What course of action best suits our situation?

PerCapitaSmile · #1 (**permalink**) 11-18-2008, 12:51 AM

Hello all. This is my first post here. Nice to meet you all!

I'll dive right in and ask my burning question. :-)

I'm in Milwaukee, Wisconsin. My wife and I live in a small apartment and have no investments to speak of. We've saved up a 3 months gross wage safety-net and have it in a bank savings account and now we've just reached the point where we can start putting away 10 percent of our gross income - $500 per month. My question is: where do we go from here, because we have slightly unusual circumstances?

Common sense tells me to put some cash into my companies matched 401k plan; however we both have chronic, life-shortening illnesses (insulin dependent diabetes) and, as we're both still in our early thirties, we have doubts we'll live past 60-70. I'm not sure we want a great deal of money locked away in a retirement account. For people like us, the earlier years are the worthwhile ones. But that said, who really knows what medical advances the future may bring so we want *some* retirement nest egg saved up.

We'd mostly like to invest in a small home. So what is the best course of investment for our spare $500 per month? Should we throw it all into a money market fund towards the down payment on a house. Should I put a small amount into the 401K and the rest towards a house? Is there perhaps a different type of investment we might be missing?

Your thoughts are very much appreciated!

pants711 · #2 (**permalink**) 11-18-2008, 08:50 PM

I recently upped my 'emergency fund' from 6 months of living expenses to 12 months worth, just in case. With the economy the way it is, you never know what might happen. I would recommend funding yours further, to at least 6 months.

If you don't already have one, check into an internet savings account (ISA), like ING Direct, HSBC, etc. Go to Bankrate.com to find the highest current yields. In this economy, you are better off making 3%-4% in guaranteed interest than putting it into your 401K which is probably hemorraging money right now, like mine is!

If you start an ISA with $500, paying 3% APR, compounded daily, add $500 a month, every month, in ten years it will be worth $70,588.80.

You also might consider the good old stand by: CD accounts. It ties your money up so you can't access it w/out penalties. Most banks offer 3-4 year CDs with slightly higher rates as well.

I would further recommend that you go to your local library and check out a personal finance book or two, to get some more ideas. 'Rich Dad, Poor Dad', any of Suze Orman's books, Dave Ramsey's books- all good reading and great financial wisdom and education.

Hope this helps and keep on 'squirreling' that money away, no matter where it ends up!

Drew_Dino · #3 (**permalink**) 11-19-2008, 06:44 AM

Quote:

Originally Posted by pants711

I recently upped my 'emergency fund' from 6 months of living expenses to 12 months worth, just in case. With the economy the way it is, you never know what might happen. I would recommend funding yours further, to at least 6 months.

If you don't already have one, check into an internet savings account (ISA), like ING Direct, HSBC, etc. Go to Bankrate.com to find the highest current yields. In this economy, you are better off making 3%-4% in guaranteed interest than putting it into your 401K which is probably hemorraging money right now, like mine is!

If you start an ISA with $500, paying 3% APR, compounded daily, add $500 a month, every month, in ten years it will be worth $70,588.80.

You also might consider the good old stand by: CD accounts. It ties your money up so you can't access it w/out penalties. Most banks offer 3-4 year CDs with slightly higher rates as well.

I would further recommend that you go to your local library and check out a personal finance book or two, to get some more ideas. 'Rich Dad, Poor Dad', any of Suze Orman's books, Dave Ramsey's books- all good reading and great financial wisdom and education.

Hope this helps and keep on 'squirreling' that money away, no matter where it ends up!

Great post

olena99 · #4 (**permalink**) 12-03-2008, 09:21 PM

My advice, keep away from mutual funds and any stocks for another 5 month. High interest savings account is the best place for now.

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