Hi all - long time lurker of GBCN and this forum. So thankful for the advice you all offer! Anyhow, I will be divorced soon (hopefully). And once it’s finalized will be working on consolidating my investments (retirements from various jobs), paying down my debt (have a small amount a result of moving out of my house to leave my ex), and doing something with the money I will receive from the house sale. Will also be looking into creating a will for myself. Anyhow... what are your go to resources for a step by step guide for financial planning? I am a former vanguard employee so very familiar with retirement strategies but I want to make smart decisions with building up an emergency fund, paying off my car, investing for shorter term and paying off my debt. I know Suze Orman and Dave Ramsey - not sure who would be provide the best advice/book for this situation? Sorry that’s so long... and thank you!
Like all advice in life I pick and choose for various sources on what works best for our family. I like Dave, but he is pretty extreme. For example, he would say halt retirement investments until debt is paid off (not mortgage debt). He is great if you are in extreme debt payoff mode, which we have been in the past, but are not currently in it.
I've read Suze, and I can't remember much about it. It was a while ago.
I've been listening to the How to Money podcast, and I have been enjoying them. They are married with families- not sure if that would bother you with the divorce. They are in their early 30's and don't make a ton of money, but adequate. So I like that they are not so extreme.
David Bach's Smart Women Finish Rich may have some tips you can use. It's been a long time since I've read that book though. I believe he just updated it and came out with a more recent version.
If you have debt and no emergency fund, I would recommend working to put at least 1 month of expenses into savings and then snowball your debt. And depending on the car loan %, it may be better to just pay it on time and make more in the market.
Then once you have the consumer debt paid off, I recommend having money funneled into savings automatically. It's great if you can do this through your employer as an allotment so that way you never see.
Most people will say not to look into investing until you have 6 months of income saved.
A lot of people will recommend You Need a Budget/YNAB if you're looking for a budgeting program.
David Bach's Smart Women Finish Rich may have some tips you can use. It's been a long time since I've read that book though. I believe he just updated it and came out with a more recent version.
If you have debt and no emergency fund, I would recommend working to put at least 1 month of expenses into savings and then snowball your debt. And depending on the car loan %, it may be better to just pay it on time and make more in the market.
Then once you have the consumer debt paid off, I recommend having money funneled into savings automatically. It's great if you can do this through your employer as an allotment so that way you never see.
Most people will say not to look into investing until you have 6 months of income saved.
A lot of people will recommend You Need a Budget/YNAB if you're looking for a budgeting program.
Great advice, thank you! I currently pay more on my car than the minimum but with the money I’ll be getting I’m not sure if it makes sense to pay it off fully or invest the money instead and continue paying on it like I am. I am close to having 1 months worth in my emergency so again balancing if I should bump that up with house proceeds or not.... And additionally I feel like I shouldn’t pay my credit card off with house proceeds but it’s just my gut! Thanks for the resources too!
Like all advice in life I pick and choose for various sources on what works best for our family. I like Dave, but he is pretty extreme. For example, he would say halt retirement investments until debt is paid off (not mortgage debt). He is great if you are in extreme debt payoff mode, which we have been in the past, but are not currently in it.
I've read Suze, and I can't remember much about it. It was a while ago.
I've been listening to the How to Money podcast, and I have been enjoying them. They are married with families- not sure if that would bother you with the divorce. They are in their early 30's and don't make a ton of money, but adequate. So I like that they are not so extreme.
Great advice, thank you, I will check out the podcast.
I know that Dave Ramsey has some extreme ideas, and honestly I think his advice can be damaging in some cases b/c it doesn't make sense mathematically, but at the same time it his Baby Steps can be very helpful for people in various circumstances, and I still would take a look at them if I were in your shoes. I recommend that esp because it doesn't sound like you have a major debt issue, and that you're more wondering in what order to tackle several very manageable goals.
At the end of the day, there's not a right or wrong order. There's just the order that works best for you, and I think a lot of that depends on the psychology of money. For someone who struggles to keep working toward financial goals, a different order may be better than for someone who is dedicated and doesn't have problems sticking to a long term plan, etc.
Best of luck to you as you wrap up your divorce and sell your house. It sounds like you've had a lot going on.
Welcome! If you're comfortable sharing, this board is pretty good at the kind of advice you're looking for. In any case, I'll just leave you with this advice - if your "shorter term" that you're picturing for investing is less than 3 years, just plunk that money in a high yield savings account (2% or better). Also, do pay off credit card debt with house proceeds, because interest rates on credit cards are far worse than the best case rate you'd get investing.
Post by followyourarrow on Jul 26, 2019 18:24:16 GMT -5
I’d pay off the credit card debts with house proceeds because CC interest will be so much higher than anything you can get investing. I wouldn’t pay off the car with house proceeds unless the interest rate is ridiculous or the monthly payment will leave things very tight for you.
I’d pay off the credit card debts with house proceeds because CC interest will be so much higher than anything you can get investing. I wouldn’t pay off the car with house proceeds unless the interest rate is ridiculous or the monthly payment will leave things very tight for you.
Really good points about the interest rates!! I’ll get a summary together to share shortly!
Okay here’s a summary of my assets ( I’m not one to carry cc debt or owe my family money but I was in a bad situation and had to get out, I realize I am very lucky and want to pay it back as soon as the asset stuff for the divorce is final).
Debts: Credit card $5,500 - interest is 10% - I have been paying the minimum + whatever else I can throw at it on a given month, while balancing building up other savings Owed to family $3,500 - no interest Car $8800 - 1.9% interest, min payment is $230 but I’ve been paying $300 since the loan started premarriage and have no intention on reducing that
Assets I have built since moving out (10 Mons ago): Emergency fund $1200 Another minimal savings account for large purchases etc. I contribute a few hundred here every month. Retirement I contribute 3% Roth, 1% traditional and my employer matches 3% - I want to bump this up at least every year or more once I can, this is a new job (in the past 2 months) so I’m trying to just do the minimum to get the match until the divorce is finalized. Retirement from old job where I contributed 6%ish over my 8 years there
Once the settlement agreement is signed (hopefully soon!!) I will be receiving about $60k in house proceeds/joint assets. My goals with that money are to 1) pay off/down debt (not sure how to prioritize this with the other goals?) 2) bump up my retirement 3) build up emergency fund to 3-6 mons is expenses 4) put $3k aside short term to take a “you made it through” trip in a year 5) invest/save for the future - maybe for a future house purchase or something like that.
My monthly budget is fine and I’m comfortable, I am mostly looking for guidance on what to do with the money I will receive post-settlement.
As someone who has been in your shoes, I'd prioritize it like I've outlined below. If I'd known all of this a few years ago it would have saved me a lot of headache.
Come up with a budget. Use YNAB or another app. I use a few spreadsheets--it's easier for me.It's harder to save and pay things off if you don't know exactly where your money is going every paycheck/month.
If you don't contribute to a 401K/403B/retirement at work set it up now to at least earn the match from your employer. Set and forget for now. Circle back to this in 6-12 months when things calm down.
Pay off any high interest credit cards. Snowball the one with the highest interest rate first. See if you can combine balances into a card with a 0% balance transfer offer or a lower APR. Alternatively look at getting a personal loan with a lower interest rate and consolidating them--the fixed rate will save money over time, and you'll know exactly how much the monthly payment will be and how long it will take you to pay it off. You can usually choose the duration of the loan. The shorter the loan (ie 3 years vs. 5 years, the lower the interest rate is likely to me). Most of these companies are very reputable--these are not "pay day" type of lenders. Many are backed by major financial institutions. Bankrate.com and nerdwallet.com can help find one.
Put $1000-2000 in an emergency fund that you have immediate access to. Don't worry about interest rates or earning anything on it.
Save up 1 month of basic living expenses--or as much as 3 if you can (mortgage, food, utilities--nothing outside of the basics). Put this somewhere safe like a high interest savings account that is out of the way but you can get to if necessary. Keep this separate from your emergency fund.
Will you be buying another house/condo/townhome? You might wish to put the proceeds from your house somewhere safe like a high interest savings account until you decide. You don't want to invest the money if you'll be using it for a new home in the next couple of years. You could also use some of the proceeds to fund the emergency fund & 1 month of basic living expenses. I'd keep at least 10% down for what you think you'd pay for a new home before doing anything else with the rest.
I'll recommend Clark Howard. He's a very common sense consumer advocate & financial expert. He's written several books although the latest is now a couple of years old. I listen to his podcast or live radio show as often as I can. www.clark.com. (As an aside, he lives in my major metro area. I've actually seen him at a restaurant eating out with his wife and family before.)
1.) Pay off the debt. (This may not be the best mathematical choice since your car loan is at 1.9% and your family loan is at 0%, but this is the best choice for me, personally, from a psychological perspective.)
That leaves you with a little over $40k.
2.) Save 6 months' of expenses. 3.) Take the trip. 4.) Fully fund your Roth IRA for this year. 5.) Fund employer retirement to get the full match. 6.) Put whatever is left into a high-yield savings account for a future home and/or work your way up to a full retirement contribution, whatever you determine that to be.
I would probably put all of #6 into a savings account for a year or so, just to give me extra peace of mind about having a large emergency fund in case something unexpected comes up - final legal fees, what if I hate my new job, what if I want to move, etc.
1.) Pay off the debt. (This may not be the best mathematical choice since your car loan is at 1.9% and your family loan is at 0%, but this is the best choice for me, personally, from a psychological perspective.)
That leaves you with a little over $40k.
2.) Save 6 months' of expenses. 3.) Take the trip. 4.) Fully fund your Roth IRA for this year. 5.) Fund employer retirement to get the full match. 6.) Put whatever is left into a high-yield savings account for a future home and/or work your way up to a full retirement contribution, whatever you determine that to be.
I would probably put all of #6 into a savings account for a year or so, just to give me extra peace of mind about having a large emergency fund in case something unexpected comes up - final legal fees, what if I hate my new job, what if I want to move, etc.
Fully funding an IRA is a fantastic idea, thank you! Hadn’t thought of this!
I would definitely pay off the credit card with the settlement. I don't know that I would rush to pay down the other loans unless the family loan is hanging over your head. I'd fund a Roth IRA with $6k, up my retirement contributions at work, and put the rest in savings.
I would: 1. Pay off the credit card and family debt first. ($9k) 2. Then I’d fully fund the Roth this year- not sure how much you have saved this year so far. (Up to $6k) 3. I don’t know how much 3-6 month of expenses are, but I’d be more than comfortable with $7-10k saved in an emergency fund. 4. Put $1-$3k in a vacation fund 5. Up monthly retirement contributions since credit card/family loan is gone. My goal would be 15%. 6. Sit the rest ~ $30something thousand in a long term savings account and sit on it. Could be used to buy a house, invest, etc but I’d hold off on a big decision.
Post by supertrooper1 on Jul 30, 2019 10:51:44 GMT -5
Thank you for posting this. I'm in your shoes right now, about one step ahead. I just paid off all of my CC debt and my car loan. I'm working on the emergency fund. I will also have money from the sale of our house, but it is stuck in escrow pending a decision on how to split the money in the divorce. As much as I want to invest that chunk of money, I think I will end up putting it in a high yield savings because I may buy a house in a year. My biggest challenge right now is not racking up the debt again. I just splurged on a Traeger grill that I've been wanting for several years and felt that I could do it now that I have my debt paid off. But it doesn't help me build up my emergency fund making splurges like that.
Thank you for posting this. I'm in your shoes right now, about one step ahead. I just paid off all of my CC debt and my car loan. I'm working on the emergency fund. I will also have money from the sale of our house, but it is stuck in escrow pending a decision on how to split the money in the divorce. As much as I want to invest that chunk of money, I think I will end up putting it in a high yield savings because I may buy a house in a year. My biggest challenge right now is not racking up the debt again. I just splurged on a Traeger grill that I've been wanting for several years and felt that I could do it now that I have my debt paid off. But it doesn't help me build up my emergency fund making splurges like that.
Best of luck to you as you work through it. I am currently waiting for my soon-to-be ex's attorney to write up the settlement papers so we can be done. It's been a year and I am so ready to move on with my life in every single way. You are doing so well by paying off debt, I've done that minimally and am waiting until the settlement to finish it up. Hang in there.