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VirginiaBound 12-28-2011 05:45 AM

Beginning a road to smarter investments and finances
 
I'm currently 19, living independently with my girlfriend and daughter. I'm renting an affordable home, two paid off vehicles and a great insurance plan through work. For the time being my financial burdens are low, I'm not obligated to any payments or debts and would like to use my extra money to help me in the future.

Where is a good place to start safely investing money with a noticeable return rate? I'm currently enrolling 10% of my weekly check into a savings account for my daughter, as well as pulling money out from every check into another separated savings account for emergencies or issues. I would really love to be intelligently using my money while I'm still paying a low amount of bills monthly.

Are stocks good for my situation? I eventually want to invest in real estate, but for the time being I feel using low amounts and getting experience in finances is my best choice.

Any advice would be very helpful, thanks everyone. :)

JaSkynyrd 12-28-2011 12:28 PM

Stocks are the playground of young folk like you and me. We can successfully weather any volatility in the market because we are not going to be retiring any time soon and short term losses won't hurt us nearly as bad as someone who is 62 and looking to retire in the next couple years. Put your money into a stocks only mutual fund and you'll see some great returns. Keep saving some of your money in an emergency fund though, Dave Ramsey says everyone should have 3-6 months of expenses in an emergency fund.

Having said that, I would jump into a foreclosure as soon as I could, assuming your credit is good. You can get an FHA loan with 3.5% down and realistically pay less to own a home than you are right now renting.

We bought our house in June with a rate of 4.5% and it's gone down since then, you could probably get something in the 4% range for sure. I know you said you want to get into real estate later, and I don't know if that meant buying a house to live in or investment properties but either way there are two good reasons to do it RIGHT NOW:

1. Rates are as low as they've ever been, and housing prices have corrected themselves from the bubble. Now is the time to buy.

2. What return are you getting on your rent money? Other than a roof over your head, the answer is nothing. Paying rent is like throwing money away. Buy a foreclosure on the cheap, move into it and do some upgrades and in 10 years you could realistically sell it for at least 20% more than you paid for it. Own, own, own. I will never rent again unless I am forced to by circumstances beyond my control.

hendooman 12-28-2011 12:32 PM

Good advice on the housing market, I suspect that your company does not have a 401k since you did not mention it. You can invest in one on your own, find a local CFP and talk to them about your situation. Your smart to do this now, I wish I was that smart with my money at 19.

2009Silver 12-28-2011 12:34 PM

Have you considered a Roth IRA?

bulhas 12-28-2011 12:39 PM

if you want something that will always rise in cost, buy a rare colored diamond, i bought a pink diamond two years ago and a yellow this past spring, the pink was around 5k and a yellow in spring, in the time i have owned the diamond, the pink is now valued at over 25k and the yellow at around 17 or 18 right now, not once have the dipped always went up,

reasoning the colored diamond market is becoming rare, and as the mines run out, the diamonds go up dramatically, you should typically see a 25% increase in value every year, so with 4 years you could typically double, in my case i more than doubled on my first diamond

that is a true assett, jump into the stocks if you can though

Aw9d 12-28-2011 12:42 PM

All I got to say is good for you man! It's nice to see someone that's your age be this responsible. Most people I know in your age group are only worried about parties and getting laid.

Wish I could give you some advice to help out.

Jdaniel1274 12-28-2011 12:42 PM

Get a Roth IRA, try to max it out every year, for your retirement.

Quote:

Originally Posted by 2009Silver (Post 4261106)
Have you considered a Roth IRA?


wmdpowell 12-28-2011 12:45 PM

Saving is always a good idea. If work has a 401k plan you can save and they will match your money up to a certain amount.

VirginiaBound 12-29-2011 03:53 PM

Thank you for the great replies!

I have considered throwing a few small amounts into different stocks and see where they go. Logic tells me using anything more than play money in any one stock would bring more stress for myself than anything.

Yes, I am currently drawing money into 401 through my employer. They do match to a certain amount, something I haven't looked into like I probably should.

That is great advice about foreclosure, it's something I have definitely looked into. Unfortunately, I'm currently living out of state and don't want to purchase anything in area. I don't plan to be living in Nc by the end of this following year, I'm ready to be back in Richmond!

I'm going to look into the Roth IRA. Anything specific I need to take into interest before starting?

Thanks again guys! I'm really looking forward starting a road to better finances!

scocar 12-29-2011 04:16 PM

Quote:

Originally Posted by Vacountryboy-IXI (Post 4268047)
Thank you for the great replies!

I have considered throwing a few small amounts into different stocks and see where they go. Logic tells me using anything more than play money in any one stock would bring more stress for myself than anything.

Yes, I am currently drawing money into 401 through my employer. They do match to a certain amount, something I haven't looked into like I probably should.

That is great advice about foreclosure, it's something I have definitely looked into. Unfortunately, I'm currently living out of state and don't want to purchase anything in area. I don't plan to be living in Nc by the end of this following year, I'm ready to be back in Richmond!

I'm going to look into the Roth IRA. Anything specific I need to take into interest before starting?

Thanks again guys! I'm really looking forward starting a road to better finances!

Definitely invest in the 401k to the maximum amount they match. This is free money. It will also lower your taxable income, so that is a raise (until you retire). Whatever funds they offer, deversify among at least 3 of different types with different strategies (growth, value, large, mid, small cap, domestic, foreign).

Also, for funds, index funds (Like S&P 500) are the most cost-effective. Actively managed funds often have a lot of overhead costs that deplete your returns. Look for low expense ratios (always under 1.00, if not much lower).

For cash reserve "savings" (a joke for the last few years), you can look into a tax-exempt money market fund, which will provide better return than just about any regular bank savings account. ING (online) also has a decent savings program, but all interest rates are shit now, so that is a tough call.

You really shouldn't invest anything in stocks that you can't afford to lose outright. You have a family... Build up at least a six-month reserve for all life expenses first (as someone else said) and stuff that in an FDIC-insured account, max out your 401k for matching funds, start a Roth and invest the max in there that you can (I think $5000 a year is the limit now), then consider other things like stocks. The retirement accounts depend on compounding interest. The earlier you start, the more it makes for you in the long-term. It is impossible to ever make up this time advantage later in life.

And keep saving for a house down payment for when you are ready. Rates have never been this low. Our folks used to face rates like 15%. You can make a one-time distribution from the Roth IRA for a first-time home purchase, if that is what works for you when the time comes. Never take loans or distributions from your 401k. It isn't worth it.

VirginiaBound 12-29-2011 04:24 PM

So it seems transferring the money currently invested into a savings account would be better suited in my 401k? Forgive my ignorance, can this 401k can be transferred when I move employers?

I like the idea of maxing out my savings in 401 and Roth before using money on the market. Without debts I feel like this is the time to start throwing money into these resources. As you mentioned I have a great time advantage, if I can start on the right path at 19 I'll be ahead of the game when I'm 50 or 60. :thumbsup:
to it.

I guess my priority for now will be learning more about 401k and begin building.

scocar 12-29-2011 04:31 PM

Quote:

Originally Posted by Vacountryboy-IXI (Post 4268227)
So it seems transferring the money currently invested into a savings account would be better suited in my 401k? Forgive my ignorance, can this 401k can be transferred when I move employers?

Well, not necessarily. Two different tools. Savings you always have access to (liquid). 401k is a retirement vehicle and heavily restricted. What goes in dosn't come out until you retire, unless you want to pay penalties, and I think there are some catastrophic provisions.

Yes, 401k generally can be transferred. Worst case, you might need to convert it to another IRA. But if you do that and don't contribute anything else to it, you can roll it into another 401k when you have access to one again. That's what I've done, and I don't think the laws have changed.

I like the idea of maxing out my savings in 401 and Roth before using money on the market. Without debts I feel like this is the time to start throwing money into these resources. As you mentioned I have a great time advantage, if I can start on the right path at 19 I'll be ahead of the game when I'm 50 or 60. :thumbsup:
to it.

I guess my priority for now will be learning more about 401k and begin building.

Yup. Here's a very helpful site:

http://www.investopedia.com/

Good luck, man. You're being smart.

JaSkynyrd 12-29-2011 04:31 PM

Quote:

Originally Posted by Vacountryboy-IXI (Post 4268227)
So it seems transferring the money currently invested into a savings account would be better suited in my 401k? Forgive my ignorance, can this 401k can be transferred when I move employers?

I like the idea of maxing out my savings in 401 and Roth before using money on the market. Without debts I feel like this is the time to start throwing money into these resources. As you mentioned I have a great time advantage, if I can start on the right path at 19 I'll be ahead of the game when I'm 50 or 60. :thumbsup:
to it.

I guess my priority for now will be learning more about 401k and begin building.

If you are not maxing out your contribution that your employer will match definitely move some of the money that you save every month to your 401k contribution, that way your not taxed on it right now (but you will be when you take it out) and your employer match is just like scocar said, FREE MONEY. Also Roths are the shit, that's not an employer matching fund but still well worth investing in since it's taxed now and when you take it out in 40 years and it's doubled itself 5 times it's tax free. If Roth is still alive I will give him my wife for a night.

jtav2002 12-29-2011 04:32 PM

Yes you can typically roll over your 401k into a plan with your new employer. Good to see you're participating in that at an early age, retirement should be your main focus with investing(along with the savings for your daughter which is a great idea). A Roth IRA as mentioned is a good idea as well.

I'd like to invest some more than I am now. Although I am putting 15% of my paycheck into my 401k along with taking $200 out into a vehicle fund. Also have a few thousand in stocks. Only throw money there if it's money you could afford to lose if the market tanks, again.

TacoDawgfan 12-29-2011 04:38 PM

Generally can't go wrong with land and or a house. Just not a mobile home. And put into your 401 at least what your employer is matching.

birddog 12-29-2011 05:02 PM

Wow - great for you even thinking along these lines at 19. You are already far ahead of most. My list in order of priority.

1. Rainy day fund of 3 to 6 months wages.
2. Max out 401K if you have one.
3. Pay off debts but it does not sound like you have any.
4. Cash flow positive property. You can probably find great deals right now on a duplex. I would live on one side, rent the other side and have someone else pay for the roof over my head.
5. I would hold off on stocks and IRA's right now. I think the market is in for some more severe hits. What's going on in the eurozone right now is like a movie preview of what's coming to a theatre near you!
6. Inflation will hit home once there is a spark in the ecomonic recovery. I would hold some physical gold and silver as a hedge. Physical not paper stock or EFTs. Washington has simply printed too much money and they are not stopping.
7. Once I completed 1-6 I would go back to #3 cash flow positive investments like rental property, your own business, ect. - anything that contributes to monthly income.

VirginiaBound 12-29-2011 05:39 PM

I'm currently drawing an average slightly over 1000k a year in my 401k. It's pulling out around 26.00 dollars a week, which I assume will increase with my raises? It would be great if I'm already maxing the matching amount with what's being pulled. If I'm already reaching the max I can max Roth (5000 maximum amount if I understood the article) and be able to set those aside until next year.

Real Estate will be coming after my move back to Virginia. I want a good foundation to set myself on while I still am ahead of the game. I am dumb-founded at the 40 and 50 year olds I work with who are living off their weekly income and can't hardly afford their car payment because they're in so engulfed in debt.

Wow, I feel much better about jumping into this thanks to you all! Very intelligent and experienced people lurk on this forum, I guess I didn't realize it hanging out in the 1st gen and Off-Topic areas! :laughing:

VirginiaBound 12-29-2011 05:45 PM

Quote:

Originally Posted by bulhas (Post 4261139)
if you want something that will always rise in cost, buy a rare colored diamond, i bought a pink diamond two years ago and a yellow this past spring, the pink was around 5k and a yellow in spring, in the time i have owned the diamond, the pink is now valued at over 25k and the yellow at around 17 or 18 right now, not once have the dipped always went up,

reasoning the colored diamond market is becoming rare, and as the mines run out, the diamonds go up dramatically, you should typically see a 25% increase in value every year, so with 4 years you could typically double, in my case i more than doubled on my first diamond

that is a true assett, jump into the stocks if you can though

Genius! Being a physical object, even if our markets clunk out the diamond will still retain value.

Knowing my luck, I'd end up losing it and tear the house apart trying to find it. :rofl:

Quote:

Originally Posted by Aw9d (Post 4261168)
All I got to say is good for you man! It's nice to see someone that's your age be this responsible. Most people I know in your age group are only worried about parties and getting laid.

Wish I could give you some advice to help out.

It's unbelievable how much life changes when parenthood comes in. I'm far from mature, my social behavior is still much that of a teenager. Providing for my family and not completely relying on parents or family has really helped me see what's important.

worthywads 12-29-2011 05:58 PM

Index funds have been mentioned, and do benefit from low overhead costs.

A spin off of that concept are the funds that target a retirement date and are internally just allocating a mix of different index funds.

Don't know what they call them but they adjust allocation from agressive to conservative as the retirement date nears.

I plan on retiring in 2030 and have money in Vanguards Target Retirement 2030.

http://www.vanguard.com/jumppage/TRF...ement2030.html

birddog 12-30-2011 04:59 PM

bump


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