Investing in Real Estate

[creditmess]

Well...I like this section :)

I guess I have a question about investing in real estate or in any other investing. I just want to start making my money work for me.

I recently purchased condo. I just made my first mortgage payement. It feels good! :D The idea of sending check to pay something that is mine really makes it easier. In any rate, I would now like to start planning for my financial future.

Currently my income is almost 50k/year. I have few credit card bills which I pay off quickly so I can build up credit. In the meantime, I am saving $500/per pay period ( I get paid every other week) which makes up to $1000/month. I have the money deducted from my paycheck automatically to my credit union to which I have no access wtih the exeption of online banking where I can check my balance. Right now, I have about $4000 saved up.

Here are the things that I am little confused about:

1. I do not have emergency fund established.
2. I am not enrolled in my company's 401K plan.
3. Saving 1000/month feels good...I don't have much money left to me, but I am chaning my habbits to spend as litle as I can and keep putting away $1000/month

Now, should I invest the $4000 that I have right now or should I keep saving for the emergency fund and THEN invest?

Also, anyone know any links to any websites where I can learn about real estate investing? In the future, I see myself buying properties, fix them up and rent them or sell them.

Thanks!

[Ravenous Wolf]

The first thing to do is to sign up with your company 401k plan.

If you are up to the point where your employer is matching a portion of your contributions, then you are simply refusing "free" money. Retirement money at that.

However, I too have not signed up for my own 401k plan.

But I have gotten over many financial milestones such as buying my first house, repairing my credit, rebuilding my credit with getting better loans, and thwarted near financial disaster by having too much debt.

Now that the dust is settling, I am itching to begin making my contributions. It won't be until this upcoming August when my employer will begin matching a portion of my contributions.

Getting my 401k set up is my biggest priority once I get into a better financial position. I have already cashed at my 401k from a previous employer and another state pension plan from another employer, so at age 35, I am starting all over again, due to a lot of big events in my life (first house, getting married, etc...).

There is a lot of people talking smack about 401k but that is the result of ignorance.

In my current job and in my previous jobs, I have worked with some highly educated and professional people, like engineers, educators with master's degrees, computer programmers, etc, yet the kind of ignorance circulating about a 401k plan is mind boggling. Many of my current and previous co-workers see a 401k as a being a mystical magical ball that psychics use. And they don't have a clue on to allocate their contributions or where to allocate their present money into. My co-workers are the ones who devote so much time into researching the best deals for a house or a car but they are totally dumbfounded on how a 401k works.

Once you know which funds are available for your contributions, do diligent research on them and map out some financial goals.

[DHK]

There are SO MANY "schools of thought" on this type of subject that it has filled many bookstores and libraries on it.

I like the "Rich Dad" philosophy series (regardless if Rich Dad is/was his "real dad" or not). In the book Rich Dad's Guide to Investing, Robert Kiyosaki outlines the 3 fundamental reasons for investing. They are:

1) To be secure,
2) To be comfortable, or
3) To be rich

"All three choices are important. The difference in one's life occurs when the choices are prioritized."

For me, my priorities are: 2, 1, and then 3.

The question I have for you is: What are your goals? What is your plan? How much do you want/need in your emergency fund? I wouldn't make any changes until you've developed a plan.

BTW, I would start your 401k plan as soon as possible. If you'd like to know how much of an impact your pre-tax contribution would make in your net take-home pay, use the link below to simulate your take-home pay (and your % contribution). In my opinion, I wouldn't contribute any more to the 401k than the company will match.

http://www.paycheckcity.com/cowf/netpaycalculator.asp

(I hope the link works)

[creditmess]

DHK and Revenous, thanks for reply,

DHK, I guess I would like to have AT LEAST 4 months to be able to live and pay all my bills ON TIME in case I loose my job. So with that said, my mortage is 1000/month, then you add bills, it would be around 300/month (that considering a LOT OF ROOM) so I guess 1300 month and I would be able to pay my bills. Then it comes the usually living expenses like food, gas for my car, and maybe 500-1000 emergency in the emergency fund in case my car brakes down or something like that.

So I guess, I should just keep saving until I reach my "comfort zone" in emergency fund, forget about that money and THEN start saving for investments?

[DHK]

Right! Based on $1300 x 4 = $5,200 in your 4 month emergency fund.

I would also look at all investments that allow you to save on your taxes - namely IRA's. I would ensure that I was saving at least $2k per year in my IRA account ($3k is the current max contribution).

Then I might look into doing some actual INVESTING for more monthly cash flow.

[katwoman]

Don't forget things like short/long term disability. See what your employer offers to you and make up the difference yourself. Also, my auto insurer, State Farm, offers "loss of earnings". For just a few dollars extra, if I'm incompacitated due to a car accident they will pay me up to 15K. For people who drive alot this is additional peace of mind.