Let's talk a little bit more about Asset Diversification as our fellow LL JB [OR] brought this subject, is something new to me.

I will be 39 this year, only have 1 multi family (2 units with the possibility to be converted into a 3) , been here for 2 years, i had to use some of the money of my 403 B for some emergencies, so i need to build that up again.

So, what percentage of your net worth is in your 403b?

Do you have any high interest debt? Personal loans? Credit cards with outstanding balances? Certain school loans?

If you have high interest debt, it is usually best to pay that off before investing in anything else, other than having an emergency fund (of at least 3 to 9 months worth of your expenses).

Sometimes folks jump into the investments before considering their whole picture. That can be a big mistake. We can talk straight up about investments, but I urge you to think about everything first.

Do you have a mortgage on your personal residence? What is the LTV (loan to value)?

Do you have a mortgage on the rental property? What is that LTV?

Asset diversification education is for those who put most of their assets in only income property and forget about tax savings with IRA, Roth IRA and employer retirement investment accounts. Some employers also do a match with retirement contributions up to a curtain level.

If any of us put $200 a month into a retirement investment from the age of 20, by the time we are ready to retire, it would have grown to over 1 million dollars. The same person starting to save at 30, would have to bump up their monthly contributions to something like $500 a month. And if you started at 40, then you'd have to sock away something like $1,000 a month. So time is important. Teach your kids these basic "money" rules.

Income property is like raising kids. You never know what surprises the future holds. One child may need braces while another child may need a tutor because of slower leaning in math and sciences. The same is with investment property. One property may go through a food and another one my need a new roof and foundation.

For these reasons and "investor" that uses their last dollar to buy a property, needs to have a "Cash" reserve for those special emergencies. If you child needs brackes, you can ask the grandparents to chip in or get it on payments. You need a new roof on your 4 plex, mom and dad can't give your 5 grand -- this is your investment and you should have saved for these types of issues....

Lord Zen,

Most Americans are financially illiterate.

I HIGHLY recommend (and lead) Dave Ramsay's Financial Peace class. It's 9 weeks of financial education, not just budgeting. He goes thru insurance, investing, wills, etc.

MY diversity is big houses and little houses!

Debt is like fire. Used properly and CAREFULLY it can do good. But the second the wind blows or you turn your back it will consume you.

JB [OR]

So, what percentage of your net worth is in your 403b?

- I don't understand that question, can you rephrase it? Hehehe

Do you have any high interest debt? Personal loans?

Credit cards with outstanding balances? Certain school loans?

-No personal loans, Yes to credit cards, No School Loans.

If you have high interest debt, it is usually best to pay that off before investing in anything else, other than having an emergency fund (of at least 3 to 9 months worth of your expenses).

-We are trying to lower our debs, but with the only unit that we have for rent being empty for over 5 month, we had been eating savings and everything, before Covid we had 2 jobs, now practically one and half, and we had done some smalls but necessary works to the house, and we had a baby coming soon... So no really much savings right now, maybe one more month worth of mortgage, we paid like 3200 with insurance and everything included...

Sometimes folks jump into the investments before considering their whole picture. That can be a big mistake. We can talk straight up about investments, but I urge you to think about everything first.

Do you have a mortgage on your personal residence? What is the LTV (loan to value)?

-Yes to a mortgage to our personal and only residence, this is the only one and we had been living here just 2 years. I don find the LTV, maybe is any of these:

Current Principal Balance $460,000.00

Original Loan Amount $495,000.00

Loan Origination Date 2018

Term 360

Interest Rate 3.25%

Do you have a mortgage on the rental property? What is that LTV?

LordZen, my first, congratulations on the coming baby!

First question: I am just trying to figure out how much of your net worth (all your assets minus all your liabilities) in relation to the value of your 403b.

For example, if you have a net worth of $100,000 and your 403b account value was $25,000 that would mean that 25 percent of your net worth is from your 403b.

You don't mention the interest rate that you're paying on your credit cards, but the national average is about 21%. So, if your paying anything even close to that rate pay that down first. Then once you have your CC balances paid off only use them if you can pay them off every month.

But, I would really like to see you build up a cash cushion for your emergency fund.

And, okay, your only investment is your primary residence, which is also a duplex. That's nice because you got a nice low interest rate. But you should be putting 100 percent of your energy right now into renting that other unit. Do everything you can to market that thing, screen well, and get someone in there to help bring in some needed income.

Dave Ramsey works for some people but depends on your goals and personality. I personally like Garrett Gunderson who wrote Killing Sacred Cows. Garrett is all about paying yourself first and cash flow investments. Garrett is more about thinking outside the box while Dave is more about sticking to a plan and cutting expenses.

I am glad you posted this as I can learn from this as well.

I agree with others that you need to get that unit rented ASAP but screen very well.

I also agree that you need to start getting rid of the debt and starting with the highest interest rate debt first. You really do need a reserve to cover the cost of any what ifs and then, of coarse, keep it replenished.

I am a bit of a slow learner and am having trouble with all of the math that investors use and talk about but I am good at saving what little I have and get and don't do loans anymore. If I can't afford to pay cash then I don't buy it.

For those looking at investments or planning outside of the real estate side of things, I recommend this as a good place to start reading:

www.reddit.com/r/personalfinance/wiki/index

- John...

I should have specified to start with the section entitled "Please read this basic financial advice everyone should follow." It is one of the first links there and takes you here:

www.reddit.com/r/personalfinance/wiki/commontopics

Also, this flow chart is usually a good thing to follow to see where you're at:

i.imgur.com/lSoUQr2.png

- John...

JB [OR] i had in my 403 B around 20K right know, because i used 8k and it went default so...

Debts on MY credit cards (said mine, not including my wife) around 7500, Capital One Card's so interest rate are about 21 to 26%...

No car loans.

Right now like 5K savings... Some small investment coming in the way, like 6k... Among these money i have to spend something into buying a car, the current it's old enough and my work require traveling/driving...

I got the low interest rate on the house because purchased 2 points at moment of sale.

JB [OR] and pelnty i think that the reason of the apartment not being rented is because of the screening, i had learned a lot reading here, Steve had been helping a lot, i got Brad's million lease knowledge and is very extensive and important, also participating from MassLandlord meetings, seminars, webinars, and MassRealEstate as well, and after Covid. i tighten my pants a little bit more hehehe, we need to rent the place but prefer to have it empty before having someone living for free and giving me headaches, but yes i want to rent is, is move in ready...

I will look for those books and read them, thanks for sharing and thanks for the congratulation, i have to say i am a lucky man because i have a great woman by my side and we both work hard, yes we have plans...

6x6 you welcome, we all are learning something here everyday or sharing something, i felt great a week ago when i shared some of my learning and knowledge to a fellow landlady friend, she was so great full and i felt really useful.

I agree with Brad... big houses little houses. I watch the stock market, but everytime I stuck my toes in it... my $$ disappeared. So I try to monopoly basically...

I got some multi units close together, retail strip mall, warehouse, office, and some farmground.

If you lost money every time you stock your toes in the stock market, then you almost HAD to be trying to lose it.

Seriously -- people shouldn't be buying individual stocks in most cases. You get a nice mutual fund -- either a specific fund or, these days even better, an S&P500 fund and just let it sit.

If you left it there for at least 10 years, you literally couldn't have lost money in the past 100 years!

To lose money in the stock market -- especially to the point that it "disappears" -- you really need to be working at buying high and selling low. :)

I disagree with putting all of your eggs into the real estate basket. Diversification is important. (And not just "big houses, little houses" "diversification.")

- John...

If you're looking for my stats:

One third of my net worth is in mutual funds and ETFs, mostly equities, some cash. All of this is in tax free (Roth IRAs) or tax deferred (IRAs)

Nearly two thirds of my remaining net worth is in RE, almost all rental properties.

I normally pay off all my credit cards every month, but currently I'm making an exception and took out a couple of offers on a couple of credit cards with an 18 month promo special at zero percent interest and making minimum payments for now. Nothing else that isn't paid off monthly on CCs.

I have been slow paying (the minimum on an old student loan) with a 3.25% rate and a $19k balance, which the interest is deductible.

Have several months worth of expenses in cash in savings as an emergency fund. Also have a currently untapped HELOC available.

I have 15 units, which are all full, but just received notice that one will be vacating after July.

Anything else you would like to know?

Sorry forgot the LTV:

Nearly 40% on Primary

About 10% on Combined NOO's

Great work, JB! Very nice.

- John...

How do you buy mutual funds or S&P funds if you do not have an employer sponsored retirement?

Do you have to go through someone like vanguard or can you buy directly without a middle man?

If you have to use a middle man, how do they charge, percentage? What is the usual rate?

Can you get an IRA or Roth IRA directly on your own or do you have to have a W-2 job?

Thanks John.

6x6, it is very easy to set up a new account directly without a middle man at Vanguard, T Rowe Price, Fidelity or Charles Schwab, etc. Just contact any of them or go to their websites and they'll walk you through setting up a new account.

A lot of the "middle men" will charge you about 1 percent or more annually based on your total investment with them. Many of them are considered RIA's (Registered Investment Advisors). But, especially in your circumstances and for most people, until you have significant money most financial advisors aren't worth the expense. By the time they deduct their annual fees, the expenses of the fund, the cost of security turnover, etc. people can lose a third or more of their annual gains. Advisors will even take their "share" when the market has fallen dramatically because it is usually based on your annual invested assets.

You do need "earned income" to fund an IRA or a Roth IRA, but you can open a regular account if you don't have earned income. If you use mutual funds you'll pay taxes annually on their distributions/dividends on accounts outside of IRA's/401ks, etc. But if you purchase ETF's such as Vanguard's VOO (SP500) or VTI (Total Stock Market) or any other ETF it is treated like an individual stock purchase and no tax would be due until you sell.

You can open an IRA or Roth IRA directly yourself as well if you do have earned income. Same steps as above.

The average rate of returns varies dramatically depending on what type of fund you have (a stock fund, a bond fund, a hybrid of both, etc, etc.). But with most all of these companies, they have cheap fund/ETF options that charge as little as .03 of one percent per year (like the two options I mentioned above). So, if you had $10k invested at the end of the year this investment would cost you $3. There are a few other small expenses built into the cost but nothing to be concerned about.

6x6, for you and most folks, I would recommend a book by John Bogle (the founder of Vanguard) called The Little Book of Common Sense Investing.

Or The Boglehead's Guide to Investing by Taylor Larimore, et al. These guys were disciples of John Bogle and have written an excellent book.

Thank you a lot JB.

When you say that I can go directly to there websites, do you mean something like S&P dot com or a company website were the company exchanges on S&P 500?

Oh 6x, I almost forgot. They have a very large website. Just click on "Personal Investors" or whatever the tab is for that particular fund family. You can usually find the application you are looking for. If you have any trouble navigating just click the "Contact Us" or "get Help" tab and you should be able to find a company phone number and they can mail you the proper application or guide you through the website to do it online. Just know (and look for) an application for a regular account or a IRA account depending on what you need.