In need of some advice

7 Replies

So I just purchased my very first house, which is also my current residence for my wife, two children and myself, I had to completely drains my savings in the process. I know I'm at least 1-2 years out from being able to purchase my first rental property because i have absolutely no capital saved. My question is, would i be better off dumping all my extra cash into the principle of my house to build equity that i can later use to help purchase my first investment or would i be better off putting my money into a savings account ?

@Christopher Nathaniel Hart No I absolutely would not put extra money against principal of your home until you have built up liquid reserves.  Money tied up as equity is not easily accessed. money in the bank is. 

I would work on getting that 6 month emergency fund reestablished for emergencies first. Then save money for an investment. For fast access I'd put the money into stepped CDs. Slightly higher interest than bank accounts, and stepped so you have one coming due every month or two incase you need the money.

@Christopher Nathaniel Hart

Here's the problem -- you had to completely drain your savings in the first place to buy your primary residence. Well and good, you have it now, but you've exhibited a significant lack of understanding of this business. Yes, you want to live in a nice home, yes you have a wife who likewise wants that nice home to live in and children to raise in a good environment...but now you have no money. With no money, you have no shot at opportunities. Was it worth it?

Stop thinking about real estate investing and start thinking about personal finance with your wife. You're most likely making a decent living, your wife might be bringing in something. What did you move into that took such a hefty down payment, a mansion? What kind of mortgage did you use, FHA or conventional?

I really think that next to that worry about where to put your extra money is a secondary concern. I would agree with @Lynnette E. that your first priority should be getting your emergency fund in order. I know nothing about stepped CDs, or I would probably take that option. We hold ours in a regular savings account.

You have, as you correctly surmise, one or two years before you can invest in something else. Make a commitment to yourself to read at least one personal finance book every three months. Listen to the Bigger Pockets Money Podcasts. Worry less about investing excellence and more about getting your house in order and your expenses in check.

Originally posted by @Jim K. :

@Christopher Nathaniel Hart

Here's the problem -- you had to completely drain your savings in the first place to buy your primary residence. Well and good, you have it now, but you've exhibited a significant lack of understanding of this business. Yes, you want to live in a nice home, yes you have a wife who likewise wants that nice home to live in and children to raise in a good environment...but now you have no money. With no money, you have no shot at opportunities. Was it worth it?

Stop thinking about real estate investing and start thinking about personal finance with your wife. You're most likely making a decent living, your wife might be bringing in something. What did you move into that took such a hefty down payment, a mansion? What kind of mortgage did you use, FHA or conventional?

I really think that next to that worry about where to put your extra money is a secondary concern. I would agree with @Lynnette E. that your first priority should be getting your emergency fund in order. I know nothing about stepped CDs, or I would probably take that option. We hold ours in a regular savings account.

You have, as you correctly surmise, one or two years before you can invest in something else. Make a commitment to yourself to read at least one personal finance book every three months. Listen to the Bigger Pockets Money Podcasts. Worry less about investing excellence and more about getting your house in order and your expenses in check.

Cds are certificates od deposit.  You can put your money in one at a bank.  Each bank will have different interest rates.  How long the cd has to mature will give a different interest rate. 

I actually get mine through my financial manager.  I get better interest rates then through the bank and he gets 1/4 of a point directly from the cd originator.  He has access to more cd originators with higher interest.  Even considering his cut I earn more.

Stepped cds are just cds that are taken out for different lengths of  time so that they mature, or are able to be cashed out or reinvested.at different dates.

So to start divide your money into 4 and buy a 3 month, 6 month, 9 month and year cd.  Then if you need  money the most you have to wait is 3 months to get the money without penality.  as these cds mature you can reinvest them at one year and get a higher interest rate and they are stepped for every 3 months.   As you save more, fill in your steps so one matures every month

You can take the money out of a cd before it matures, but there is a small penality. Most cds are issued by banks, credit unions, etc so they are FDIC i sured. Its a super safe investment for emergency money.

 

Thank you all for the advice. I'm going to look into CD's that my credit union offers as soon as i have free time during business hours.  Definitely going to start with doing my budget and living more frugal, this has been something I've talked about for years now but have never really put it into practice, it's something I'm going to have to do to get me to my goal of being financially free. 

I've started listening to the BP money pod casts and also have downloaded Your Money or Your Life by Vicki Robin and will be listening to that when i have time at work, she seems like a very inspiring person.  Again thank you all, i have so much to learn but i feel like this community is going to be a great place to do that.

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