Saturday, July 14, 2007

Officially an investor

So, I am officially an investor. After the discussions on my posts about my money mistakes and my decision on whether or not to pay off my car loan, I’m sure you can all tell that this idea makes me a little nervous. While on our vacation, though, my husband and I met with a family member who is a financial professional and he convinced us to take the chunk of extra money we had (from a windfall, not our summer savings cushion), as well as a small monthly deposit, and to invest in a good value fund. He suggested we do this outside of a retirement account, while at the same time maximizing the match on my 403(b).

The reasoning was pretty simple: I could put money in my ING account and it would be better than paying extra on my car loan at less than 2%. Even factoring in the risk of having to replace the car, paying down the car is not a great financial decision. The student loan, on the other hand, is something I’m less sure of. It’s a HUGE loan, and the interest rate is 7% on a big chunk of it (the average rate is probably closer to 6). Even factoring in tax deductions, it’s hard to make enough to cover that, and while I can’t possibly total my masters degree (it’s done and in the books, thank goodness), debt still incurs with it some degree of risk. What scares me even more is that we were told that we should keep the investments out of a retirement account so we have the money when we want to buy a house. Aren’t we planning to buy a house in 3-5 years? Doesn’t that make this a terrible place to put our down payment money? I don’t like to repeat my mistakes?.

But, the idea of investing got my husband really reved up. He was excited about it, and numerically it was a pretty sound decision. In fact, he was so psyched that he seemed more willing than I’ve ever seen him to start making and sticking to a budget, so as to allow that contribution to steadily increase as our income does. Since it is “found money,” and a small amount per month, since we have an emergency fund, and since we can probably afford to do it while still paying a little extra on the debt or socking money away in money market accounts, I decided I was willing to try it. And since I can do math too and given our ages, I see the potential growth of this, I am starting to get excited too.


Fabulously Broke in the City said...

YES! :) I'm so happy you two are embarking on this journey .. the first step is the hardest but it gets easier from here onwards. Watching your money grow is a real pleasure.