Cheat Sheet Q & A


Today’s question: 


I'm recently married. Directly out of college I knew that I wanted to work hard and build a career for myself.  We were poor and I was never taught about money.  Although I have learned to be disciplined with my money, I was never learned to invest.  I only have student loan debt and about $65,000 in my savings account. I do not own a home or many assets.   What would you recommend that I do with my money that is just sleeping in my savings account?


Bottom Line:  First the quick disclaimer.  I’ll offer what I would do in your situation; you should consider advice from your own financial advisor.  Let’s down to business. 


First and foremost congrats on your recent marriage and on your savings! You are well ahead of the curve at this point in your life.  You’re also asking the right questions and thinking the right way.  Time is your friend at this point in your life.  Investing and decision making can be complicated but it doesn’t always have to be.  The two best historical asset classes for investment in the US historically have been stocks (8.5% average annual rate of return) & real-estate (4.1% average rate of return).  You mentioned that you don’t own a home.  If you plan on staying in our area for a minimum of 3 years I’d look to buy a home first.  Aside from the average appreciation of 4+%, the current interest rates present a tremendous opportunity.  


  • The average 30 year fixed rate mortgage is 8%
  • The current 30 year fixed rate mortgage is 4.2%  


To put it a different way…  Per $100,000 of home purchased, it represents nearly $50,000 in savings over the term of the loan.  Now about the cost of the home.


When purchasing a home you’ll want to put 20% down on the property to avoid the expensive mortgage insurance you’ll otherwise have to pay.  Given your $65,000 savings I’d look to purchase a home for up to about $200,000.  That would require a $40,000 down payment (and count on a few thousand more for closing and other related expenses). 


So now you have a home and $20,000-$25,000.  I’d take the first step towards retirement savings.


  • A Roth IRA (my preference over traditional) will enable you to contribute $5500 per year.  I’d contribute the max of $5500 for each of you.

That leaves you with $9,000 to $14,000.  With that money I’d open a regular investment account that you could access if you needed the money for any emergencies or life events. 


So what should you invest in to get started in your IRA’s and standard investment account?  This is where a financial advisor may be helpful or at a minimum you may consider investing in a index fund that tracks the S&P 500 (basket of the largest companies in the US) and/or the Russell 2000 index (basket of smaller companies in the US). 


So under my example you’d have:


  • A new home with significant equity & a terrific mortgage rate
  • A good start on your retirement savings
  • A decent amount of money for emergencies that is growing for you


If you have a topic or question you’d like me to address email me:  


Audio Report: 



What to buy now & what to avoid: 


Bottom Line:  The folks at Kiplinger have identified items that are really good deals right now and some items that you’ll likely find at a better price by waiting until at least late February.  Among the good deals right now: 


  • Big Screen TV’s
  • Boats
  • Home goods
  • Mattresses


What’s not a good deal right now?:


  • Jewelry
  • Luggage
  • Smart Phones


So something for you and something for your wife (Valentines Day is coming up after all…).


Audio Report:




The Google Maps app just got smarter:


Bottom Line:  If you use the Google Maps app you’re aware that you have the option to choose a route based on current traffic information.  But what happens if traffic problems occur on your route after you’re already driving?  Previously your app wouldn’t have notified you.  Starting today the Google Maps app will automatically reroute you in route based on current traffic conditions (if you want it to).  It’s a neat upgrade if you frequently are battling traffic during the day.  It is available for Droid and iOS devices.


Audio Report:



A reminder about what a large tax refund means & what you should do:


Bottom Line:  It’s that time of year when many people get exited about the prospect of their tax refund and many companies advertise to you if you’re receiving a tax refund.  It’s also a time of year that I cringe in hearing the afore mentioned.  If you’re used to getting a significant tax refund every year; you’re most likely significantly mismanaging your finances and doing a disservice to yourself. 


Sure sometimes you may obtain a significant tax refund in a given year due to a life event.  Outside of those times your tax refund is likely the product of you’re improperly allocating your  Federal withholding selections.  Rather than a significant tax refund being a positive…  For millions of Americans it was actually an interest free loan being provided to the Federal Government.  Nothing good comes out of that scenario.   Among the negatives…


  • You lose access to your money throughout the course of the year you earned it
  • You lose the ability to invest the money and earn a return on it
  • The Federal Government gives you your money back at a negative rate of return (when you account for inflation)


So if this is you…  It may be wise to sit down with your HR folks and reconfigure your Federal withholding selections to retain more of your money throughout 2014.


Audio Report:



The budget looks a little better for 2014 key takeaways:


Bottom Line:  So the argument has gone something like this for years:


  • Conservative:  We have a spending problem
  • Liberal:  We have a revenue problem (referring to needing higher taxes)


Well there are two sides to every story but only one side to every fact.  Here are the facts about the 2014 Federal Budget according to the CBO:


  • The Federal Government will receive 9% more revenue in the form of taxes this year
  • The Federal Government is set to spend 2.6% more this year
  • The Federal Deficit is estimated to be $514 billion this year


So…  Let’s see.  We’ll collectively pay 9% more in taxes to the Federal Government this year and we’ll still have a deficit of greater than $500?!  That’s all of the proof you need to know that we indeed have a spending problem in WashingtonDC.  Sure some will point to the deficit being smaller than last year’s.  That’s fine but it’s still yet another $500+ billion in new debt being lopped onto our $18 trillion in IOU’s.  What’s more is that the CBO is projecting deficit’s to increase again over the next ten years. 


Audio Report:





The CBO demonstrates that ACA is in fact a huge jobs killer:


Bottom Line:  And now for the other big CBO story of the day…  So the CBO has estimated that between now & 2021:


  • The equivalent of 2.1 million full time employees will not be working as a result of the ACA
  • By 2025 that number will be 2.5 million…


So…  There is no way to spin this news.  The ACA is indeed a jobs killer (again one side to every fact).  What’s more though is that it’s also an American Dream killer.  What do I mean? 


  • More than half of those who won’t be working as a result of the ACA will choose to work less


That’s the dirty little detail in the story.  The CBO pointed out that those, who make little more than the cutoffs for obtaining Government subsidies to pay for a part of their healthcare coverage, will in many cases opt to work less to become eligible for the handouts.  So in other words…  Choose to work less and get more…  Isn’t that the opposite of the American Dream (incentives to work less).  But at least healthcare is indeed more affordable.  Oh wait that’s not true either. 

Audio Report: