saving vs investing

[35nothing]

I intend to save 1500 every month from my salary. However I want to also get into investing .

1) What do you suggest would be a good amount to start with??

2) I used stash invest some spare change, but those dividends even though they are pennies suggest its the way to grow the money.

3) Any names of index funds you recommend.

 

[FIREmenow]

1) What do you suggest would be a good amount to start with??

My (LBYM) philosophy was the opposite of this type of thinking. I paid for everything I HAD to pay for, then EVERYTHING ELSE was saved/invested.

 

[Aerides]

Since we don't know the rest of your financial picture, assuming you have no debt other than a mortgage, I'd generally advise the following, in order:

1 - Save that $1500 until you have 3-6 months of expenses put aside (3 if you are single, 6 if you have family/kids - maybe more). That's not investment money, but for emergencies. Keep it in some sort of online liquid MM account with no risk, but do get at least a decent bank interest rate on it.
2 - Cap your 401k contributions, not just the match, but the maximum tax savings, currently 18.5 per year in your age bracket
3 - Explore ROTHs depending on your income
4 - THEN - after that focus on after tax savings and investments, google bogle lazy portfolios for some general index funds available both on Fido and Vanguard that most of us tend to start with. The amount doesn't matter after you've done 1-3, as you can just keep buying every month or quarter as you see fit.

 

[kgtest]

What I do at 37 in order...
1. Pay bills that are interest bearing (mortgage)
2. Maintain Emergency fund of 3months mortgage expense
3. Max my 401k to $18,500
4. Max my Roth IRA $5,500
5. Contribute $1k to 529
6. Do roth conversions from IRA up to ~15-17% taxable
7. randomly put money into brokerage as I can afford (lately not much with daycare$$$)

Determine an Asset Allocation (stocks/bonds/cash) and investment blend of Growth, Value / Large/Mid/SmallCaps . International...

For me I always recommend VUG, but I own it. If you wanted to diversify which you should... VUG, VOT, VBK....equal split.

so if 10k 3,333 to each fund. Rebalance as the thirds get more uneven as markets gain.

 

[The Cosmic Avenger]

Since we don't know the rest of your financial picture, assuming you have no debt other than a mortgage, I'd generally advise the following, in order:

1 - Save that $1500 until you have 3-6 months of expenses put aside (3 if you are single, 6 if you have family/kids - maybe more). That's not investment money, but for emergencies. Keep it in some sort of online liquid MM account with no risk, but do get at least a decent bank interest rate on it.
2 - Cap your 401k contributions, not just the match, but the maximum tax savings, currently 18.5 per year in your age bracket
3 - Explore ROTHs depending on your income
4 - THEN - after that focus on after tax savings and investments, google bogle lazy portfolios for some general index funds available both on Fido and Vanguard that most of us tend to start with. The amount doesn't matter after you've done 1-3, as you can just keep buying every month or quarter as you see fit.

This is almost exactly what I was going to say!

Emergency savings are important because you don't want one big home or car repair to cause you to run up a credit card balance, which has a very high interest rate. The next focus should be maxing out pre-tax retirement contributions because --let's say you're in the 25% tax bracket -- for every $1,000 you contribute, you only reduce your take-home income by $750. It's like free money! The employer match (if you have one) is important, but a lot of people forget about the tax savings.

 

[racy]

Check this out. In the box titled The Boglehead Philosophy you'll find 10 short little videos that are just what you're looking for! https://www.bogleheads.org/wiki/Getting_started

Quote from the site, "Bogleheads® emphasize regular saving, broad diversification, and sticking to one's investment plan regardless of market conditions. We follow a small number of simple investment principles that have been shown over time to produce risk-adjusted returns far greater than those achieved by the average investor."

 

[copyright1997reloaded]

Some great suggestions so far.

My only addition is to use raises and bonus money (if any) as an opportunity to up the savings/investment rate. When I got a raise, just about all of it (after taxes) went into my investment flow. Late in my career, I went from a SW development lab job to a sales position with sales commission money. Those commission checks went almost entirely into paying down my mortgage, eliminating the remaining concern on my ability to FIRE.

 

[GravitySucks]

Do what Aerides suggested and you'll be golden.

 

[Scuba]

I think it depends when you want to retire. I planned to retire early, so I chose to prioritize in this order:
1. Whatever it takes to get full employer match for any employer plans
2. If accessible to you, any tax deferred plans that you can access without penalty before 59.5; my employer offered a deferred comp plan that had penalty-free withdrawals at any age
3. Taxable portfolio
4. Other tax-deferred

By doing it this way, we have a taxable portfolio that is about 2/3 of our financial assets. This comes in handy to minimize taxes as most of our income from it will be preferenced (dividends and cap gains), and provides a lot of flexibility - no need to worry about Rule 72T for example.

However if you don’t intend to retire until after 59.5, maybe what others are saying about putting taxable dead last makes the most sense.

 

[35nothing]

Thanks for all the inputs. MY situation is as below.

1) 35 .
2) No 401k.
3) No medical or life insurance
4) some emergency fund of 4k.
5) Make around 66k net in the bank as income .
6) Monthly expenses are around 3500$(including CC payments)
7) No home/mortgage
8) CC debt of close to 15k..

Sounds terrible right ?

 

[PatrickA5]

Thanks for all the inputs. MY situation is as below.

1) 35 .
2) No 401k.
3) No medical or life insurance
4) some emergency fund of 4k.
5) Make around 66k net in the bank as income .
6) Monthly expenses are around 3500$(including CC payments)
7) No home/mortgage
8) CC debt of close to 15k..

Sounds terrible right ?

In your case I'd work on getting out of debt and upping the emergency fund. The rest can wait until you're done with those two.

 

[Rianne]

Check this out. In the box titled The Boglehead Philosophy you'll find 10 short little videos that are just what you're looking for! https://www.bogleheads.org/wiki/Getting_started

Quote from the site, "Bogleheads® emphasize regular saving, broad diversification, and sticking to one's investment plan regardless of market conditions. We follow a small number of simple investment principles that have been shown over time to produce risk-adjusted returns far greater than those achieved by the average investor."

+1, it takes patience and long term thinking. Regardless of market conditions is not for the faint of heart. I suggest studying the long term DJI graph. You can google it. There were major panic moments in the history of investing. We kept sticking to the plan, with the help of Bob Brinker in the early days, who is a Boglehead. That's how we became Bogleheads and it worked for us.

 

[Aerides]

Agree with Patrick.

Your priorities for this year are debt elimination and savings (emer fund) increase.

Your next priorities - perhaps at the same time. Find a better job? You have no health or life insurance and no 401k. Start looking, on the side. A position that gave you both of those, with a slightly lesser salary, may very well be worth it.

You cannot spend energy on money thinking about investing at this time. You have to get the basics down first.

 

[brucethebroker]

What I do at 37 in order...
1. Pay bills that are interest bearing (mortgage)
2. Maintain Emergency fund of 3months mortgage expense
3. Max my 401k to $18,500
4. Max my Roth IRA $5,500
5. Contribute $1k to 529
6. Do roth conversions from IRA up to ~15-17% taxable
7. randomly put money into brokerage as I can afford (lately not much with daycare$$$)

Well said. I would add PAY DOWN/OFF debt between #3 and #4.