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Posts tagged with: Roth IRA
Oct 30, 2024    |       19 comments

Changing the Whole Plan – Prioritizing Savings

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I recognize the whiplash of my thinking. My apologies for not responding to the individual comments. It’s been a really challenging month with “busy-ness”.

However, I did sit down this week and read through many of them during some quiet times of reflection. And I am so grateful that you as a community keep hounding me. I need it.

Big Change of Plans

I recognize that you all only see the smallest sliver of my life here. There is so much more to it. And it’s just as much of a roller coaster. As much as I love the “adventure” my life has been, you are very right that this time of stability has me struggling more than I do in times of high stress.

Sitting down to write about my failures was hard. But what is worse is that even in recognizing my biggest failure, I didn’t do anything about it.

I’m still spending down to the last penny every month. I have done NOTHING of significance to prevent the biggest challenges that I have faced over the last decade…a couple of times. By that I mean, losing my largest source of income and having no real cushion to tide me over.

Here I am in a season of feast. And while I am paying down debt. And getting things of importance accomplished. I am not focusing on resolving this, my biggest failure.

And failing to do this seriously contributes to my high level of anxiety, fear, and lack of self confidence. I have to change this NOW.

Priority Change

I realize that this blog is Blogging Away Debt. But I feel like it’s important to switch my focus for a few months. And I need to focus on Building a Significant Emergency Fund. The recommended $1,000 just doesn’t cut it.

And I’ve learned this the torturously hard way over the last decade. But I didn’t really learn, because I didn’t change.

I have to change now. This will allow me to be more confident that if something happens with my income, I have time to replace it. (Goal = Peace of Mind that I can’t remember the last time I had)

suit case full of money

SAVINGS GOAL: $36,000

I came up with this number by adding my forecasted monthly output for the next months outside of my aggressive debt payments and current savings plan.

Meaning, if I lost the bulk of my income, this is what I would need to meet all financial obligations for 6 months. (With a bit of wiggle room since I used averages.)

So my thought is, instead of pushing to pay off debt. I push to save, thinking 5 months to hit this goal. Then turn my eye back to the aggressive debt payments.

Thoughts? And if this is a good idea, what is the best place to put the bulk of this savings? I’m assuming high yield savings, recommendations? This is a I’m asking post, not telling. Guidance requested.

 

 

 

Oct 28, 2024    |       7 comments

What To Do With An Inheritance

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We are set to receive an inheritance soon. This is one of those happy cases where no one has died (which, I would think, is the most common reason for inheritance?). Instead, a relative has liquidated some of their assets and decided to bequeath some to us now, while they are alive, versus waiting until they pass away.

It’s a good amount of money, but still in 5-digit territory (just to give a rough approximation of the amount). At one point in our younger lives, this money may have felt life-changing. Heck – I remember receiving an inheritance from my Grandfather for $10k when I was 22 and it definitely felt like a life-changing amount of money! This inheritance is much higher than that.

Our Current Financial Position

At this point in our lives, however, we don’t really need the money per se. We make enough to cover all of our bills. The only debts we have are my student loans (scheduled to be forgiven in October 2026), and our mortgage (on a super low 2.625% interest rate). We both have healthy retirement accounts, we’ve maxed out our Health Savings Account, I have healthy 529 accounts for the kids, and we also have a mix of financial investments in stocks, bonds, mutual funds, and CDs (outside of the retirement accounts).

Investment Ideas

Given that we don’t need the money to help pay bills, my thought is that we should invest it and let it grow. To me, the obvious next place to invest is in real estate. I’ve written before on the blog about my budding interest/desire to invest in real estate. To me, this is the next obvious spot to place an investment to help diversify our financial portfolio. The amount we are inheriting – it’s not enough to buy a house, but it’s certainly enough for a down payment large enough to avoid PMI (for a modestly priced home) and likely some leftover for repairs. Kind of like a rental house “Emergency Fund” separate from our normal emergency fund.

I’m pretty financially conservative, but hubby is even moreseo than me. I know his preference is to put the money toward our mortgage on our current home. He has a goal to own our home outright before he retires in 7 years. And while I love that as a goal, I’ve been pulling out calculators and running numbers to show how much more we stand to gain from another investment versus paying off our home early. And although we aren’t running out looking at real estate right this second…..I do think he’s come around and is cautiously on board.

Short-Term versus Long-Term Rentals

This brings me to my next conundrum. If in fact we go the real estate route – what kind of rental should we get? Selfishly, I like the idea of buying a house someplace a couple hours away that is more of an AirB&B vacation rental type place. That way, we can use and enjoy it as a family, and we will also make income from short-term renters. PROS of this approach: our family gets to enjoy it and take vacations for cheap; you can also stand to make potentially more money on short-term rentals. CONS of this approach: income is more inconsistent, and there’s a lot of hassle involved with oversight, management, cleaning in-between guests, etc.

The other alternative is to buy a house in-town someplace that we try to rent with a one-year (or longer-term) lease option. PROS of this approach: it’s a lot less hassle, and cleaning/upkeep is less. The income is more consistent month-over-month. CONS: it’s potentially less money than a short-term vacation rental, and we wouldn’t get to enjoy it as a family.

Making a Decision

While I lean toward the short-term rental option so our family could enjoy it, I’m also split because I like the idea of having less ongoing oversight and maintenance. Also, I have no idea how to manage an Air B&B so I know it would be a lot of work to get up and running.

If anyone has had both short-term and longer-term rentals, do you have any insight or opinions to share? I’m curious to hear from folks who have done both. Other factors that may weigh in on your decision – if we go this route, we plan to have a dedicated EF just for the rental, with enough money to cover a potentially “bigger” repair (like a new HVAC or new roof). Also, with our current incomes we can afford to pay the mortgage of both homes if we need to. It would make things tight at home and is not ideal, but it is possible to do if needed (this is more on a short-term than a long-term/ongoing basis).

For now, it stays put

Just as I’m in no hurry to buy a new-to-me car (see my last post), we also aren’t in a hurry to buy a home. Especially with higher interest rates right now, it might be wise to wait a bit and see if things come down. In the meantime, the money will be safe and sound in a money market mutual fund. But I like to think and plan ahead and diversifying seems like a wise financial decision.

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