How would YOU spend the money? Help me!?

Question

My father gave my husband and I $24,000 for Christmas to use in any way on the following things:

* retirement
* college for our child (we have a three month old baby)
* house payments
* investments/stocks

How would you spend it to make the most of it? I need some good, solid advice here.

A little background to help in each category:

* retirement - neither of us have retirement plans...I used to teach public school and have some set aside from that, but now am self-employed...

* college for our child (we have a three month old baby) - we have $5,000 saved so far in an account strictly for her college...so we HAVE started thinking about that...

* house payments - our monthly payments are about $2700 and we are doing fine (30 year mortgage) but could probably pay "on principle" and shorten our mortgage by several years...?

* investments/stocks - my father strongly encouraged us to invest in some stocks, but my husband and I know nothing about that and are nervous.

Answer 1

This is an excellent question; I hope I find my self in this situation.

From least to most important based on your data

College education for your child. This is by far the least important. Every parent wants to provide for their child but college is something they can do for themselves. When the time comes and they need a little help here or there ok. Making sure you are taken care of to be there for them is more important. Infact you should take the 5k from your "childs" account and stick it in the ROTH IRA below. I know sacrilege but it's what you should do.

Paying down on your house. This could be a good idea. If you have a low interest rate, say 6% or less plus the tax benefits don't do this.

Investments/stocks and Retirement are almost one in the same.
So here is how I’d split it.

1st start an emergency fund in a www.emigrantdirect.com savings account currently at 5.05%. This gives you access if you need it with out going through a broker or the like. How much really depends on what kind of saving you already have and how much you make but let’s make it $8000 for now and keep contributing every month till you get to 6 months worth of income.

2nd Roth IRA for retirement. This is the most flexible type of retirement. How you invest it would be determined by your age and level of risk tolerance. However since you have a child you must be fairly young, under 45 so most should be in the stock market in various EFTs and/or mutual funds. Again let’s make it $8000 and keep contributing every month.

3rd investing in stocks. Now you could just add this last $8000 to your Roth ira and be investing in stocks but you can do this. The key to the stock market is not timing. It is "buy and hold" and "dollar cost averaging". Very few people make money trading so buy funds like Vanguard VTI that just try to mirror the market. Here is an article that will help shed some light, you by no means need to do this but it would be "safe" way to diversify.
http://articles.moneycentral.msn.com/Investing/StartInvesting/StartInvestingWithJust100.aspx?page=1
Dollar cost averaging is just buying stocks all the time, when they are up and when they are down. In the long run the market goes up.
I use sharebuilder and not a broker to buy EFTs and Computershare to buy stocks. there are many others. I don't like paying broker fees as I usually only have a couple hundred a month to invest and a $40 commission usually is a 10% loss right off the bat.

any questions you can email me click on my pic

Answer 2

When times are lean (and they are very lean) people want a job and any one who promisses them a job is their new best friend. Obama knows full well that the $50 billion he has propossed will never make it to law. The democrats would never vote for it this close to election time. He only made the 'recommendation' publicly so that they will be able to campaign on the arguement that he had a really good plan that would have created jobs but those mean old republicans who don't hold a majority in either house have prevented it for working. Just a thought about all these great ideas the president would like to propose. A bill may be submitted to congress by any member of congress or by the president. How many of his brilliant ideas has he ever submitted to congress as bills?

Answer 3

I would recommend putting it into a retirement account. Depending on your income levels, you can put some in an IRA or Roth IRA and get a tax break. If you have nothing saved for retirement, then you should start as soon as possible. The earlier you save, the less you'll have to put away, since that money will grow.

I don't know all of the laws, but in some states, you can even take money out of a retirement account to pay for a kid's education without penalty.

Answer 4

Split the difference.

5 grand in certitficate of deposits for the baby(this'll double before you know it and than grow much faster.

!0,000 put into certificates of deposit for future emergencies in case you lost your income for any length of time with is easyto do. It would be nice to just take the entire amount and pay it on your mortage (on the principle) or off of the balance rathe rthan advance payments but your mortage is so large at 2700 a month that 24000 would not make a much of a dent in monthly payments.

The balance I would invest with a good broker in something like senior Income and have the dividends reinvested . This increases fast and is about as safe as stocks get. It's a long term investment and has accasionally low years but still it is a money maker.

Or just purchase soem stocks in bank IPI (new banks) for the baby's educational benefits if you can afford it.this is also one of the best long term stock investiments.

Answer 5

you said you dont have any retirement plan, does this mean you dont have much saved? if you dont have much i would put a good chunk of it away for retirement, you can put 8k away in your two roth ira's what is the interest rate on the mortgage? if its high it makes sense to pay some off,but if you can pick a safe mutual fund that should beat it then maybe stick it there

anyway, its nice to have money for the kids college, but if you have to there are always loans, you can't borrow money for your retirement , put that as an important part of your plan