Investment/savings question - DPChallenge Forums

03/08/2006 03:27:59 PM · #1

This is totally OT, I know...

When my husband is out of the military in 10yrs or so, we want to retire to Colorado (where we are both from) and buy/build a house there.

I was thinking maybe it would be a good idea to start saving for it now. I figure even a small amount of savings could help with closing costs at the very least.

What is the best way to save/invest money to use in 10 years?

I really am clueless about it!

ShutterPug

Canon EF 24-105mm f/4.0L IS

03/08/2006 03:32:15 PM · #2

rob a bank. j/k I have no idea what is best for you either

cpanaioti

Canon EOS-40D

Canon EF 70-300mm f/4.5-5.6 DO IS USM

03/08/2006 03:33:19 PM · #3

Dollar/cost averaging. (Relates to stocks and mutual funds)

This means put a little away each month and you will have more in the long run than if you were to put large amounts away in larger intervals.

Pay yourself first.

Usually, when we get paid we spend what we need to on essentials and (not so essentials) and then whatever is left is ours. For this to work you set aside what you think you can save and use what's left over for the essentials.

One way of doing this is every time you spend some money take 10% of the amount you spend and put it away in your savings.

Just some general ideas.

A good book to read is:

The Wealthy Barber

It has a Canadian slant but the ideas can be applied anywhere.

SDW

Canon EOS-60D

Tamron AF 28-300mm f/3.5-6.3 XR Di LD Aspherical IF for Canon

03/08/2006 03:36:08 PM · #4

With the stock market being so vulnerable right now and CD's at a low and the US dollar not stable. I would say (a long with many investor) GOLD is the best investment right now.

LoudDog

Canon EOS-350D Rebel XT

03/08/2006 03:47:09 PM · #5

Buy an acer or two of land only there now. Something out of the way and an hour from town. In 10 years it should double or triple in value, or you could just build a house on it when the time comes.

Real estate is a great long term investment.

JayWalk

03/08/2006 03:49:15 PM · #6

OK, well I work in the financial field and I can give you a few tips:

1) Since you are a beginner in the investment area my first advice would be to KEEP IT SIMPLE. Don't go jumping into things that you don't know of right away (ie Gold, Hedge Funds, Margins Accounts...). The best way to do this is through mutual funds where the portfolio managers do all the work for you! Start by visitng some of the larger institutions like Goldman Sachs, Fidelity and Wells Fargo.

2) Once there I would suggest an index fund. This is a portfolio of stocks that is in direct proportion to the staock market. So what you are buying is a percentage of this larger group of stocks. All you need to do is fill out some simple applications and you will be all set.

3) As for the funds, I recommend S&P Index funds. You are young, have a relatively long period to invest in and can take slight risk. This is a perfect match for a an S&P or SPRD fund.

4) DIRECT DEPOSIT! Arrange online to have whatever company you choose take a certain amount of money out of your account each month for you. This forces you to contribute each month and you will make sure you don't miss a deposit. Don't worry... you will hardly even realize its gone.

5) Assuming you do not already own a house you may want to open your account and make your deposits into a ROTH IRA. This is an account where you do not pay any taxes on the income after retirement should you decide to keep the money there AND you are allowed to take the money out free of any penalties for the purchase of your first home at any time. This gives you flexibility should things change a few years down the road.

6) Most importantly... do your homework. There are TONS of online sites that will teach you all the basics that you need. One of the best ones I can recommend is Motley Fool Online. Here you will find all the information you need ranging from the basics to more advanced. Plus they have all these cool calculators you can play with to see how much money you can expect in 10 years.

If you need some more specific info feel free to ask!

Message edited by author 2006-03-08 15:49:54.

03/08/2006 03:49:44 PM · #7

Originally posted by LoudDog:

That is actually a thought I had. So its a smart move? CO is getting very expensive. 10yrs ago there was a real estate boom and prices sky-rocketed!

Are you require to do any maintainance on land you own? I ask because we only make it to CO for a visit once a year :)

JayWalk

03/08/2006 03:52:22 PM · #8

Don't buy land! You'll have to pay taxes on it which will eat into any profits you are thinking of making over the long term. And without enough saved over the next 10 years, having all the property in the world won't help if you can't afford to build on it!

03/08/2006 03:54:34 PM · #9

Originally posted by JayWalk:

OK, well I work in the financial field and I can give you a few tips:

Thank you! (Thanks to everyone) I really am clueless about investing and really don't know what everything is..LOL You gave me a good starting point.

Right now, we are investing in the government's Thrift Savings Plan and put in $165 a month there so far. (We just started that last year).

We no longer own a house....we sold ours in Pensacola. I am not sure we will buy another house in the next 10yrs, we may though. I just want to be set when he gets out of the military.

Thanks :)

Prof_Fate

03/08/2006 04:15:48 PM · #10

Work backwards - what pension will he(you) have monthly?

Plan A
What costs will you have (food, car, insurance, utilities, clothing - you know the list) - pretty much everything yo uahve now (or had in teh states) except the mortgage payment. If you don't ahve to go to wrk everyday you save some money on travel, lunch, clothing. So without a car payment, $30,000 a year might do it (i know folks that do it on $20k) but $50k might be more reasonable.

medical - newseek this week claims a 65yr old retiree will need $200,000 to cover their medicare bills, so for two of you that's $400,000, plus probably any premeiums and non-prescript drugs.

So for 20 years, you need 400k, plus $1,000,000 (50k x 20 years - no inflation adjustments there either, but no interest earnings...kind of cancel out)

then you might want a paid off house - depends on where you live of course. You can get a dcent house here for 100k, but figure 300k.

YOu need 1.7million. less any savings you have now.
Over 10 years, you need to save prolly $150,000 a year. (interest will make up the difference - probably).

SO, what, about $13,000 a month.

Plan
Keep working till you die. That's my plan LOL

JayWalk

03/08/2006 04:20:00 PM · #11

or....... you could invest all of your money into lottery tickets instead! :)

03/08/2006 04:24:54 PM · #12

Originally posted by Prof_Fate:

Work backwards - what pension will he(you) have monthly?

Plan A

SO, what, about $13,000 a month.

Plan
Keep working till you die. That's my plan LOL

ROFLMAO!!! Piece of cake ;o)

I am guessing his pension will be around $1700/mo after he gets out. I know there is retiree medical coverage from the military.

There are some rough things about him being in the military, but I just have a feeling it will pay off in the long run!

Of course, after we settle in CO I plan to open my own photo studio ;o) Then I'll be raking in the BIG bucks..LOL

03/08/2006 04:25:19 PM · #13

Originally posted by JayWalk:

or....... you could invest all of your money into lottery tickets instead! :)

Now that is the FUN plan ;o)

Prof_Fate

03/08/2006 04:40:44 PM · #14

I looked into buying a couple of photo studios (one in a small town in pa, one in kansas). Both are home and studio on the same property (seperate buildings) and both do primarly portraits and some weddings. Both gross (in sales) 170k a year on average. For that both husband and wife work and at times a third person is hired. After tax income is $45-60 grand, but if you;ve ever played the tax game you know they make more than that in real spendable money.
The info i never pursued were actually seeing the books. The one in PA i spent a bit more time on, and his sales varied from $105 to 205, and he rarely does weddings, hits the HS senior market hard, average $400/senior, does 5 or 6 on a saturday in the studio (hence no weddings). They've been in business for 29 years - so i bet their morrgage is small compared to what mine would have been had i boought the place - so my net taxable income would have been lower.

Most military retirees i know keep working. My cousin Sue did her 20 in the navy as an air traffic controller and was set on coming home to PA, but got a civilian job 'doing the same thing' there (nevada desert - only the US has a navy in the desert).
I work with a woman that went back to work to alleviate boredom. She's 62 now and works part time.

I guess I should have started off with 'define retirement'. Not going to work for the paycheck, making up your own schedule for the most part, and pursuing those things that interest you might be mine. So i am about retired myself LOL

03/08/2006 08:40:06 PM · #15

WOW. That is more money than I would ever expect to make from a home studio. My husband does plan to continue in his same field after the military and can make about the same. However, the tax benefits of the military as well as the free insurance will not be there. I plan to 'start my life' after he retires...LOL

I think that is a perfectly smart idea having a home and studio on the same property. Something to think about...in 10 years..LOL

rox_rox

Canon EF-S 18-55mm f/3.5-5.6 USM

03/08/2006 08:52:54 PM · #16

Do a lot of research and buy some good land on the outskirts of a growing area. Buy two or three times as much as you need. When it comes time to build your home, you can sell off the additional lots. The equity should more than exceed your taxes. Taxes on undeveloped land shouldn't be that much anyway.

I believe that if the economy ever fails enough to devalue real-estate, any other investment options will also suffer. Real-estate can be like the lottery. If I had a time machine; I would go back and buy acres of land in this part of Florida. Lots that sold for $2,000.00 seven years ago now consistently sell for $70,000.00 and up. No exaggeration. Colorado real-estate is a lot like Florida.

robs

Canon EOS R6 Mk II

Canon EF 24-105mm f/4.0L IS

03/08/2006 09:56:59 PM · #17

Go to Diehards.org and ask the question again (This is just an entry to the Vanguard formum of the Morningstar.com forums, go through M* directly if you prefer).

There are some books on the left of diehards.org that might help. The recomendations will likely end up as a couple of low cost no-load mutual funds and put away some money each month. Land might be a good plan but it depends and you need to understand the risks first.

I would say do some research and make a plan before you start.

MQuinn

Olympus OM-D E-M1

Olympus 14-54mm f/2.8-3.5 Zuiko Digital Zoom

03/08/2006 10:16:58 PM · #18

I suggest www.fool.com sign up and start researching! 10 years is not alot of time, I suggest saving as much and investing as possible. One thing that can save you alot of money is not buying a new car, drive what you have into the ground. Keep living cost as low as possible. Investing real estate is a great idea sometimes, do your research before buying.

RayEthier

Canon EOS-5D Mark II

Canon EF-S 18-55mm f/3.5-5.6 USM

03/08/2006 10:19:35 PM · #19

Buy land............they don't make any more of that.

Ray

shamrock

Nikon D300

Nikon AF Nikkor 50mm f/1.4D

03/08/2006 10:56:15 PM · #20

I'm a big fan of investing in land, as Ray says, they aren't making any more of it. HOWEVER - in Colorado, and most of the western states, water is a very big deal. Make sure you very clearly understand the water rights you do or don't have on any property you consider.

rox_rox