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March 27, 2011

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Is this the only money you have? If so, this amount needs to be your emergency account and should be kept in a safe account.

Given that you are in an occupation that could result in moving every 6 or so years, it would not be in your best interest to consider buying a home until you are ready to retire.

Beyond that, there is not enough information to say what to do with the money. Do you have any retirement savings? Have you opened up a savings account for future college expenses for your child? What are your other savings goals? The advice for short term needs is considerably different than for long term needs.

I had the same question as Jim, is this your only savings (besides retirement)? I think we need more info to answer accurately.

If you do plan on waiting a year to decide how to invest, that would be a great time to research different financial vehicles that are in line with the level of risk you can tolerate.

A tough one to comment being Pastors in a church and not understanding totally how that line of ministery works, so I guess you need to ask yourself questions. Like where does God want me to do with the money? What am I being called to do? Should I store this up for a future need?

Then there are the more parental (worldly) questions like.

What do you want for my daughter? Take some of the money and put it in a college fund for her? Am I planning to retire from this job or never retire?

Seek and ye will find, knock and the door will open.

Good early afternoon, I'm the one who asked the question. I do see that I did not include some info that could be helpful. We have other retirement accounts of about $100,000 right now and expect to receive a pension from our denomination. We have no other debts. We do have college savings for our daughter. This money that I'm asking about really is some type of future housing money. As I said, we live in a parsonage now, with a corresponding lower salary because of our living situation. So what to do to make some money in the 6-8-10 year time frame w/o too much risk, as we could need that money at the end of that time if we are called to a church that does not have a parsonage and we would then purchase a home.

Thanks for your thoughfulness.

Jim,

Could you define "without too much risk" for the readers? Do you never want to lose the original investment principal, or do you want to limit the amount of monthly/annual volatility?

Derrik Hubbard, CFP

Derrik, I suppose some type of growth, knowing that nothing is a "for sure." We already know that, taking a hit of more than 18K when we sold our house last year.

Jim,

Do you have an emergency savings account equal to at least 8 months worth of expenses? If not, put the money into a money market account.

Secondly, your age, you really do not have enough in your retirement account.

Third, if you are in an occupation in which you could end up moving to another position/area within a 6 year period of time, I would not recommend buying a home. The housing dynamic has changed and it may be better to rent until you retire.

For that time frame (6-8 years) with a high risk tolerance (after all, if you have to rent, it would not be the end of the world later), it seems like a bond fund/stock index mix would be fine. I'd think at like a 30/70 to 50-50 stock to bond division (depending on your own interpretation of risk vs. time frame question).
Also, I'm in agreement with others-though I'm not sure how generous your pensions are, and pastors can usually work till they are pretty old (75 is not out of the question, particularly at a part time basis in my denomination), your retirement account levels are rather low.

Jim,

Be sure to file your loss with the IRS to the year you sold your house. You'll get a good tax return this year and will add to your liquid savings. Keep at least 30K in a money market or CD account at your bank. Stagger the CD so that the maturity dates come at different intervals.

Above and beyond 30k, take the first 10K and put in a ROTH IRA account with an INVESTMENT group like Fidelity. NOT A BANK!!!! Choose a no-load mutual fund. If you have more money after that, then you can invest in bond funds, ETFs, TIPS, index fund, etc. at the same or a different INVESTMENT group.

Before you start following instructions in the second paragraph, find a good CPA first. You will need to shop around so interview several, at least three. If you can get a referral from perhaps a church member that would be great! Be sure to mention fee structure in your interview and insist on a flat rate system.

You will want to open a brokerage account and purchase some ETF's that invest in assets that will do well with the coming inflation storm such as GLD, SLV, AGQ, USO, DGP, DBA, and DBC.

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