What did you do with your wedding money? My dad is telling me to open a 401k?

Question

I am 21 and my husband to be is 23.

We get married in 2 weeks and my parents are telling me to use what ever money I get to start a 401k. However we planned on paying off some of our bills and putting some towards a mortgage. Advice?

Answer 1

we spent it all on our honeymoon.  but now we just recently bought a house and i WISH we had put it toward the mortgage!! you're smart if you pay off some bills and put it toward your mortgage for sure!  

Answer 2

All of the financial experts say basically the same thing. Pay off debt first. Then you can save as much as you want. But debt should always go first. It's very responsible for you guys to be planning on paying off bills and saving for a house.

Answer 3

My advice is that you guys know your debts and you know what you want in live.  You are both adults and getting married so the decision making is now up to the both of you.  Do whatever you want and whatever you think its the smartest move for the both of you.  Its time to break free from mom and dad and start thinking together as a married couple.

Answer 4

Hmmm, well, since we haven't gotten any yet, I can't really say. We will probably use it to pay some bills. Both my FI and I have retirement plans through our work that we are already saving in every month.

You are younger than us, though. I think I would save some for mortgage and pay off bills in your situation.

Answer 5

I'm in a sticky situation. Most of our money will go towards surviving for the next 2 months until my husband leaves for the marines. Neither of us is working, me because I'm a full time student and him because he has a load of loose ends to tie up before he will be allowed to leave for boot camp (which is his biggest priority right now). My parents give us just enough money but we do have some bills and stuff, so I will probably use it the same way you intended to (except without the mortgage. The Marine Corps isn't very condusive to home-ownership at the moment).

Once that money hits your hands it is YOURS. I think the best way you could spend it would be towards a mortgage, but whatever comes up comes up and if thats more bills than thats where it needs to go if you need some financial assistance. Before putting it in a 401k I would put it in a savings account and then put that in a 401k after you are settled and on with your lives.  

Answer 6

I was 20 and my wife was 19 when we were married.  We used our wedding money to purchase those things that we need for our first place together as well as getting that first place.

Answer 7

My suggestion is to plan to do all of the above; the question is how much to put into each bucket.

First, you will need to distinguish between a 401K and an IRA.

A 401k is an employee-sponsored plan where you have deductions from payroll (pre-tax dollars) that go in to a retirement account.  So this is not money coming from your wedding.  It doesn't sound like this is the option your parents are referring to.

An IRA (or Individual Retirement Account) can be opened by anybody of age and you can each contribute up to $5,000 per year into the account.  The benefit is that you deduct this amount from your gross taxable income and your investments grow tax-free until you take the money out, hopefully many years down the road.  This sounds more like what your parents are talking about.

So, depending on how much money you have, I would appease them by starting an IRA with some of it.  Keep in mind that you will need some investment advice or to read about investing with an IRA, because the contribution to your IRA is like a brokerage or bank account - it needs to be directed into a mutual fund, CD etc.

However, if you are carrying credit card debt at rates over say 10% you should probably pay those off, because your IRA will not return more than that annually over the long haul.  In addition, the debt may be harmful in seeking a mortgage.  You also want to put down at least 20% of the purchase price to avoid a surcharge on the mortgage called PMI.  So you need to figure out your target home price and work backwards in terms of how much you will need to put down (e.g. $40k for a $200k home - and I am assuming you and your husband will qualify for a loan for the balance - $160k in this case.

Finally, with real estate depressed, this is the ideal time to be a first time home buyer :)  You should be able to find some real bargains.

Good luck!

Answer 8

It is your money so do whatever you want with it.  Don't listen to your dad.  We saved our money and then when my husband started his own business we put it towards that.  Use it however you wish.

Answer 9

mortgage is good.  We're going to use what we get towards a down payment on a house (and if people get generous maybe the whole down payemtn;) lol. okay so we aren't counting on that.)

But you guys should talk about it.  I would recommend paying off bills first.  Starting your marriage without debt is something I dream about and know won't happen. it would be great though.  Or you could do half and half.  I'd recommend bills or down payment on a house but talk to your fiance and see what you guys can agree on:D

GOOD LUCK AND CONGRATS!

Answer 10

Pay some bill, but also have a little fun what about spending a little on your honeymoon, and than saving some.

Answer 11

Thank your parents for their advice and then do what you want to do.  I agree. Paying off bills and putting towards the mortgage is a wiser choice. The sooner you can pay off your house, the more you can save for retirement because right now, you are paying mostly interest and little principle.  

I honestly doubt we will get anything in the way of cash gifts (my guy has been married several times before).  Anything we get will go to buying new furniture for the new-to-me house we will have a month before the wedding.

Answer 12

I would suggest putting it toward a mortgage, since that will be a better benefit in the short term. You are young enough that if you put away money from your paycheck into a 401k you will be set. And I think the people who gave you money would like to see you use it sooner than age 65!

Also, 401k accounts have a limit of how much money you can put in, I think 25% of your annual income. IRAs are also limited, to $5000 a year I think. Maybe you can make your dad happy by setting up a non-retirement investment account, so that you can build wealth but also be able to use it before retirement.

Answer 13

I am getting married in Nov.  I would DEF. say put it towards a mortgage.  I know 401 is a great idea but if it were me I would put whatever I could towards a house to start my family in.  Whatever you and your soon-to-be husband feel is right is what you should do.  Congrats and good luck!!

Answer 14

My opinion,

1. pay off debt

2. develop 3-6 months savings

3.save for mortgage

4. 401k

5. have fun

Thats if your honeymoon is paid.  

Answer 15

If you able to yes, put it in an IRA. There a 2 different types a Roth and a traditional.

Roth IRA...When you put money (Max of $4000 per year) into a Roth any money earned on the investment can be take out tax free when you retire.

Traditional IRA... Any money put into a Traditional can qualify you for a savers credit on your income tax return. You will get taxed on any money earned from your investment when your take distributions.

See your local bank for more specific details. The sooner you open up a retirement account the more you will have when you retire.

From a tax standpoint, you can deduct mortgage interest on your tax return as long as your able to itemize.