Hey Money Minder,
So, I’ve got some cash flow from passive income and a new job that brings in even more dough. I’ve been maxing out a trad IRA, but it’s not much. I’m 30, married with kids, and looking to build a house in South America in the next 5-10 years – about $100,000 for the house and another $150,000 for other stuff. Plus, I want to invest any extra cash wisely.
Right now, my monthly expenses are around $2,500, I have some savings, a bit of debt, and no real emergency fund to speak of. What’s the smart move for me here?
Hit me up with your advice on where to put my money. Should I keep pumping cash into a trad IRA to save on taxes, or maybe switch to a Roth IRA down the line? I might take a year off work at some point, too, so there’s that to consider.
Thanks in advance for any tips you can throw my way,
Savvy Saver
Response from THE MONEY MINDER:
Hello There,
Hi,
First off, congratulations on the new job! That’s a significant increase in income, and it opens up new opportunities for financial growth and stability for your family.
Given your two major goals of building a house in South America and investing extra money wisely, here’s a practical approach to consider:
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Building a house in South America
- While it’s a wonderful dream to build a house on your property in South America for your family, it’s also important to assess the financial feasibility. Since you mentioned that none of it can be financed, it would be prudent to start saving specifically for this goal. Setting aside a portion of your income towards this goal each month can help you reach the necessary amount in a reasonable timeframe.
- Considering your children’s ages and your desire to provide them with new experiences and language exposure, renting a place for the initial venture instead of immediately building a house might be a more flexible and practical option. This approach allows you to prepare adequately and slowly work towards the larger goal of building your home on the property.
- Investing extra money
- It’s commendable that you don’t want to let your money sit idle in a savings account. Investing it can potentially yield better returns over time. However, it’s crucial to consider your risk tolerance and investment horizon before diving into the stock market.
- Diversification is key to mitigating risk. Instead of putting all your extra money into a single stock market account, you may want to consider diversifying your investments across different asset classes such as stocks, bonds, and real estate. This helps spread risk and can provide a more balanced approach to growing your wealth.
Regarding your current financial situation, focusing on paying off your credit card debts, even if they are at 0% interest, can provide you with more financial freedom and peace of mind. It’s a practical step that can set you on a stronger foundation for achieving your goals.
In terms of IRA contributions, considering your current income level and potential future plans like taking a year off work, consulting with a financial advisor or tax professional to determine the most advantageous strategy regarding Traditional vs. Roth IRA contributions would be wise.
All the best in navigating these financial decisions and working towards your goals. If you have any further questions or need more specific advice, feel free to reach out.
Warm regards,
THE MONEY MINDER
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