30 and looking to start making things happen.

[Stosh]

Alright so here is my deal... I am a recent spender turned saver that just turned 30 a few months ago. I make about $60K and have very little debt ($2,500 on an interest free credit card that will be payed off over the next few months.) I contribute 10% to my 401K and I now live within my means. I just got my tax refund back and I would like to use $1,500 of it to start my path towards financial independence - I just don't know where to start. I opened a Merrill Edge Acct (because I use BOA) and have been doing some preliminary research on ETF's and Mutual Funds.

Any advice on how I can start making my money do something for me?

 

[Candy83]

Alright so here is my deal... I am a recent spender turned saver that just turned 30 a few months ago. I make about $60K and have very little debt ($2,500 on an interest free credit card that will be payed off over the next few months.) I contribute 10% to my 401K and I now live within my means. I just got my tax refund back and I would like to use $1,500 of it to start my path towards financial independence - I just don't know where to start. I opened a Merrill Edge Acct (because I use BOA) and have been doing some preliminary research on ETF's and Mutual Funds.

Any advice on how I can start making my money do something for me?

Roth IRA — if you are eligible. That's where the $1,500 can go. Maximum this year for a person under age 50 is $5,500. You don't have to do the full amount. Any amount is better than [zero].

@ 2013 Roth IRA Limits

My account, from the last eight months, has generated 10.3 percent.

You haven't mentioned your annual gross income, but assuming it's five figures … can you go higher with your 401 (k) contribution? (Annual amount?)

As for the spending … try doing it as a treat. That way you find yourself more appreciative as you also find yourself more selective of what you purchase in merchandise.

 

[Stosh]

My annual gross income is $60,000. I can go higher with my 401k. Any advice on how to invest for short to mid-range goals like down payments for a car or house?

Also, as for the Roth IRA. Do you suggest a specific company (Vanguard, Fidelity, Merill, etc...)?

Thanks for the help!

 

[Candy83]

My annual gross income is $60,000. I can go higher with my 401k. Any advice on how to invest for short to mid-range goals like down payments for a car or house?

Also, as for the Roth IRA. Do you suggest a specific company (Vanguard, Fidelity, Merill, etc...)?

Thanks for the help!

I was with Merrill Lynch and then transferred back to my banking institution that has a partner company which operates within. My Roth IRA is strictly with the company.

One thing to look out for with big-time investment firms: Unless you're over $100,000, they may not look at you (during your run) as a VIP. In other words, your account won't be too important … and you may not see much growth. Maybe. Maybe not. They love the big-bucks clientele and are more motivated for them. But, hey, they'll still deal with you. Merrill Lynch, Charles Scwab, etc.

As for your 401 (k), $6,000 is better than nothing. (That's supposing 10 percent of your annual gross income.) Go higher if you can, for the duration. If you could max it ... you won't regret it. If you can't ... see if you can go to at least $7,000. (Meaning, as long as you can be doing this. If something changes, especially personally, and you have to scale back then you can adjust.)

It takes time.

My financial advisor said that about every nine years the balance in one's 401 (k) pretty much doubles. That is, keeping in mind the timing and any downturn in the market. I lost about 20 to 25 percent after the economic meltdown in 2008. It came back up as I nearly maxed my 401 [k] that year and still contributed in 2009. There are people who feel antsy about tolerating downturns. (Which is also why it's not necessarily good to check out balances too frequently.) Those downturns can be an advantage for people who can withstand it. (You don't stop investing.) But one is better off when that happens if the person isn't nearing normal retirement age plateau.

Let's say you had $6,000 in your 401 (k) and didn't add anything to it for the next ten years. Theoretically, you would have about $12,000 for your balance in nine years. It's based on figuring an annual average of 8-percent growth, compounded.

Let me give you this:

@ 401(k) Calculator |- MyCalculators.com


Now, for the Roth IRA, I can also you refer you here (make sure you are Java-enabled):

@ Roth IRA calculator

For the Roth IRA, an advisor will recommend what to invest.

At your age, you can take some high-risk stocks. A mix of some bonds is also good. Perhaps something in real estate. International. Not too many individual plans; that would lack focus. A diversified portfolio, of course.

Here's what I recommend: Let's say you can't do a full $5,500. Let's say you can do $3,000. That would be $1,500 from your income-tax refund and $1,500 from your liquid savings. Take the $3,000 and open a Roth IRA with either an advisor from your banking institution or go to one from the big investment firms (depending on area availability). I would recommend going with an advisor who isn't nearing retirement. Mine is essentially the same age as me. (I'm 41.) That advisor's success will be as important for him as your investment will be for you. (For different reasons.) The $3,000 will be a good start. It's better than zero … and much better than never doing it.

Do what you can for yourself while you can.

If you can be contributing, at this point in your life, pretty well with both Roth IRA and 401 (k) at age 30 … in ten years you will see a hell of a change that should please you. And as even more time passes, and it grows even more (don't touch them; don't borrow from your 401 [k]), you'll look back at your spending-rather-than-saving as just some period you were going through before other priorities became more important.

Good luck!

 

[Candy83]

Any advice on how to invest for short to mid-range goals like down payments for a car or house?

I don't know if it's still as bad as before the housing market crashed … but your income (if combined with a good enough credit score) won't be a problem for a vehicle and a house.

The big-three American auto manufacturers want to get the deal through. On a lease especially. So, I don't know what you'd want in a car. Your travel (distance and minutes) to and from work. Whether you are laid back in tastes for a vehicle, etc. It isn't an investment. It's a necessity.

The house is an albatross no matter what. If you have 20 percent of the purchase price, you can avoid PMI. Otherwise, you would have to deal with carrying it for a good while. The interest rates on purchasing a home are an advantage. The market is good. Assuming you're single, I wouldn't knock myself out for an ideal house … not taking on more than you should. (Meaning, not what you figure you can afford; but not taking on what the amount you'd be approved for with a purchase.) A decent starter house, one that is 25 percent or less in payment relative your monthly income, would be better. $5,000 a month in gross income. If you can get a house where the mortgage payment, the PMI (if applicable), and house tax is less than $1,250, you'd be better off than something that adds, say, an excess of $500 per month above that.