Anonymous and her husband have set themselves on the path of saving for retirement. But an old mistake haunts them: a financial planner convinced them to buy a mix of whole and term life insurance, which costs them $700 per month. Do they need whole life insurance, and where else can they save their money?
Mike has $60,000 in cash earning one percent interest. He has plans to buy a home and get married in three to five years. Where else can he put his cash to earn a little more? Is the stock market too risky for such a short time horizon?
Anonymous and her future husband are wondering: what’s a realistic amount to spend on a wedding?
My friend and former financial planner Joe Saul-Sehy joins me to answer these questions on today’s episode. Enjoy!
Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it here and we’ll answer them in a future episode.
Anonymous asks (at 4:28 minutes): I’m in the early stages of wedding planning and the hardest part has been creating a budget. We’re paying for the wedding ourselves and don’t want a courthouse wedding or to elope.
We’re both in our early thirties. I make $85,000 annually with an anticipated bonus of $20,000, have $5,000 in cash savings, $65,000 in retirement accounts and contribute approximately 20% of my income to these accounts annually. My annual expenses are about $45,000.
My fiancé makes $83,000 annually, has $45,000 in retirement accounts and about $15,000 in savings. His annual expenses are about $50,000.
Neither of us have significant debts other than our house and pay off credit card balances in full every month. We owe $220,000 on our house, at an interest rate 3.75% and have $110,000 in equity. Neither of us want to retire super early; we are targeting our mid to late forties.
What do you think would be a realistic and responsible budget for our wedding?
Mike asks (at 22:46 minutes): I’m looking for advice on where to put money for short to medium term savings goals – a 3-5 year time span.
A little about me: I’m 36, single, have no debt, live in a large midwestern city, and I make about $70,000 per year. I have about $75,000 in a 403b account. I recently opened a Roth IRA and am making monthly contributions. I contribute about 9% of my income to my 403b, I get a 10% employer match and contribute 2% to my Roth IRA.
I’ve also amassed about $60,000 in a high yield savings account, where I earn about 1% interest. I’ve come to the realization that having this much money in a savings account isn’t ideal. Some of this money will be diverted to my Roth IRA and I’ve opened a brokerage account with Fidelity to possibly invest some of the money in stock index funds. I’m trying to figure out what to do with the rest of it.
There’s a good chance I’ll be buying my first home in the next 3-5 years and marriage is also in the cards.
My impression is that stock index funds may be too risky for that short time horizon. I love the idea of a CD but the returns are low. I’m gravitating towards the idea of putting a good portion of that into bond index funds – I’m looking for something low risk but will beat my savings account returns. Any thoughts on bond index funds or any other place to stash your cash for short to medium term goals?
Anonymous asks (at 40:56 minutes): My husband and I are 32 years old. Right now, we have 10 months of emergency savings. We contribute $12,000 a year to our brokerage. We both max out our Roth IRA’s at $12,000 per year, combined. We contribute 3% to our 401k’s or 403b’s.
My husband’s company matches 3% and my employer contributes 5%, regardless of how much I put in.
We are also saving $24,000 a year towards our next investment, which might be another rental home or starting a business. I also have about $40,000 in an old 403b. We have two mortgages, with one being a rental home, and we have a car loan at just 1.9%. We have no other debt. My questions are:
Should we be contributing more to our employer 401k’s? They aren’t Roth accounts and have limited investment options – I have the funds in an aggressive target date fund. I’ve considered an HSA or contributing more to our brokerage account. Are there benefits for one option vs. another?
Two years ago, when our child was born, I panicked because we didn’t have IRA’s and neither of us were getting retirement plans with our employers. With the help of a financial planner, we opened IRA’s and purchased whole and term life insurance. We are spending $700 a month on whole and term insurance, as advised by our financial planner.
We feel this might be a mistake – I’ve read that building generational wealth is built through investments and that term life insurance should be enough. Should we put this money into our brokerage, start an HSA, or a 529? Should we have whole life at all?
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#352: ASK PAULA: SHOULD I PULL MONEY FROM MY EMERGENCY FUND TO INVEST OR PAY OFF DEBT?
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#348: ASK PAULA: HOW SHOULD WE INVEST TO RETIRE BY OUR MID-40’S?
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Posted in: Episodes, Personal Finance 101
Tagged in: ask paula, asset allocation, budget, downpayments, health insurance, HSA, index funds, investing, joe saul-sehy, whole life insurance
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