Poor guy question

The paying off the mortgage debate is a fun one but there are to many variables to apply across the board to all home owners. It does depend on your family size and needs or anticipated family size along with and you (and/or your spouses)job security. I paid off my house when I sold my first business. When my second business failed, it was nice not having a mortgage payment until we got back on our feet again. Now I'm looking to sell my third business and after that, I'll be able to look for a second home and get back into mortgage payments again (for the interest/points deduction). But the second home motgage will be 15 years instead of 30 for sure.


Mortgage debt is considered "good debt" as long as the interest payments are deductable. With the new normal of the slow stagnant economy who can say they will be able to pay the mortgage (even at 2.75%) on a regular basis. Sometimes renting is the smart way to go until your future is more secure (if only in your own mind).

 

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The Dave Ramsey plan is a good one.

If you invest in an IRA, make sure it is a Roth IRA. A regular IRA would give you a tax deduction now, but you would pay taxes on it later. With a Roth you will pay taxes on it now, but get to withdraw it later tax free.

Since you make about $40,000 per year you are in a very low tax bracket now, but might not be when you are in your late 60s. So pay the taxes now while your tax rate is low.

 

Id say spend freely and have fun. You got your whole life to work and save.

 

Also - This largely depends upon your unique situation.

If you're married and making decent money now, it might not make sense for both people to have Roth IRAs. My wife has a Roth IRA and I chose to keep my traditional IRA. If all of our income in our senior years was tax free, we'd be missing out on the tax deductions available to us in those years. So, we've chosen something of a hybrid strategy to take advantage of some tax breaks now when we can use them the most, and the tax breaks that will be available to us in the future.

Of course some people will say you'll pay more in taxes with a traditional IRA than a Roth IRA, and that might be true, but it isn't all about taxes. I don't mind paying my fair share of taxes. To me, it's about what will result in more money in my pocket when I retire. Let's say my wife and I both contribute $4k to our IRAs. If they were both Roth IRA's, we'd both pay taxes on that income today. Let's say those taxes come to only $1k. My question is where does that $1,000 come from today? If you invest the $8k in traditional IRAs, what do you do with the $1K you are saving in taxes today? If you invest it in your brokerage account and realize a good return, you'll come out ahead.

If you only look at the total dollar amount the average Roth IRA holder will pay in taxes, then yes, Roth IRA's should result in a lower tax burden on average. But if you take all other factors into consideration, a Roth IRA might not result in a lower tax burden, and they might not be the best option for you.

Furthermore, Roth IRA's can save some people money, but keep in mind that wasn't the true reason they were created. They were created to increase tax revenue in the short term at the expense of tax revenue in the future, while telling people they would pay less in taxes in the long run. In other words, Senator William Roth wanted to get reelected, but didn't really care about the long term financial health of our government.

 

Yes. Do this! Especially BEFORE you have kids. Live fast, travel the world, eat out, have lots of s_x ...things you won't have the time, energy, etc. for after you hit 30.

 

After 45 with pre-diabetes, obesity, a wife you only tolerate and 3-4 teenagers in the house with raging hormones, you really have nothing to look forward to except coin talk.

PS. and don't forget roll searching in your twilight years.

 

I agree. I'm 35, single father of a five year old girl. I have no time and Im to tired to spend money. I can still remember all the crazy stuff i did in my 20's and im glad i did it then.

 

It depends. But that isn't what was proposed. It was whether to not invest in anything to pay off a mortgage.

Lets break it down. A 15 year mortgage is a little over 3% today. Given an average tax rate that takes its real cost down to 2%. You are making 2% guaranteed by paying off the mortgage. If that sounds like a wonderful return, then feel free. Myself, instead of paying it off early I started a brokerage account. That account now has enough to pay off my mortgage, but I prefer to leave it where it is and pay the 2% effective mortgage interest rate.

So, its a personal choice. At such a low rate of "return" from the mortgage, I simply believe its more prudent to diversify your investment mix. Your mileage may vary. I see you are in TN, since you have no state income tax, your "return" paying down the mortgage would be higher.

 

i make half of what you make i buy coins and silver in small quanties every week or to because its what i like to do. you could also start coin roll hunting which realy dosent cost anything because if u dont find anything you still hve the money. also if you find any silver you can save that and put it towards prettier silver

 

Howdy SilverNoob,

And you thought you were a Poor Guy. Wrong. Look at all the wonderful advice you just received for free. The one thing that I don't believe was mentioned was to enjoy your marriage. There is an old adage for newly weds to 'budget the luxuries first'. Now in light of all the great pragmatic advice you received from all the good people above, build a little slack into this to address your spouse. She (assumption) can probably be convinced to like silver and gold jewelry - for special occasions, sure - but it would not hurt her and I'm sure it won't hurt you. Take a tip from the Indian culture of giving bling to all the women for every occasion. They take it with them and it is effectively their social security. Pay off your debt, stash an emergency fund, contribute to your 401, etc. But you can stash some pm here and there by simply buying wifey some bling.

Good luck,

peace,

rono

 

Here's another thing to look at. Now anyone who believes, living in these times, with silver having two highs near 50.00/oz and in-between being about 5.00/oz is indicative of what silver is valued at (referencing the 34 year chart from my previous post in this thread)..... take a look at this chart: (from http://www.kitco.com/charts/historicalsilver.html entering for years 1792 - 1999) and anyone can see that silver is historically valued at about a certain point and tends to stay there. Although past performance cannot predict the future (otherwise you wouldn't have seen two huge spikes within about 30 years when it hasn't really happened prior to this), you might expect that large values on silver are not the norm. I would really take that into consideration when determining whether silver is a good "investment", and would think that if anyone who thinks silver will keep up in price may just want to really delve into why the spikes occurred in the first place. Perhaps the silver boom is really nothing more than a repeat of Tulip Mania. Perhaps the point in the most recent increases (about 18.00/oz) is where speculators entered the market and drove up the price, then it could not be held up due to lack of more speculators to continually increase it. It has fallen to about 20.00 and I would say that may be about the high point that silver can hold out at absent a number of speculators coming in to increase it again.

Obviously, again. I don't know the future, or the factors behind the rise in silver. I am simply doubtful that a PM that has historically been valued at about X, suddenly is valued at 10 times that and can hold it out even when people aren't needing to feel more secure by having solid holdings. I think it is more likely that silver will find a place to be between about 5.00 and 18.00/oz and pretty much flatten out. But I could be wrong.

 

This is a little off topic and off color but still amazes me. Numerous studies have found that on average a couple will "make whoopee" more in their first year of marriage than the rest of their marriage combined. So enjoy indeed!

 

Yeah, that "fact" has been around forever. I remember in a sitcom in the late 70's someone said the same, saying to put a jelly bean in a jar every time the first year, and take one out every time after that. That you can never get all of the dang jelly beans out of the jar. The guy getting married said "I bet I empty that jar before the second year is out!", (forgetting he was standing next to her father).

While this FEELS true, I don't think it is, (at least for me anyway ).

 

I think it is probably true of some couples who slow way down after the first one or two "fruits of the whoopee" start toddling around. A variable I thought of that totally skews it is the high divorce rate i.e. if a couple gets divorced after 15 months then they are contributing a totally full jar to the pool and taking nothing out.

But if this was true in the 70s when divorce was not as high, it makes the stat more impressive. Assuming it is true, and I am pretty sure it is.

 

Like you mention it is a personal choice, but the last couple of years on the loan you might want to check what it really saves you tax wise since it is pretty much all principle and escrow at the time. Other than that I like get debt free, minimum 6 months safety money, then fully funding your 401k(or split between 401k and roth ira(wider range of investments). Then I would split the $250 - $125 coins or pm's and $125 in a stock account(something secure). Just one more humble opinion.

 

Fair enough. There never is a right answer. The "best" answer is the one that lets you sleep well at night. That aspect of investing is usually too overlooked by investment counselors.

 

Personally I would not add to the 401K because I don't trust the integrity of the financial system. Otherwise I would consider that the best place to invest since you can get employer matching contributions aka free money.

If you want to invest in silver I would only suggest doing so if you plan on holding it for down the road. I have little doubt that silver is the most undervalued commodity in existence right now, but it's not very likely to pay off under current circumstances where the price is controlled by contracts that do not represent the actual metal in full. As long as that is the case it's most likely going to be a hedge against inflation, but I expect it to return to fair value within the next decade.

Independently of investing I think it is also a good idea to have a modest stack regardless just in case we see a barter scenario. Cash on hand would also be a good idea initially in that case, but not for the longterm.

 

Wow didn't expect to get that many responses! So first thanks everyone.

I saw a lot of people saying pay off debt first, i've just made my last debt payment last month I've now payed off everything I owe money on and I sold my car that had a loan and bought a used car for 2k. So completely debt free. My bills for the month are 600 rent which also includes utilities, 94 car insurance, 80 phone, 80 cable and internet, and 8 bucks on netflix. So 862, and then around 300 for gas/food. So we will round up to 1200 for my monthly expense. Sense I get some overtime at my work my last years w2 was 36,400 at 16 bucks and hour. Average monthly after the 50 I do have going to 401k and taxes is about 2100 take home. Leaving me 8-900 a month. Now next month when I get the 4 buck raise this will obv change which should be fun. I like to keep at least 500 in my checking at all times, and right now I have 3200 in my savings account. So with everything I've red from the reply's this is what i'm thinking.

Add an extra 100 to my 401k a month
Start a roth ira and do 150 a month
200 bucks a month to savings
100 to silver bullion, so 3 ounces a month at current price

Also on the house thing I do not intend to buy one, We happen to be renting a house that my gf's mom owns and she said she put it in the will to go to us when she passes.. so no reason for a mortgage

From what everyone has said this seems like a good start and i'll try and add more to them as I make more (or when I get her a full time job )

Thoughts?

 

If you DO buy some silver here and there, don't buy rounds or bars. Then, down the line, you won't have to convince a skeptical buyer that they are solid silver and not silver-plated, or Chinese, or whatever. Buy dimes and quarters a roll at a time, or from flea marketers where you can haggle or swap. LQQK at the rolled coins before you buy them.

And, all things being equal, I would "bank" at a credit union, not a bank. Around here, credit unions are much more consumer-friendly, and their fees are about 1/3 less than local banks. Their safety-deposit boxes are HALF what a bank charges.

I like the "trust" idea, but it's too soon for that. You can find library books that give all kinds of examples for different situations. Finally, if there's any chance at all that you or your wife may have to keep your parents afloat in 20 years, plan ahead. You can read the rest of this article by searching Google:

"Jun 25, 2012 – Twenty-nine states have “filial support” laws on the books that could be used to go after patient's families for unpaid long-term-care bills." This is a shocker to young families.

 

If your wife has brothers or sisters, after you're married, YOUR attorney should review the mother's will, and it should specify who has the controlling interest in the house, and how the proceeds are divided if it's sold, or if you break up, and, what has been done to mollify your wife's siblings. I know you don't like to contemplate such negatives, but bad things happen to good people. Also, the house should be properly insured, even while you're a tenant.

This is not legal advice, it's an ex-Realtor's observations from experience.

I was a Realtor for 15 years, and I can assure you I saw plenty of wills and promises go sour (regarding real estate, that is). You are counting on that house, and if something goes wrong that could have been prevented, all your plans are cut off at the knees.