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saving at the beginning of your career.
Posted on 11/12/13 at 11:53 am
Posted on 11/12/13 at 11:53 am
Knowing well the power of compounding interest, I want to be able to start saving and investing as soon as I start my career post graduation. I'll probably be making in the 50-60k range in South LA while saving up to get married and build a starter home on land I already own. What kinds of investments and accounts will work in the short term for saving up for these expenses in the next 2 years and what types of investments are great for saving and building a nest egg in the long-term?
6
Posted on 11/12/13 at 12:10 pm to kingbob
quote:right now, literally none. Work on your credit and take out a loan for a house asap.
What kinds of investments and accounts will work in the short term for saving up for these expenses in the next 2 years and what types of investments are great for saving and building a nest egg in the long-term?
Posted on 11/12/13 at 12:59 pm to kingbob
quote:
What kinds of investments and accounts will work in the short term for saving up for these expenses in the next 2 years and what types of investments are great for saving and building a nest egg in the long-term?
Mutual funds with Vanguard is a great way to start. Obviously, you will want to make sure you take advantage of any 401k matching with your employer, but, really, 15% of your gross income should go towards retirement, ASAP. You can never get this time in the market back (and that is a more important factor than the percentage, right now.)
As a basic example - every $120 dollars saved in 2013 will be about $20k in 2053 (assuming a modest 6%). If you wait until 2033 - it will cost you about $500 to get that same $20k in 2053.
With more aggressive 12% return projection, that $120 dollars in 2013 will be over $100k in 2053.
Likewise, you'll need $1200 to $1300 invested in 2033, to get that same $100k (again, at 12%) in 2053.
So, even if it is $10 per month (then up it whenever you can) pay yourself first. Then you can laugh at the debt/wage slaves when you're 65 and chartering your own spaceship to the moon.
This post was edited on 11/12/13 at 1:05 pm
Posted on 11/12/13 at 1:27 pm to kingbob
quote:
types of investments
real estate....as a great man once said....
quote:
"It's the cash flow stupid"
You can also put in what your employer matches in a 401k and max out a roth ira. Plenty of good funds out there for you to choose from.
Posted on 11/12/13 at 4:05 pm to kingbob
You won't make much in 2 years off investing only a small amount.
If you had 1000 in the market at the beginning of this year, you'd have what, 1200ish now? And it's been a great year.
Not much when facing a house payment and kids
ETA at the beginning of your career.
Savings rate>>savings placement (unless you put everything in bonds of course)
If you had 1000 in the market at the beginning of this year, you'd have what, 1200ish now? And it's been a great year.
Not much when facing a house payment and kids
ETA at the beginning of your career.
Savings rate>>savings placement (unless you put everything in bonds of course)
This post was edited on 11/12/13 at 4:11 pm
Posted on 11/12/13 at 4:52 pm to jimbeam
I'm not sure if I understand exactly what you mean. Could you elaborate?
Posted on 11/12/13 at 6:20 pm to kingbob
You stated your goal is to buy a house.
With the short timeframe of your intended goal, you can not reasonably expect a significant return on your investment and you are exposing yourself to substantial market risk.
Being young, you should be a big emphasis on retirement funding due to the power of compound interest.
However, funding for your housing goals should not go into the market. Keep it liquid. You would be risking thousands on the chance to gain hundreds otherwise.
Do not put anything in the market for a goal that you don't expect needing in the next 3-5 years (as an absolute bare mininum).
Best summary I can give of his point as I understand it
With the short timeframe of your intended goal, you can not reasonably expect a significant return on your investment and you are exposing yourself to substantial market risk.
Being young, you should be a big emphasis on retirement funding due to the power of compound interest.
However, funding for your housing goals should not go into the market. Keep it liquid. You would be risking thousands on the chance to gain hundreds otherwise.
Do not put anything in the market for a goal that you don't expect needing in the next 3-5 years (as an absolute bare mininum).
Best summary I can give of his point as I understand it
This post was edited on 11/12/13 at 6:23 pm
Posted on 11/12/13 at 6:25 pm to Ace Midnight
quote:
With more aggressive 12% return projection, that $120 dollars in 2013 will be over $100k in 2053.
This math seems off by an order of magnitude.
Did you mean 1200 as opposed to 120?
Posted on 11/12/13 at 6:31 pm to Volvagia
One point is I'm not planning on building a house with resale in mind. I'm planning on building a house that I'm going to live in for at least a decade or longer, with possible future additions, but not selling and moving on. One thing that should help is already having the lot, dirt pad, electrical, and sewage plant paid for. I'll also be designing it myself in Revit and AutoCad and already have any and all surveys and elevations done. Depending on my work load, I may even get licensed as a GC and run the job myself, hiring my own subs to save more money. I'm also coming out of college with zero debt, but also no credit, so financing too much makes me nervous.
Posted on 11/12/13 at 6:32 pm to Volvagia
quote:
With more aggressive 12% return projection, that $120 dollars in 2013 will be over $100k in 2053.
This math seems off by an order of magnitude.
Did you mean 1200 as opposed to 120?
He has to be. Plus, 12% is just unthinkably generous.
Posted on 11/12/13 at 6:35 pm to kingbob
Get a cc now and start building some credit if you haven't already. Put everything you buy on it and pay it off in full every month. Request a limit bump every six months, rinse, repeat.
Posted on 11/12/13 at 6:39 pm to Chris Farley
I tried to convince my dad to let me do this, but he said no. The bank even offered a card that he could set the monthly limit on and he said no. 
Posted on 11/12/13 at 6:42 pm to kingbob
Somebody correct if I am wrong(not too hard )
but I have heard that if a 25 year old starts investing $100 a month in some sort of modest growth funds till they are 65 years old, they will be have around $1 million dollars accumalated.
) but I have heard that if a 25 year old starts investing $100 a month in some sort of modest growth funds till they are 65 years old, they will be have around $1 million dollars accumalated.
Posted on 11/12/13 at 6:55 pm to Reubaltaich
quote:
Somebody correct if I am wrong(not too hard )
but I have heard that if a 25 year old starts investing $100 a month in some sort of modest growth funds till they are 65 years old, they will be have around $1 million dollars accumalated.
That's if you average 12% growth per year......I wouldn't count on it. Plus how far will a million bucks go in 40 yrs?? Not near as far as you think.
Posted on 11/12/13 at 6:58 pm to kingbob
Hes talking about 120 a year for 40 years. Not 120 once.
Posted on 11/12/13 at 7:13 pm to Chris Farley
quote:
Get a cc now and start building some credit if you haven't already. Put everything you buy on it and pay it off in full every month. Request a limit bump every six months, rinse, repeat.
I agree. Building a solid credit rating is very important for lots of reasons, one of them being that you'll more easily qualify for a low mortgage note. And you can't build a credit history if you have no credit to start with.
I also agree with the other sentiment that right now you should focus on socking away as much as humanly possible in tax-advantaged accounts. It doesn't matter much what you invest in when you don't have much capital.
I often tell people they should either 1) Get a market index fund (or target fund) and reinvest dividends, or 2) Make a series of high-risk investments and plow everything into them. Better yet, day trade them. I'm quite serious about #2, right now you don't have much to risk and you'll learn that beating the market actually is not easy no matter how long a lucky streak you get. It's better to learn this now than when you're retired and bored.
Posted on 11/12/13 at 7:27 pm to foshizzle
quote:
I'm quite serious about #2, right now you don't have much to risk and you'll learn that beating the market actually is not easy no matter how long a lucky streak you get. It's better to learn this now than when you're retired and bored.
but I already know that
I'm just trying to find good ways to get solid interest rates on investments with relatively little risk. I know that the sooner I start investing the more my investments will be worth later in life. I'm not looking to spend money on things (except a house since I kinda want to settle down in the next couple years), I want to start working towards my goal of having my money make money and build real wealth. I have regretted not having had any capital to invest for the past couple years while I've been in school.
Posted on 11/12/13 at 7:32 pm to dlmast87
quote:
That's if you average 12% growth per year......I wouldn't count on it. Plus how far will a million bucks go in 40 yrs?? Not near as far as you think.
Yeah, that is a high target rate of growth year after year. Told ya
But still, a million bucks to have in ones nest egg when they retire is nothing to sneeze at.
Posted on 11/12/13 at 8:51 pm to Reubaltaich
Some good stuff so far in this thread. A couple of things I'd add:
-Whoever mentioned about not investing anything you want to use in the next 2-3 years is spot-on. The market is at record highs, and it won't stay that way for long. Even if it continues, like someone mentioned, 2 years even at an incredible 20-30% return isn't going to change your life as far as what you're saving, but if you lose that much it could seriously derail your plans. Whatever you're planning on using to buy/build this house, keep it liquid.
-Having said that, you still want to contribute to a long-term investment/retirement portfolio as soon as you can due to the compound interest benefits mentioned already. This is more important at this age (IMO) than getting a starter home as fast as you can.
-It's smart to start investing young, but you don't need to turn into a 40 year-old overnight with a mortgage and all your money in investments. There's nothing wrong with getting an apartment, meeting people, having some fun, and only putting a little towards your retirement for the first couple of years.
-Whoever mentioned about not investing anything you want to use in the next 2-3 years is spot-on. The market is at record highs, and it won't stay that way for long. Even if it continues, like someone mentioned, 2 years even at an incredible 20-30% return isn't going to change your life as far as what you're saving, but if you lose that much it could seriously derail your plans. Whatever you're planning on using to buy/build this house, keep it liquid.
-Having said that, you still want to contribute to a long-term investment/retirement portfolio as soon as you can due to the compound interest benefits mentioned already. This is more important at this age (IMO) than getting a starter home as fast as you can.
-It's smart to start investing young, but you don't need to turn into a 40 year-old overnight with a mortgage and all your money in investments. There's nothing wrong with getting an apartment, meeting people, having some fun, and only putting a little towards your retirement for the first couple of years.
Posted on 11/12/13 at 9:13 pm to kingbob
So what I can tell you is,
Invest towards retirement
Make a lot(or put yourself in a position to)
Don't spend a lot
That's about all you (and me too) can do for now
Invest towards retirement
Make a lot(or put yourself in a position to)
Don't spend a lot
That's about all you (and me too) can do for now
This post was edited on 11/12/13 at 9:13 pm
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