A Guide to Savings and Investing (1 Viewer)

[Random]

So if you don't have a mortgage or rent, it seems like your monthly bills would be pretty low and your "emergency fund" wouldn't have to be that large.

That is correct. Once we paid off our house, we lowered our cash on hand since our monthly bills were lowered on average.We still keep a very healthy amount in cash, but no where near as much as we used to have.

OK, well, it seems like you're already in good financial shape. But your advice probably isn't very practical for most people.

The guy paid off his home at 31 and has emergency funds for an entire year. His advice is exactly the kind we need to hear.

But the other side of that is that his retirement savings probably suffered for the years he was massivly paying down his mortgage.

 

[andy_b]

You don't pay taxes on the appreciation until you sell. As long as you don't plan on doing a lot of trading, you won't pay taxes until you cash out, presumably at retirement. I guess the IRA does give you the option of exchanging between funds without having to declare a gain. However, with a regular account, if your funds have a bad year, you can cash out, take the deduction, and reinvest (after 30 days to avoid wash rules).

I don't think you answered my question.How do you avoid paying taxes on capital gains distributions and dividends that most mutual funds generate multiple times a year?

Don't confuse this will selling your mutual fund, it has nothing to do with that.

I have been holding some mutual funds for a deace now, have never sold them but I pay taxes on the distributions (1099) every year.

Can you tell me how you are getting around this?

That's why I put the line in there about having a DRIP. Dividends are directly reinvested so as to avoid defer paying taxes on the gains.

I am still confused.I reinvest all capital gains and dividends immediately in all mutual funds I own.

In all of my non retirement mutual funds, I get taxed forms at the end of the year showing what I owe.

Can you provide me a link that will explain to me how I should ignore the 1099 forms I get so that I can defer the taxes?

Thank you for your help!

 

[wildbill]

So if you don't have a mortgage or rent, it seems like your monthly bills would be pretty low and your "emergency fund" wouldn't have to be that large.

That is correct. Once we paid off our house, we lowered our cash on hand since our monthly bills were lowered on average.We still keep a very healthy amount in cash, but no where near as much as we used to have.

OK, well, it seems like you're already in good financial shape. But your advice probably isn't very practical for most people.

The guy paid off his home at 31 and has emergency funds for an entire year. His advice is exactly the kind we need to hear.

But the other side of that is that his retirement savings probably suffered for the years he was massivly paying down his mortgage.

He doesn't have a house payment, and he won't have to take on any debt if he has an emergency that lasts less than a year. I think his retirement will be just fine.

 

[Dentist]

Why would you suggest funding the Roth to the hilt before maxing out the 401K?

I still barely qualify for the Roth, but after maxing out my 401K, maintaining my emergency fund, and having enough to blow on booze and strippers (a step you totally skipped).. there just isn't enough for the Roth.

Seems like saving money tax-free would be the way to go over investing taxed money.

I mean.. to invest that $4000 Roth I probably had to earn $6000... it's going to take awhile to make that money back.. but instead I can invest the full $6000 in the 401k...

Discuss.

 

[andy_b]

So if you don't have a mortgage or rent, it seems like your monthly bills would be pretty low and your "emergency fund" wouldn't have to be that large.

That is correct. Once we paid off our house, we lowered our cash on hand since our monthly bills were lowered on average.We still keep a very healthy amount in cash, but no where near as much as we used to have.

OK, well, it seems like you're already in good financial shape. But your advice probably isn't very practical for most people.

The guy paid off his home at 31 and has emergency funds for an entire year. His advice is exactly the kind we need to hear.

But the other side of that is that his retirement savings probably suffered for the years he was massivly paying down his mortgage.

I am 39 years old now and we have a fairly conservative model that shows we can retire between 50-52.The model calls for a 7.5% investment return before retirement and a 6.5% return after retirement using a 4% inflation rate along with saving 50% of what we have been saving the past 3 years on average.I don't think my retirement savings suffered at all especially when you factor in the time frame I paid off the majority of the house which was in 2001, followed shortly by the massive dip in the market.

 

[prefontaine]

Well, then I don't believe there is any limit to how much you can contribute after-tax so it doesn't make a lot of sense as written ("max it out").

Of course their is a max.For a non deductable traditional IRA its $4000 this year and will soon be $5000.

Traditional IRA's grow tax deferred. There is no way the government would ever allow these to be unlimited.

the max is for pre-tax contributions.

1) There is no such thing as a pre-tax contribution to an traditional ira2) If you make under a certain amount and/or you don't use a 401k, you may qualify for a tax deduction

3) Whether you qualify for the tax deduction or not, the limit is $4000k this year

http://en.wikipedia.org/wiki/Traditional_IRA

How do 1 and 2 not contradict each other? You do understand what "pre-tax" means, right? On 3, you appear to be correct looking at the IRS code although TurboTax disagrees with you (and your link doesn't address this at all).

 

[wildbill]

Why would you suggest funding the Roth to the hilt before maxing out the 401K?I still barely qualify for the Roth, but after maxing out my 401K, maintaining my emergency fund, and having enough to blow on booze and strippers (a step you totally skipped).. there just isn't enough for the Roth.Seems like saving money tax-free would be the way to go over investing taxed money.I mean.. to invest that $4000 Roth I probably had to earn $6000... it's going to take awhile to make that money back.. but instead I can invest the full $6000 in the 401k...Discuss.

Dave Ramsey and Clark Howard both recommend contributing up to the company match in your 401k, then maxing out the Roth IRA, then maxing out the 401k. Most folks can't afford to max out both, but that's the order they suggest following if you're able.

 

[Archie Bunker]

[i am still confused.I reinvest all capital gains and dividends immediately in all mutual funds I own.In all of my non retirement mutual funds, I get taxed forms at the end of the year showing what I owe.Can you provide me a link that will explain to me how I should ignore the 1099 forms I get so that I can defer the taxes?Thank you for your help!

I actually misspoke. I was incorrect. Sorry. Even so, I think it would still make more sense to take a capital gain at 15% yearly, reinvest, and bump up your cost basis vs. contributing to an IRA after-tax and paying 28 or 31% later.

 

[fatguyinalittlecoat]

andy b, if it's too personal feel free to ignore, but can you give some more info about how you managed to do all this? Did you go to college? Grad school? If so, did you take out loans? How much did your house cost? What sort of salary were you earning when you paid it off?

Paying off a house at 31 is just unbelievable to me without some sort of inherited wealth or something. At 31 years old, I'm pretty sure my debts were greater than my assets.

 

[andy_b]

Not sure how you can qualify for a traditional and not a Roth. Doesn't a Roth have higher limits?

A traditional IRA has no income limitsA roth is income limited to ~$95K for an individual and ~$160k for married filing jointly (AGI)

http://beginnersinvest.about.com/cs/iras/f/tradvsrothira.htm

It's not as simple as this. You are actually getting less than your Mortgage rate on paying it down because you lose that tax write off.

But you also have to factor in the taxes on the investments as well. I do agree that in todays mortgage market that you would likely do better investing.

Although speaking as someone who paid of his house at 31 years old, I can tell you there was no better feeling in the world.

That's awesome. Please tell us how you pulled that off.

Its boring and corny but here goes1) We both worked a lot of co op in college and were able (with help from parents) to graduate with no school loans

2) My wife and I both got good jobs (we are each engineers). This was before we met

3) We both made a sacrfice to live at home after we graduated to save as much money as possible. Again this was before we even met

4) When we got married we purchased a home during a dip in the market (this was pure luck) in 1995.

5) We purchased a house much less than we could afford

6) We were able to put down a large downpayment because we lived at home for so many years after college

7) As the bull run of the 90's picked up speed, so did our salaries and investments. We prepaid our house every month while not sacrificing our 401k investments. We also kept our expenses fairly low. We also both picked up our masters degrees part time, of which the company paid for,

8) At the turn of the century we started to sell our ESPP shares and put them towards the house directly until it was paid off

9) Once the house was paid off, we simply started to channel the mortgage payment directly into a 529 plan for our daughter and have been doing so ever since.

 

[guru_007]

Why would you suggest funding the Roth to the hilt before maxing out the 401K?I still barely qualify for the Roth, but after maxing out my 401K, maintaining my emergency fund, and having enough to blow on booze and strippers (a step you totally skipped).. there just isn't enough for the Roth.Seems like saving money tax-free would be the way to go over investing taxed money.I mean.. to invest that $4000 Roth I probably had to earn $6000... it's going to take awhile to make that money back.. but instead I can invest the full $6000 in the 401k...Discuss.

Are you self employed?

 

[Archie Bunker]

Dave Ramsey and Clark Howard both recommend contributing up to the company match in your 401k, then maxing out the Roth IRA, then maxing out the 401k. Most folks can't afford to max out both, but that's the order they suggest following if you're able.

This is exactly why I am skeptical of the Ramseys, Ormans, etc. They talk (or at least the masses interpret them) in absolutes. If you are a couple with more than 1 child, with a AGI between $110K-$160K, you should max out your 401k first before even considering a Roth contribution. The 401K contribution reduces your AGI, which raises your child tax credit. That is an immediate 5% (or more) return on your money.

 

[andy_b]

Well, then I don't believe there is any limit to how much you can contribute after-tax so it doesn't make a lot of sense as written ("max it out").

Of course their is a max.For a non deductable traditional IRA its $4000 this year and will soon be $5000.

Traditional IRA's grow tax deferred. There is no way the government would ever allow these to be unlimited.

the max is for pre-tax contributions.

1) There is no such thing as a pre-tax contribution to an traditional ira2) If you make under a certain amount and/or you don't use a 401k, you may qualify for a tax deduction

3) Whether you qualify for the tax deduction or not, the limit is $4000k this year

http://en.wikipedia.org/wiki/Traditional_IRA

How do 1 and 2 not contradict each other? You do understand what "pre-tax" means, right? On 3, you appear to be correct looking at the IRS code although TurboTax disagrees with you (and your link doesn't address this at all).

yes I do understand what pretax is. It is not identical to being tax deductable (but it is close).You can either believe me or not on the limit. Its such common knowledge its not really worth arguing about IMO.

 

[andy_b]

andy b, if it's too personal feel free to ignore, but can you give some more info about how you managed to do all this? Did you go to college? Grad school? If so, did you take out loans? How much did your house cost? What sort of salary were you earning when you paid it off?Paying off a house at 31 is just unbelievable to me without some sort of inherited wealth or something. At 31 years old, I'm pretty sure my debts were greater than my assets.

but this is your problem with every financial thread we have.You always assume people who do ok is because of inheritance and never through working for it.FWIW, neither my wife or I have received any inheritance to date nor do we factor in expecting any to our retirement models.

 

[andy_b]

[i am still confused.I reinvest all capital gains and dividends immediately in all mutual funds I own.In all of my non retirement mutual funds, I get taxed forms at the end of the year showing what I owe.Can you provide me a link that will explain to me how I should ignore the 1099 forms I get so that I can defer the taxes?Thank you for your help!

I actually misspoke. I was incorrect. Sorry. Even so, I think it would still make more sense to take a capital gain at 15% yearly, reinvest, and bump up your cost basis vs. contributing to an IRA after-tax and paying 28 or 31% later.

shoot! I was hoping I was missing something.As to your second point about the %'s, I have a hard time arguing it either way because I can not predict the tax code later in life.

 

[andy_b]

Why would you suggest funding the Roth to the hilt before maxing out the 401K?I still barely qualify for the Roth, but after maxing out my 401K, maintaining my emergency fund, and having enough to blow on booze and strippers (a step you totally skipped).. there just isn't enough for the Roth.Seems like saving money tax-free would be the way to go over investing taxed money.I mean.. to invest that $4000 Roth I probably had to earn $6000... it's going to take awhile to make that money back.. but instead I can invest the full $6000 in the 401k...Discuss.

Dave Ramsey and Clark Howard both recommend contributing up to the company match in your 401k, then maxing out the Roth IRA, then maxing out the 401k. Most folks can't afford to max out both, but that's the order they suggest following if you're able.

Who are Ramsey and Clark? I am unfamiliar with their names. If I am reading this correctly, it seems to match the order I posted in the original post.

 

[guru_007]

andy b, if it's too personal feel free to ignore, but can you give some more info about how you managed to do all this? Did you go to college? Grad school? If so, did you take out loans? How much did your house cost? What sort of salary were you earning when you paid it off?Paying off a house at 31 is just unbelievable to me without some sort of inherited wealth or something. At 31 years old, I'm pretty sure my debts were greater than my assets.

but this is your problem with every financial thread we have.You always assume people who do ok is because of inheritance and never through working for it.FWIW, neither my wife or I have received any inheritance to date nor do we factor in expecting any to our retirement models.

Anyone who owns their house free and clear by 31 either lives in a shack, lives so far beneath their means, they are miserly cheap, or had more assistance than others. I think that is fatguy's point.At 31, I had 2 young kids, had just gotten started making decent money with my wife and just bought a house (didn't pay cash)

 

[prefontaine]

Well, then I don't believe there is any limit to how much you can contribute after-tax so it doesn't make a lot of sense as written ("max it out").

Of course their is a max.For a non deductable traditional IRA its $4000 this year and will soon be $5000.

Traditional IRA's grow tax deferred. There is no way the government would ever allow these to be unlimited.

the max is for pre-tax contributions.

1) There is no such thing as a pre-tax contribution to an traditional ira2) If you make under a certain amount and/or you don't use a 401k, you may qualify for a tax deduction

3) Whether you qualify for the tax deduction or not, the limit is $4000k this year

http://en.wikipedia.org/wiki/Traditional_IRA

How do 1 and 2 not contradict each other? You do understand what "pre-tax" means, right? On 3, you appear to be correct looking at the IRS code although TurboTax disagrees with you (and your link doesn't address this at all).

yes I do understand what pretax is. It is not identical to being tax deductable (but it is close).You can either believe me or not on the limit. Its such common knowledge its not really worth arguing about IMO.

Please clarify the difference then.

 

[andy_b]

Anyone who owns their house free and clear by 31 either lives in a shack, lives so far beneath their means, they are miserly cheap, or had more assistance than others.

We live in a very nice house. In fact downsizing our house is going to help with our retirement plans.We did not receive any assistence from anyone.We are not miserly cheapWe do live below our means, mostly because we both want to retire as early as possible.

 

[fatguyinalittlecoat]

but this is your problem with every financial thread we have.You always assume people who do ok is because of inheritance and never through working for it.FWIW, neither my wife or I have received any inheritance to date nor do we factor in expecting any to our retirement models.

I meant "unbelievable" in the sense of "wow", not that I didn't believe you. I'm impressed with what you were able to do.It sounds like your folks did help you out with paying for college and by letting you live at home for a few years after you graduated. Not that there's anything wrong with that, but it does give you a leg up on some people. But you made the most of it. Congratulations.

 

[Archie Bunker]

I actually misspoke. I was incorrect. Sorry. Even so, I think it would still make more sense to take a capital gain at 15% yearly, reinvest, and bump up your cost basis vs. contributing to an IRA after-tax and paying 28 or 31% later.

shoot! I was hoping I was missing something.As to your second point about the %'s, I have a hard time arguing it either way because I can not predict the tax code later in life.

I look at it this way. What is the probability that the tax rates (for middle class earners) will be at or below 15% at retirement (or at anytime). Unless there is a major tax code overhaul, i.e. flat tax, it will not happen. And, I don't think we will see a flat tax anytime soon.

 

[andy_b]

It sounds like your folks did help you out with paying for college and by letting you live at home for a few years after you graduated. Not that there's anything wrong with that, but it does give you a leg up on some people. But you made the most of it. Congratulations.

my folks did help out with college, god bless them! Its one of the reasons I am doing my best for my daughter as well in this regards.But in terms of "letting me live at home" well lets just say you probably don't understand the italian family dynamic It was our choice to stay at home and it basically sucked ( as you can imagine it would for a 20-something person to live at home), but in the end, every good thing that has happened to me financially, both my wife and I can trace back to the choice of living at home after we graduated.

 

[fatguyinalittlecoat]

Anyone who owns their house free and clear by 31 either lives in a shack, lives so far beneath their means, they are miserly cheap, or had more assistance than others. I think that is fatguy's point.

Well, your post seems to be negative and I wasn't intending to do that. But it is pretty amazing to pay off your mortgage in 6 years like andy b. I just have no idea how I would pull that off.

 

[Archie Bunker]

It sounds like your folks did help you out with paying for college and by letting you live at home for a few years after you graduated. Not that there's anything wrong with that, but it does give you a leg up on some people. But you made the most of it. Congratulations.

my folks did help out with college, god bless them! Its one of the reasons I am doing my best for my daughter as well in this regards.But in terms of "letting me live at home" well lets just say you probably don't understand the italian family dynamic It was our choice to stay at home and it basically sucked ( as you can imagine it would for a 20-something person to live at home), but in the end, every good thing that has happened to me financially, both my wife and I can trace back to the choice of living at home after we graduated.

I wish my wife & I lived at home a little longer than we did. We stayed at home for just over a little more than a year. If we waited another year, between savings, interest rates, utilities, refinancing, and housing prices, we would have saved about $40K-$50K.

 

[fatguyinalittlecoat]

It was our choice to stay at home and it basically sucked ( as you can imagine it would for a 20-something person to live at home), but in the end, every good thing that has happened to me financially, both my wife and I can trace back to the choice of living at home after we graduated.

Maybe this should be Step 1 of your Guide.

 

[andy_b]

It was our choice to stay at home and it basically sucked ( as you can imagine it would for a 20-something person to live at home), but in the end, every good thing that has happened to me financially, both my wife and I can trace back to the choice of living at home after we graduated.

Maybe this should be Step 1 of your Guide.

While I admit that this was a very important step, I don't think it works in a general guide since I would guess many people don't have the ability due to location of work to live at home after graduation.

 

[andy_b]

Anyone who owns their house free and clear by 31 either lives in a shack, lives so far beneath their means, they are miserly cheap, or had more assistance than others. I think that is fatguy's point.

Well, your post seems to be negative and I wasn't intending to do that. But it is pretty amazing to pay off your mortgage in 6 years like andy b. I just have no idea how I would pull that off.

it was closer to seven years if I count the exact months.We had planned on paying it off in 15 years, but the market was kind so we decided to take our gains and remove our biggest liability at the time.It was just pure luck that the market dropped like a stone shortly after we did this.

 

[andy_b]

I wish my wife & I lived at home a little longer than we did. We stayed at home for just over a little more than a year. If we waited another year, between savings, interest rates, utilities, refinancing, and housing prices, we would have saved about $40K-$50K.

exactly. And now picture that my wife and I did this (seperately) for almost 5 years before we got married and got a house.

 

[guru_007]

Anyone who owns their house free and clear by 31 either lives in a shack, lives so far beneath their means, they are miserly cheap, or had more assistance than others. I think that is fatguy's point.

Well, your post seems to be negative and I wasn't intending to do that. But it is pretty amazing to pay off your mortgage in 6 years like andy b. I just have no idea how I would pull that off.

Wasn't trying to be negative....hope it didn't come off that way (maybe my choice of words was a little strong) I just agree with you that owning your home at 31, well, hell I didn't buy my home till I was 30. The next line of my post stated my financial/personal situation at that age which I believe is much more common....a family just starting out and just starting to be able to build assets and save some money.graduate college - broke22-25 find some entry level, mediocre pay type job - spend all excess money on fun25-29 find decent job, making decent pay, maybe find a girl, get married, maybe have a child, start thinking about house30-35 hopefullystart owning more than you owe36 - retire, I am an FBG afterall

 

[Archie Bunker]

It was our choice to stay at home and it basically sucked ( as you can imagine it would for a 20-something person to live at home), but in the end, every good thing that has happened to me financially, both my wife and I can trace back to the choice of living at home after we graduated.

Maybe this should be Step 1 of your Guide.

There was a little bit of luck factored in there as well. They were able to buy at an extreme low. If they graduated in 1995 and waited until 1999 to buy, they would have ended up paying significantly more for their house. There are houses in my neighborhood that were built for $190K in 1990 and wouldn't sell for $155K in 1995. By 2000, they were selling for $225K. By 2004, they were selling for $300K+

 

[fatguyinalittlecoat]

It was our choice to stay at home and it basically sucked ( as you can imagine it would for a 20-something person to live at home), but in the end, every good thing that has happened to me financially, both my wife and I can trace back to the choice of living at home after we graduated.

Maybe this should be Step 1 of your Guide.

While I admit that this was a very important step, I don't think it works in a general guide since I would guess many people don't have the ability due to location of work to live at home after graduation.

I made a lot of choices in the first five years after college that weren't financially optimal. I'm not sure that I regret them, though. But I think there is something to be said for concentrating on these things as early as possible.

 

[Chadstroma]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

 

[andy_b]

There was a little bit of luck factored in there as well. They were able to buy at an extreme low. If they graduated in 1995 and waited until 1999 to buy, they would have ended up paying significantly more for their house. There are houses in my neighborhood that were built for $190K in 1990 and wouldn't sell for $155K in 1995. By 2000, they were selling for $225K. By 2004, they were selling for $300K+

I will go even further. We got very lucky on 3 seperate items, none of which we could really control1) We got married in 1995, which in the Boston area was pretty much a perfect time to buy a house

2) The late 90's saw the bull run to end all bull runs and we happily rode it along with our company

3) We pulled our money out to pay off our house and then saw the stock market plummet. I would like to tell you I did this on purpose because I knew the bubble would burst but that would be an outright lie. We simply got lucky

 

[wildbill]

Why would you suggest funding the Roth to the hilt before maxing out the 401K?

I still barely qualify for the Roth, but after maxing out my 401K, maintaining my emergency fund, and having enough to blow on booze and strippers (a step you totally skipped).. there just isn't enough for the Roth.

Seems like saving money tax-free would be the way to go over investing taxed money.

I mean.. to invest that $4000 Roth I probably had to earn $6000... it's going to take awhile to make that money back.. but instead I can invest the full $6000 in the 401k...

Discuss.

Dave Ramsey and Clark Howard both recommend contributing up to the company match in your 401k, then maxing out the Roth IRA, then maxing out the 401k. Most folks can't afford to max out both, but that's the order they suggest following if you're able.

Who are Ramsey and Clark? I am unfamiliar with their names. If I am reading this correctly, it seems to match the order I posted in the original post.

They're both financial guys with radio shows.Clark Howard

Dave Ramsey

Their advice is a little bit different that what you suggested in the first post. If I'm reading it correctly, you suggest maxing out the 401k, then maxing out the Roth IRA. They suggest investing in the 401k only up to the employer's match. If there's anything left after that, you put it towards a Roth IRA until that's maxed out. If there's anything left after that, you put it towards the 401k until it's maxed out.

 

[andy_b]

It was our choice to stay at home and it basically sucked ( as you can imagine it would for a 20-something person to live at home), but in the end, every good thing that has happened to me financially, both my wife and I can trace back to the choice of living at home after we graduated.

Maybe this should be Step 1 of your Guide.

While I admit that this was a very important step, I don't think it works in a general guide since I would guess many people don't have the ability due to location of work to live at home after graduation.

I made a lot of choices in the first five years after college that weren't financially optimal. I'm not sure that I regret them, though. But I think there is something to be said for concentrating on these things as early as possible.

exactly. I can honestly tell you that there were many many many times I thought of moving out, getting an apartment and living like a normal 20-something but for one reason or another I never did it.In the end it worked out, but there is nothing wrong with doing things in a "non optimal" way especially if their are no regrets.

 

[andy_b]

Their advice is a little bit different that what you suggested in the first post. If I'm reading it correctly, you suggest maxing out the 401k, then maxing out the Roth IRA. They suggest investing in the 401k only up to the employer's match. If there's anything left after that, you put it towards a Roth IRA until that's maxed out. If there's anything left after that, you put it towards the 401k until it's maxed out.

I think I do match that.==========5) Invest in your companies 401K/403B up to the point where you can get the full company match. If your company does not match, move on to step 6 before you invest in a 401k (assuming your company offers one).6) If you qualify for a Roth IRA, fund it for the legal limit. If you don't qualify for a Roth, move on to step 7.7) Max out 401k to the legal limit (assuming your company offers one).8) If you don't qualify for a Roth, max out a traditional IRA to the legal limit

 

[Giant Wooden Badger]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

Example?

 

[Archie Bunker]

There was a little bit of luck factored in there as well. They were able to buy at an extreme low. If they graduated in 1995 and waited until 1999 to buy, they would have ended up paying significantly more for their house. There are houses in my neighborhood that were built for $190K in 1990 and wouldn't sell for $155K in 1995. By 2000, they were selling for $225K. By 2004, they were selling for $300K+

I will go even further. We got very lucky on 3 seperate items, none of which we could really control1) We got married in 1995, which in the Boston area was pretty much a perfect time to buy a house

2) The late 90's saw the bull run to end all bull runs and we happily rode it along with our company

3) We pulled our money out to pay off our house and then saw the stock market plummet. I would like to tell you I did this on purpose because I knew the bubble would burst but that would be an outright lie. We simply got lucky

I'm in CT. Ever been to Foxwoods or Mohegan Sun? I'd bankroll anyone with that kind of luck.

 

[fatguyinalittlecoat]

I'm in CT. Ever been to Foxwoods or Mohegan Sun? I'd bankroll anyone with that kind of luck.

That emergency fund's gotta be burning a hole in his pocket.

 

[wildbill]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

It may be useful, but it's also very risky. If you borrow money against your house, then get hit with an emergency just as the housing market starts to dip, you could find yourself in a lot of trouble.

 

[Archie Bunker]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

Example?

A HELOC is a good tool to use to ride out bumps in cash flow without dipping into investments or having $10K-$20K tied up in a savings account earning 1% interest. At least that's how I use it.

 

[andy_b]

I'm in CT. Ever been to Foxwoods or Mohegan Sun? I'd bankroll anyone with that kind of luck.

I don't drinkI don't smokeI rarely swearGod played a nice joke on me and wrapped up all of my vices into one neat package, and thats gambling I try to stay as far away from Foxwoods as possible. But we are adding on a poker room to our home theater in our basement this summer The wifey figures that will cost less than a couple of bad trips to Foxwoods I actually like Mohegan Sun more but for some reason, no poker their....

 

[Archie Bunker]

I'm in CT. Ever been to Foxwoods or Mohegan Sun? I'd bankroll anyone with that kind of luck.

That emergency fund's gotta be burning a hole in his pocket.

If you watched the Sopranos on Sunday, you'd see how easy it is to win at roulette.

 

[Chadstroma]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

Example?

One example is taking advantage of a situation where a property of some sort is available at a highly discounted rate because they need to sell quickly. With an open line, as long as you have the asking price available, you can close the deal without getting financing etc. Another example would be home improvement. Other than the obvious upgrade of your lifestyle that home improvement often brings it can bring a higher return on money invested when the property is sold.

Two quick one's right off the top of my head.

 

[SofaKings]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

How can you build wealth by opening up a home equity line of debt?

 

[Chadstroma]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

It may be useful, but it's also very risky. If you borrow money against your house, then get hit with an emergency just as the housing market starts to dip, you could find yourself in a lot of trouble.

It is a tool. Just like any other tool- you can use it intelligently or not so much. A hammer is great for when you use it to hit nails into things. But if you turn around and smash your hand- is it the hammer's fault or did you mis-use the hammer? Odds are that you messed up and not the hammer.

 

[SofaKings]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

Example?

One example is taking advantage of a situation where a property of some sort is available at a highly discounted rate because they need to sell quickly. With an open line, as long as you have the asking price available, you can close the deal without getting financing etc. Another example would be home improvement. Other than the obvious upgrade of your lifestyle that home improvement often brings it can bring a higher return on money invested when the property is sold.

Two quick one's right off the top of my head.

So you would use it for real estate speculation?Not all home upgrades will bring a higher return on you investment.

 

[SofaKings]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

It may be useful, but it's also very risky. If you borrow money against your house, then get hit with an emergency just as the housing market starts to dip, you could find yourself in a lot of trouble.

It is a tool. Just like any other tool- you can use it intelligently or not so much. A hammer is great for when you use it to hit nails into things. But if you turn around and smash your hand- is it the hammer's fault or did you mis-use the hammer? Odds are that you messed up and not the hammer.

You must sell HELOC's?

 

[wildbill]

Their advice is a little bit different that what you suggested in the first post. If I'm reading it correctly, you suggest maxing out the 401k, then maxing out the Roth IRA. They suggest investing in the 401k only up to the employer's match. If there's anything left after that, you put it towards a Roth IRA until that's maxed out. If there's anything left after that, you put it towards the 401k until it's maxed out.

I think I do match that.==========5) Invest in your companies 401K/403B up to the point where you can get the full company match. If your company does not match, move on to step 6 before you invest in a 401k (assuming your company offers one).6) If you qualify for a Roth IRA, fund it for the legal limit. If you don't qualify for a Roth, move on to step 7.7) Max out 401k to the legal limit (assuming your company offers one).8) If you don't qualify for a Roth, max out a traditional IRA to the legal limit

That's why I qualified it with "if I'm reading it correctly."

 

[andy_b]

I would add setting up a Home Equity Line of Credit (no closing cost, no annual fee, etc) to have available as a financial tool to use for those who own and have equity built into their house. Used properly this can be a very useful tool to build wealth and protect you financially.

Example?

A HELOC is a good tool to use to ride out bumps in cash flow without dipping into investments or having $10K-$20K tied up in a savings account earning 1% interest. At least that's how I use it.

so it helps you build wealth as Chadstroma mentioned by not ever dipping into investments and allowing them the max exposure to the power of compounding interest?