Category: Readers

Reader Money Questions II

 

Hello Guys, I wanted to start a new series of posts based on you the readers. I added a new questionnaire page under suggestions to give you a guideline as to what questions you guys can answer to help you come to terms with the money issues you are experiencing and how by answering these questions you can improve your finances. At the end of the questionnaire I will give you feedback if it is necessary and I hope you all enjoy this new series we all will embark on.

 

This is the second series of Moneywatch1o1 questionnaire and hopefully I will keep getting more going forward.

 

This response is from Meghan, and if anybody else is interested you can copy and paste the questions and then email them to me at moneywatch101@gmail.com.

 

Moneywatch101 Questions and Answers:

  • Do you have any money issues in your life right now?
I don’t think I have any real money issues. I have 13,000 left in college loans. I will have this paid off by March. I graduated in 2 years this December from Purdue and I have been able to pay off 30,000 in loans in about 2 years once march hits. I still love to spend money so I think I could work on buying what I really need and not spending so much on random items that I just want.
 
 
  • Do you have any Debt?
Yes, the only debt I currently have is a 13k student loan.
 
  • If you do, how do you plan to overcome these issues?
I have been really focused on meeting my financial goals to get this paid off and will have it paid off about a year earlier then I thought I could.
 
  • Do you have a written budget you like to follow or do you just wing it?
I have an extremely detailed excel sheet that shows where all of my money is going including 401k and Roth IRA
 
  • How much are you currently saving a month for any goals?
I currently have 15 k in savings (5 k of that I plan on throwing at my loans come march as my final payment. I currently put 5% in my 401k and the rest goes to my loan. If I was not paying loans I would be saving 30-50% of my income a month but since I have an emergency fund of 15k I don’t see the need to save any more.
 
  • How confident are you with investing your Money?
I am very confident about 401k and Roth IRA investing. Once march hits and I no longer have debt I will be putting 10% to 401k (almost half the max) and maxing out roth IRA which will be a little bit more than 15% of my total income going to 401k . Then the rest I plan on filling two different savings accounts for the next 3 years. A 20k emergency fund that I won’t touch and a 30k car fund just in case my car ever dies. This is where I get stuck. I will have 30k just building up each month. I feel like I could invest that but I still want to be able to pull that out if ever my car dies on me.
 
  • Do you currently want to learn more about investing ideas?
I would love to!
 
  • Do you think about Retirement when you save your Money or other goals?
I have been investing in my retirement 5% since I was 21. I turn 24 in January and I will start putting 15% in. If ever I can afford to put the max 401k in I will hopefully by age 26.
 
 
 
Thanks a bunch for your feedback!
 
 
 
 
Moneywatch101 Response and Feedback:
 
1. Do you have a steady job and are not in any risk of losing it? Can your skills and networking capabilities find you another job very easily? If you answered yes to both questions I would immediately pay the 13K in student loans from the savings account and be done with it now. Then you can use all the extra money plus your past student loan payment amount to re-build the savings account faster than ever. Obviously a layoff can come at anytime, but if there are no signs of this and your company is doing good in these times, then no need to have such a huge savings account earning nothing while saddened with debt. If you pay off your student loans you will gain an immediate return on your money by saving the interest charges plus lot more in the long run.
 
 
 
2.  I would hold off placing 15% in the 401K until you have your emergency fund back to a comfortable level for you. I will suggest about 4-8 months of living expenses for the emergency fund. Once you reach your desired level of security you will know it.
 
 
 
3. Most financial gurus state that people spend way too much for their modes of transportation and in your case 30K for a car replacement fund seems too high. I understand the need to drive something new and cool looking, but there is a time and a place for that later. The safe level to buy a car that will not break the bank is 10-15% of your annual income should be spent on a car. So if your income is the national average of around 50K then they suggest you only spend $7500, on the other hand if your income is 150K then you can spend about $22K for a car. This is a standard guideline, but given the fact I do not know your expenses and living situation.
 
 
 
4. Ok if you abide by the car percentage purchase then you can invest your future money in better places and have your money working overtime for you. Rather than losing it in a depreciating thing like a car that loses value faster than the speed of light. Always remember spending should be relative to your income levels. I once made an expensive car purchase and I am still paying for it with regret.
 
 
 
5. Once you fully get the emergency fund back to preferred levels and your future car purchase fund with an amount equal to 15% of your annual income, then you can open an online brokerage account and start investing in ETF’s or Index Funds. This will be above and beyond the 401K and Roth IRA you already invest in, given you can put about 5% into this. Doing this will allow you to diversify some of your money into non-retirement type of accounts that are less strict.
 
 
 
 
 
I hope you can use the information and use it to take advantage of your money life. Having a solid financial situation is better than not being on solid financial ground. The future you, will thank you by making the right money decisions now. I think you are doing great for somebody your age and if you continue all of your financial goals will be realized.
 
 
 
RichUncle EL

Reader Money Questions I

 

 

Hello Guys, I wanted to start a new series of posts based on you the readers. I added a new questionnaire page under suggestions to give you a guideline as to what questions you guys can answer to help you come to terms with the money issues you are experiencing and how by answering these questions you can improve your finances. At the end of the questionnaire I will give you feedback if it is necessary and I hope you all enjoy this new series we all will embark on.

This first post is by an anonymous reader and you can copy and paste the questions and then email them to me at moneywatch101@gmail.com.

 

Moneywatch101 Questions:   

  • Do you have any money issues in your life right now?

I wouldn’t say lack of money is an issue for me, however I can say I have money spending issues. I am in the mist of saving for a house, but with my spending habits I have missed out on saving the maximum, making it longer to achieve my goal.

  • Do you have any Debt?

Yes, the only debt I currently have is a car loan, which I am trying to pay off way before my term ends.

  • If you do, how do you plan to overcome these issues?

Overcoming my spending issue is hard. I mainly shop out of boredom or too much free time but I am learning to buy the necessities rather than the wants. Every month I realize I’m spending less and less so I must be doing something right and it feels good.

  • Do you have a written budget you like to follow or do you just wing it?

I have tried several times to follow a written budget, from spreadsheets, to graphs, to reading bank statements, but none of that works for me. I just wing it and try to do my best with estimations. Another thing that is a big help for me is an online bank tool that my bank offers. It’s called “my money map” and it shows your total income versus your spending on a month to month basis. As soon as I see my spending report getting close to my average, I slow down on my purchases.

  • How much are you currently saving a month for any goals?

I am currently saving 20% of my monthly income for a home. If I used my money more wisely, I could be saving a maximum of 35% a month.

 

  • How confident are you with investing your Money?

With all the risks involved in stocks and bonds, I don’t believe I will ever be completely comfortable with investing my money for big growth. I currently have two savings accounts and always have the option to open a CD but that’s as far as it gets for me.

 

  • Do you currently want to learn more about investing ideas?

Yes, of course. It’s always good to expand your knowledge on investing. 

 

  • Do you think about Retirement when you save your Money or other goals?

I think about retirement all the time. Even though I’m 25 years young I contribute 15% into my 401K account and I am saving money aside for possible early retirement.

 

 Moneywatch101 Feedback:   

1. By separating your direct deposit into 2 or more accounts you now have an additional barrier to your money which in turn can help you get your hands off your extra dollars. I would recommend that you make one of those direct deposits in an online bank. For example ING or Alley Bank are two highly respectable options for you. In your regular checking account make the direct deposit amount enough to cover your bills and a $150 dollar cushion. Send the rest aka surplus to the online bank and this shall be earmarked for your down payment account.

2. I noticed that you say you save 20% total for your home but that you also stated you save 15% in your 401K account, if this is the case you are either saving 35% in total or only 20% in total . If it is truly 35% that is a great accomplishment, but if you are only saving 5% for the house then you need to ramp it up more or reduce the 401K to 10% and add it to the house down payment. I noticed your primary goal is your buying a house and you should focus more on that now, retirement can wait till later.

3.  Granted that the stock market is risky and volatile, but that should not scare you to the point where you stay stagnant with investing. If you reach a higher income one day and reach the maximum you can save in retirement accounts what will you do put the money in a mattress? No you will look into investing in ETF’s, Bonds, Dividend stocks, or non retirement mutual funds. These all have risks, but if you only put your money in products that have been around more than 10+ years then you can reduce risk. Just keep in mind that investing in these is long-term and avoid jumping in and out.

4. If and when you get bored try to focus on an activity you can do that does not involve spending money. For example make a meal that can last you a few days or go to the park and walk / bike for an hour. These little changes to your lifestyle will allow you to save more and avoid spending on useless things because you are bored.

 

  Thanks for answering these questions. I think the amount you are saving is commendable because not many 25 year olds are saving as much or even thinking about buying property. I hope you can use the recommendations as you see fit in your life. We all can use evaluations with money issues from time to time, and it should not hurt you to change things to make your money goals more easily attainable.

 

 

RichUncle EL