Posted: 3/3/2010 8:25:39 PM EDT
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Alright guys, a quick rundown of my situation:
I am a married 28 yo expecting my first kid in a couple of weeks. The wife and I are both employed. This month marks the first that we have not payed mortgage. Last month we paid the last payment to Wells Fargo for our home. We now are officially completely debt free. No car, home, or any other type of debt payment are in our future. We dipped into our 6 month expense reserve to finish off the mortgage. Currently we have a little over 5K in liquid savings. This will be over 9K at the end of this month. We both match our 401Ks and I contribute a little more past the match. I do not understand the financial world at any level beyond what most college educated people do. I work in IT and have a good understanding of all things technical and/or mechanical. I feel this pressure to now safeguard all money that we earn since we are not qualifying for any of the shelters that most people get from mortgage interest paid. This has been keeping me up at night, I feel like we are a target to be raped since we have lived well within our means to reach the goal of having zero debt. What are some nuggets of wisdom that you could share that would point us in the correct direction to grow our hard earned money and also shield us from tax pitfalls? At this point, we plan to save around 40-50K and look for some land to stick our money into. This seems very rudimentary to me, but it the safest thing I know about. I am looking for advice on other investment vehicles. Neither of us have IRAs. Should this be something that we are devoting money to? What kind of investment vehicles should we be looking into for our child? Thanks for the insight. |
First, congratulations on the tax deduc... er, upcoming birth of your child. 
Second, major kudos for paying off the mortgage. You and your wife both work. Does she want to continue after the baby is born? Does she earn enough to justify her continuing to work? After my daughter was born my husband and I investigated newborn day care in our area, and it would have taken all but $200/month of my husband's salary. Throw on commuting costs, dry-cleaning, the odd lunch out with coworkers, and we realized that it just was not worth it, so he stays home with our daughter. We now have a home-based business plus my day job. Otherwise, tax shelters: - Max the 401k plan - Max Roth IRA plans. They don't shelter income but withdrawals are tax-free when you eventually take them. - Does your company offer any Flexible Savings Account (FSA) or Medical Savings Account (MSA) plans? These shelter income, but watch out for the FSA "use or lose" rules. This is why I prefer my MSA since it rolls over year-to-year. - 529 education plan |
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Stock up on diapers, formula for emergencies, baby fever medicine, baby blankets, and cloth diapers.
1) check diaper 2) burp 3) feed 4) put to bed Congrats, you will soon have more tax deductions and less money to worry about. You're about where I'm at only a decade sooner. Saving cash and looking for good real estate deals is my plan too. |
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Re-Read Bubbles post and follow it to the T.... Well - invest in your 401/ira whatever you are comfortable with. 529 programs are excellent too - however, choose your plan wisely - they are subject to market risk too. The big thing is to start socking away cash in your rainy day fund. Don't try to "invest" it until you can invest in 10k chunks. Then you'll have to weigh your appetite for risk. Start simple, CDs, etc.... buy time and do more research. If you think you want to invest in "XYZ" or gold or this fund or that fund. Stop yourself. Watch what ever it is you want to invest in - Daily - and read about it/research it yourself for several months.
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