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November 05, 2012


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Wow MD that is a very disciplined approach to money. Its good to see young people like you taking control of your money so early in life

Sounds like you're doing great, have you considered ERE (early retirement extreme)? I wouldn't be surprised if you could retire by 40 without changing too much.

I am really impressed with your savings rate and also with starting early, kudos to your parents for getting you off on the right foot!

Do you know that leasing a car is largely a rip-off? If so, have you had that financial conversation with you fiancee?

It's ok to help others financially, but you have to do it in a smart way. When you say that you help out with dining with friends, don't do it so that you can increase the number of times you can dine out with them every month. If they cannot afford eating out often, then do not enable a habit that they cannot afford. I'd say once a month is a good limit.

Helping family financially is something I'd consider even more than helping friends. Again you must do so smartly. Do their fixed income at least cover all the basic expenses? You may have to sit at home on a dinner invite and find out what their budget is like. Would not be cool if you are paying for their needs while they keep spending a good amount on wants.

How old are your parents? Have their taken social security yet or just living off pensions?

Never ever cosign a loan! Student loans are one of the worst as they cannot be discharged with bankruptcy! Myabe your 32k car is attracting a lot of moochers? Do you really want to pretend to be living large or just in luxury? If you want luxury, then buy a used luxury car. I bought a reliable luxury car for 12k with 73k miles and I'm keeping my car for at least ten years.

Nothing wrong with visiting your sister in Hawaii, you and your fiancee deserve it and it also helps your sister out.

If your brother in law cannot afford to go to Spain on his own, and her family cannot come visit him, then don't break the bank to do it! There is Skype nowadays and you can most certainly get to know someone very well through Skyping.

It's great that you and your fiancee up your retirement contributions. First, have your finacee start a Roth IRA and open it up at Vanguard. Any low cost mutual fund will suffice and do a high percent of stocks because you are in your 20's. You can start contributing monthly at $458/month starting in 2013. Beyond that and you want to contribute more to retirement?, then up your 401k's. Target date funds work fine.

Try accepting offers from your family to help with your wedding. Who cares that the economy sucked money out of your parents net worth? As you say, they are doing "well". You have to learn to receive as you've learned to give. It feels good to give so let them give and feel good about helping out on the most special day of your life!

@Rohit, Thanks! Really that has to go to my parents. Financial responsibility is incredibly important to them.

@JP, I've thought about ERE, but the big unknown factor for me is kids. Honestly, it gives me anxiety when I think about how much I may have to spend on kids.

@Luis, we've had the lease conversation. When his lease is up, we'll be looking at purchasing a car.

We don't always pick up the bill when we eat out with friends. We usually only do it once (at most twice) a year, and never for the same event. I didn't want our friends to come out to eat and rely on us picking up the bill because we "traditionally have" in the past.

My fiance's mom and her husband have enough to cover their monthly expenses. She is still working part time, 6-12 hours a week at a vet office. In the past, the only time we've helped them financially is with their property taxes. Their biggest asset right now is an old house, not the one they live in, in the historical district. It's currently occupied by her eldest son and his wife. He doesn't give her rent money (I personally disagree with this) but will give her some money to cover part of the property taxes for it.

Before anyone asks, we've all sat down and talked with my fiance's brother about their plans for the future. His wife finishes her degree in MIS next spring, and we wanted to know their plans for the future. The house they live in is old, needs some major repair work (new roof), and then needs to be sold. As of right now, they've agreed they will move out June 2013.

My parents are both in their late 50's. They're both still working. My sister and I were born in the US, my parents are originally from China. All of our relatives are still in China. The reason I don't want my parent's help with the wedding is because they also want to hold one in China. They've already said they will pay for that celebration, as well as our travel costs to China.

I should probably mention that my fiance's father recently sold his house, he married a year and half ago and moved in with his new wife. The mortgage was paid off, and from the sale he is giving $10,000 to each of his two sons, and his new stepdaughter. My fiance and I plan to put his $10,000 into our savings for a house down payment.

We are hoping his brother uses his share to either fund a trip to Spain, fund their move to a new place next summer, or both if they make smart choices.

Wow what a great start! Owning your condo outright at 25 is very smart. You can save so much for that bigger house down the road. You're doing just fine and are on track for a bright future.

I also had to "train" my now-husband into being a responsible saver and conscientious spender. He used to run up credit cards and saved very little if anything before we met. Having a spouse that shares your financial values is critical to a successful marriage.

I would suggest that you do not buy friends dinner all the time. People will automatically expect you to pay for everything in the future - best to go out with people who can afford to pay for it in the first place.

Also with regards to family who are asking for loans, money for trips, don't do it unless you don't mind losing the money outright. Bad loans also have an uncanny ability to destroy relationships, are you willing to lose your relationship with your brother? Don't give him money for luxuries like the trip to Spain. You helping with your mother's tax payment is fine, and if you feel it is worth it that is your call. I made a very large loan to wipe out my MIL's credit card debt that her children are paying back. While it would sting to lose that money, it has made an immeasurable improvement on her mental and physical health and as such I feel it is worth the risk.

I suggest your husband read a few finance books, starting with the The Wall Street Journal's Guide to Starting Your Financial Life. It's a digestible format and I found it useful for people who are new to financial planning.

My daughter has found that when a friend gives you a sob story and asks you for a "loan" what they really mean is a "gift". This is especially true when they know that you are in a much better financial position than they are. It's sad but true. It's all very well being kind and compassionate but be prepared to be taken advantage of.

One high school friend of my daughter that has received two loans years ago and never mentioned them again still found the money to give her daughter a lavish wedding in Hawaii.

I gave my two daughters interest free loans to buy their first cars but I also gave them payment books. Neither of them ever missed a payment and today both have net worths in the $2M-$3M range. I also cosigned a home loan for one of them and never had a problem.

The only time we pick up the bill at a restaurant is when we have invited guests.

As JY said above, "Bad loans also have an uncanny ability to destroy relationships".

Do you plan to have children? If so, how do you plan to adapt to that situation?

I'd recommend not buying expensive cars if you can get away with it. They aren't investments and a more expensive car carries forward with it more expensive repairs, insurance, and sometimes gasoline.

Sounds like you guys are doing well. There are a couple things you could potentially optimize but it seems that as long as you are happy and financially sound you should spend where you want. I would suggest increasing retirement savings a bit so that you don't have to save so much later in life if something pops up.

@JY, definitely the condo purchase was probably my best move financially. We wouldn't be able to save near as much, or have as much discretionary income to spend if it weren't for that decision.

@Old Limey, I refuse to do personal loans to family or friends. That's what banks are for. My philosophy is if you're that hard up to have to ask a friend or relative for a loan, you need to do some serious overhauling or rethinking of your life. Now when I have adult children, this may change. Hopefully I will do as good a job as my parents did in raising me.

@Noah, we plan to have 2 children, timeline is starting in the next 5 years. House comes first, our current condo is too small. Ideally by then, we want to be in a larger house (3-4 bedrooms), and be further along in our careers to have a higher income and yet still be able to save a considerable amount. We do have plans to start a 529 (or similar savings account) for our kids, pretty much as soon as they're born.

Where we live currently, we're near both my fiance's parents, and judging by the hints, they're excited to help. The first child will probably be spoiled, he or she will be the first grandkid for both of our parents. His brother doesn't plan to have kids, and my sister is significantly younger, so short of an unplanned surprise...


529s are great and thinking about them now is a good idea. Will either one of your being staying at home with the children? If not, have you factored in the cost of daycare?


Thanks for asking these types of questions, it's forcing me to zero in on an event that will shape 18 years of my life at least. The following is what I've come up with. If any real parents want to correct any illusions I'm laboring under, please!

I will probably take the first 6 months off, and then ease back into work for the next 6-12 months. If we time it well, the holidays are the slowest for me at work. I can easily be gone Nov thru April and not miss anything big. The important months are budgets and audits, which happen from June thru Sept. I usually do work from home most of this time, with the exception of a few hours a week for meetings. It's easier to get through the paperwork when other people can't bother me. As I type this out, I realize how terrible this could sound to some. Am I a bad person for thinking of timing the conception and birth of my child?

When our child gets old enough, we will probably use a daycare facility. Even if we maintain our current wages, it doesn't make sense financially for one of us to stay home. With my fiance working at the University, they have discounted day care for around $750 a month for employees, otherwise there are private day cares for about $1250.

My fiance's parents have also offered to help babysit part time. Both of his parents are retired. They both have part time jobs/volunteering they do, but both have said they would like to help babysit around 4-8 hours a week each.

Prior to having my first child, I'd like to have both an emergency fund of 1 years worth of expenses in place and a savings fund of 6 months of my pay to subsidize what my husband would then be making. The savings fund would be to make up for my lost wages. If we don't use it, great it'll go into the 529 or our retirement funds. The emergency fund would be if something terrible were to happen.

My wife and I have been married 56 years and have 3 grown children. We were both born in a popular seaside town on the South coast of England and made the decision, as many have done before us, to emigrate to the New World as soon as my training and education as an aircraft engineer was over. Thus we left our families behind, and sailed away when I was 22 & the first in our family's history to earn a college degree, and she was 23 and a credentialed librarian.

We have realized the American Dream and have lived in Silicon Valley, California since 1960. The reason I mention this is that our success would have been nothing at all like we have achieved if we had stayed in our home town where all the remaining members of our families still live.

In retrospect our decision has made all the difference in the world to how our life, and those of our 3 children have turned out. One child was born in Canada, the second in Denver, CO, and the third in Santa Clara, CA. My 48 year old son, for example, never went to college but is now the Western Regional Sales Manager for an international company and making $160K/year.

Sometimes it's good for people of your age to make very bold decisions and strike out on their own. None of our family members ever tried to talk us out of our decision, as was the custom in a country that, prior to the end of WWII had the largest empire in the world and was used to seeing its sons & daughters move overseas.

@MD Don't forget you may have a few years overlap so plan for at least $1500 - $2500 if the children are near each other in age. Also, planning the birth is a good idea but it may only allow a few months of "trying" before you have to get back to birth control. If one or the other spouse really wants a child, the "trying" may have to continue to keep peace and thus the planning may not work at all.

Also, lots of states offer some sort of leave payment before and/or after the baby is born. In CA I believe 60% of the paycheck can be covered for a few weeks.

I don't know you as a person, but you may want to have that conversation with your fiance about the possibility of one of you not returning after a child is born. Sometimes a mother (or father) changes their mind after a child is born and doesn't want to go back to work. Budget your finances so that if that does occur, it can be manageable. Learning to live off one income is a good idea anyways in this economy. When both spouses work, the lifestyle usually creeps up a little higher and if a job is lost, it causes a lot of stress.

Hi MD,

Fantastic fantastic start. You are definitely in a much better shape compared when I was your age.

Just 2 comments:
- On investing, try out "Bogleheads Guide to Investing" and also plenty of good investment tips here at FMF blog.
- On moving for bigger and better opportunities, like what Old Limey mentioned, it is easier to take bold decisions when you are young, rather than later (especially when you have kids). The stakes are much lower when you are young, when kids are not in the picture.

Good luck to you.


Echoing Noah's comments - In the years when our children were born, 1958, 1960, and 1963 it was far less common for wives to go back to work after having young children. When we bought our very first home in 1963, every family in the street was in our same position and the mothers enjoyed staying home and looking after their children. It was just the way that married life was portrayed in the TV shows of that era. The community felt very safe in those days and the children would all walk back and forth to the nearby elementary school on their own. That's all changed, as have lots of other things. These days women have more education, have good careers, and seem to enjoy getting back to work and resuming their career. My wife went back to work as soon as she felt comfortable with the idea, and also never held a full time job after becoming a mother. Fortunately she had a good job with the school district and gets a nice pension which along with my pension and our SS checks are more than enough to live on, even though we have a very high income from our investment portfolio.

Hi MD,
Congratulations! You seem to have a good head for business as well as financial management skills. You are outstanding at a time when so many young people your age struggle to stay on track with finances.

A piece of advice: Helping your family and friends financially is the admirable thing to do, however, you can also become an enabler, whereby they will stop making efforts to help themselves because they have you to count on. (This is usually the reverse situation, with parents helping children).

My spouse and I help family members who need it with a one-time GIFT, but with the understanding that they don't make it a habit, as it only serves to keep them in a dependent state and, in the long run, less appreciative of our efforts.

IMO, the best way to help someone who struggles financially is to offer whatever financial assistance you can, but then lovingly suggest ways in which they can EARN the extra cash to meet their need. There are tons of information everywhere, starting with the FMF website, on how to manage or increase your income.

Thanks for listening.

I am so impressed with your money situation! Your parents helped you get a huge head start in life, and you are being responsible with that by continuing to get ahead.

Congratulations for a really strong start to your financial life! That is so amazing that you have so much saved so early. Kudos to your parents and to you for listening! One of the misconceptions that my husband and I had when we were "DINKs" like you and your fiance is that we would always have more income/disposable income in the future. I always like to point out to couples with no children that when you do have kids, money does tighten up considerably. Even if you'll both continue working, you'll have daycare costs to factor in, diapers, perhaps more meals out since you'll have more to do and less time to cook, etc. Then, as the kids get older, you'll have activities, clothes to buy, camps, Christmas gifts, and all the expenses that come with having children. So, IMO, I would think a lot about the size mortgage that you take on. If you can keep mortgage costs way low (lower than 25% of your take-home) that will help you. The fact that you have a paid-off condo is so incredible, but I would think hard about how much mortgage you take on with your next house. And anticipate having less, not more disposable income. My two cents for what they're worth! :)

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