S/O What are your financial priorities?

jf198400 · April 2014

Given the posts about 401Ks and savings, it got me thinking, how do you balance financial priorities? We all want to save for retirement and college, pay off debt, save for a house, so how do you choose where to put your money?

jf198400 · April 2014

For me personally, our highest priorities are retirement and saving to buy a house. I figure we should take advantage of getting the full employer match on or 401Ks. I don't want to neglect our children's college funds so we direct deposit a small amount in their 529s each month, but honestly it's not a big priority for me right now. I figure there is always scholarships and loans. We will help them as much as we are able to, but I think they need to be responsible for their futures as well. Saving a down payment for our next house is a big deal for us right now. We are having baby 3 and live in a townhouse right now. We are outgrowing our space and definitely want to move within the next 2 years.

I feel lucky that we don't have tons of debt. We have one car loan and some student loans, but it's not a huge burden. And we obviously have our mortgage. I am not concerned about trying to pay any of these off early. The monthly payments are reasonable.

ETA: we pay off our credit cards every month and already have an emergency fund.

SoMoNY · April 2014

We already have a home so money is set aside from bonus from improvements & maintenance, then we attack any bad debt first (credit cards), then retirement, then college.

They give loans for school, not retirement so we pay ourselves first

jlaOK · April 2014

We've been following Dave Ramsey's plan so if you are familiar with his plan this will sound familiar.

We paid off all of our debts except for our mortgage over the last few years and now we are saving for our 3-6 month emergency fund. We will hopefully be done with that in the next 6 months and will start saving for a down payment for our next house. We hope to start building in January and hopefully move next summer before DS starts kindergarten. After that we will simultaneously bump up our retirement savings and the kid's 529s (right now only my parents contribute to the 529s). After that we hope to take a break and enjoy some of our money. By that time we will have saved or debt eliminated close to $100k and look forward to relaxing a bit.

mexicolombiana · April 2014

This is such a hard question for me to answer. The reason is that our student loans between me and my husband are so high it's a joke to try and pay them off. We cannot even attempt to put a dent in them at this time (I'm talking $320k). Unless both our salaries were over $100k it's not a possibility to plan on paying off our student loans. It would take $3-4k a month to be on a solid repayment plan to "pay them off" in say 20 years or something. And now that I'm only working part time it's not even on my radar. I am thankfully saving money on child care since I'm home a few days a week.

So, given that situation, my hope is that there will be some kind of legislation to either make student loans dischargeable in some kind of bankruptcy or allow people to have their loans forgiven in a better plan than the current IBR. We are currently on IBR payment plans for our federal loans and since we had a loss on the sale of a condo and our AGI was negative we are paying ZERO to the loans. Screw them. It doesn't even matter.

If I continue on IBR for however # of years the loans will be forgiven anyway. I have ideas on how to avoid any tax liability from the IRS at that time. We just pay minimums to our privates.

We invest a little in a 401k at my husband's job but it won't do the trick for a real retirement. That's our big problem now. We don't have any solid investments for retirement. I am working on that but we don't have much disposable income to save now anyway since we have our 2 small kids.

We save a little for college for the kids but obviously not enough. I wouldn't want my kids to take on the kind of debt I did for grad school so we'll see how the state of post-secondary schooling is in 15 years when they go to college.

We already bought a house that we plan to stay in for a while so that's done and we have a generous cushion in a savings account.

Other than that we live happily and spend money on vacations and having fun when we can. Life is short and if you don't enjoy it while your kids are young, then what's the point of living? I do need to work more on retirement funds but other than we are pretty content for now.

snicksnack · April 2014

Personally I feel for those starting at square one first should be your emergency fund and then retirement along with paying off debt. It is nice to pay for college but in my opinion it should be last on the savings list as we more than likely won’t have social security to fall back on the way our parents do and most companies don’t offer medical coverage for retirees. I see so many of my friends spending every dime or living pay check to pay check so one person can stay home and I cringe. I hate to see their situations once they are retirement age it won’t be good. Worse came our children can get schools loans and hopefully will have schlorships.

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DH and I are aggressive savers I have been saving for retirement since I started my first real job. We count on my pay as DH is self-employed and it fluctuates so we live as if we are one income. Technically we could live off my salary except we do have a summer home but worse case we would rent that out so it is viewed as a luxury.

We own a home n/a

We have no dept other than a small school loan for me that has very low interest and is not worth paying off at this time

We have an emergency fund that covers 6 months of my take-home pay I define take-home pay as what is in my check so it does not count what comes out to go towards benefits, 401k and flexible spending therefore it will cover more like 8 to 12 months given the kids would not be in daycare if I lost my job. We have other savings we don’t want to touch and have tied up as it is not for emergencies and we have retirement accounts

We are prepaying two years of college for each child this year and will contribute with regular 529 investment accounts the goal is to cover 4 years for each child

jf198400 · April 2014

jlaOK said:
We've been following Dave Ramsey's plan so if you are familiar with his plan this will sound familiar.

We paid off all of our debts except for our mortgage over the last few years and now we are saving for our 3-6 month emergency fund. We will hopefully be done with that in the next 6 months and will start saving for a down payment for our next house. We hope to start building in January and hopefully move next summer before DS starts kindergarten. After that we will simultaneously bump up our retirement savings and the kid's 529s (right now only my parents contribute to the 529s). After that we hope to take a break and enjoy some of our money. By that time we will have saved or debt eliminated close to $100k and look forward to relaxing a bit.

I find Dave Ramsey a bit confusing. I can understand paying off bad debt (credit cards). But I don't see the advantage in paying off my student loans, or even my car loan, if I don't already have an efund. If DH or I lost our jobs, and we didn't have savings, we'd be screwed. I see more harm in that, than in paying off my loan which has a payment of $100/ month.

emberlee3 · April 2014

We already have an emergency fund, employer matched retirement contributions, and live well below our means. I plan to pay off all my student loans this year except the (large) chunk that is 2.35% interest. At that point I think we need to sit down with a financial adviser to figure out a plan.

banks81 · April 2014

First, we max out what our emplolyer matches for 401k. We actually put more in than that, but I think that is a definite must. We were both doing that well before we got married. When we had saved enough, we re-financed our mortgage to a 20 year loan and paid the 20% down payment so that eliminated the PMI. Then we worked on building up our 6 month emergency fund, which is done. And any projects we want to do around the house are saved first (on top of the emergency fund) and then we pay in cash. And if anything comes up that we have to dip into our savings, we build it back up before doing any other non-necessary projects or trips. We use credit cards for almost everything to get the rewards/points and pay them off, in full, each month.

I think what helps is that we live below our means in regards to the big things - house and cars. We decided that we feel most comfortable with a mortgage that either of us could pay if something ever happened to the other person's job. Obviously our lifestyle would have to change, but it would be manageable. This has given us the flexibility to save our money in other ways.

We were also fortunate to both graduate college with no student loans and DH was able to get his MBA paid for through his company. So I know we are ahead of the game on that aspect.

We are now talking about starting a college savings for our children and increasing the contribution to our 401k. I would like to get to the point where we are maxing out our 401k and saving the max for college each year as well. But we are going to wait until DD is born (next week or 2!) and see how it goes after we start paying for daycare, etc.

Something my dad has always said regarding financial decisions is "Piece of mind is worth a million bucks" and I think about it often when trying to make a decision. Everyone has to do what is right for their family and what will make them the most comfortable.

jobiann · April 2014

We are currently following Dave Ramsey. We have step 1: our $1,000 emergency fund done and then some, and we are currently working on step 2: our debt snowball, we are about half way through it right now. I'd say we almost have step 3: 3-6 months of expenses in savings done already and we also contribute to our Roth IRA's and other retirement accounts each paycheck. Step 4: is investing 15% of household income into pre-tax retirement accounts.

College funding comes last, we have an account started for DS, we put a little here and there into it. DH's parents contribute a percentage of their paycheck into an account for DS's college as well (this was something they offered, we didn't ask for it).

We are a lot better off then we were when we first started dating.

jlaOK · April 2014

jf198400 said:

We've been following Dave Ramsey's plan so if you are familiar with his plan this will sound familiar.

We paid off all of our debts except for our mortgage over the last few years and now we are saving for our 3-6 month emergency fund. We will hopefully be done with that in the next 6 months and will start saving for a down payment for our next house. We hope to start building in January and hopefully move next summer before DS starts kindergarten. After that we will simultaneously bump up our retirement savings and the kid's 529s (right now only my parents contribute to the 529s). After that we hope to take a break and enjoy some of our money. By that time we will have saved or debt eliminated close to $100k and look forward to relaxing a bit.
I find Dave Ramsey a bit confusing. I can understand paying off bad debt (credit cards). But I don't see the advantage in paying off my student loans, or even my car loan, if I don't already have an efund. If DH or I lost our jobs, and we didn't have savings, we'd be screwed. I see more harm in that, than in paying off my loan which has a payment of $100/ month.

Under his plan you aggressively pay off debt, he assumes that all debt (minus mortgage) would be paid off in less than 2 years. In that short of a time the chances of a major financial event happening would be slim. I will say, however, that we didn't drop our savings down to that $1000 that he recommends. We kept a few thousand in savings. Since we were putting so much down on debt each month (close to $2000) if an emergency came up we'd just put our debt money towards it.

I have heard him say that if you have a huge debt that would take years to pay off or if you aren't sure about the stability of your job that it is good to have a larger "starter" emergency fund while you are doing the debt snowball.

mae0111 · April 2014

We bought our "forever" house last year, after saving for years (HCOL, 20% down). Our mortgage rate is extremely low, and fixed, so we're not paying any extra on it at this time. We do have a small HELOC, and I'm paying that back at about 2.5X the amount due each month.

Other than that, we have a car loan. We paid off all CC debt several years ago, as well as our undergrad loans ($60K -seems small compared to the numbers here, but when that's what you're making in a year, combined, in HCOL, it seems huge). DH doesn't feel that a grad degree will help him in his industry, and my company paid for my MBA.

We also use our CCs for everything, and pay them off each month. We earn a ton of points/rewards. DH travels a ton, and his company does not issue corporate cards outside the C-suite, so all travel goes on his personal Amex. We can either just use the points to pay off the CC, or we get gift cards. Great for home improvement in our "everything is original from 1985" home.

So our goals are education, home improvement, and retirement. And possibly one of us downshifting our careers in 5 years. We had our financial planner map this out, and if we both keep working, we can retire at 55 (assuming we live to be 100). If, in 5 years, I leave the workforce completely and never return, DH would retire at 62. She did not take into consideration a lot of unvested stock that DH and I have through our respective employers, which we sort of earmarked for education, but some of it could go toward retirement as well. So he could retire even earlier.

MommaP12 · April 2014

We just bought our "forever" home and will never be moving again. I don't mind having our mortgage for the next 25 years because we got a great rate, so not worried about "owning" the house That said, our savings is pretty low. So I think this is the order I'd like to focus on once we are moved into our new house:

1) Build up savings again (used a lot for house purchase and need to build emergency fund up again)

2) Payoff CC debt (we have very little, should be gone by fall)

3) Contribute a little more to retirement savings

4) Contribute a little ($100/each or so) to each kid's 529

We own our car outright thankfully.

.

traveltheworld · April 2014

We have no debt except mortgage on our house. My priority is to pay that off. I know there are probably better ways to invest, but I want the comfort of knowing that if either DH and I lost our jobs, we wouldn't have to worry about a roof over our head. And I LOVE my house and plan to stay in it forever, so the sooner I pay off that mortgage, the sooner it's truly "mine"! We live in a HCOL so even with the aggresive repayment plan, we are still looking at 10 years before the mortgage is fully paid off.

That said, we put probably 40% of our savings into paying off the mortgage early, and the rest is put into investments for retirement. We saved and bought 2 rental properties that are now cash-flow positive, and I plan on funding DS (and any other future childrens') education by selling one of those properties in 15 - 20 years.

My dream is to retire at 55 and do lots of traveling, so we are saving vigorously to accomplish that.

PSU_Texan · April 2014

mexicolombiana said:

This is such a hard question for me to answer. The reason is that our student loans between me and my husband are so high it's a joke to try and pay them off. We cannot even attempt to put a dent in them at this time (I'm talking $320k). Unless both our salaries were over $100k it's not a possibility to plan on paying off our student loans. It would take $3-4k a month to be on a solid repayment plan to "pay them off" in say 20 years or something. And now that I'm only working part time it's not even on my radar. I am thankfully saving money on child care since I'm home a few days a week.

So, given that situation, my hope is that there will be some kind of legislation to either make student loans dischargeable in some kind of bankruptcy or allow people to have their loans forgiven in a better plan than the current IBR. We are currently on IBR payment plans for our federal loans and since we had a loss on the sale of a condo and our AGI was negative we are paying ZERO to the loans. Screw them. It doesn't even matter.

If I continue on IBR for however # of years the loans will be forgiven anyway. I have ideas on how to avoid any tax liability from the IRS at that time. We just pay minimums to our privates.

We invest a little in a 401k at my husband's job but it won't do the trick for a real retirement. That's our big problem now. We don't have any solid investments for retirement. I am working on that but we don't have much disposable income to save now anyway since we have our 2 small kids.

We save a little for college for the kids but obviously not enough. I wouldn't want my kids to take on the kind of debt I did for grad school so we'll see how the state of post-secondary schooling is in 15 years when they go to college.

We already bought a house that we plan to stay in for a while so that's done and we have a generous cushion in a savings account.

Other than that we live happily and spend money on vacations and having fun when we can. Life is short and if you don't enjoy it while your kids are young, then what's the point of living? I do need to work more on retirement funds but other than we are pretty content for now.

I'm sorry, this may not be PC or compassionate, but how can you just hope that you can discharge your debt? You took on this debt and somebody loses if you don't repay. Maybe it's other tax payers who are struggling too? I don't mean to start a big argument but I just don't get this logic.

As for us, we were very fortunate to come out of college debt-free. We have both been maxing out 401Ks since we started. We also try and target 10-15% savings over and above the 401K savings. This is money for home improvements and college savings. We are in our forever house but it needs upgrading. We also have to make sure we have money annually for private school.

In general, our goal has always been to fund our retirement first and college funds second. We didn't buy our forever house until we could afford a sizeable down payment. We also never finance cars.

cecilyandgautam · April 2014

Retirement savings are a permanent priority for us. We don't stop doing that to achieve some other temporary aim. We don't even consider those contributions part of our budget.

Other than that, we have small "good" debts at low interest rates and we compare the savings to be had with paying it off early vs. the gains to be earned by investing. We've accelerated our pay off plan for DH's student loans but we're still putting money in the 529s, our general savings, etc so not 100% of our extra funds are going directly at the loan and given the returns on other options, I think it's a smart move for our situation.

Klavanga74 · April 2014

-Home ownership is a big one. We bought as soon as we could and as the market has improved and rates have dropped we've always gotten out of that house, made a good bit of $$ and moved up a little bit.

-keeping credit cards paid off, although we haven't been as successful as we'd like, which is dumb, considering that we've managed to move. Simply poor management on our parts

-saving for retirement...it comes out automatically, like most people, so it's like we never had it in the first place

-saving for college - we live in Virginia and do the VA 529 plan.

dashofreality · April 2014

@jf189400 I agree on the Dave Ramsey thing. I understand where he is coming from, and he did make me realize that it was dumb to pay10k in interest so that I could write off 2k in taxes, but I cannot let go of my big savings cushion. I would be so stressed if I only had 1k saved.

That being said, my priority is my lovely law school debt. Right now I'm down from 115k to 35k and will be done with that in about 2.5 years. I am going to try and push it and get it knocked out in the next year and half.

My husband will retire from the military so it is nice to have that pension cushion. Once my loans are paid I will up contributions from 10 - 15%.

As far as college, I'm not too stressed. I manage to pay 1250 a month on my loans now with me working PT. Once they are paid, I plan on dumping that into college savings. 4 years should have 1 kid paid for and we can use the GI Bill for the other.

Outside of that my goal in life is to not take on debt again except for our next house.

GracefulStar · May 2014

Right now paying off our mortgage on our apartment to have a down payment for a house. I have money taken out for retirement. We have an account for my son's future education but have been slow with contributing. I figure I can focus on that after we pay the mortgage. We pay our cc every month. We are going to get rid of our second car which will cut down our insurance. Savings was established first, now it's full mortgage focus!

2-Step · May 2014

We have always put a lot in 401k. My priorities constantly shift, but if I had to list them I would say - short term savings and once that is maxed, retirement, college, debt. Our debt is a car loan at 3% interest and student loans at 1.8% interest, so those aren't a huge priority unless we needed the extra cash to meet the other goals. If we ever carry a credit balance then that goes to the head of the line until it's paid off.

SunAndRain · May 2014

Given our current financial and family status, our priorities are protecting our savings and DD. So we recently purchased more disability coverage on top of what our employers provide, and life insurance.

This was all part of a bigger estate planning effort.

At this point we have a handle on all debt and retirement savings. Wasn't always like that but we have managed to make progress which feels really good since It is something DH and I accomplished together

exhibitv · May 2014

We both max out our 401ks (up to the employer match) and then we max out our ROTH IRAs since we will likely be phasing out of the ability to contribute soon. After that, we try and allocate $4-5k (annually) per kid into a 529 plan. The rest is going to savings for a downpayment for a larger house.

shakinros · May 2014

This thread is making me a feel loads better about our efund. Thanks for that. I've been stressing about having "only" 9K (which will cover about 2.5 months). But I guess we are ok with that!

We're about to close on a house and we ended up with a 4K tax bill this year. Ugh. So with those things in mind, our priorities are:
- pay off tax bill (accomplished this week! Woo hoo!)
- pay off credit cards (we'll finish the one that was 8K with 12% interest next week. Still have 4K on 0% but we have until December on that)
- pay off DH's student loan debt ($100k, interest rates ranging from 3 to 6.8%)
- up retirement savings
- home projects

College savings for DD is not on the list right now at all. My parents are saving for her. We'll start throwing money at that once we've made a bigger dent in the school loans. No plans to pay the mortgage early. We think this is our forever home so we're not in a rush.

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