Advice for a Noob?

[kevman]

Hello everyone im 22 and a clean slate ready take advice! Im looking to start saving and/or investing for ER like everyone else but don't quite know where to start. Im pretty inexperienced in this field since i started really putting this to thought within the last year or so and i feel like iv'e waited too long. What would be a good idea to do this year to take active steps toward this direction? I was looking into starting an IRA but don't know the mechanics of those either and don't know what companies to trust.

I really appreciate the your 2 cents and realize there is a search function but i just wanted to hear some fresh opinions. I think i'll learn alot from this forum and will be reading through tons of topics; but like i said i just wanted to stir up some ideas and see what you would recomend in this particular situation.

Thanks -Kevin

 

[Purron]

Kevin,

You are wise to start your planning at age 22 and have plenty of time to reach your goals. If you post a few details about your situation, folks may be able to give you some specific pointers. Absent that, I would suggest the following:

If you have debt, particularly credit card debt, get that paid off pronto.

Get into the habit of living below your income level and saving as much as possible. If your employer has a 401(k) plan, participate to the maximum.

Once you have eliminated debt and accumulated some savings, come up with an asset allocation plan taking your goals and risk tolerance into account.

Good luck! I know many folks wish they had started on the path to financial responsibility at your age.

 

[travelover]

Welcome Kevman. You've just made the most important step - deciding to get serious about saving and investing.

I would recommend that you study a couple of good, basic finance books. Two of my personal favorites are Bogleheads Guide to Investing and a Random Walk down Wall Street. These should give you some perspective toward all the financial "news" noise.

Amazon.com: The Bogleheads' Guide to Investing: Taylor Larimore, Mel Lindauer, Michael LeBoeuf, John C. Bogle: Books

Amazon.com: A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition: Burton G. Malkiel: Books

You might also find the Bogleheads site worthwhile. Look for posts from people in your same age group and see what recommendations are given.

Bogleheads :: View Forum - Investing - Help with Personal Investments

I have no financial interest in these recommendations, but hate to see anyone lose money needlessly.

 

[armor99]

Congrats Kevin on starting so early. I guess the first thing that I would say... is that planning for your retirement is not something so difficult that you need an expert, or something you can never hope to achieve yourself. This forum is an excellent source of information, and I think noob's as well as experts are always learing something new here.
Not sure if you follow stocks yet.... but if you do.... you might be worried... stock prices are down, talks of recession, etc. But no!!! This is actually a great opportunity for you to get into investing. Stocks can be bought on the cheap...and will likely go up in the future. Try to remember (and it is hard sometimes) that you are investing for a long term payout (in 20-30yrs). A single years loss or gain is not what you should be concerned with. Slow and steady will almost always win in this race. Try to avoid the temptation to jump onto that hot stock tip you gor from somewhere.... you will almost always loose doing that. (I had to learn that lesson the hard way). Diversification is really important... Some stocks... some bonds... some cash. Pick a good invetment house. I use Vanguard (their fees are some of the lowest) and I think most here will agreed they are a good place to invest with.
Lastly.... stick to a certain amount of money put into your 401k ,or other retirement savings each month. If you can put aside ~$200 a month (at your age) you are almost certain to become a millionare by age 60 or earlier.

 

[jIMOh]

Live on less than you earn- set aside 20% of each paycheck for savings- both short and long term.

Avoid debt in the process and you will be ahead of 50-75% of your peers. I started at age 24 and have 200k set aside now at age 35. It is a slow process to start- but when I started I set aside 6% and now we set aside 20% of a much larger amount.

Takes time, do not get impatient.

 

[Keyboard Ninja]

I started at age 24 and have 200k set aside now at age 35.

$200k cash? I thought having anymore than $100k cash was a bad thing.

 

[FIREd]

Hi Kev,

My wife and I started investing when we were 27 and like you we started out with a clean slate, no debt but also few assets. Our first step was to contribute to our 401K plans at work. When we were able to max those out, we opened Roth IRAs. When the Roths got maxed out, we opened a taxable brokerage account and started pouring the excess there. Seven years later we have more than $350,000 saved up for ER (not including home equity and short term savings) and we are saving more than 45% of our disposable income each year.

I'll give you a few of my "secrets":
1) Automate your savings. Set it and forget it.
2) Avoid unnecessary debt. Avoid credit card debt at all costs.
3) Avoid upping your lifestyle when your income increases. That has been our real secret. We are basically living on a fixed income (Better get used to it if we want to retire!). Today our annual budget is the same as it was in 2004, yet our income has increased greatly since then. Therefore, all income increases go to savings and our savings rate has climbed from the mid-20% to just over 45%.

Good luck!

 

[kevman]

Thanks guys, all good advice, it means alot. Looks like im going to be reading up on Vanguards Tonight. Anything else i should consider? Thanks alot i think this will help me point the right way.

 

[travelover]

Thanks guys, all good advice, it means alot. Looks like im going to be reading up on Vanguards Tonight. Anything else i should consider? Thanks alot i think this will help me point the right way.

Kevin, if you can, I'd suggest contributing to a Target Retirement Mutual Fund at Vanguard or Fidelity. Choose a maturity year when you think you'll retire and just automatically invest as much each month as you can. It is a no brainer and will net you a better return than most of your peers will get chasing returns or doing nothing as they dither trying to decide how to proceed.

Example:

https://personal.vanguard.com/us/JS...?tab=0&FundId=0699&FundIntExt=INT#hist::tab=0

 

[jIMOh]

$200k cash? I thought having anymore than $100k cash was a bad thing.

200k is set aside in retirement accounts invested in equities for retirement.

 

[Westernskies]

Welcome to the forum. Nice to see someone your age taking an active interest in FIRE.
My cardinal rules, some of which echo some of the other posters here:
1. Automate your savings, if you don't have it you won't spend it.
2. max out your 401K every year
3. LBYM
4. Avoid installment debt like the plague.
5. Concentrate on accumulating assets, not just possessions.
You are starting early enough that you should be in good shape. I didn't really get serious about saving until I was in my early 30's, and am playing catch up now at 50.