Reply to What a self made multiple millionaire would do in your shoes to increase your net worth.

Forum Index » Money and Finances

Reply to "What a self made multiple millionaire would do in your shoes to increase your net worth."

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous]Current HHI is about 300.  220K from one salary, about 75K from the other.

We're both 36.  One child. Massive debts.

Currently have about 40K saved in cash.  Nothing saved for retirement.

Trying to pay down our school loans.  35K is at an 8% fixed interest rate, 40K is at a 6.3% fixed interest rate.  The remaining $200,000 in school loans (not a typo) is at an interest rate of about 3.5% on average.  All loans have already been consolidated at a lower interest rate when possible.  We also have a 720K mortgage.  Home is valued at 930K.  Mortgage is 5/5 arm with rate of 3%.  Refinanced this year.

Our current plan is to save until we reach 100K in cash (for emergencies) and then work on the 8% followed by the 6% loans.  We would like to have another child in the next year or so and want to have enough cash on hand should we need fertility treatments.  Because of my age we don't want to wait longer than a year to try for our second baby.  We think we need to save for retirement now too and for college for our child, but we've been putting any extra money towards loans and now liquid savings.  Not sure if this is the right thing to do.

One of us has the option of 401K but is not contributing under the theory that we're better off putting that money towards the student loans with the 8% interest rate.  Monthly, after our debts are paid (also have 2 car payments), mortgage and child care, we have little left over.  We're not saving for our child's college yet either.  He's 9 months old.

Thank you.
Would appreciate your advice.[/quote]

This one is hard.  It is hard because you don't have sufficient cashflow to do anything.  Its not the amount that you make or have left over, but the amount as a percentage of your income.  You made a mistake buying a single family house (or condo) of that value.  You couldn't afford it (and invest) and it will inhibit your ability to build wealth.  Of course you technically have enough money, but not enough to invest.  Housing cost is not a variable, so there is little I can do to help you in the near future.  Frankly your options are to earn more, sell the house to free up cashflow or accept that you will not be able to do any investing for a good 10+ years. Most people in your shoes would choose the last option.  I would choose the first.

That said, I can offer some general advice that will help (but not make you rich).  If your employer has a 401K match you must take it.  It actually makes sense to put into a 401K if the employer is matching if you have to take credit card cash advances (nowhere can you get 50%-100% rates of returns, like employers provide when they match).  Then the 8% loan, then the 6%.  Do not pay the other one more quickly.  The rate is way too low (in fact it would be a mistake to pay 1 penny more on this than what is due monthly).  I would also refinance from the 5/5.  I love the 5/5 product, but rates are too low to not do a fixed mortgage today unless you know you are going to move.

Children are very important (I have 2) and we had to do fertility treatments.  It is expensive.  This is ultimately about choices.  Being wealthy is a choice and it involves sacrifices.  Personally, I think you need to revisit your priorities.  You may decide that you are happy where you are, but you should revisit them to confirm.  I mentioned this to a prior poster about a rental property.  i told him to sell it if he wouldn't buy it as a rental today.  My advice is the same to you.  Based on where you are today, does it make sense to downsize the house, sell a car, have less children or delay financial comfort longer.  There is no right answer, but you should own your decision.
[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics