24 Year-Old With $15,000

[RetiredGypsy]

I have $15,000. I don't think this is a bad start, but Dr. Stanley and Dr. Danko say I should be worth closer to $86,000 at this point, so I'm eager to do everything I can to make them proud.

Originally I planned on having $3,000 each allocated to Vanguards S&P500, Small Caps, etc. but I read everything I was looking at was bundled into the Total Stock Market Index (VTSMX) fund, so I thought putting $9,000 there would cover what I had originally planned to spend broken up into the individual funds.

The other $6,000 I have no idea what I want to do with. This wouldn't be used to fulfill short term goals. I'm interested in your "If I had $6,000 to invest this is what I would do with it" stories.

 

[FIREd]

I am not quite sure what formula Stanley uses to determine the net worth you are supposed to have at any given age, but the one I am familiar with is:

NW= annual income * age/10

This formula is not realistic for young people right out of school. In my case, on my first day on the job, I was supposed to already have accumulated $150,000 according to this formula... Right... I was lucky enough to start my career with a (barely) positive networth... So having $15,000 to invest at your age is a great start.

Even now, at age 34, my wife and I are still a bit behind the ball according to this formula, but only because our income keeps increasing too darn much each year for us to be able to catch up! I guess we could have worse problems...

VTSMX is a great choice. As for your $6,000, you could look into the total international stock index to gain global exposure.

 

[slouch]

you could buy a house or buy some BRK.B?

At your age I think I just paid off my car and had about 30k in a taxable account invested in a short term bond ETF, which was then used as a down payment on a condo. I was then house poor for 2 years as I paid off the 2nd mortgage 13yrs early (it was a 15yr loan, I didn't like having that much debt outstanding). Paying off the 1st mortgage at the regular rate means I'll own the place free and clear by age 44, which is part of my longer term plan towards financial independance (more available cash flow by reducing expenses).

In addition to doing this I max out the 401k and hold some company stock and BRK.B in taxable accounts for long term goals; as well as some MMAs and short-term bonds for emergency fund / short term goals.

 

[Frugality_of_Apathy]

Using static formulas at is is ridiculous. You just need a target and then be able to calculate how quickly you are approaching it. If you're going to be at your target before you want to retire then you are fine. If I gathered a net worth of 84,000 by my first year out of college I would have retired before I was 26.

 

[RetiredGypsy]

I was joking about the Millionaire Next Door bit.

 

[RetiredGypsy]

Here's another question about Vanguard. I lost my phone and every time I try to fill out their form to e-mail them the window keeps closing prematurely, so I can't contact them directly at the moment. If I buy into a mutual fund for a minimum $3,000 can I still contribute to that fund, say an additional $1,000 a month, or would I have to contribute $3,000 every time I wanted more of the fund?

Thank you ahead of time for for answering my dumb question.

though I hope it doesn't seem all that dumb...

 

[rickier55]

Here's another question about Vanguard. I lost my phone and every time I try to fill out their form to e-mail them the window keeps closing prematurely, so I can't contact them directly at the moment. If I buy into a mutual fund for a minimum $3,000 can I still contribute to that fund, say an additional $1,000 a month, or would I have to contribute $3,000 every time I wanted more of the fund?

Thank you ahead of time for for answering my dumb question.

though I hope it doesn't seem all that dumb...

Once you've established the fund you should be able to add to it in smaller increments. There fund website should show this amount somewhere.

Rick

 

[Tempesta]

at your age, I was still one year from graduating for my undergraduate degree, 8K in credit card debt plus 4K in other debt

 

[Animorph]

If you want to invest equally in large cap, small cap, value, growth, foriegn etc, then go with the individual fund approach. Fundadvice.com has some example portfolios, including one with Vanguard funds.

You don't have any choice with how those asset classes are weighted if they are combined into one fund. Nor can you sell just one asset class that has been doing particularly well.

For now you might try a retirement date fund with a bond level you're comfortable with and then do the research into other funds you might want.

 

[FUEGO]

I believe vanguard has a $100 minimum purchase requirement for additions to funds that are already open. The $3000 amount is what is required to open new funds (in general) - some require $10,000 or $25,000, while one only requires $1000.

 

[cardude]

I can't remember exactly what I had at your age, but I'm pretty sure it wasn't much because I was still mostly drinking beer and partying.

Nice job. Think about starting your own business so you wont be a wage slave most of your life-- you will able to get out of most payroll taxes if you do it right. I think young people could have a tough time with taxes over the next 10 years if they are working for someone else.

 

[Walt34]

RetiredGypsy, you're a smart guy. When I was 24 I had $3,500 saved so I bought an airplane. I also had a 650cc motorcycle parked in the living room of my apartment, and I was sober some of the time.

 

[RetiredGypsy]

I have 250cc more but one less airplane. Does that even out?

Next on the agenda is buying Bernstein's 4 Pillars and going to town on that. At the end of this year I should have another $7,000 or so to sweeten the pot, and at the beginning of 2010 I plan both on being able to look more deeply into how I can better allocate and using that as the beginning of a yearly checkup on how things are doing.

 

[segfault]

As an aside, Stanley and Danko's formula doesn't work very well for people who are just beginning their careers. It's better for people in their 30s and 40s...

 

[RetiredGypsy]

If I hadn't been a complete idiot with my money before this year, I would have been so close to that figure, but oh well. Live and learn.

I've decided to use $12k to put toward 3-4 different mutual funds through Vanguard, and use the additional $3k to buffer the emergency fund. At the end of the year there will be an additional $6,000 to add to more funds with an additional $1,500 for the emergency kitty. I'm going to consider myself in an accumulation phase, so now it's just keep feeding the beast.