management, estate planning, insurance tips to help people make/save money, please do so.

Best way to save money is not to spend it. Limit your spending, don't buy BS and stick to your monthly plan/budget.

Best advice I can give you is build emergency fund/pay off debt and save.

Once debt is paid off and you have Emergency/Savings, focus on saving for a down payment (if house is what you want).

Get a solid car that will last and don't waste your money on a new one every 3 years like most Americans. It's an expensive habit.

Good luck

 

[jaedaliu]

I would start with paying off the 70k quickly, and the 30k stuff at minimum monthly. It's difficult to guarantee a rate of return on investments above 7%.

I'm a little surprised that at 80k/year you aren't getting any 401k match, but regardless, you should consider maxing out your 401k. It'll help you defer your taxes until you're older.

At your salary, retirement shouldn't be an issue. As long as you're pretty sure you want to stay in your area, I would save up for a down payment, buy a small/reasonably sized place, and once every few years when you've built up enough equity, leverage that to purchase a bigger place and renting out your old. Repeat until you're very happy with the size of your home, and start buying apartment buildings instead.

Slum lord is my ultimate goal. Up to you if you want to go that route. (this strategy was developed for my future investments in beach communities in California, where I feel very safe that housing will grow in value over time. It may not be as good if you're in (for example) Wichita, KS, where housing value doesn't appreciate)

 

[GWestphal]

@ vdubchaos,

With the housing, so say I rent an apartment until I can save up 20% down, that's say 24-36 months of 700-1200/month (16-28k which could be going into a house). Idk that seems like a lot to me, but does the finance stuff work out i.e.

100% financed + PMI +20 yr of taxes < 16-28K rent+ 80% financed +18 yr of taxes


Then about not worrying about trading or investing until emergency is set up, isn't that the magic of compound interest? If you have a 4 year headstart with compound interest at your endpoint there is a significant difference in value. Shouldn't that almost be your primary concern because putting say 50K in at 6% return will turn into 160k in 20 yrs, where as only 127k in 16 years.

 

[TwiceOver]

At that kind of cash you should be able to put $5k away relatively quick for an emergency fund, knock out your student loan in 2 years. After that begin putting 15% into retirement accounts. You said you are single but have a kid. Take out enough term life insurance that would make you happy knowing your child would have {insert whatever here} if you were to die. So, want your kid to go to college if you die and not walk out with $100k in student loans like his dad? Take out $100k term life, it's probably $10/mo.

Welcome to being an adult. You make a boat load of money, do smart things with it.

 

[GWestphal]

@TwiceOver,

Two years might be a tad ambitious. I have about 20-30k per year to work with so 3 might be doable but 4-5 would be more likely.

 

[Rakehellion]

IUL

 

[PricklyPete]

Aggressively pay off your debt than worry about investments. The only exception is if your company has a generous match policy on your 401k.

I wouldn't worry about life insurance until you have kids. It is likely your employer provides a policy equal to your salary. Just have enough emergency funds to cover your burial (10-15k).

 

[TwiceOver]

@TwiceOver,

Two years might be a tad ambitious. I have about 20-30k per year to work with so 3 might be doable but 4-5 would be more likely.

I guess with that attitude sure.

I'm sure you have child support to pay though so I'm sure you are getting raped there. I know a lot of people around here want you to game the system, why pay off a low interest student loan when you can make xx%/yr blah blah blah. Have fun with that, I'd personally rather be actually debt free.

 

[ponyo]

Just marry rich.

 

[Xonim]

You could post your details in reddit.com/r/personalfinance if Bogleheads seems to intimidating. Even though their advice is excellent, they get kinda carried away at Bogleheads and it can be intimidating if you're not familiar with all the terminology. /r/personalfinance is much more noob friendly.

Edit: Should mention you're going to want to list your average monthly expenses and the balances / interest rates of all debts if you're going to post in either place.

Edit 2:

Snip

So much bad advice in here I don't even know where to start.

 

[GWestphal]

What about buying a house and taking out a home equity loan for 110k to cover my student loans and put all my debt into one payment?

My thought is that since most of the loans are at 5-7% interest, but rolling it over I convert it into a 3-4% loan and make it dischargeable. So if bad times did hit, at least I would be absolved of the student loan debt if I lost the house.

 

[TwiceOver]

If you have the money to buy a house, why not spend it on your student loan?

 

[jagec]

What about buying a house and taking out a home equity loan for 110k to cover my student loans and put all my debt into one payment?

My thought is that since most of the loans are at 5-7% interest, but rolling it over I convert it into a 3-4% loan and make it dischargeable. So if bad times did hit, at least I would be absolved of the student loan debt if I lost the house.

You can't borrow arbitrary amounts of money from a house. You can only borrow against your equity...furthermore, rates go up if you borrow more than 80% of your home value (mortgage+HEL/HELOCs), and many banks won't go above 85-90%. If you're buying a house, unless you get an AMAZINGLY good deal, your equity at the time of purchase is roughly equivalent to your down payment.

 

[GWestphal]

Ahhh, ok that makes sense. I'll have to keep my eyes peeled for a house with some easily realizable equity plus a good price.