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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 12:44 pm to HailToTheChiz
I backed off my Roth contributions significantly while getting everything in order. My employer also offers a match which I have been able to take advantage of. With that being said I'm ready to start moving the money I was paying out each month in credit cards into my Roth account.
Posted on 2/20/21 at 12:46 pm to flyAU
quote:
I am hard pressed though to say pay off the student loans with the insane people in DC talking about forgiveness.
Depends on his interest rates. I’d say high rates he should focus on paying it off. He won’t pay it off before loan forgiveness happens if it’s going to happen IMO. Though the line seems to be $10k forgiveness
Posted on 2/20/21 at 12:48 pm to Blizzard of Chizz
You're killing it
Posted on 2/20/21 at 12:56 pm to HailToTheChiz
The Chizz’s have converged.
Tbh if you want to slowly build without having to think about it, acorns is a great tool. Set recurring deposits that you can budget in. I have it pull money daily to deposit. I am up 42%. It’s my side account that I don’t even think about. Started at 1k. Am at 25k now Whatever you think you can manage will help you to invest without worrying.
Tbh if you want to slowly build without having to think about it, acorns is a great tool. Set recurring deposits that you can budget in. I have it pull money daily to deposit. I am up 42%. It’s my side account that I don’t even think about. Started at 1k. Am at 25k now Whatever you think you can manage will help you to invest without worrying.
Posted on 2/20/21 at 1:03 pm to flyAU
quote:
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.
When I originally came to the board for advice I was working as a server. One of my problems with contributing to the work 401k was the taxes. At a dismal hourly rate I was worried that I was going to get killed by the tax man. Eventually I said screw it and went with it. After some tweaking with it and making a decision to pay federal and state taxes through quarterly estimates I came out alright last tax season.
Covid hitting was a game changer. I essentially carved out my own opportunity with ToGo business. My minimum pay rate went from 2.13 an hour to 7.25 and tips also increased because I built a solid base of regulars. The increased pay rate plus 6 or 7 hours of overtime each week gives me enough pay check to cover taxes, insurance and decent 401k contribution. I know that if I can keep up my current pace, I can be in a really strong position in another year.
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 1:12 pm to Blizzard of Chizz
quote:
My minimum pay rate went from 2.13 an hour to 7.25
This is what had me stumped. When I was serving the paycheck was an afterthought. You making 300 a week at $2.13 would mean you never slept ha.
Good for you on the initiative. Do you live in a high cost of living town? I will still say utilize that acorns account. $2 a day that you already factor into your budget will help you grow. I am up to $30 a day and make sure you put your stance in aggressive.
Posted on 2/20/21 at 1:28 pm to flyAU
quote:
You making 300 a week at $2.13 would mean you never slept ha.
No doubt.
Trust me I would not be where I’m at at 2.13. Last week I managed to hit 60 hours in 1 week because of Valentine’s Day. It’s taken me a while but I’ve learned to be very disciplined with money. I’ve found that the more places I find to put money the less likely I am to do something stupid with it... I’ve lurked this board for a long time and love reading about the investment successes. Eventually I want to be in that position but I’ve got a lot to learn first. Oh and not really. I live in Shelby county so it’s not that bad.
This post was edited on 2/20/21 at 1:29 pm
Posted on 2/20/21 at 1:33 pm to Blizzard of Chizz
Tip of the hat to you and your achievements towards your financial stability/security goals. It’s not easy, but with short term milestones and discipline, can be achieved easier than many people think. How old are you?
This post was edited on 2/20/21 at 1:35 pm
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 2:07 pm to TorchtheFlyingTiger
That kind of leads me to another question. Currently I transfer 100 dollars a month into my Roth automatically but I’ve just let it sit there. In the event I bump that up significantly, is there a recommended cash on hand balance I should achieve first before actively investing? In other words, should I max it out this year and begin from a position of strength or start small and build my portfolio that way?
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