| need advice: 26, no debt, earning 3k/month... |
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youngmoney1234
New Member
Cash: $ 0.70
Posts: 3
Joined: 29 Dec 2010
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| need advice: 26, no debt, earning 3k/month... |
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Living with parents, netting 3k/month (after biweekly pay), age 26,
working for the CA University system. No debt after paying off a 16k
student loan. I'm a frugal spender--credit cards are always paid in
full. Monthly costs are 450. Savings account is 10k.
When I was a per diem worker, the university took 7.5% pretax out of
each paycheck towards a 401a plan ("UC DCP") which now totals 7k. I'm
not sure what this plan details. Been working full time for 6 months
and will continue to do so.
I have no other investments, and I'm new to investing. I will probably
buy a 20k car late 2011. Thoughts in my mind are CD, Roth and
traditional IRA. The university also has a 403b and 457b option. Maybe
buy a condo and get it rented, and later use equity for more
investments or maybe a downpayment on a house.
Any more advice you could give me? Am I on the right track? How much
should I allocate for all this stuff?
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Fri Dec 31, 2010 3:39 am |
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oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
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quote:
Am I on the right track?
You are on the right track in that you are thinking about wealth building at age 26 - and have a solid & steady income stream to make it happen. As for your specific plans - not so good.
You say $3000/m net and biweekly pay - is that $36k/yr or $39k/yr? And what is the gross? It's important for you to look at how you spend all of your income, not just the 'net'. Eg, a $5k contribution to a 403b with a match might lower your taxes by $2000 as well as add $10k to your 403b account.
I googled the UC DCP, it is specific to C, here is the site. http://map.ais.ucla.edu/go/1000449 You can probably roll it into a 403b, it appears to fit that category.
quote:
Thoughts in my mind are CD, Roth and
traditional IRA. The university also has a 403b and 457b option
Let me straighten out some terms for you. Roth, IRA, 403b, 457, are types of accounts, they differ only in their tax treatment. And a CD is an investment product that you put into one of theose accounts (BTW, a CD is a poor choice for a 26 yr old).
The important metric for any of the account types is the return that you select - eg, if you invest $20k/yr in a CD for 30 yrs you'll have only $600,000 ( a CD is designed for safe storage of cash, not for wealth building).
Conversely, if you put that same $20k/yr into 11%/yr funds, it will be $4,400,000. Ie, the 'return' is the important part of your decision if your goal is wealth building.
quote:
I will probably buy a 20k car late 2011.
Ya, probably - most of us do or did, LOL. Late model cars are a key to the financial failure of lots of american families. Two late-model cars cost about $8000/yr for depreciation, & that's just for owning them. If you add gas/insurance and drive them, it's about $8000/yr more. That $16k/yr is a net cost, it requires about $20k of your gross. That $16k/yr is a constant cost for your entire driving lifetime - ie, it would be another $4M of wealth if you didn't spent it on cars. (Probably why many millionaires drive older cars?)
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Fri Dec 31, 2010 5:53 pm |
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Nick D.
First Time Poster
Cash: $ 0.20
Posts: 1
Joined: 31 Dec 2010
Location: ID
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| Re: need advice: 26, no debt, earning 3k/month... |
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"Any more advice you could give me? Am I on the right track? How much
should I allocate for all this stuff?"
Sounds like you are doing great! I agree with the other response to your post, the fact that you are even thinking about wealth management at age 26 is great!
I would recommend looking into a concept known as becoming your own bank. The whole premise behind the idea is to recapture the money you would normally give to someone else through debt, interest and taxes.
It is a seldom heard about system but one that provides some incredible wealth building potential. Seeing as how you are so young and have hundreds of thousands of dollars worth of purchases ahead of you it may make sense to give it a look.
My only other advise would be to learn from the examples of those who, in the last few years, have lost over half their retirement. more and more people are realizing that having your retirement funds in the market - at risk - may not be the best thing to to anymore.
Nick Drzayich
208-477-1330
http://www.becomingyourownbank.com
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Fri Dec 31, 2010 6:06 pm |
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coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
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| Re: need advice: 26, no debt, earning 3k/month... |
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quote:
Originally posted by Nick D.
My only other advise would be to learn from the examples of those who, in the last few years, have lost over half their retirement. more and more people are realizing that having your retirement funds in the market - at risk - may not be the best thing to to anymore.
I'm 60 and I have ALL my retirement funds in the market, and the NAV hit a new high in the third quarter of this year. My own experience highlights my three favorite maxims:
1) you don't lose real money if you don't sell
2) you can't gain the reward without experiencing the risk
3) the level of risk must be tailored to the time remaining before you need the money
I welcome Nick to the forum, but I respectfully disagree with his advice, at least with respect to the opening poster in this thread.
quote:
Originally posted by Nick D.
I would recommend looking into a concept known as becoming your own bank. The whole premise behind the idea is to recapture the money you would normally give to someone else through debt, interest and taxes.
And furthermore, you can do this on your own. There's no need to buy any particular financial product or to pay anyone for this. If you use the forum's search function to look for the posts by the other member in this thread - oldguy - he's spoken to this topic (if not always using the same terminology) many times on this board.
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Sat Jan 01, 2011 6:49 pm |
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oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
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quote:
There's no need to buy any particular financial product or to pay anyone for this. If you use the forum's search function to look for the posts by the other member in this thread - oldguy - he's spoken to this topic (if not always using the same terminology)
To add to coaster's comments - Nick D's website is that same Idaho Co that Dan & Josh were pitching a few posts earlier - it was called 'infinite banking'. Now it was 'be your own bank'. They are actually selling Whole Life Insurance and asking you to borrow against it. Probably not a good way to build wealth, LOL.
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Sat Jan 01, 2011 10:54 pm |
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coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
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Unless you're helping to build your insurance agent's wealth. 
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Sun Jan 02, 2011 4:47 am |
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cccfree
Full Member
Cash: $ 7.80
Posts: 51
Joined: 08 Mar 2011
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I agree that if you're 26 years old you definitely should be in something more aggressive than a CD.
Something more appropriate like a securities based mutual fund or something like a blue chip stock or buying some shares of Google.
BTW I'm not a financial advisor and you should probably seek professional advice for your financial situation.
Debt Settlement Scam | Credit Counselors
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Tue May 10, 2011 10:13 pm |
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