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Young and a bit overwhelmed have been getting into investing this weekend LOTS of ?s
Old 10-12-2008, 07:06 PM   #1
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Young and a bit overwhelmed have been getting into investing this weekend LOTS of ?s

Alright here is where I am at currently. I am 21 years old. My current "excess" money is about 800$ a month... that is money after i have payed all obligations that i have. I plan to be making considerably more money in the next year or so without much more going to bills and such. I have a 1year CD with an APY of 3.25% that matures in June that i started with 9000$ in. I also have a RIRA with 5000$ in it for the year in a 3month CD with an APY of 2.9% that matures in December. And a checking account with ~1000$ in it. I kind of set this all up just so my money was not sitting in a low yield savings account but now i really want to get into investing and don't know where to go from here.

What i think i should try and do first is get the RIRA invested into something better once it matures but i don't know what. I am thinking about an index fund from vanguard perhaps the total stock or s&p500... something reliable. I do plan on adding 5000$ to it every year. However, if my situation leads me to believe that i can retire at 45-50 is an RIRA still a good option for later in my retirement years? I plan on living below my means.

Also from my limited understanding the best time to start investing would be pretty soon as a lot of things are really low.

Now If all goes to plan i will have more then 5000$ a year to invest. My employer does not offer a 401k. What do i do with that money?
I don't currently have any debt.

I have been toying with the idea of vanguard however I will most likely like to play around with individual stocks at some point(just as a side thing main investments would be funds). Would fidelity(or something else?) be better for this?

Anyways as you can see I am pretty clueless. I really want to not have to worry about money ever and I am hoping if I start saving and investing now it will help.

Any suggestions of what to do with the money and where to do it will be appreciated more then I can explain in words. I currently feel lost and no one i know knows enough to make suggestions. Sorry for the load of questions.
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Old 10-12-2008, 07:15 PM   #2
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Hi there,
You would probably benefit from reading a good personal finance book. Dare I suggest Suze Orman's Women and Money? Others may have different suggestions.

Emergency fund -- 6-8 months expenses is crucial these days. Do that first, in a money market fund. Vanguard Prime Money Market is FDIC insured up to $250K. You can link it to your checking account. This is different from CDs which are not really liquid.
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Old 10-12-2008, 07:20 PM   #3
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Ah already something i didn't know... I did not think there were FDIC insured money market accounts. That is an awesome first step.
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Old 10-12-2008, 07:43 PM   #4
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Yes, educate yourself. If you do not have access to a 401k, then pour as much as possible into a RIRA and an IRA. You would then want to put money into a non-tax-advantaged account (vanguard, schwab, etc). Also, at your young age you may want to consider your near- or mid-term financial needs, and consider how best to fund them (marraige, kids, house, etc). I second the encouragement to build an emergency fund, and also suggest a small amount of food storage, built up a bit over time, i.e, canned soups, fruits, veggies, proteins like beans, etc, that can support you thru a small crisis.

Next, make sure you stay out of debt, except for modest housing...LBYM.

Finally, there are a lot of bargains out there right now. If you have money floating around not returning anything, now is a great time to get into the market...just my opinion. Don't invest money in this market that you will need short-term though... as the market may go down some more before things improve.

Good luck to you, and welcome!

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Old 10-12-2008, 07:49 PM   #5
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I'm sorry. Not FDIC. It's the Treasury guarantee program. Read up on it.
"The program, which is open to all publicly offered U.S. money market funds that pay a fee to participate, insures investors' holdings for three months, although it may be extended through Sept. 18, 2009, according to the Treasury."
At Least 10 Fund Companies Sign Up for Money Market Guarantee - New Money (usnews.com)
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Old 10-12-2008, 08:00 PM   #6
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After a RIRA the next best place would be a IRA?
What about the possibility of early retirement.

I grabbed "the only investment book you'll ever need" and "the wealthy barber" and i got alot more on order, including "four pillars" and "random walk guide to investing".

While i believe an emergency fund is a very good idea and i plan to have one, right now i am at extremely low risk for any problems (living at home/immediate family owned business/support from parents if need be). So while i will start an emergency fund i don't want to focus on it completely right now. I understand that I am in a very good situation at the moment and don't want to let that blind me to reality however i do want to take advantage of it while i can.
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Old 10-12-2008, 08:01 PM   #7
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Originally Posted by Oldbabe View Post
Vanguard Prime Money Market is FDIC insured up to $250K. You can link it to your checking account. This is different from CDs which are not really liquid.
Only the assets that you had in the fund as of the close of business on September 19 would be covered, so investments after that date would not be insured. See

Vanguard Money Market Funds
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Old 10-12-2008, 08:09 PM   #8
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Only the assets that you had in the fund as of the close of business on September 19 would be covered, so investments after that date would not be insured. See

Vanguard Money Market Funds

Thanks! I missed that little detail.
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Old 10-12-2008, 08:30 PM   #9
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Originally Posted by shinymoney View Post
After a RIRA the next best place would be a IRA?
What about the possibility of early retirement.

I grabbed "the only investment book you'll ever need" and "the wealthy barber" and i got alot more on order, including "four pillars" and "random walk guide to investing".

While i believe an emergency fund is a very good idea and i plan to have one, right now i am at extremely low risk for any problems (living at home/immediate family owned business/support from parents if need be). So while i will start an emergency fund i don't want to focus on it completely right now. I understand that I am in a very good situation at the moment and don't want to let that blind me to reality however i do want to take advantage of it while i can.
I hope by "on order" you mean at your local library. Why would you buy a book you can get for free at the library. That wouldn't be a very good start at living below your means. Living below your means doesn't just mean spending less than you earn it also means not spending money you don't need to spend(wasting money).
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Old 10-12-2008, 08:51 PM   #10
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yea by order i mean have the library order from others.. don't know exactly what its called.
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Old 10-12-2008, 10:36 PM   #11
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My thing right now is while i know i should have a emergency fund i want to make the best of the current market as it seems now is a better time then ever.

I am also thinking of early withdrawal from my CDs.. at those %s they wont be earning much. Just something I am thinking about... any opinions?

penalties from my bank are for terms less then 6months (my IRA) would be all interest so 3months of it. And for my 1yr CD 3 months of interest. So i wouldn't really lose any money, at least compared to having just kept it in a low yield savings, from when i put them in and i think the amount i could egain invested elsewhere far outweighs a small loss.
So hopefully some of you can either explain that this is a decent idea or slap me into reason.
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Old 10-12-2008, 11:19 PM   #12
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My thing right now is while i know i should have a emergency fund i want to make the best of the current market as it seems now is a better time then ever.

I am also thinking of early withdrawal from my CDs.. at those %s they wont be earning much. Just something I am thinking about... any opinions?

penalties from my bank are for terms less then 6months (my IRA) would be all interest so 3months of it. And for my 1yr CD 3 months of interest. So i wouldn't really lose any money, at least compared to having just kept it in a low yield savings, from when i put them in and i think the amount i could egain invested elsewhere far outweighs a small loss.
So hopefully some of you can either explain that this is a decent idea or slap me into reason.
Although it's always risky to go without an emergency fund it differs from one person to the next. Your situation is unusual and I think it would be okay for you to go without an e-fund for a while to open a taxable account and invest while the market is "on sale". I just took $3K out of my e-fund to start a taxable account at Vanguard and on Jan 2nd I will max out my roth IRA which will leave me with less than 2 months of living expenses left in my e-fund. Also on Jan 2nd I will start an automatic payment of $500/mo into my taxable account. I live on $1200/mo or less out of my $2400/mo take home pay so i'll still have about $700/mo to use towards my e-fund and saving towards the following years Roth. I think you could do something similar. Good luck.
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Old 10-12-2008, 11:50 PM   #13
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I figure that anyone who is 21, is completely out of debt, and is living below his/her means to the tune of $800 per month is a lot smarter than me.

Bogle says that success at building a retirement fund is much more about "spending less than you earn" than it is about deciding between stocks/bonds/CDs or whatever. Congratulations - you're already doing the hard part.
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Old 10-13-2008, 09:17 AM   #14
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Any opinions on taking the money out of the CDs early to get in on the market now?

Quote:
I have a 1year CD with an APY of 3.25% that matures in June that i started with 9000$ in. I also have a RIRA with 5000$ in it for the year in a 3month CD with an APY of 2.9% that matures in December.
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Old 10-13-2008, 06:32 PM   #15
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Just my $.02--from the perspective of age 52:

1. Don't get sold on the idea that you need to buy a house. They're poor investments, and in my mind, always have been, unless one is able to time the market just right. A house costs too &%#! much to keep up. Only buy one because you really love having a house.

2. Remember, while you're LBYM (which everyone on this forum, including me will tell you to do, as will those books you're mentioned), have as much fun as you can, too. Don't go hog-wild or anything, just remember you're only young once. I worked my @$$ off during my 20's and 30's and frankly, I wish I'd taken life slightly less seriously, saved a bit less, and would have more fun to look back on. I was in my 40's before I realized that some things I would have *loved* to do when I was 25, but put off "till later," are really only fun for 25-year-olds.
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Old 10-13-2008, 10:10 PM   #16
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2. Remember, while you're LBYM (which everyone on this forum, including me will tell you to do, as will those books you're mentioned), have as much fun as you can, too. Don't go hog-wild or anything, just remember you're only young once. I worked my @$$ off during my 20's and 30's and frankly, I wish I'd taken life slightly less seriously, saved a bit less, and would have more fun to look back on. I was in my 40's before I realized that some things I would have *loved* to do when I was 25, but put off "till later," are really only fun for 25-year-olds.
That is gonna be the hardest part. Already my friends are beginning to turn on me :X
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Old 10-14-2008, 01:00 AM   #17
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Gonna go to sleep soon but one last question just in case.

What would be my steps to doing this.
Go to the bank, Have my Roth IRA withdrawn from the CD and moved to a Roth IRA holding account?
Then withdrawn my 1year CD and move that into my checking account?
Make an account with vanguard. Link it to my checking account. Move the money from my checking account into the fund of my choice?
Request a move of my Roth IRA into a Roth IRA with vanguard and then once that happens move it to a fund of my choice?

Does that sound right? if not what am i missing? Any costs of doing this that i am missing besides the penalties for early withdrawal?
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