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my wife currently maxes out her 401k each paycheck and we started looking in to the discounted stock purchase program there as well. For 6 months we would contribute between 1% and 10% of her salary, then at the end of the 6 months stock is purchased at a 7.5% discount of the cheaper price from either the enrollment date(January 1, 2014) or the purchase date(the end of the 6 months.) Have many of you partaken in your companies stock purchase program? What are the biggest drawbacks from such a program? We talked briefly about just selling at the end of the 6 months if the price was worthwhile. Her companies stock is already near it's high for the year(started roughly 20 points lower, from 70-90). I'd prefer us to just participate and build it up but is that better than just taking the money we would put into the program and investing it ourselves?
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Dec 25, 2013 21:30
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Space Gopher posted:I'm about to start my first "serious income" job (nothing outrageous, but solid middle-class money), and one of my goals is to build a robust emergency fund. Thanks for the reply. The school I want to attend is eligible, so I guess it's time to max the 401k.
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Dec 25, 2013 23:13
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ayb posted:Have many of you partaken in your companies stock purchase program? What are the biggest drawbacks from such a program? We talked briefly about just selling at the end of the 6 months if the price was worthwhile. Her companies stock is already near it's high for the year(started roughly 20 points lower, from 70-90). I'd prefer us to just participate and build it up but is that better than just taking the money we would put into the program and investing it ourselves? Potential drawbacks are a minimum holding period (ie once the 6 months is over you are require to wait X months/years before you can sell your shares), inability to withdraw from the program mid-term, and having insufficient savings to be able to cover the missing income. Check the plan documents regarding the first two, and make sure your budget can accomodate the third. The "gold standard" for these ESPPs is 6 months / 15% discount / no minimum holding / lower of the two prices. If there is no holding period at the end then it is no risk free money that you can think of as a twice a year bonus since you can sell the stock immediately when the period ends. If there is some sort if holding period you may need to think twice, but as long as you are doing okay financially you should participate in the plan, otherwise you are leaving money on the table. I personally sell it off immediately, others hold onto it for a little while to get long-term gains treatment for taxes. Either way, I would very strongly recommend against building up a long term portfolio that includes shares of your employer's stock. Take the free money and cash out into a safer investment (index funds).
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Dec 25, 2013 23:36
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Eyes Only posted:Potential drawbacks are a minimum holding period (ie once the 6 months is over you are require to wait X months/years before you can sell your shares), inability to withdraw from the program mid-term, and having insufficient savings to be able to cover the missing income. Check the plan documents regarding the first two, and make sure your budget can accomodate the third. There is no minimum holding time. The discount used to be 15% years ago but that ended well before my wife was hired. Are there certain industries that something like this wouldn't be good for investing? Her company is oil/gas related and one of the largest in the world.
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Dec 26, 2013 00:53
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ayb posted:There is no minimum holding time. The discount used to be 15% years ago but that ended well before my wife was hired. Are there certain industries that something like this wouldn't be good for investing? Her company is oil/gas related and one of the largest in the world. That plan is pretty good then. If you participate and sell immediately then this isn't actually investing, it's your employer giving you additional compensation (free money). It's only investing if you hold on to their stock. The idea is to participate in the plan and at the end of 6 months the company buys stock in your name at a discount. Ten seconds later you sell that stock for its current full price, pocketing the difference. The company pays that difference and as far as they care it is part of your salary. Of course, the point of the program is they want you to hang on to their stock so you have extra motivation to work hard, but you have no real incentive not to sell it right away and invest the money elsewhere. The industry or even the individual company doesn't matter - investing in individual companies is generally a bad strategy even for experts, and investing in your own employer is doubly bad, even if it is a world-class stable blue chip.
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Dec 26, 2013 01:40
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IAMKOREA posted:Thanks for the reply. The school I want to attend is eligible, so I guess it's time to max the 401k. One thing I didn't clarify initially: only IRA distributions are penalty-free for education expenses. 401k distributions will still take a 10% penalty. My suggestion that bam thwok could use his 401k to save for school hinged on the fact that he would be quitting his job to go to school, and thus be able to rollover his 401k to an IRA. If you're planning on following this strategy, I really recommend that you read up on the subject yourself and make sure that you don't have any pitfalls ahead in your specific situation. Retirement plans were not designed for this sort of use, and I'm very much just some guy on the internet theorizing about how they could be taken advantage of in an edge case. I'd hate for someone to screw themselves over by placing undue trust in my posts.
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Dec 26, 2013 07:53
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I'm 27, I make $45k / year, and currently I have zero investments / retirement savings. I have around $13k in a savings account, zero debt, and my employer does not offer a 401k plan. I'm thinking about maxing a new Vanguard Roth IRA before the end of the year, what should I do after that? Start my own 401k outside of work or start next years Roth contribution?
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Dec 26, 2013 08:45
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Ethanfr0me posted:I'm 27, I make $45k / year, and currently I have zero investments / retirement savings. I have around $13k in a savings account, zero debt, and my employer does not offer a 401k plan. I'm thinking about maxing a new Vanguard Roth IRA before the end of the year, what should I do after that? Start my own 401k outside of work or start next years Roth contribution? Have an emergency fund first, something that will last you 3-6 months if you were to lose your job this instant. 3-6 months might be a tad bit too much, but I feel that having more money in an emergency fund is better than less. After you have an emergency fund, max out that Vanguard account. After that, you can start looking into other avenues of investing.
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Dec 26, 2013 09:10
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Ethanfr0me posted:I'm 27, I make $45k / year, and currently I have zero investments / retirement savings. I have around $13k in a savings account, zero debt, and my employer does not offer a 401k plan. I'm thinking about maxing a new Vanguard Roth IRA before the end of the year, what should I do after that? Start my own 401k outside of work or start next years Roth contribution? You do want to start maxing a Roth IRA soon, because without a 401k you're limited in the tax-advantaged contributions you'll be able to make over the course of the rest of your life (you can't start a 401k on your own unless you're self-employed, they're meant to be a replacement for pensions). As obi_ant mentioned, though, you want to have an emergency fund in place first, and how big that should be depends on your monthly expenses. It just might be that $13k should stay put. Here's the upside: you actually have more than just a week to use up your contribution limit this year, so there's no rush. You can have contributions counted towards your 2013 limit up until tax day. Make a plan to max your IRA by then while leaving yourself adequate savings, then start working on your 2014 contributions.
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Dec 26, 2013 15:08
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obi_ant posted:Have an emergency fund first, something that will last you 3-6 months if you were to lose your job this instant. 3-6 months might be a tad bit too much, but I feel that having more money in an emergency fund is better than less. I read recently that, since interest rates are low, some people are using a Roth IRA as an "emergency fund" since you would not be making much interest in a savings account. If I put $3k into the Roth, and had $10k in emergency funds (easily 6 mo. of expenses), that's the only way I could hit my max contribution this year. Even if I had to cash out that $3k due to something super extreme, it would not be penalized, correct?
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Dec 26, 2013 17:01
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You are right that you can take contributions out any time without penalty. And it would make sense to max out your contribution this year by reducing your cash. What is the minimum amount of cash you are comfortable having access to for emergencies? If it's $10k, here is what I would do: $7500 in savings account $2500 in Roth IRA in a money market (so it's safe to take this back out in an emergency) $3000 in Roth IRA in preferred stock/bond index funds (don't even consider taking this out) Next year, focus on building your savings back up to $10k, and when you've done it, move the $2500 from money market to stocks/bonds within the IRA. Overall this is a pretty low risk way to take full advantage of the Roth IRA space this year even though you can't quite afford to. It's just a temporary measure, though - in general, don't consider your IRA as any sort of an emergency fund. Edit: Vanguard has a $3k minimum for their money market fund, so split it $3000 to money market and $2500 to one of the target retirement funds if you go with Vanguard. slap me silly fucked around with this message at 18:52 on Dec 26, 2013 |
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Dec 26, 2013 18:42
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Contributions can come out, but can you replace them? Without a 401k, you have a very small opportunity per year to avoid taxes on your retirement savings. I would argue that it is a nice amenity that, in a dire emergency, you can burgle your future self by withdrawing contributions, but certainly don't plan for it. How much do you spend every month? Cut that to 60% and multiply it by 6 months. Keep that in savings. Don't worry about interest on it because this emergency fund is here to keep you from getting poor, not to get you rich. Use https://www.bankrate.com to find an online savings account with good-enough interest (probably around 0.8%). Depending on where you live, what you do, your individual circumstances, etc., you may have any of a wide range of emergency fund needs. I'll estimate it at $7,500 as Slap Me Silly did. Put that in savings. For your Roth, Vanguard is the (only?) recommendation to be found here, but you'll notice their funds typically have minimums of $3,000, so you won't be purchasing two different funds just yet. Choose one of their Target Retirement Date funds (instant diversification at a slight cost of a few basis points in expenses). Note that you have until April 2014 to make your 2013 contribution. This is completely idiot-proof on Vanguard's website, so you won't accidentally make a 2014 contribution unless you try very hard to. You have no debt and, to look at your age and assets, you are probably saving a couple hundred dollars a month. You should have no trouble maxing out your Roth contribution for 2014 within a few months into the year. Overall, my recommendations are: 1. Figure out how much you need to survive on for 6 months if you lost your job, then put this amount in an online savings and don't give a crap if its yield is terrible. 2. Put $5,500 in a Vanguard Roth for 2013 (Recommendation: Target Retirement Fund) by April 3. Save diligently and get another $5,500 in your Roth for 2014 as soon as possible 4. When you've got that ~$11,000 in the Roth, you'll have enough to branch out into a few funds if you desire. Read the Four Pillars book in the OP or check out this incredible series of blog posts to learn more: http://jlcollinsnh.com/stock-series/
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Dec 26, 2013 19:31
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If you don't have a 401k offered to you, you can simply use a traditional IRA and benefit as if it were a 401k. Not a big deal. That said, if you work somewhere that doesn't have a 401k, it's possible you are a lower earner and would vastly benefit from a Roth as it will be taxed now and tax free in retirement. Vanguard offers ETF's too, at very competitive rates. That could be use to manage diversity before you have enough for normal Vanguard mutual funds. The Target funds are rather heavy in bonds if you're pretty young, but they're a smart and very simple option.
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Dec 26, 2013 21:25
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SiGmA_X posted:
Did they used to be heavier in bonds? Currently, every Target fund for ages 18 to 40 is holding 10% bonds, and the age 41-45 fund is only 15% bonds!
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Dec 26, 2013 21:49
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Vanguard funds tend to be heavier in equities than the 'your age in bonds' rule-of-thumb that some people like to use. It makes sense though; someone at age 45 could easily have 50+ years until they stop drawing down from their investments. At that kind of investment horizon, shifting lots into bonds could mean substantially lower returns (and therefore income) over the long term.
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Dec 27, 2013 00:07
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GoGoGadgetChris posted:Did they used to be heavier in bonds? Currently, every Target fund for ages 18 to 40 is holding 10% bonds, and the age 41-45 fund is only 15% bonds!
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Dec 27, 2013 00:15
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Ethanfr0me posted:I read recently that, since interest rates are low, some people are using a Roth IRA as an "emergency fund" since you would not be making much interest in a savings account. If I put $3k into the Roth, and had $10k in emergency funds (easily 6 mo. of expenses), that's the only way I could hit my max contribution this year. Even if I had to cash out that $3k due to something super extreme, it would not be penalized, correct? As everyone has stated already that's something you *can* do, but personally I wouldn't. My philosophy has always been once something goes into my "retirement" account, it should stay in your retirement account. From talking to many of my friends, if you act like the money is there, it makes it difficult to save or not pull out when you want to. I guess it's a psychological thing. This is the same advice I always give to my friends. 1. Emergency fund (3-6 months of living). So, rent, car, insurance, utilities and gas. I would leave this in a savings because it's liquid and you can pull out almost instantly if needed. 2. 401k up to employer match. Free money. 3. Try to max out your IRA Roth account each year, either by a $5,500 or monthly payments. 4. Max out your 401k. If you've made it this far, you're probably good on retirement. Remember this is a thread for retirement. So don't rob future self of money.
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Dec 27, 2013 03:08
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obi_ant posted:As everyone has stated already that's something you *can* do, but personally I wouldn't. My philosophy has always been once something goes into my "retirement" account, it should stay in your retirement account. From talking to many of my friends, if you act like the money is there, it makes it difficult to save or not pull out when you want to. I guess it's a psychological thing.
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Dec 27, 2013 03:24
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I'm going to be starting a job in 2014 that doesn't offer a 401k and I'll be making pretty close to the upper level phase out deduction. They're planning on starting one in 2014, or possibly 2015. From what I can tell, if they start up the plan in 2014 at any point I will be counted as being covered and will pretty much not be able to deduct the IRA contribution. Does anyone have more concrete info that says otherwise? I like to do an automatic transfer every month, but don't want to do it if there's a chance I'll lose the deduction.
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Dec 27, 2013 05:01
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Harry posted:I'm going to be starting a job in 2014 that doesn't offer a 401k and I'll be making pretty close to the upper level phase out deduction. They're planning on starting one in 2014, or possibly 2015. From what I can tell, if they start up the plan in 2014 at any point I will be counted as being covered and will pretty much not be able to deduct the IRA contribution. Does anyone have more concrete info that says otherwise? I like to do an automatic transfer every month, but don't want to do it if there's a chance I'll lose the deduction. Your traditional IRA deductibility will not be affected unless you or your employer actually deposits money in the 401k: http://www.irs.gov/Retirement-Plans/Are-You-Covered-by-an-Employer%27s-Retirement-Plan%3F
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Dec 27, 2013 05:19
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Stryguy posted:I am currently "officially" saving 28% of my income (estimated based on pre-tax amounts). I don't spend all that's left over, it accumulates in my checking until I dump a bit into savings or stocks here and there to clear it out. Hi, you're a Midwest version of me. We have, quite literally, the same exact future goal. I throw a pile of money into my 401k same as any other guy reading a Long Term Investing thread, but I feel that small passive income streams are overlooked in general. I've spent the last year working on an e-commerce business, and have a few more (less complex) e-commerce ideas that I want to put in motion as well. But before I get into those secondary e-commerce ideas, I want to get into the real estate game in a college town. I started looking into college town rentals early in 2013, but just got overwhelmed with my e-commerce business. Since I see you're interested in rentals in general, I encourage you to look into the financials of renting by the room to college kids. Pay attention to the tax write-offs, more than anything. When I ran the numbers, it came out to a taxable loss, with about $10k in (tax free) annual income. Look for a growing a college/university in an area with affordable housing. I've found a few towns where I could buy a 3/4 BR house for $125-150k, and rent the rooms out for $400-600 per room. Property managers are not as expensive as you'd think either (and are tax deductible), and there are college rental specialists. Maybe to start you'd want to self manage to save a few bucks, but it's not as scaleable long term. No one wants to rent to college kids, but when you really think about it, the fears are unfounded. Who would you rather rent to: a 24 year old with baby's first job out of school, still maybe not sure how to budget money properly, or a 19 year old with virtually no living standards, backed by parents? You're essentially renting to their parents checkbook. Plus, their standards for the house will be "is it better than a dorm". There's also no other demographic you can rent to on a room basis, which makes for a nice premium. Renting a whole 4 BR house in an area with housing prices around $150k would probably be $1200-1400/month, but renting by the room gets you more like $2000/month.
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Dec 27, 2013 18:51
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So I'm pretty happy with changing the way I viewed saving for retirement in 2013...went from having literally zero dollars invested in retirement accounts at age 29 to having 11k in my 401k and 2kish in my Roth IRA. However, when I started the 401k at the beginning of the year I basically just threw poo poo together, not knowing what I was doing. I still don't know what I'm doing, but I know a little more, and would like to rebalance. Just wanted to get some input on the plan. Current funds: 50% American Funds Balanced Fund Class R3 0.95% ER 25% Delaware Select Growth Fund Class A 1.27% 25% RS Partners Fund Class A 1.45% Basically, I've done well on the 401k just due to the market doing well, but looking at the expense ratios I've realized I'm probably leaving a lot of money on the table by paying those. These are the options I have: American Funds Money Market Fund - Class R3 American Funds Intermediate Bond Fund of America - Class R3 PIMCO Total Return Fund - Class A Templeton Global Bond Fund - Class A JPMorgan SmartRetirement Income Fund - Class R2 JPMorgan SmartRetirement Various Target Funds - Class R2 American Funds American Balanced Fund - Class R3 American Funds The Income Fund of America - Class R3 American Funds American Mutual Fund - Class R3 Vanguard 500 Index Fund - Signal Class American Funds AMCAP Fund - Class R3 American Funds The Growth Fund of America - Class R3 Delaware Select Growth Fund - Class A American Century Mid Cap Value Fund - Class R Vanguard Mid-Cap Index Fund - Signal Class BlackRock U.S. Opportunities Portfolio - Investor A Class RS Partners Fund - Class A MFS New Discovery Fund - Class R2 American Funds EuroPacific Growth Fund - Class R3 American Funds Capital World Growth and Income Fund - Class R3 American Funds SMALLCAP World Fund - Class R3 Not that great, sans a few Vanguard options that have extremely low expense ratios. The target funds being class R3 are really unattractive compared to say my Vanguard target IRA. I was thinking of: 50% Vanguard 500 Index Fund 0.05% ER 30% Vanguard Mid-Cap 0.10% ER 20% Templeton Global Bonds Fund 0.91% ER (about halfway through The Four Pillars, for context...so I'm currently thinking 20% in bonds) Some arithmetic tells me my average expense ratio under this allocation drops from 1.155% to 0.2825%...nearly an extra 1% in returns sounds a lot nicer. 1) Is this good for someone my age, or would there be a better option? 2) Should I just leave my current assets where they are or transfer them to the new allocation? ADP's website isn't really clear on what sort of fees they'll take out of the balance due to the transfer. Nail Rat fucked around with this message at 21:56 on Dec 27, 2013 |
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Dec 27, 2013 21:02
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Hi money wizards, I made a thread about this but it was suggested that I might get more help if I post in here. My husband and I just got $5,000 as a gift from his grandmother. She wants us to use it as an investment and not for current living expenses which is totally cool with us. She suggested that it might be nice to save it for a down payment on a house someday. My husband and I have no idea what to do with this money. We have never invested money in anything. We have no work-related investment accounts or retirement accounts or anything like that. Basically we have no money, now we have some money, but we can't use it and we want to know what to do with it until we want to/can use it. About our financial situation: My husband is an independent contractor for a ranch his family owns, and where we currently live in our own house rent-free. We also don't pay utilities. He makes about $1,000 a month and works part time-ish. It's a working cattle ranch so there's weeks where he can get a lot of hours, and weeks where there's not much to do. On average he makes $10,000 per year. I am a graduate research assistant and make $700 bi-weekly after taxes (around 17K per year). Well, I did. I'm no longer funded after the end of the year so I think I'll get 1 possibly 2 more paychecks before I'm done with school. I cannot get unemployment. I'll have a Master's degree in biology when I finish though, so hopefully I'll be able to get a $40-50K job which is pretty standard for someone with my education and work history starting out as a professional in my field. We have $6,000 in savings which will hopefully last us until I get a job. I'll be getting a ~$2000 tax return as well. So, maybe 8K in savings. That's our total monetary assets. Oh, I'm 27 and he's 34. Yeah, we're adults and still making basically minimum wage. We are fine with this for now. Hopefully I will get a job soon but if not we can basically bum around the ranch indefinitely. Obviously that's not a good plan for the future but it's not like we'll get evicted or starve to death if I can't find a job for 6 months. We don't have much in the way of expenses. We don't pay rent or utilities. Food is not much of an issue since we hunt/grow most of it. I guess we spend $150/month on groceries. We have 2 vehicles that are both paid off. So our regular bills are 2 phones ($110), insurance on 2 vehicles (~100/month), health insurance (gonna be ~80 a month when we get on under the Affordable Care Act), food, gas, vehicle maintenance, just general stuff. We are very cheap obviously. We don't buy or spend much. We spend a decent amount on gas though since we live 45 minutes from anything and 2 hours from my school, where I am still technically a student, and where I will be going at least once a week until I finish my thesis (~2-3 months). I have about $20K in subsidized student loans, not making payments but they will be ~$150/month when I start payments (soon). My husband owes his mother about $25K for loans. He defaulted on them, she bailed him out by paying it all off in a lump, now she charges him $150/month. Obviously our family is very generous which is why we can basically survive on less than minimum wage. My parents gave us $1600 to fix our truck earlier this year, we were going to have to scrap it. Which would have sucked because then my husband wouldn't have a work truck and he works on a ranch so he kinda needs it... that's beside the point, anyway both our families help us A LOT. We have no plans to buy a new vehicle or a house or anything like that anytime soon. This is why I'm not really sure what to do with this money. I would love it if we could throw it at our loans but we were advised to "invest" this money. The same grandmother gave us $6,000 about 6 months ago to use for education (went all toward husband's loans). She does this regularly with all of the grandchildren. This whole family was raised knowing that random large sums of money just appear as a check from Grandmother every 6 months or so, and I think she is sick of pretty much all of the grandchildren just blowing it on Ipads and poo poo. So now the money comes with directions. Which like I said, I don't mind, I think it's a great idea. I just don't know what to do with $5,000 or how to invest it. The irony of this is not lost on me (I'm about to become unemployed, my husband only works part-time and we just got 5K we can't use). I was laughing to my husband about this because I spent 3 yeas of grad school saving up every penny because I figured I wouldn't get a job right out of school and would need some emergency savings. I was able to save up $6,000 and it took me 3+ years. And here we get a $5,000 surprise in the mail today. I understand now why my husband was so bad with money when we met. Why worry about the future when there's a bailout right around every corner? Don't worry goons, we're actually really good with the limited income we have and don't want/need anything. We're simple folks with simple needs. Anyway, help? What to do with the $5,000? What's a good way to invest this money? What's a good time frame for investment? What does a poor person do with $5,000 for the future? Thanks for any help you can give us! TL:DR - We got $5000 to "invest", we're super poor, what do we do with money for the future?
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Dec 27, 2013 21:53
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Sounds like you need an emergency fund. Establish it first before making any investments.
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Dec 27, 2013 21:57
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ETB posted:Sounds like you need an emergency fund. Establish it first before making any investments. I know. I wish we could. We have $6,000 in savings and that's basically our emergency fund. I wish I could just throw that money in there but it's just a regular savings account that gets like, $4 in interest per month. I also wish I could use it for student loans. But the extremely nice woman who gave us the money and who is very much a forward-thinking investment driven lady wants us to invest it for our future. So we will invest it. The problem is we know nothing about this sort of thing. I know it seems like a backwards situation (we're super poor and got a bunch of money we can't use). But my husband's grandmother does a lot for us, and for EVERYONE in the family she is VERY generous to the point where I almost can't stand it. If she wants to invest it, that's what we're going to do. I want to be able to say "Look, this is where we invested the money you gave us for our future". Yeah she's a little old fashioned but eh, she's 90, what do you expect?
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Dec 27, 2013 22:10
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Open a Roth IRA and invest it in a few different things. You can do it tax free, withdraw your original cash without penalty (should you need to), and when you retire the entire amount will be tax free.
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Dec 27, 2013 22:19
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Paying down your loans is definitely investing in your future in a general sense, but I see what you're saying about family feeling here. So yeah, Roth IRA. It is well in line with what your grandmother is saying. It's intended to invest for retirement, but you could also pull it out to buy a house, or maybe take out contributions to pay down loans later on if your financial picture changes. Within the IRA you'd need to pick some fund that's a good match for your expected time horizon: are you really going to use it for a house in 5-10 years, or can you just plan to keep it in there until you're 60? (Keep it until you're 60!) A Vanguard target retirement fund or lifestrategy fund would be a good bet.
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Dec 27, 2013 22:28
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Thank you for the info about the Roth IRA. I just found a Roth IRA calculator and if I put the $5000 in and contributed only $100 per month until age 65, I would have ~160,000. Whaaa? Is that for real? Honestly I do not anticipate my husband and I purchasing a house any time soon, if ever. We're not really the "American Dream" type, you know? I'm fine with renting forever or living on the ranch forever if I can get a job locally. I just applied for a local job that's ~$50K/year so cross your fingers for me! Unless we come into a large enough sum of money that we could buy a house outright I don't see us buying a house. We both feel this way. I do not know who to talk to about setting up a retirement account. We have bank accounts at 3 different banks (we each had one before we married, now we have a joint account but still use the other accounts, it's dumb but we're slowly working on funneling our money into one account). How do I know which one to set up an account with? Does it matter? What about a Credit Union? I'm also curious as to how "safe" investing in a Roth IRA is. My husband is very concerned about this as well (the fact that money can just disappear because some guy pushed a button on Wall Street is mystifying to us). Can you lose any of your original investment, or can you lose money due to varying interest rates or what? Basically, what makes the amount in the account tick steadily up rather than go down? Again I am new to anything financial so dumb it down as much as you possibly can 
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Dec 27, 2013 22:46
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razz posted:
The SA Forums are blowing up for me right now, so apologies if I've been beaten to the punch several times on this, but I recommend this as a very easy to understand primer: http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/ Some things you'll learn are that the amount never "steadily" ticks up, and the reason why you can expect to be rewarded for your investment is because you ARE shouldering the risk that someone will push the Make Your Money Worth $0 Button.
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Dec 27, 2013 22:55
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razz posted:Thank you for the info about the Roth IRA. I just found a Roth IRA calculator and if I put the $5000 in and contributed only $100 per month until age 65, I would have ~160,000. Whaaa? Is that for real? Yeah, that's about right. It will probably only have roughly $115k worth of today's money in purchasing power though. If you'd like a more thorough primer than the MMM one Chris posted above, follow the links at the bottom of this other post of his: http://www.mrmoneymustache.com/2013/03/07/how-about-that-stock-market/
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Dec 27, 2013 23:02
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Thanks so much for all of the links and information. I feel a lot better about everything. It might sound weird but it was shocking for us to see so much money at once and we kind of had a "oh god get it away from me" reaction, haha. I mean, that's 1/3 of my annual pay right there on a piece of paper. That's 600 hours of minimum wage work and it was just handed to us with a typed letter telling us to "invest" it. Crazy. What even is money??? After looking over some of those links and the retirement calculators I see why she wants us to invest this money. I also feel pretty dumb that I didn't know any of this. I'm 27, I should. I have had zero education on long-term financial goals/savings. My mantra has always been "as long as I have a couple grand saved for emergencies, I'll be good". razz fucked around with this message at 23:19 on Dec 27, 2013 |
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Dec 27, 2013 23:14
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The US stock market has historically gone consistently upwards over long periods of time. The price of a stock is correlated with the earnings of the company. An investment can go down. That is the price you pay for potential profit. Risk is highly correlated with reward. I think putting 5500 in a roth ira for the year 2013, invested in VTSMX (vanguard total stock market) is a simple move that should give decent returns.
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Dec 27, 2013 23:15
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Oh crap, I need to get this set up before the first of the year, yes? Otherwise I can't contribute any more in 2014 because I'm already almost at the cap with the initial $5000. Is there some sort of leeway or do I literally need to have this money invested before Jan 1st?
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Dec 27, 2013 23:22
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I think you just have to do it before tax day
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Dec 27, 2013 23:24
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razz posted:Is there some sort of leeway or do I literally need to have this money invested before Jan 1st? You have until the tax-filing deadline in April to contribute for 2013.
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Dec 27, 2013 23:24
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razz posted:Stuff I'm glad that you're starting to invest. I read this very thread a few years back and everyone here is very helpful. But really, you should have an emergency fund as your first order of business. Invest that 5k that your grandmother have you because that's what she wants. After that, emergency fund that you *wont* touch unless it's an emergency.
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Dec 27, 2013 23:27
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obi_ant posted:I'm glad that you're starting to invest. I read this very thread a few years back and everyone here is very helpful. I think she's got $6,0000 in a savings already. That's about a year's expenses for them!
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Dec 27, 2013 23:36
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obi_ant posted:I'm glad that you're starting to invest. I read this very thread a few years back and everyone here is very helpful. Is there something special I should set up for an emergency fund? I really do use my savings account as an emergency fund. Every paycheck I put money in there and I do not touch it. I do not take money out of that account. I have never had to take money out of that account. I figure we will use some of that money when I'm unemployed but I consider being unemployed a good use of an "emergency fund", right? I really am very good with money even though I don't have any of it. My friends always say I "have so much more money than them" but we all make the same amount (grad school stipend). I just don't buy stuff. I don't care about stuff, or what my car looks like or if my appliances/furniture are new or whatever people spend money on. I don't care about my phone, its not a smartphone, all my clothes are things I get for my birthday or christmas. Not paying rent is nice too although the free rent deal has only been happening for ~6 months. It's just hard to do *anything* smart with money or even know what to do when you only make ~$17K a year, you know? You spend all your money just to eat and pay rent. All these money breaks I've gotten all happened in the latter half of 2013. Up until 6 months ago I was paying rent, paying utilities, living in a college town supporting myself and my husband who was working at a bookstore for $7.25/hour. GoGoGadgetChris posted:I think she's got $6,0000 in a savings already. That's about a year's expenses for them! And I'll get a sizable tax return in a couple months that will go into savings. Every year I get $2000-2500 because I'm in grad school and they tax the hell out of our monthly stipend, but we get pretty much all of it back. razz fucked around with this message at 23:43 on Dec 27, 2013 |
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Dec 27, 2013 23:38
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razz posted:Is there something special I should set up for an emergency fund? I really do use my savings account as an emergency fund. Every paycheck I put money in there and I do not touch it. I do not take money out of that account. I have never had to take money out of that account. I figure we will use some of that money when I'm unemployed but I consider being unemployed a good use of an "emergency fund", right? That's exactly what an emergency fund is, yeah. Sounds like you've got a good one. You know your employment situation is about to change - you could keep the $5k in cash to help buffer you during that time. But you are sure that's not what you want to do with it, so... I think you're in a pretty good position to go ahead with the Roth IRA. It's a simple and obvious good choice, given what you're saying.
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Dec 27, 2013 23:45
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slap me silly posted:That's exactly what an emergency fund is, yeah. Sounds like you've got a good one. Yep, I think we will definitely do that. Like I said, we didn't have this money a couple hours ago so it's not going to hurt us to make it "go away" for a while. That's what I always do and always have done with "surprise" money, like from a birthday or something. Didn't have it 5 minutes ago, might as well put it in my savings account where I will continue to "not have" it. As opposed to going out and buying something with the "surprise" money. I mean, sometimes I do. But it also helps that we live in a ~225 square foot house so we don't really have room for extra stuff . Where would I even put a new pair of boots, you know? Closet's already full, better not buy them. Thanks for all the help everyone!
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Dec 27, 2013 23:54
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