In short, I'm looking for opinions and ideas on what you'd change or continue doing if you were in my shoes in regards to finances.  I think I'm doing okay for the most part, just want to make sure I'm not missing anything too obvious, though I likely am.

The Good:
27 years old
$125,000 salary
18% cash bonus with up to 3x multiplier
20% stock options annually
$640 monthly vehicle stipend
15% 401(k) contribution with 7.5% company match
Credit score of 746 as of 2/19/15
Chase Sapphire credit card that I use for all transaction and pay the statement monthly.
Paid off $10K in student loan debt this year so far.
HSA through work with ~$4500 value (setup for max contribution)

The Bad:
$47,000 in student debt (intend to refinance through Social Finance within the month)
$47,000 owed on truck - 2014 Ram 1500 Ecodiesel used for work, monthly payment of $832 @ 6% (intentions to refinance through my credit union in the next month)
$17,500 owed on Kubota tractor - 0% interest for 60 months

The Not So Ugly:
$20,000 in cash due to vesting and selling of RSU's, income tax return, and small estate inheritance. (This does not include normal biweekly income).
Co-owner with sister of a duplex rental home that brings in $1200 gross monthly.  Property value of $100,000 and is paid for.  
50% ownership of another commercial building with value of ~$40-50K that generates no income and is also paid for.
Do not own a home, I rent an apartment currently and am single with no kids.

What would you do if you were in my shoes?  Mostly torn about how to allocate the $20K cash.  Thinking $10K on debt (truck or student loans) before refinancing, $5K into the stock market, and maybe $5K into an IRA.

Fire away, and thanks in advance!

Buy a house, or 2 or 3.

What do you do?


In addition to the $20,000, It sounds like you need to figure out how to invest roughly $80,000 a year.

Do you max out your tax deductable Retirement allocations?    

if you are able to manage that property without going insane, then I agree, you should buy another.    By all means, put some in the Market, but being diversified into rentals is a great thing, Provided you are the type that is organized enough to make it work.  

Buy a house for yourself.    30 years fixed Rates are below the future rate of inflation, so you can't lose, as long as your income stream is secure.     Plus, you can use every tax deduction you can get.

I'm an engineer by degree but, I work as a completions operations supervisor for an oil & gas company.  Potentially moving to a corporate strategy role in a few weeks.

Managing the property is pretty easy.  Major upgrades (furnace, new roof) have been done in the last five years.  I take care of most of the small maintenance items, major repairs are handled by close friends and family who are in the trades.  

I should disclose that my compensation has only recently been the above due to long overdue market adjustments.  Total comp has increased by $50K in the last year.

My biggest fear in purchasing a home is that I have and will likely relocate for work more in the future.  I've been working for five years and have relocated four times.

I basically break even with taxes every year, which I'm okay with but could certainly utilize more tax breaks.

Then pay of the truck right away, and the tractor within 60 months.     Put the rest into diversified investments, market, pms, RE.     Any land available in your area?      

   Being mobile is important, and there's nothing quite like having a 50 grand or so in cash.  You never know when a great investment will present itself.

Here is how I would use the 20K in cash:
1. 5K to max out a Roth IRA (which can be withdrawn without penalty in the event of an emergency). .
2. 10K towards highest interest debt (I'm guessing the truck).
3. 5K in savings as an emergency fund.

It seems you have about $111,500 in debt to pay off. Personally, with your income (which is awesome) I'd have that paid off in three years or less. Single in an apartment, you could easily do it in two if determined to do so.

Once the debt is paid off, I'd want a larger emergency fund of $25-30K, and to keep saving cash to use to buy a house or land.

I hope you drive that truck for a decade, and get your money's worth out of the tractor.

https://www.penfed.org/refinance-auto-loan/

ar-jedi

1) i would figure out what 3-6 mos of expenses works out to (you are offset a bit by rental income) and keep that as cash or cash equivalent.
2) i would not do anything with the tractor loan (this is free money).
3) take what is leftover and pay down the student loan as part of refinancing it.
4) see post above for what to do about the vehicle loan (today, like right now)

incidentally you should post your sitrep on FWF and see what folks there think, you'll get tons of good ideas.
http://www.fatwallet.com/forums/finance/

ar-jedi

At your age and with no family, why so much to the HSA? Couldn't that money better serve you to debt service?

Not if he handles it right.  Let that amount build a little.  You can invest that money after it grows enough, at that point it's essentially a Super Roth IRA.

At your income level you will be close to losing out on the ability to complete a straight forward Roth IRA contribution.  You need to research this issue, then look at the possibility of a back door Roth contribution (google it, it's not that complicated if necessary).  You can still make an IRA contribution and designate it for Tax Year 2014 until April 15th.  I would suggest opening an account with Vanguard and placing $5,500 there in a low cost index fund - either the appropriate Target Date Fund or Total Stock Market.

Make sure you are keeping some money on hand for an emergency fund.
Buying a house would be the worst move someone in your position could make.
Work on getting that debt refinanced.  You should be able to do way better.  As soon as you know your new rates you can apply some of that money to the highest interest rate.  Keep applying extra money to that account until it's gone.

Do not allow your lifestyle to move up with your new income (yet).  You haven't earned that privilege, you still need to pay off expenses from the past (debt).  This will create more available money for the above step.
Always live below your means.  Make sure you are contributing to your IRA at least to the limits of your employer's match.  Your future self will thank you.

he can also push more money into his 401k at work, designate it as post-tax (which will likely happen automagically as he crosses the IRS 2015 401k contrib limit), and then convert it to a Roth later.  this is one way to get more than $5500 into "Roth status" in a given year.

ar-jedi

Mostly as a tax relief, but my company does a match there as well.  I've got some future medical stuff planned that I'm saving for, too.

Thanks for the feedback, will definitely post this over there to see what those folks have to say.

Agree with you on the student and vehicle loans, I never realized how shitty the interest rates were until I took a good hard look at them recently.  

What are your thoughts on paying more principal down on the truck before refinancing versus on the student loan debt?

I have some smaller parcels of land that I own outright.  Two acres with two story garage, and another 1.25 acre property that was an old pasture/barnyard and abuts a 3200+ state park.  Looking into finding the "right" piece of land.  Have a friend willing to sell me 30 acres in a very desirable area outside the suburbs for a reasonable price below market value, so I very well may take him up on that offer.

I've realized the need for more cash on hand, so I'm probably going to divest some "material goods" that I've collected over the last few years that I just don't get enough use out of.

1) you have to tell me what the terms of your student loan are.  this is the only way you can determine which to pay off first.

2) your student loan and your truck loan present different types of risk, and hence should be treated somewhat differently.  (btw this aspect probably does not apply in your specific situation because your cash flow is good).  let's say you are right-side-up on a vehicle loan; you have an offsetting collateral to your loan amount.  this is not the case with a student loan -- you can't "give back" your degree and get cash for it.  so -- if the terms were exactly the same (and that's a stretch...) ideally you would pay down the student loan first.  if you got in financial trouble (job loss etc) you could simply sell the vehicle and pay off the loan.  you ain't got wheels, but you also don't have a creditor calling you every 24 hours. then scrape $2K together and buy a CVPI with 200K miles.  

ar-jedi

i have one other question.

do you need a truck?   i mean, REALLY NEED a truck?

your monthly vehicle allowance is high, so i presume that your company is compensating you for some gotta-travel-to-the-jobsite miles.
but that monthly vehicle stipend, as high as it is, is swamped by your truck payment.  
you would get thrown out of GD if you announced your monthly payment there.  

that said, you are paying for the truck two ways: big monthly payment (capex) and big fuel bills (opex).  

if you need to carry 4x8 CDX plywood and bundles of roof shingles around or need the ground clearance for unimproved jobsite roads, or whatever, that's a reason to keep it.  

but if you can do a different vehicle, you could turn your monthly vehicle stipend into break-even at worst and a profit center at best.  
and that doesn't necessarily mean getting a prius, either.  

ar-jedi

Truck is $45,200 for 72 months at 5.75%

Student loans are from a mix of institutions with an average rate of 7.25%.  $47,000 owed, 15 year term.

We used to be issued company trucks that we were allowed to use for personal use.  Late last summer they decided that policy was going to change and we had two weeks to elect to keep our trucks for business use only or to take the vehicle stipend and drive a personal vehicle to work.  Terms of the stipend are it must be 4x4 and five years or newer.  I've ran the numbers, and even with the high payment and paying for fuel, I'm not any worse off than had I bought a 5-7 year old vehicle to use on personal time.  In regards to work, I haul a lot of gear and tools with me to our wellsites and need a full size truck or SUV.  In addition, I do a few cross country road trips for hunting each year, as well as a lot of other gear intensive activities, so it honestly makes sense for me.  On a positive note, my Ecodiesel gets 21-22 mpg during mixed driving.

I've got a 1997 Dodge Ram 2500 and 1998 Nissan Frontier as well and would GLADLY drive them daily if I could.

sign up with penfed, anyone can join, and knock at least 3% off that rate.  it will take you 10 minutes online, decision online in the 11th minute, payoff check on it's way the next day.


i'm not too familiar with what options exist for debt consolidation loans for student loan notes, but there has got to be some lower cost alternatives out there.  

THIS is a GREAT question for the FWF or Bogleheads crowd.

ar-jedi

You are sloppy.

Having that much high interest debt with an income that high shows your spending is out of control. Get on a budget and pay that crap off. Don't be looking for ways to invest beyond your 401k until you clean up your mess. When you are single, no kids, and renting an apartment it is pretty pathetic to have to borrow 40k for a truck and have 47k of student debt around your neck (both above 5% I might add) when you are bringing  in over 10k a month.

Sorry if that sounds harsh but that is the way I see it. You make good money but you spend it just as fast as you earn it.

While you make valid points about him getting rid of the debt, I don't think the criticism is entirely fair. He clearly wasn't making this level of income when he took out the student loans. The education those loans provided is what opened the door for him to make that level of income.  

ETA: I believe he mentioned he has only been at this higher wage for the past 6 months..

And he said he paid off $10,000 in debt this year...It's February. If he's paying down $5,000 in debt a month, he can have the student debt knocked out this year, and the truck paid off next year. That's pretty damn good.

I must have missed that. I was pretty tired when reading the thread. Yes if OP is paying off 5k a month he is doing good. I would make that the absolute minimum to pay off each month with that kind of income. I just have seen so many people who make damn good money end up with nothing because of debt and spending it just as fast as they make it. All it takes is a hiccup in that income stream and you are up shit creek without a paddle due to high debt payments.

My advice would be to live like your are a broke college student for a couple years more and pay everything off. Then you can party like a rockstar after that. Don't fall into a cycle of borrowing for everything under the sun.

I was in a very similar position to you about ten years ago. Good pay and lots of payments. I never had a problem making the payments but I was not getting ahead. It was like the money just came and went every month. I changed my ways and my life totally changed for the better.

Is there anything the second and third vehicles due that your primary truck doesn't? I would be inclined to pare down, and out that cash towards your existing debt - it will also save you taxes, insurance, and maintenance on two extra vehicles. That can be a big swing toward your financial goals,

-shooter

shooter, neither are in good enough condition to use as daily drivers for the distances I have to travel to work sites.  I do get a lot of use out of them, though I may pare down and sell the Nissan at some point.

Just to be clear, I really don't have cash coming out of my ass with my salary.  For my tax bracket and with my current deductions, my bring home pay every two weeks is ~$2700.  The only thing I could do to increase that is to drop my 401(k) contribution to the company match.  The only problem is that I will get HAMMERED on federal taxes, as that is what happened to me two years ago when I was only contributed company match at a much lower salary.  Short term bonuses are not a given, but are all going to debt.  Stock options vest every three years, so it takes a while for me to see everything that I get.

Thanks again to all for the opinions, I do greatly appreciate them all.  What prompted all of this was me starting to use Mint.com to track spending habits and start budgeting. I shit my pants the first time I realized what I spend in a month, often on useless stuff.  It's getting much better now.

i cant imagine financing 45k for a truck on a 125k salary

I'd immediately sell your truck.

Selling the truck is not an option, because I still need a truck that is five years old or newer with four wheel drive and must be reliable enough to get me to multiple job sites across three states.  At this point, I would probably take a significant loss on my truck (10k maybe) and not really be that much further ahead.  I could've easily bought a 2-3 year old truck when this all came up, but I had to make a decision on this in two weeks and would much rather have something I like, as it is not uncommon for me to spend 6-8 hours a day in my vehicle between driving and working out of it as a mobile office.

It's better than buying it on a $35k salary like I imagine most people do

OP I think you're doing fine. Just work on refinancing some of that debt to a lower interest rate and then pay as much as you can on it

Now I didn't read what the others said.

Personally this is what I would do with 20k.

Pay off the tractor. Sure that's takes most of the 20k but if you don't pay off in the 60 months (are you guaranteed your job during this entire time?)

The left over I would save

The money that would be used per month on the tractor could be used in addition on the truck with your primary payment and pay it off faster. After that used that money in addition with the school payments to pay that off

I'm not interested in land or other investments unless half my debt was paid.


Also look at your smaller bills. Are you able to cut that down?

i'd refi the student loans and truck loan ASAP!  those are high.  remember what your current monthly payments are and keep paying that amount at the very least.  with the refi, the monthly payments will go down, but your already used to the higher monthly payments.  the difference will go towards the prinicpal and it'll get paid off that much faster.

the Roth IRA isn't really an option for you as it starts to phase out at $116K/yr income.  

I wouldn't worry about paying off the tractor first, it's at 0%, work on the loans with the higher interest rate.  student loan interest should be tax deductible, check with your accountant/tax preparer.

so it might work out to: Refi both loans, pay old monthly amts on them, think about selling the nissan (cool to have multiple cars, but probably don't need 3 of them), put nissan sale $$ toward the truck loan, don't reduce 401k contribution (out of sight, out of mind).

if you have extra cash at end of month, put toward truck, once that is paid off, you can put the $640ish monthly stipend towards the student loans as well and once the student loans are paid off, put the car stipend into a seperate account to start saving for the next vehicle you'll need given the vehicle age requirements set by your employer.


"Mostly torn about how to allocate the $20K cash. Thinking $10K on debt (truck or student loans) before refinancing, $5K into the stock market, and maybe $5K into an IRA."

you really need some cash set aside for emergencies, some say up to six months worth of expenses, if this $20k is above and beyond your reserve of cash, then feel free to put it towards other stuff.  if you do not have a cash reserve, i'd set at least $10k aside.  

since you are already putting 22.5% away for retirement, you don't "need" to put any extra towards the stock market or IRA, i'd put that towards debt as well. once your debt is gone, you can go hog wild in the stock market/IRA.

pay off the 0% loan first?  really?  am i reading your post correctly?

ar-jedi

Yup now mind you I don't know what the payments are per month on the tractor but I hate paying interest. As I said in my post use what you would be paying for the tractor to double pay on the truck. In the unfortunate event you loose job and need to sell something I much rather sell (or at the very least pawn) I fully own and not have to worry about. Sure you can sell the truck but you will have less options compared to a fully paid off own item. It's also one less thing to worry about unless you decide to buy something else.

So you don't like paying interest, but you want to spend all your money paying off a debt that doesn't charge any interest and pay less on the debt that does charge interest? That makes zero sense

The tractor is 17,500 meaning its roughly $300 per month (he said no interest not no payment and if that was the case I would choose different action)

As of now with current payment on the truck it will be paid off in 57 months (at the current 832/month)

If he were to pay off the tractor he could take the $300 add it to the current payment it would me $1132.

This would mean if he were to combine the payments He would be able to payoff the truck in 42 month a whole 15 months earlier. Now if he wanted to take the remainder of the 20k ($2500) and not use it as a nest egg he would get an addition 3 month making the truck paid off in a year and half.

Now I also wouldn't mind if you took 17,500 and put that towards the truck. It would take the truck to be paid off in 35 month (7months faster) than paying off the tractor and combining payments

Also mind you, you would need to put in at least $12k (common suggestion was 10k into the truck) into the truck to pay it off in 42 months or less (anything less in the payment you might as well payoff the tractor and combine payments and you would at least have something to show for that). Anything can happen within that time. Anything from a new bonus to loss of job and I view the tractor as collateral over the truck if need be. and that's only if you pay it off

Side note these numbers can and could change through and of his refinancing and if the numbers change I might redo a plan of action.

ETA: Re read the thread (previous viewing was through phone) and curious why OP has two other vehicles and what his plans are for them? Not saying he needs to sell them but could sell them to take and even bigger burden of debt off the newer truck.

My tractor payment is $414 per month for the term of the loan.  Granted, some "interest" was included in a marginally higher purchase price compared to the cash price that I see now from other dealers but, I see no reason why I'd pay this off early unless it was absolutely the last item that I owed on. I get more than my money's worth out of it maintaining some of my property, so it can't go.

Since I started this thread, I paid off one of my student loans in full ($9671 or so).  Also, I dropped another $2000 on my new truck, and will probably drop another 3-4 grand on it before refinancing.

I've also started the process with Social Finance to refinance my student loans at ~4.1%, my payment should be around $275 and I intend to pay at least $1000 per month plus any bonuses I receive.  Should be able to get it all paid off in less than 24 months.

Thanks for the update.

out of the money you paid was \that out of the 20k?

ETA: any plan for your other veichles? im just curious on them?

I must be confused.

125 k salary  / 26 = $4807 less taxes = approx $3,300 bi weekly

18% bonus = $594 more bi weekly

vehicle stipend 640/mo = 320 biweekly

your share duplex $600 / mo = 300 biweekly

biweekly income net $4514

This doesn't include the 3x multiplier or stock options.

should be close to 9k per month take home before any retirement contributions

but but it's a tractor! can't have debt on a toy!

That's better than most. Way better than Im doing. At this rate, I'll be lucky to pay off my mortgage before retiring.

I highly encourage you to have at least 20% down (or more) for real estate purchases in the future. It's a lesson I've learned the hard way.