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Started By
Message
Am I ready to start investing?
Posted on 2/20/21 at 12:01 pm
Posted on 2/20/21 at 12:01 pm
A couple years back I came to this board for advice on how to get started investing. While it didn't go horribly wrong, the general advice I was given was that I was not ready. I had credit card debt, a tiny bit of savings and no emergency fund. I was also not participating in the company's 401K program. Fast forward a couple years and here is where I currently sit financially..
Cash on hand : 10K with 1400 set aside for emergencies (EF continues to grow at 80 dollars a week)
401K: $12,325
Roth: $3,415 with 1070 cash available
Acorn App: $1820
Life Insurance: 20K policy through work and in the process of purchasing a 200k policy
HSA: currently contributing $50 a week
I owe approximately 23K in student loan debt but have taken full advantage of the zero interest Covid period and Im on pace to be under 20K before the end of the year. Other than that, I have zero debt. My credit cards are paid off and I have no car payment.
My income is a combination of an hourly wage plus tips. Conservatively, that breaks down to ~900+ a week in cash and ~ 350 a week in hourly wages.
Expenses: $1,565 + ~ $400 for food, gas and misc stuff.
Apologies for the long post. I wanted to give the clearest picture possible of my finances to get the best advice in return.
Cash on hand : 10K with 1400 set aside for emergencies (EF continues to grow at 80 dollars a week)
401K: $12,325
Roth: $3,415 with 1070 cash available
Acorn App: $1820
Life Insurance: 20K policy through work and in the process of purchasing a 200k policy
HSA: currently contributing $50 a week
I owe approximately 23K in student loan debt but have taken full advantage of the zero interest Covid period and Im on pace to be under 20K before the end of the year. Other than that, I have zero debt. My credit cards are paid off and I have no car payment.
My income is a combination of an hourly wage plus tips. Conservatively, that breaks down to ~900+ a week in cash and ~ 350 a week in hourly wages.
Expenses: $1,565 + ~ $400 for food, gas and misc stuff.
Apologies for the long post. I wanted to give the clearest picture possible of my finances to get the best advice in return.
This post was edited on 2/20/21 at 12:03 pm
14
Posted on 2/20/21 at 12:07 pm to Blizzard of Chizz
Are you investing for income or retirement? Because the first thing I would do to “invest” would be work towards increasing the Roth contributions. Or the HSA. Your goal should be to max those out first.
Posted on 2/20/21 at 12:23 pm to Blizzard of Chizz
Does your 401k have employer match?... if so, put in at least enough to take advantage.
Posted on 2/20/21 at 12:31 pm to Blizzard of Chizz
First steps should be contributing enough to max roth each year and contribute at least enough to meet all employer match for 401k
Posted on 2/20/21 at 12:32 pm to Blizzard of Chizz
You’ve done a really good job of righting your ship. Congrats. 
You’re already investing. Just keep doing what you’ve been doing, just more of it. As others have said, *fully* take advantage of any employer matches (401k and HSA), then hit your Roth and/or Traditional IRA.
Only other advice I can think of is to learn the difference between investing and trading. Don’t get into (short term) trading yet. Learn, study and set goals before you even think about doing that. For now, stick with whatever low expense ratio ETFs and mutual funds that are available to you in those various accounts.
Good questions. Make a plan and work the plan. You’re doing well.
You’re already investing. Just keep doing what you’ve been doing, just more of it. As others have said, *fully* take advantage of any employer matches (401k and HSA), then hit your Roth and/or Traditional IRA.
Only other advice I can think of is to learn the difference between investing and trading. Don’t get into (short term) trading yet. Learn, study and set goals before you even think about doing that. For now, stick with whatever low expense ratio ETFs and mutual funds that are available to you in those various accounts.
Good questions. Make a plan and work the plan. You’re doing well.
Posted on 2/20/21 at 12:35 pm to Blizzard of Chizz
First, congrats on getting out of credit card debt! That’s awesome dude. You’ve absolutely righted the ship here in a number of ways. You should be incredibly proud, most people can’t do that
I would recommend you keep 6 months of expenses in your emergency fund BEFORE investing. You already have close to that. Then anything above that should either go to your student debt or investing. What interest rate is your student debt at?
I would recommend you keep 6 months of expenses in your emergency fund BEFORE investing. You already have close to that. Then anything above that should either go to your student debt or investing. What interest rate is your student debt at?
Posted on 2/20/21 at 12:39 pm to Blizzard of Chizz
quote:No need to apologize. The more you post the more tailored the advice you can get here.
Apologies for the long post. I
Congratulations on taking all those steps.
Posted on 2/20/21 at 12:39 pm to Blizzard of Chizz
Good for you on getting going on this.
Can I ask what your job is? That cash/wage looks like server/bartender work but haven’t ever seen a 401k come with those jobs.
I will say the best day of my financial life was when I went debt free (minus mortgage). I am hard pressed though to say pay off the student loans with the insane people in DC talking about forgiveness.
I would build the emergency fund. At least 6 months worth. Your cash on hand is certainly available for that but pushing it to the side will give you a new starting point to build.
Can I ask what your job is? That cash/wage looks like server/bartender work but haven’t ever seen a 401k come with those jobs.
I will say the best day of my financial life was when I went debt free (minus mortgage). I am hard pressed though to say pay off the student loans with the insane people in DC talking about forgiveness.
I would build the emergency fund. At least 6 months worth. Your cash on hand is certainly available for that but pushing it to the side will give you a new starting point to build.
Posted on 2/20/21 at 12:39 pm to Blizzard of Chizz
This might be overly cautious for some on this board but it's a good baseline imo. Generally a lot of work to be done before opening a taxable account. Each person would feel different I'm sure. I have this printed and laminated near my desk..but I'm a nerd. LINK
quote:
Funding priority:
Here is a general account funding priority that often works well for many people (not all points will apply to everyone):
1-Establish an emergency fund to your satisfaction. If you have many other high financial priorities (like paying off high-interest debt), start with a smaller emergency fund, and grow it later over time, as those other priorities are satisfied.
2-Contribute to a work-based plan (eg. 401(k) or 403b) enough to get the full employer match (the match is like free money, your best possible investment).
3-Pay off high-interest debt (a guaranteed high return, the next best thing to free money).
4-Contribute to a Health Savings Account (HSA) if available (unlike many other tax deductions, there are no income restrictions to contribute to an HSA).[1][note 1]
5-Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique[note 2]), depending on eligibility and personal circumstances.
6-Contribute the remainder of the maximum employee contribution to the work-based plan, including an After-tax 401(k) (Mega Backdoor Roth), if available.
7-Pay off medium-interest debt (eg. student loans, car loans, personal loans), especially if the interest is not tax-deductible.
8-Invest inside a taxable investing account. In certain circumstances, a Non-deductible traditional IRA and/or variable annuity may be better than a taxable account.
9-Pay off low-interest debt (eg. most mortgages, some car loans).
10-Invest in low-return assets (eg. money markets, Certificates of Deposit (CDs)).
This post was edited on 2/20/21 at 12:40 pm
Posted on 2/20/21 at 1:10 pm to Blizzard of Chizz
This is impressive. If you went from major CC debt to this it took a real disciplined lifestyle change. I have no doubt you are ready for investing. Congrats.
Posted on 2/20/21 at 1:38 pm to Blizzard of Chizz
Get out of Accorns. It has served its purpose to get you started investing but the fees are high and they charge to transfer. Sell and pay taxes now while income isnt excessively high and before it investment grows. Put that money into your Roth where you'll never pay another cent of taxes.
Posted on 2/20/21 at 2:25 pm to Blizzard of Chizz
I don't have any specific advice but congratulations on being more financially secure / responsible than a very large number of people.
Keep up the great work.
Keep up the great work.
Posted on 2/20/21 at 9:10 pm to Blizzard of Chizz
Nice work. You are already investing. Keep it up and max out what you can it in - it will grow without you even looking.
Posted on 2/21/21 at 10:22 pm to Blizzard of Chizz
Don’t sleep on the HSA account. HSA is an awesome vehicle for saving. Max it out and take care of yourself. Every young person should be using this.
War Eagle!
War Eagle!
Posted on 2/22/21 at 9:21 am to Blizzard of Chizz
quote:
A couple years back I came to this board for advice on how to get started investing. While it didn't go horribly wrong, the general advice I was given was that I was not ready. I had credit card debt, a tiny bit of savings and no emergency fund. I was also not participating in the company's 401K program. Fast forward a couple years and here is where I currently sit financially..
Cash on hand : 10K with 1400 set aside for emergencies (EF continues to grow at 80 dollars a week)
401K: $12,325
Roth: $3,415 with 1070 cash available
Acorn App: $1820
Life Insurance: 20K policy through work and in the process of purchasing a 200k policy
HSA: currently contributing $50 a week
I owe approximately 23K in student loan debt but have taken full advantage of the zero interest Covid period and Im on pace to be under 20K before the end of the year. Other than that, I have zero debt. My credit cards are paid off and I have no car payment.
My income is a combination of an hourly wage plus tips. Conservatively, that breaks down to ~900+ a week in cash and ~ 350 a week in hourly wages.
Expenses: $1,565 + ~ $400 for food, gas and misc stuff.
At this point you are probably more qualified to give money advice than 95% of people on this planet.
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