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Working for the man
Old 12-19-2005, 09:08 AM   #1
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Working for the man

I am 18 and I know I have a long way to go, but I work full time for the Cambece law firm and I was wondering about 401k and IRAs. This is all just letters and numbers to me. I know there are different types of each and some are taxed and others are not, but to me itís all just a blur.

Cambece

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Re: Working for the man
Old 12-19-2005, 10:14 AM   #2
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Re: Working for the man

Jacambece, I'm going to move your post into the Introduce yourself board, and let me suggest you start with a couple of books before mucking in the weeds here (by all means, welcome, but you might need explanations for some members explanations!). "4 pillars of investing", "Your money or your life", "The millionaire next door" are all staples here, but a personal favorite is "Personal finance for dummies" -yes, that series of yellow and black books has a finance book, and it's quite good for beginners.

Jacambece, why don't you tell us a little more about your financial situation as well:apartment, house, live at home? Going to college?
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Re: Working for the man
Old 12-19-2005, 10:30 AM   #3
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Re: Working for the man

Quote:
Originally Posted by jacambece
I am 18 and I know I have a long way to go, but I work full time for the Cambece law firm and I was wondering about 401k and IRAs. This is all just letters and numbers to me. I know there are different types of each and some are taxed and others are not, but to me it’s all just a blur.

Cambece

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Save save save!!

Every time you get paid save 10% or more if you can and when you are 50 you will be good to go!
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Re: Working for the man
Old 12-19-2005, 10:33 AM   #4
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Re: Working for the man

Quote:
Originally Posted by jacambece
I am 18 and I know I have a long way to go
I agree the best thing to do is to get a lot of readers cramp. *I can't add anything to your reading list cause I'm not up on the current best starter books.
Books aside, the best thing you have going for you is your youth. *Get started at 18 and let the miracle of compounding work for you.
Along with starting early, I'd recommend that you make a commitment to be your own financial planner. *Until your life gets really complicated you can do it yourself and probably with better results than what the typical "pro" would do for you.
Of course, always remember the 3 biggest lies as you approach your financial planning for ER.
#1 biggest lie::Oh I'll start later when I am earning more money.
#2 biggest lie:: *Oh I'll just keep on working longer.

Biggest lie #3 never seems to change:: *Of course I'll still love you in the morning. *

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Re: Working for the man
Old 12-19-2005, 10:55 AM   #5
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Re: Working for the man

Welcome and it is never to early to start learning about the financial maze. Might want to consider just sitting down with a financial planner/advisor and try picking his/her brain. They will do it for free with the intent of trying to get you to set something up with them. Cold be a good learning experience, was for me many moons ago.
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Re: Working for the man
Old 12-19-2005, 11:52 AM   #6
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Re: Working for the man

jacambece
I commend you for starting to think about this stuff while you are so young. You'll be glad you started early!

As you get started financially, get in the habit of saving a little every paycheck. You may want to open an IRA or other account favorable for taxes (you can find out more about these accounts in one of the recommended books from other posts). I personally believe it would be a good thing to learn a little about real estate investing. If you can stash some cash for several years you'll probably be able to go in with a partner on a piece of real estate by the time you're 25, maybe even sooner. By starting that early you can achieve a surprisingly high net worth by the time you're in your 40s. I recommend reading "Secure your Financial Future Investing in Real Estate" by Stone and Strauss (Dearborn Publishing, 2003).

If you're willling to not conform to the usual way people manage their finances (spend too much, save too little, get into debt, refuse to get serious about investing) you'll do great.

As you get going in your career and financial life, follow the advice from all of the books mentioned on the site: control debt, live a little below your means, invest intelligently and aggressively, value financial freedom more than social status.

Good luck!
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Re: Working for the man
Old 12-20-2005, 11:52 AM   #7
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Re: Working for the man

jacambece,

401k's are retirement accounts set up by you through your employer. Part of your wages before taxes are put into this account and grow without being taxed until you take them out. This sounds great, but it is best when your employer matches your contribution to some extent (free money!). Eventually, you will have to pay taxes when you take money out, years from now, and that is the rub. You will usually be better off in the end investing your money on your own outside of a 401K, but they ain't bad. (All that I have came through 401K savings p;rograms.)

IRAs are Individual Retirement Accounts. Unless you make a ton of money, you qualify and can set one up on your own. You can only contribute earned income, though. There are several flavors, but the best is the Roth IRA. You put after-tax money into it and it a) grows tax-free, AND b) withdrawals are TAX-FREE FOREVER (or until Congress changes its mind, but for now it is the best deal going). You have a lot more control over IRAs than 401ks.

What to buy inside a 401k or IRA? Read this web site:

http://www.coffeehouseinvestor.com/

He makes a case for low cost index funds, primarily from Vanguard. Vanguard is one of the lowest cost sources of mutual funds and will help you set up your IRA. Call them and talk to them. It is free and I have found them very helpful. You can also visit their web site and read more:

http://www.vanguard.com/

This is not rocket science. You can do it all yourself and beat the pants off most of the professionals, believe it or not. The "professionals" make money selling you stuff, not by making you rich. This means your friendly banker and your friendly insurance broker and your friendly financial planner, too. (Why do you think they are so friendly?) You do not need to pay anyone for the best advice.

The best advice is, first, SAVE. I recommend 20% of your gross pay, but that is hard to do. Sit on it and educate yourself on investment in the meantime. If you are uncertain, put it in a Roth IRA in an interest-bearing account at a bank until you feel comfortable investing on your own. You can start slow. It's OK. But that won't be enough to retire on all by itself, so you have to learn about investments. See the above two sites again. You do not have to know all the fancy stuff, honest.

Best of luck,

Ed The Gypsy

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Re: Working for the man
Old 12-21-2005, 10:07 AM   #8
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Re: Working for the man

Thank you all for your recommendations. I will use them wisely.

Cambece
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