Saving $$ at a young age? Advice needed

[josh220]

Since I have purchased my 4Runner last August, I have continued to save my money. I now have in the mid $9,000 range, and am curious if there are any good plans I can look into, to be more financially stable down the line as I get older. It's just sitting in my saving account, and I feel that I will regret not investing it in a more productive manor. Any thoughts?

 

[Jeff Kleb]

Invest in an aggressive growth type of fund now, and gradually make your mix more conservative as you get older. I know that Prudential and Vanguard both offer (as do other investment companies) funds that "change" for you as you age. USAA also has several "First Start" programs set up for younger investors. {My son is nine years old and already has enough money for the first year or two of his eventual college education.}

I have both a "Retirement 2020" and "Retirement 2030" type of fund in my 401(k) and Roth IRA plans. Since I will be 55 and 65, respectively, in those years, my investments are geared to generate the largest return now and then change to 'preservation' strategy with lower risk as I near retirement age.

Socialist Security will not be there, and anyone 45 or younger is going to be losing out - big time - in that department. Just look at the politicians who think Socialist Security will always be solvent.....and you will notice none of them are under 60. Of course, the people that age have already "gotten theirs" and their beloved Ponzi Scheme will go belly-up after they've been taking a dirt nap.


Get a job with a 401(k) and company matching to the highest extent possible. MAX IT OUT as best you can, since dollar-cost averaging and sheer time will be your best ally in wealth accumulation. Even five or ten bucks a week to a young person will pay mucho dinero for your future. Heck, I only wish I knew "then" what I know now.

Right now, my company 'matches' 50% of my contribution - up to 8 percent of my gross income. Of course, I elect to contribute eight percent (which is like getting another 4% totally free). For instance, I set aside 8 percent and if I made $1000 in a week, that would be eighty bucks. The company then 'matches' another forty bucks (which is half of my eight percent contribution). Since it "comes out" of my check before I get it, I won't spend it. The amount I contribute - as well as matches, interest and gains - is tax-deferred until retirement. (It is pretty much a no-brainer, especially with overall taxation continuing to rise over the long term.)

Good luck you & kudos to you for your insight into financial stuff.
:biggrin2:


"The only way to get rich quick is through forty years of prudent investing." -- Unknown

 

[Even Steven]

Continue to save that money towards a down payment on a house. Jeff gave you good advice with maxing out a 401K and starting an IRA, but at your age I'd also start building that down payment for a house.

If your down payment is at least 20% of the purchase price (of a house), then you'll significantly lower your mortgage payment and avoid paying PMI, saving you even more money over the life of your mortgage. I managed to save enough money to put a big chunk of it towards a mortgage on my first house about 13 years ago. Today, my house is worth more than three time what I paid, even with the housing market in the toilet and the falling real estate prices. Right now is a perfect time to buy a house because interest rates are very low and real estate prices are dropping like a rock.

Anyway, defnitely think about investing toward your retirement because you are NEVER to young to do that. The younger you start, the more you'll have later in life. But for now, start thinking about a house because if you are like most of us, nothing in your life will build your wealth like owning your own home.

 

[Jeff Kleb]

If you are like most of us, nothing in your life will build your wealth like owning your own home.

Yes, mostly true; but not with some of the "sham" mortgages going around out there. Lots of gullible folks got burned by 'interest only' loans, thinking that they could live in a 600k house for only $1000 per month and then "flip it" two years later and get an even better house.


I'm glad to have a fixed-rate mortgage on a house that I can honestly afford without having to live on canned spaghetti and Ramen noodles.
:awais:

 

[Even Steven]

Yes, mostly true; but not with some of the "sham" mortgages going around out there. Lots of gullible folks got burned by 'interest only' loans, thinking that they could live in a 600k house for only $1000 per month and then "flip it" two years later and get an even better house.


I'm glad to have a fixed-rate mortgage on a house that I can honestly afford without having to live on canned spaghetti and Ramen noodles.
:awais:

Yes, but that's one of the reasons that I suggested he save until he has a 20% down payment. And with interest rates this low, there's really no reason anyone should get an adjustible rate mortgage.

We are definitely entering into a buyers' market in my area (NY), but I'm sure that is true just about everywhere else too.

 

[magnumfan]

keep you eye on the ball

Good on you Josh, thats great.

my only advise is that what ever you choose to do, dont take your eye off of your investment. ultimately - its you who is responsible for your investments. not anyone you hire or pay fee's too.

I did that a few years ago, I put a lot of money into a UBS Payne Webber managed fund (they charged me about $500 a month to manage it) and they crashed it over the course of a year.

I got back about 10% of what I initially put in

what amazed me, is they contacted me and dropped me as a client, saying I had fallen below their threshold of invested collateral, the account needed some $250k in it to be a managed account.

the joy of working overseas and being so busiy i didnt pay attention to my investments

Its probably going to cost me for the rest of my life...

 

[josh220]

Well right now I am planning on adding to an account I have set up in my name already. If I invest $10,000 at age 20 and it earns 8% (attainable with stocks and bonds) it will be worth $750,000 when I am 65 (beauty of compound interest) - without adding another dime, and more if I add to it as I mature. I will probably pull it out before 65, so I will add to the account fairly vigorously as I grow older.

I'll also look into Roth IRA's, thanks for the advice guys.

 

[CJ3Flyr]

For the next 18 months there are some really good real-estate deals to be had. The challenge is, as mentioned, getting the right mortgage with a fixed rate. If all goes well real-estate will be well on it's way to recovery within 24months, if not so well it may be 7 years.

I know you are young but if you feel stable enough in terms geographic location purchasing a house might be a good deal. If you're going to stay put for at least 4-5 years you'd do well appreciation wise, have tax deductions and chicks dig houses.

Just my 2cents
:cheers:

 

[magnumfan]

yeah, Ive had some chicks that were really good HOUSEKEEPERS

For the next 18 months there are some really good real-estate deals to be had. The challenge is, as mentioned, getting the right mortgage with a fixed rate. If all goes well real-estate will be well on it's way to recovery within 24months, if not so well it may be 7 years.

I know you are young but if you feel stable enough in terms geographic location purchasing a house might be a good deal. If you're going to stay put for at least 4-5 years you'd do well appreciation wise, have tax deductions and chicks dig houses.

Just my 2cents
:cheers:

When you leave them, they keep the F....ing house!!