Mark91880
First Time Poster
Cash: $ 0.25
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Joined: 18 Jan 2006
Location: Pa
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Hey,
First time on this board. My name is Mark and I am 25. I am new to all of this and was looking for some advice. I have zero debt far as credit cards and things of that nature. My job does not have a 401k or retirement program(small business, I do contruction) My bills consist of car payment,insurence, and cell phone. I was in a car accident last year and received my settlement. With that and what I had in the bank I have about 25k in the bank. I am going to sell my car and buy something outright so I dont have a payment anymore. I will have around 15-20k in the bank left. I am really lost and was hoping to get any feedback before I went out buying books and not knowing what to buy. I was wondering what the best place for my money is. I still live at home and I wanna buy a house soon so I am thinkin more in terms of that then retirement right now if that makes sense. Thanks for any advice you might be able to give me.
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Wed Jan 18, 2006 9:58 pm |
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coaster
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First, congratulations are in order for getting a timely start. That being said, I think the first thing to do is to project how much you want to devote to the downpayment on a house and when you plan to buy it. Any money that you're going to need within the next two or three years you don't want to put at risk. You need to take risk to make your money grow, but risk only produces assured reward over time.
~Tim~
Eye Candy : Why Whimsy
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Thu Jan 19, 2006 12:34 am |
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Jaszbo
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I would personally put 4k towards a Roth IRA, especially since you don't have a 401k plan. With the Roth IRA you can always pull back out the money you put in.
Besides that If you are looking for a secure savings plan there are some out there between 4-4.5% that you can get into. With 20k in savings it's going to make you about 850 dollars, which in all honestly it's not about making the money, but holding on to the money. Inflation is about 3% and then if you take into consideration taxes you are honestly just slightly above breaking even. If you aren't getting at least 3% a year then each month you are actually holding on to less buying power.
You could put it in a CD, but I personally am not a fan of any CDs compared to intrest rates of savings.
If you don't mind taking a slightly higher risk, I would suggest some municpal bonds. If you are in say the 25% tax bracket the return of 4.34% for the past year on a municipal bond would be equivalent to 5.79%, which is not completely secure, but for the past 5 years the one I'm looking at has an equivalent of 7.55% return if you are in the 25% tax bracket.
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Thu Jan 19, 2006 2:17 pm |
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coaster
Senior Advisor
Cash: $ 1355.60
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Location: Wisconsin
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No!! Not bonds of any sort. Sorry, but a two-year time horizon is too short of a time to invest in anything where the value fluctuates. And especially in a possibly rising inflation / rising interest rate scenario where the fluctuation will be DOWN. In other words....the risk of losing money on bonds within the next two years is too high. Buy bonds now only if you plan to hold them to maturity.
~Tim~
Eye Candy : Why Whimsy
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Thu Jan 19, 2006 4:52 pm |
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Rolo
Yo' Daddy
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Location: Colorado/Florida
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| Re: New to all of this |
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quote:
Originally posted by Mark91880
I am going to sell my car and buy something outright so I dont have a payment anymore
-If you can get a decent interest rate on a car loan, make the payments.
-Don't be in such a hurry to buy a house...there are more expenses there than a down payment. Additionally, if you have a hard time emotionally with a car payment, how will you feel about a mortgage payment?
-Retirement should be your #1 priority ALWAYS...otherwise you will never retire, retire later than you want to, or retire poor. "Pay yourself first." Play with some retirement calculators online. You won't want to spend that $25K anytime soon.
-Definitely do the IRA idea and look into opening a SEP IRA if you are considered self-employed, which many in your field are considered.
-Within those IRAs, you invest in quality mutual funds.
-For your extra money, continue to invest in mutual funds in a discount brokerage account.
-Read books: Rich Dad, Poor Dad series ("Cashflow Quadrant" is a quick read and gets his point across), "The Millionaire Next Door", and "The Truth About Money"). Research how to invest in mutual funds online...many tutor sites, morningstar.com has a fine one.
-Ixnay on the bonds. However, use bond funds instead. During bear markets, I prefer junk bond funds. (not really for you right now, though)
"Expect me when you see me."
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Sat Jan 21, 2006 2:27 pm |
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coaster
Senior Advisor
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| Re: New to all of this |
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quote:
Originally posted by Rolo
-Don't be in such a hurry to buy a house...
-Retirement should be your #1 priority ALWAYS...
No, don't be in a hurry. Make sure you're financially prepared. And building your net worth for retirement is certainly a priority. But buying a house IS part of building you net worth for retirement. Real estate is just part of your total portfolio of assets that constitute your net worth. It's your net worth that will sustain you in retirement. So don't be in a hurry, but then, don't wait until you're over 50, like I made the mistake of doing, before you buy your first house.
~Tim~
Eye Candy : Why Whimsy
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Sat Jan 21, 2006 6:12 pm |
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arbitrade3
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I am no expert, but you should look at fixed annuities for a retirement plan. Allocate your money between that and maybe a money market, however that does not have a high interest rate. You could invest in stocks although they are pretty risky. Do your research first of course. I suggest fully paying for a car and then once you have at least half of what you spent on the car saved back, then try for a house.
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Mon Jan 23, 2006 11:54 pm |
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Rolo
Yo' Daddy
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Location: Colorado/Florida
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quote:
Originally posted by arbitrade3
I am no expert, but you should look at fixed annuities for a retirement plan.
Fixed annutities are for when you are IN retirement; one would never be able to retire investing in them.
quote:
Originally posted by arbitrade3
You could invest in stocks although they are pretty risky.
Taking and managing risk is the proper (and only) way to retirement; risk should never be avoided all together. (this is why we have Social[ism] Security)
quote:
Originally posted by arbitrade3
I suggest fully paying for a car
Not if you have a good interest rate you don't!
"Expect me when you see me."
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Tue Jan 24, 2006 1:59 am |
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