Finances and Planning for Future

[Peter_Pan 661]

Interesting topic, especially the part about college. I dont have kids yet, but I will definitely send them to Europe to study when the time comes. I would rather invest an X amount of money in them while they are still very young (I am leaning towards getting German or Austrian au-pairs, so they can speak the language natively), than put it into an account and help them pay the huge sums required for US education.

Once they have an undergraduate degree, nothing's stopping them from applying to a fully funded graduate program in the States.

[ca_babe 129]

Credit Cards: We only use credit cards to get the rewards. We use Fidelity Amex that gives 2% rewards on all purchase which is deposited to a Fidelity 529 account. We never carry a balance. If we can't pay it in full, then we can't afford it and we'll wait until we can pay for it in full. I signed up for several cards that gives bonus points for opening and is free during the first year. I got around $4k in rewards from them. It only works if you don't care that your FICO score goes down by about 10 points and if you are not getting any sort of loan in the near future. Also, you have to remember to cancel them before the annual fee kicks in.

529 Account: We opened one before we had a kid. We opened under my husband's name and contributed to it. When our first child was born, we changed the beneficiary to our first child. We use uesp.org which uses Vanguard Index funds. They have very low expense ratio. California has a 529 but it's not tax deductible so I don't get any benefit from opening one in California. As I've mentioned earlier, we also have rewards from our credit cards deposited to our 529 account.

Life insurance: We got a 30-year term life insurance. It's a lot cheaper than life insurance. To those who hasn't heard of it, the insurance benefit only pays if you die before the 30-year term and does not after the term. The kids will be old by then and wouldn't need support from us.

Food: Cut down food costs by $800 a month a eating home cook meals instead of going out. I also lost 25 pounds.

401ks and IRAs: We used to max out our 401k and IRAs especially during the recession. When it comes to allocation, we do not change our allocation based on the market conditions. We chose an allocation based on our age. We stick to it regardless of the market conditions. Then, we adjust to more stable funds as we get older. We are now only contributing up to the percentage where my husband gets a match from his company.

Mortgage: We got a 30-year loan in 2008, we maid extra principal payments to it. In 2012, we refinanced to 15-year loan. We are now working on paying it off in the next 4 years that's why we stopped contributing the max to our 401ks and IRAs. I mostly wouldn't get a mortgage if I had to do it over again. It limits our capability to move to a new job or to move to a new area with great schools for the kids. Renting is better! Most of the payment towards a mortgage goes to interest anyways.

Car loan: I bought my first car at 32. I was taking the subway before then to get to work. My husband and I share the car if I couldn't take the subway. Had to buy a minivan to accomodate multiple strollers and other kids' stuff. I took a 3-year car loan which I paid in 1.5 year. I wouldn't get a car loan again ever. It made me think I had more money than I actually had.

Budget: We live on less than once income. We save the rest. Pick toys for the kids that they will be interested in playing more than five times and doesn't cost much. Live a simple life. Trying to move towards a debt free life. No designer bags, no designer clothes. Pay tithes and give offerings.

Edited June 6, 2013 by ca_babe

[christeen 966]

Very prudent advice for most of above... The only issue I would have is with the owning vs. buying a home. There are several calculators available to see if buying is better than renting. For many, buying a home would be a better and wiser investment. For those that mobility is not a concern and plan to stay in their home/area for a long time, buying might be the best way to go.... It also has benefits for tax deductions etc... Even if after 5 years you sell the house for what you paid/invested, you would still have lived for those 5 years for way less net $ than paying rent... It also depends on the market as some areas (s. Florida for example) rents are waaaayyyy overpriced compared to a mortgage on a similar home. But it is all a matter of what is best for each persons personal situation...