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Very New To Everything but learning Quickly, need your advice!
Old 11-25-2016, 12:12 PM   #1
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Very New To Everything but learning Quickly, need your advice!

Hi all! First off I will start by saying that Reddit brought me here and I am learning alot just by trolling and reading different threads and posts. I will start by giving me financial details and lack there of.

I do need your help in just getting started, I looked for a thread like this but couldn't find anything am I am assuming it's becasue every situation is different. Please forgive me if I leave out any info I can provide it upon asking!

I am a single 28 yr ol male that has a 5 year old daughter and lives and work in Northern Virginia as a Recruiter. I am a contractor (Hopefully will convert soon). I currently have a daughter that is 5.

I currently make 110,000/yr.. I do have a small 401K set up in fidelity and have less than 10,000 in it because I just have been living under a rock for the past 10 years and I don't know how to invest. I will start by spelling out some debt and my financial situation I need some help on where to start!

Salary-110,000
401k- currently have 6,500 no employer match.
Savings- I have a small saving but I am trying to pay off debt so that number isn't really relevant.

Assets- None. I rent and still have a car loan.

Debt (I was terrible with money when I was younger and everything has changed as I grow up. this has been a huge work in progress for me and I'm learning how to seriously budget and get things paid off)

Car- 3K left to pay off.
CC #1- 3,300 balance
CC#2- 5,500 Balance
Line of Credit- 2,800 balance
Tuition/Navient- 14,5000 left to pay off.

Here is an idea of my monthly expenses.

rent- 1500
daycare-600
Pre-school- 340
Internet-40
Phone bill-55 (just switch from Verizon paying 160 a month to Straight talk, best move ever)
Electric- 70

I have a small business that is registered as an LLC and I make roughly around 1000.00 a month profit for that.

So I am not looking for help with my budget and spending, I have that under control contrary to what it looks like. But feel free to give ideas on what would or could might help, but I have a good strategy of what to pay-off first, second, third, etc. Reddit and Dave Ramsey have really helped!

What I am looking for is ways to save that I am unaware of. I am going to be diving into the stock market and trying to understand that as best as I can (Tony Robbins book is great for that) but the market is like another language to me and I find myself getting confused very easily when trying to understand it.

I see alot of people saying maxed out HSA,Roth 401k or IRA and I do understand what they are I just don't understand why and how it benefits. I have trouble on deciding what to do first. I do research on my own so I am trying but it is easier for me to learn by having conversation about it.

So my question to all of you is, what accounts would you open first,second third and how much do you think I should contribute to my 401K/IRA or should I open a ROTH also? Really looking for your options and advice on anything related to my situation.

This is my first time posting and really asking for help! I thank you in advance!
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Old 11-25-2016, 12:26 PM   #2
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$10,000/month for an outside business = $120,000/year.

You'll definitely want to look into opening a solo 401(k).

Also, a Roth IRA.

https://nb.fidelity.com/public/nb/de...cles/irslimits

Paying off the debt is guaranteed return.
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Old 11-25-2016, 12:30 PM   #3
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Originally Posted by broadway View Post
$10,000/month for an outside business = $120,000/year.

You'll definitely want to look into opening a solo 401(k).

Also, a Roth IRA.

https://nb.fidelity.com/public/nb/de...cles/irslimits

Paying off the debt is guaranteed return.


And that was a typo, now edited as 1,000.00. Thanks!
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Old 11-25-2016, 12:30 PM   #4
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Max out any 401K you can. The full 18K for an employer account.

Save a bunch in a Roth IRA, if you can. Hopefully the max. If not, do a non-deductible IRA.

Invest in IVV for a commission free transaction at Fidelity. You have time on your side.

And let time take it's course.

If you have an outside business, make sure it is a LLC or S-Corp. Take a dividend and some salary. You will save some self employment taxes.
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Old 11-25-2016, 01:07 PM   #5
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Originally Posted by Senator View Post
Max out any 401K you can. The full 18K for an employer account.

Save a bunch in a Roth IRA, if you can. Hopefully the max. If not, do a non-deductible IRA.

Invest in IVV for a commission free transaction at Fidelity. You have time on your side.

And let time take it's course.

If you have an outside business, make sure it is a LLC or S-Corp. Take a dividend and some salary. You will save some self employment taxes.


Thank you for the response. So I have a regular 401K, Should I open a Roth IRA with my Credit Union (Navy Federal) or with Fidelity?

So on every paycheck I should put money into my reguler 401k and my Roth IRA?

Any more insight on which IVV and how much to Invest? (I apologize, very green in the market!)

I do have it as an LLC and currently looking for an accountant to help me with the taxes and that side of the business.

Thanks!
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Old 11-25-2016, 01:45 PM   #6
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No need for an accountant.
I have an LLC. I file a Schedule C-EZ and a Schedule SE. You need to do both.
My solo 401(k) is with Fidelity.

Open the Roth IRA with Fidelity. You'll need to decide which mutual fund.

You could make contribution to the Roth IRA through automatic deductions from your checking or savings account or you can do a one-time investment of $5,500 at the beginning of the year.

I suggest reading https://www.amazon.com/gp/product/0470067365
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Old 11-25-2016, 02:58 PM   #7
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Since you have no match with your 401K you should be looking to pay off your debt before saving. If your credit card is charging 10% then paying that off is a guaranteed 10% return on your money. You can't get that with a 401K or Roth. Pay the debt off first then with your income you should be able to max your 401K. After that you should still be able to max your Roth IRA at $5500/yr. Contributions to the 401K are thru payroll deductions set up with your employer. I would go to HR and get them to set your 401K contributions at 15%. With you income and likely a raise you should get close to the max of $18K/yr. The Roth is invested with after tax money. You can contribute a little every paycheck or all at once any time during the year. I prefer Vanguard but Fidelity is the other top choice. Maxing the 401K reduces how much of your current income gets taxed. Being single with a rather high income, you are paying a lot in taxes so take advantage of that 401K.
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Old 11-25-2016, 03:21 PM   #8
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Some good books on investing and finance are "The Millionaire Teacher", "The Millionaire Next Door" (now the numbers are somewhat dated but the principles remain sound) "Your Money & Your Brain", "Predictably Irrational" "How a Second Grader Beat Wall Street", "A Random Walk Down Wall Street".

I don't want to overwhelm you with a long list, so start with "The Millionaire Teacher". It may sound complicated and mysterious initially, but really, this stuff is mostly grade school arithmetic so it isn't that hard. For many people the mental self-discipline of not spending every dollar that comes in is the hard part.
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Old 11-25-2016, 04:01 PM   #9
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No need for an accountant.
I have an LLC. I file a Schedule C-EZ and a Schedule SE. You need to do both.
My solo 401(k) is with Fidelity.

Open the Roth IRA with Fidelity. You'll need to decide which mutual fund.

You could make contribution to the Roth IRA through automatic deductions from your checking or savings account or you can do a one-time investment of $5,500 at the beginning of the year.

I suggest reading https://www.amazon.com/gp/product/0470067365


Ok, thank you for the info and the book reference, I'll take a look at it. I am willing to learn I just need something to break it way down for me.

After reading and seeing the Roth options, I will set one up. I'll take a look into which Mutual funds would be beneficial and go from there? I feel like an idiot, but this is good!
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Old 11-25-2016, 04:06 PM   #10
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Since you have no match with your 401K you should be looking to pay off your debt before saving. If your credit card is charging 10% then paying that off is a guaranteed 10% return on your money. You can't get that with a 401K or Roth. Pay the debt off first then with your income you should be able to max your 401K. After that you should still be able to max your Roth IRA at $5500/yr. Contributions to the 401K are thru payroll deductions set up with your employer. I would go to HR and get them to set your 401K contributions at 15%. With you income and likely a raise you should get close to the max of $18K/yr. The Roth is invested with after tax money. You can contribute a little every paycheck or all at once any time during the year. I prefer Vanguard but Fidelity is the other top choice. Maxing the 401K reduces how much of your current income gets taxed. Being single with a rather high income, you are paying a lot in taxes so take advantage of that 401K.


Yeap, the debt is a top priority and I pay extra on everything but I feel like I am bringing enough in to invest/save to have some money work for me at the same time.

And I didn't know that the 401K would potentially bring down my taxes by changing my current income, I didn't even think of it like that. Good to know!

When you put the max of your 5,500 to a ROTH IRA every year, how much potential do you have to tun that into extra money off of dividends if you invest it? Any tips on which mutual fund to pick or advice on how to maximize my potential for that money?
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Old 11-25-2016, 04:06 PM   #11
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After reading and seeing the Roth options, I will set one up. I'll take a look into which Mutual funds would be beneficial and go from there? I feel like an idiot, but this is good!
I would recommend index funds over mutual funds. Index funds cost less and usually perform as well or better in the long term. If you go with mutual funds you should still be ok if you go with Fidelity or Vanguard.
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Old 11-25-2016, 04:07 PM   #12
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Some good books on investing and finance are "The Millionaire Teacher", "The Millionaire Next Door" (now the numbers are somewhat dated but the principles remain sound) "Your Money & Your Brain", "Predictably Irrational" "How a Second Grader Beat Wall Street", "A Random Walk Down Wall Street".

I don't want to overwhelm you with a long list, so start with "The Millionaire Teacher". It may sound complicated and mysterious initially, but really, this stuff is mostly grade school arithmetic so it isn't that hard. For many people the mental self-discipline of not spending every dollar that comes in is the hard part.
Good to know! Thank you!
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Old 11-25-2016, 04:08 PM   #13
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Pay off your highest % loans, particularly credit cards. That in itself gives a good return. I have been investing mostly in stocks, mutual funds, and ETF's for 35+ years, and I recomend index ETF's. Do not try to beat the market. It is a fool's errand. Invest at low fee rates and you will do better. I recommend the book "Your Money and Your Brain" by Jason Zweig.
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Old 11-25-2016, 04:11 PM   #14
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Pay off your highest % loans, particularly credit cards. That in itself gives a good return. I have been investing mostly in stocks, mutual funds, and ETF's for 35+ years, and I recomend index ETF's. Do not try to beat the market. It is a fool's errand. Invest at low fee rates and you will do better. I recommend the book "Your Money and Your Brain" by Jason Zweig.

Paying off the debt is definitely a return in itself, My goal to be debt free in 6 months. I don't see any reason why I can't be.

What sites do you use to invest?
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Old 11-25-2016, 04:12 PM   #15
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Yeap, the debt is a top priority and I pay extra on everything but I feel like I am bringing enough in to invest/save to have some money work for me at the same time.

And I didn't know that the 401K would potentially bring down my taxes by changing my current income, I didn't even think of it like that. Good to know!

When you put the max of your 5,500 to a ROTH IRA every year, how much potential do you have to tun that into extra money off of dividends if you invest it? Any tips on which mutual fund to pick or advice on how to maximize my potential for that money?
You need to remember that a 401K and a Roth are retirement accounts so any dividends earned would be reinvested rather than withdrawn to use now. That being said, any stock fund you invest in should pay out 2-3% in dividends which will then be used to buy more shares of the fund which will pay out more dividends and so on.
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Old 11-25-2016, 05:47 PM   #16
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Welcome. I second the recommendation for the Bogleheads Guide. You'll see in there that they favor index mutual funds that track a large index of stocks (rather than an active fund that picks specific investments). One advantage is that they tend to have lower fees and over years and decades of time, it will make a big difference. Plus, you get diversity even with a small account.

I'd also recommend starting your IRA at Fideliity rather than your bank/credit union as you'll have broader investment choices and usually lower fees. Fidelity just lowered the fees on some of its index funds to better compete with Vanguard.
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Old 11-25-2016, 06:10 PM   #17
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Welcome. I second the recommendation for the Bogleheads Guide. You'll see in there that they favor index mutual funds that track a large index of stocks (rather than an active fund that picks specific investments). One advantage is that they tend to have lower fees and over years and decades of time, it will make a big difference. Plus, you get diversity even with a small account.

I'd also recommend starting your IRA at Fideliity rather than your bank/credit union as you'll have broader investment choices and usually lower fees. Fidelity just lowered the fees on some of its index funds to better compete with Vanguard.

IRA and brokerage account are both opened at Fidelity. Next, I am going to get that book and get to reading and understanding.

Can you or anyone else give me some place to start, what should I get to "dip my toes in the water"?
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Old 11-25-2016, 07:01 PM   #18
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If you go to the Bogelheads.com website, they have a 3 fund portfolio thread. It would be an easy way too get started investing.
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Old 11-25-2016, 07:43 PM   #19
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Paying off the debt is definitely a return in itself, My goal to be debt free in 6 months. I don't see any reason why I can't be.

What sites do you use to invest?
I have most of my investments at Fidelity. Vanguard is very good too.

A book that I always recommend is "Your Money and Your Brain" bu Jason Zweig.
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Old 11-25-2016, 09:36 PM   #20
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KB has some good advice. Read about the "three fund portfolio" at the bogleheads forum and the book. Bogleheads will usually discuss Vanguard funds, but you can find similar index funds at Fidelity.

You'll want to consider your asset allocation - what percentage of your funds do you want in stocks vs bonds Typically younger people are more aggressive and invest more in stocks and move to a more conservative allocation as they get closer to retirement.

But take the time to read the book, the bogleheads thread and their wiki. It won't take long to get to the point you're comfortable making your own choices.
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