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24 years old going on 25 with no kids, and I am a newbie to investing!
Old 12-14-2010, 10:56 AM   #1
Confused about dryer sheets
 
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24 years old going on 25 with no kids, and I am a newbie to investing!

Hi,


I'm currently a part-time college student starting from scratch again in terms of school because my associate's degree from a junior career college was merely nationally accredited and almost a complete waste of 30 grand. It had me start at a slightly higher pay than others who worked the same dead-end, $9-11/hr (I started at $11) job position out of college, that's it. I merely started my current degree program this past May and will gradually make my way to full-time status next year and have about 4 or 5 years left to complete both my associate's and bachelor's degrees. The total tuitions of both degrees combined look to be about 35K or so. I plan on a master's degree next in IT, possibly in management.

I am currently working fulltime at about 34K a year as a program assistant in the Washington D.C. area! Yes, low-ish pay and pricey area for a very hectic and demanding job. I just moved back in with my parents and other family members again, unfortunately, because my past and current job salaries could not accomodate the living expenses and savings without a roommate. I have had associates who had terrible experiences with finding roommates that they do not know at first and all my current friends already have their own places.

My debt in student loans is just beginning as I started just this past May as a part-time student.

In terms of assets, I currently have about:
*45K in the Money Market account
*20K in a bond with merely $50 a month return in interest (dropped from $200 bucks a month, then $160 a month and continually to this $50 because of the economy).
*I have a friend who currently owes me close to 11K (jobless for almost 8 months and extremely low-paying job that is part-time).
So total = 76K in net worth.

I was thinking long and hard about quitting my current job to go for a part-time job with inevitably just above minimum wage so that I could go to school full-time, but I am too worried to do that now. I am thinking about working for at least another year either at my current job or another one that pays at least the same while going to school full-time.

I plan to never have any kids and other dependents (hopefully, no more friends that depend on me).

I am a complete newbie to investments and don't even know where to start learning how, what, and when to invest! Your enlightenment would be greatly appreciated!
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Old 12-14-2010, 11:00 AM   #2
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First, welcome! Glad to have you.
Offhand, I'd not include that $11k in outstanding loan among your assets because it may not come to pass that you get paid back.
Then, I'd try very hard to find a job that will pay for your college, thus avoiding the student loan debts.
Next I'd look for a mutual fund to put that bond money into (unless you have it earmarked for a specific purpose that is short-term in nature) so you can let it grow for your retirement.
Also, while you are living with family, you should be able to save substantially, both for retirement and for future goals like a home because of the reduction in cost of living.
Good luck!
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Old 12-14-2010, 11:13 AM   #3
Confused about dryer sheets
 
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Originally Posted by Sarah in SC View Post
First, welcome! Glad to have you.
Offhand, I'd not include that $11k in outstanding loan among your assets because it may not come to pass that you get paid back.
Then, I'd try very hard to find a job that will pay for your college, thus avoiding the student loan debts.
Next I'd look for a mutual fund to put that bond money into (unless you have it earmarked for a specific purpose that is short-term in nature) so you can let it grow for your retirement.
Also, while you are living with family, you should be able to save substantially, both for retirement and for future goals like a home because of the reduction in cost of living.
Good luck!

Thanks for welcoming me! I know in the title I said 45 as the retirement age, and this may be pessimistic, but I don't feel like I'd retire by then- it may be more like 55. I changed that part of the title to something else. I think that if I aim for a younger age though, the better/harder that I'd work to grow and save money just to be safe than sorry. I have spent money recklessly for long periods of time before and you're prob right about that 11K even though that close and good friend has promised me convincingly that he'd pay me back wether through financial aid for his education or another job. That debt he owes me is growing continually though as we hang out together because he blows his little money off trying to support himself with fast food (he lives with his folks as well) when we're not together.

I have to research about mutual fund! I am shady about that.
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Old 12-14-2010, 01:28 PM   #4
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my two cents - cease lending money to your buddy, save as close to 100% of your income as possible (that is, don't save 30% and tell yourself that's enough since it seems like a lot, if you can find a way to save 60%), keep making as much as you can for now but invest consistent time and effort to build new acquaintences. Improving your career is more about who-you-know than you think. You may find a situation where you can have a great career despite not having a 4+ year degree, or you might find a situation where your new employer says "hey we like you but it would be better if you had a degree - how about if we pay half?" You never really know where you are going in life, you only know where you are going next, and a good next step is to broaden your friendships knowing that they sometimes lead to money
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Old 12-14-2010, 03:37 PM   #5
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i also believe you will most likely never see the money from your friend. i would write it off now and decide if you want to squeeze a few pennies out of him or preserve the friendship.

things i don't understand:
* why aren't you paying cash for college? you live with your parents, you have a significant amount of cash in a MM and you make decent money.
*why a master's degree? more specifically, why management? just b/c you have a piece of paper that says "management" doesn't entitle you to a "...low-ish pay...for a very hectic and demanding job." it does take time to work your way up in salary.
*why are you bound to the DC area?

There are many paths to retirement and you are most likely on one. It just seems you have a lot to learn not only about finances, but life in general. I know I am still learning every day.

good luck. and read the boglehead's book for investing advice. read both of them in fact.

and welcome.
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Old 12-14-2010, 03:49 PM   #6
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The #1 factor to retiring early is savings rate. Meaning if you make $X and save 20%, that is better than making $Y and saving only 10%.

If you save 20% of your gross pay, that leads to an average retirement. Meaning average age of retiring for your generation might be 65, so you reach that age with enough to retire with an average standard of living.

If you want to retire earlier than AVERAGE, you need to increase savings rate. Like 25%, 30%, 50% type thinking...

here is some food for thought...

if you save 10%, it means you spend 90%, and every 9 years you are saving 1 year of expenses (10x9=90). So 90% is what you spend, and it takes 9 years to save 1 year of that spending level...

If you save 15%, it means you spend 85%, and every 5-6 years you are saving 1 year of expenses (6x15=90). So 85% is your spending level, and it takes just short of 6 years to save that spending level.

if you save 20%, it means you spend 80%, and every 4 years you are saving 1 year of expenses (20x4=80). So 80% is spending level and every 4 years, 1 year of expenses is set aside.

if you save 25%, it means you spend 75%, and every 3 years you are saving 1 year of expenses (25x3=75).

if you save 33%, it means you spend 66%, and every 2 years you are saving 1 year of expenses (33x2=66).

if you save 70%, it means you spend 30%, and every 1 years you are saving 2 years of expenses (70x.5=35).

Focus on savings rate- it is the single biggest variable you have control over.

The tips and risks you get for investing will change returns by maybe 2% per year.

Meaning I could suggest an allocation of 90% stocks and 10% bonds and think that portfolio will give you an "average" return of 10%, and someone else could suggest that is not right, and tell you 60%-40% is better, and that is probably a 7.2% "average" return.

The difference in that advice is the 10% return doubles every 7.2 years, where as the 7.2% return doubles every 10 years. This effect will be minimal for the same savings rate- the savings rate will control your success more than the investment strategy.
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Old 12-15-2010, 08:14 AM   #7
Confused about dryer sheets
 
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Quote:
Originally Posted by johnoh View Post
my two cents - cease lending money to your buddy, save as close to 100% of your income as possible (that is, don't save 30% and tell yourself that's enough since it seems like a lot, if you can find a way to save 60%), keep making as much as you can for now but invest consistent time and effort to build new acquaintences. Improving your career is more about who-you-know than you think. You may find a situation where you can have a great career despite not having a 4+ year degree, or you might find a situation where your new employer says "hey we like you but it would be better if you had a degree - how about if we pay half?" You never really know where you are going in life, you only know where you are going next, and a good next step is to broaden your friendships knowing that they sometimes lead to money
At the lowest on average, I'm saving 55%, but on average-average, it's closer to 70%. If I kick off the money-gobbling friend to survive on his own with his folks, it'd be like 77.5%-85%. If I eliminate my own bad habits (i.e. the little purchases of food and drink on an almost daily basis), I'd prob average 90%.

Quote:
Originally Posted by ronocnikral View Post
i also believe you will most likely never see the money from your friend. i would write it off now and decide if you want to squeeze a few pennies out of him or preserve the friendship.

things i don't understand:
* why aren't you paying cash for college? you live with your parents, you have a significant amount of cash in a MM and you make decent money.
*why a master's degree? more specifically, why management? just b/c you have a piece of paper that says "management" doesn't entitle you to a "...low-ish pay...for a very hectic and demanding job." it does take time to work your way up in salary.
*why are you bound to the DC area?

There are many paths to retirement and you are most likely on one. It just seems you have a lot to learn not only about finances, but life in general. I know I am still learning every day.

good luck. and read the boglehead's book for investing advice. read both of them in fact.

and welcome.
I'd like to preserve the friendship and squeeze my money back out and keep it out! But, I understand where you are coming from and everyone else that I've come across about this says the same thing about loaning money to even your closest friends and family and with "Don't loan it if you expect it back." This has got to be the last time I'm doing anything like this anymore with anyone else.

*I've already paid cash for college the first semester. This second semester I applied to see if I could get any grants and I got a huge excess of only student loans instead. I accepted it because I was unsure of the future; if I would need my savings and a part-time job being on my own then to pay for living expenses and college right after it ended before the interest rates hit.

*It's so common to have a bachelor's degree. A lot of jobs are asking for a master's degree now. Yes, I understand it takes experience to reach a higher income level, but a master's degree would give me a worthy increase in chances of having it sooner and/or higher. Possibly management, meaning I need to do more research first.

*I'm going to school here now that I value. I have done the research for the college of the associate's and the four-year college with the bachelor's program to transfer it to. People I know are here. I have a job here and a prospective job here. I know my way around here. If one or two of these reasons did not exist, I would go elsewhere, but all of them together are too much for me to start from scratch all over again in every aspect of my life under my current circumstances.

Thanks so much for recommending the books. I actually caught sight of it along with references to it as I was browsing the forum. I have to check it out!

Quote:
Originally Posted by jIMOh View Post
The #1 factor to retiring early is savings rate. Meaning if you make $X and save 20%, that is better than making $Y and saving only 10%.

If you save 20% of your gross pay, that leads to an average retirement. Meaning average age of retiring for your generation might be 65, so you reach that age with enough to retire with an average standard of living.

If you want to retire earlier than AVERAGE, you need to increase savings rate. Like 25%, 30%, 50% type thinking...

here is some food for thought...

if you save 10%, it means you spend 90%, and every 9 years you are saving 1 year of expenses (10x9=90). So 90% is what you spend, and it takes 9 years to save 1 year of that spending level...

If you save 15%, it means you spend 85%, and every 5-6 years you are saving 1 year of expenses (6x15=90). So 85% is your spending level, and it takes just short of 6 years to save that spending level.

if you save 20%, it means you spend 80%, and every 4 years you are saving 1 year of expenses (20x4=80). So 80% is spending level and every 4 years, 1 year of expenses is set aside.

if you save 25%, it means you spend 75%, and every 3 years you are saving 1 year of expenses (25x3=75).

if you save 33%, it means you spend 66%, and every 2 years you are saving 1 year of expenses (33x2=66).

if you save 70%, it means you spend 30%, and every 1 years you are saving 2 years of expenses (70x.5=35).

Focus on savings rate- it is the single biggest variable you have control over.

The tips and risks you get for investing will change returns by maybe 2% per year.

Meaning I could suggest an allocation of 90% stocks and 10% bonds and think that portfolio will give you an "average" return of 10%, and someone else could suggest that is not right, and tell you 60%-40% is better, and that is probably a 7.2% "average" return.

The difference in that advice is the 10% return doubles every 7.2 years, where as the 7.2% return doubles every 10 years. This effect will be minimal for the same savings rate- the savings rate will control your success more than the investment strategy.
Thanks very much for your insight. I very much appreciate it. Read it top to bottom multiple times. :>)
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Old 12-15-2010, 09:24 AM   #8
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Originally Posted by GhostPepper View Post

**snip**

*It's so common to have a bachelor's degree. A lot of jobs are asking for a master's degree now. Yes, I understand it takes experience to reach a higher income level, but a master's degree would give me a worthy increase in chances of having it sooner and/or higher. Possibly management, meaning I need to do more research first.

**snip**
What fields are you looking at? I work for a company which has 400k+ employees. I am linked to about 200 people on linked in (which shows professional and educational background). Only a handful of people have masters degrees, and not everyone even has a BS, and we work in a relatively technical field.

The keys to professional success are

1) Be good at what you do
2) remember #1- get better at what you do
3) become the best at what you do
4) when doing #1-#3 don't piss anyone off
5) make friends along the way and don't be afraid to ask for help
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Old 12-16-2010, 04:59 PM   #9
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You have already made on good decision in being able to retire early - you are childfree.

I credit this life choice at age 20 to my being able to retire 2 years ago at the age of 45 although I did not realize it when I was 20. I always paid my credit cards in full to avoid costly debt. I paid off my student loans before I took on a home mortgage and always for cars in cash and kept them for many years. I became debt-free at age 35. My savings rate was pretty high but really zoomed once I became debt-free.

No kids, no debts, that was my key to ER.
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Old 12-18-2010, 02:46 AM   #10
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You loaned your friend $11,000? Four months worth of your salary? I'm sorry, but you do not have that kind of money to lend. You live at home to save money, are going to school, taking out student loans, etc... And, the debt he owes you is growing continually?? Please, look out for yourself and be a better steward of your money and your future.
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Old 12-21-2010, 11:25 AM   #11
Confused about dryer sheets
 
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Originally Posted by jIMOh View Post
What fields are you looking at? I work for a company which has 400k+ employees. I am linked to about 200 people on linked in (which shows professional and educational background). Only a handful of people have masters degrees, and not everyone even has a BS, and we work in a relatively technical field.

The keys to professional success are

1) Be good at what you do
2) remember #1- get better at what you do
3) become the best at what you do
4) when doing #1-#3 don't piss anyone off
5) make friends along the way and don't be afraid to ask for help
It Security is the concentration I'm looking at for my bachelor's in IT. Well, if only a handful have a master's degree, in terms of education, that's a whole lot less competition to worry about. Yeah, there are other major keys to being successful. Thanks for the advice.

Quote:
Originally Posted by scrabbler1 View Post
You have already made on good decision in being able to retire early - you are childfree.

I credit this life choice at age 20 to my being able to retire 2 years ago at the age of 45 although I did not realize it when I was 20. I always paid my credit cards in full to avoid costly debt. I paid off my student loans before I took on a home mortgage and always for cars in cash and kept them for many years. I became debt-free at age 35. My savings rate was pretty high but really zoomed once I became debt-free.

No kids, no debts, that was my key to ER.
Thanks for sharing your story! I have no problem avoiding having children and never wanted them.
My debts will be extremely similar to yours.

Quote:
Originally Posted by mnopqr View Post
You loaned your friend $11,000? Four months worth of your salary? I'm sorry, but you do not have that kind of money to lend. You live at home to save money, are going to school, taking out student loans, etc... And, the debt he owes you is growing continually?? Please, look out for yourself and be a better steward of your money and your future.
Yeah, I understand. This "friend" is a guy I'm dating but I just don't like using the term "boyfriend", not that that would make a difference.
Yep, and what really sucks is that 11K is actually about 5.5 months of my salary after taxes, retirement, and insurance. I know next year should be much different. Other women are shocked that I put up with it when they have men paying for their stuff.
I *refuse* to loan anyone in the future, including him any more money. I need that debt he owes me to go down, down, down, down... Even if it all returns to me, I have to put my foot down if anyone else is looking to borrow money from me as "friends" and "family" should not have to stress one out financially! If anything, they're there to alleviate stress!
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Old 12-21-2010, 03:07 PM   #12
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Oh, Ghost, are you going to hear it from the folks on the board whose bad relationship decisions cost them a lot more than $11k! Warning!

This guy is an albatross to your future ER plans. I promise this is true. And a whole bunch of folks around here are likely to chime in, with their own horror stories. I somehow lucked into a guy with the same goals and plans as me at a *very* early age so we've been in harness together since I was a mere pup.

He's not in the same ballpark as you, I promise! Find you a nice hard-working guy who wants the same stuff as you and is willing to work as hard as you do for it.
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Old 12-21-2010, 03:32 PM   #13
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He's not in the same ballpark as you, I promise! Find you a nice hard-working guy who wants the same stuff as you and is willing to work as hard as you do for it.
Dear Pepper,

A man is supposed to be a revenue source for a young lady, not a cost center.

Maybe sign up for an accounting course next semester?

Your friend,

Ha
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Old 12-21-2010, 03:33 PM   #14
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What kind of friend, never mind boyfriend, would take $11,000 from you as a loan that you're not even expecting to be repaid? Why didn't he borrow the money as a student loan from the normal sources? Your first step toward financial independence is to stay away from people like that!
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Old 12-28-2010, 10:51 PM   #15
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Just say no. Why do you give him the money? He isn't paying you back. He's borrowing more money. You need the money. It's YOUR money and you earned it. Just say no.

Have you seem Suze Orman on TV? She often has people on with relationship stories such as yours. Maybe if you watch a few episodes, you will gain some insight into your situation. Good luck.
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