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Advice for a 28 year old
Old 09-12-2019, 07:51 AM   #1
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Advice for a 28 year old

Hi All -

First time poster....

Looking for some $$ advice because I was too immature to listen to my dad in my college days (he is probably reading this).

I am a recently engaged male making over $120k annually. I have around $20K in savings and another $1k stashed in an acorns account (which seems dumb but the app is too easy to hold and earn $$ with).

My $20k is just sitting in a savings account barely earning any interest and it’s driving me crazy...

Question:

Where should I be putting this money??

Would love any input and advice!
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Old 09-12-2019, 08:12 AM   #2
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You're going to get 20 different answers.

I'd probably just throw it in an index fund from whatever investment company you go with. Fidelity and Vanguard are both popular.

https://www.bogleheads.org/wiki/Fidelity
This page lists index funds from Fidelity and Vanguard
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Old 09-12-2019, 08:37 AM   #3
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Welcome!

I would probably start by moving that 20K to an online savings account from Discover, Ally, etc. You will earn much better interest than your local bank offers (Discover is at 1.9% currently).

I would build up the savings account until it covers 6 months of your living expenses. Basically you're creating an emergency fund in case an unknown problem happens.

Obviously, pay off any debt you have, car loans, student loans, credit cards, etc. The interest you pay on your debts is going to cost way more than any interest you'll earn investing.

Once you have your emergency savings built up and debts paid off, you can open an IRA (Roth probably) and start contributing to that. As YoungSaver said, pick index funds from someplace like Vanguard. I use a simple single index fund (VBIAX) at Vanguard for my IRA (60% stocks/40% bonds). You may want something a bit more aggressive on stocks at your age, but that's up to you. Or pick a target date fund that will adapt your allocation as you age.

If you can afford it, open an IRA for your new spouse too.

If you still have extra cash you can open a taxable brokerage account and invest money in that.

If you're saving up for a house or other large purchase in the next five years or so, I would probably leave it in the online savings account.

120K is a good income, just try to live below your means. Spend less than you earn and save as much as possible.
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Old 09-12-2019, 08:38 AM   #4
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You probably want to keep that in cash or a money market account as an emergency fund. You are making a good income, but if you have any sudden expenses over $1K, you don't want to carry a balance on a credit card. And if you invest it, what happens if the market takes another nosedive right when you need it?


If you want to retire early, the important part isn't the $20K, but how much you will add to a retirement account every year from now on, and what to do with that money. That's a whole 'nother conversation!
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Old 09-12-2019, 08:40 AM   #5
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Since you are in a long term horizon for this money, go with 100% equities. A low fee broad market index fund would be a good choice. Let it ride, and keep investing 15% or more of your paycheck. Over 30 years you will be in great shape for early retirement.


Edit: I agree that you should have a larger rainy day savings amount than $1000.
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Old 09-12-2019, 08:47 AM   #6
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You're making great $ for a 28 yr old. Make sure your fiance has similar goals and strategies about $$. Nothing like $$ to destroy a relationship. Are you a saver? We were in debt at 28 yrs old. DH in graduate school and me working full time.
Do you feel lucky? I have this alter ego that wants to invest big in marijuana stock. DH would never do it, just me. I'd research the best single stock company and go for it. When do you want to retire?

Honestly, don't listen to me. Every once in awhile I think shoulda woulda coulda...McDonald's, early 70's, Amazon, 2000ish, Apple, late 90's.
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Old 09-12-2019, 08:56 AM   #7
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Congrats for thinking about this stuff now. Don't worry so much about your investment return. Instead focus on your spending. Keep that in check and everything should work out fine in the long run!
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Old 09-12-2019, 09:00 AM   #8
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Quote:
Originally Posted by mountainsoft View Post
Welcome!

I would probably start by moving that 20K to an online savings account from Discover, Ally, etc. You will earn much better interest than your local bank offers (Discover is at 1.9% currently).

I would build up the savings account until it covers 6 months of your living expenses. Basically you're creating an emergency fund in case an unknown problem happens.

Obviously, pay off any debt you have, car loans, student loans, credit cards, etc. The interest you pay on your debts is going to cost way more than any interest you'll earn investing.

Once you have your emergency savings built up and debts paid off, you can open an IRA (Roth probably) and start contributing to that. As YoungSaver said, pick index funds from someplace like Vanguard. I use a simple single index fund (VBIAX) at Vanguard for my IRA (60% stocks/40% bonds). You may want something a bit more aggressive on stocks at your age, but that's up to you. Or pick a target date fund that will adapt your allocation as you age.

If you can afford it, open an IRA for your new spouse too.

If you still have extra cash you can open a taxable brokerage account and invest money in that.

If you're saving up for a house or other large purchase in the next five years or so, I would probably leave it in the online savings account.

120K is a good income, just try to live below your means. Spend less than you earn and save as much as possible.
+1 - This pretty much covers all your bases. We retired early and you have about a 20-year head start on us. Imagine the amazing life you could build for yourself!
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Old 09-12-2019, 09:15 AM   #9
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The standard foundation is:

1) Pay off any credit card type debt.

2) Keep 4-6 months expenses in cash in a money market. I use Goldman Marcus. This is probably where that $20k will go.

3) Contribute to your employer 401k to capture the maximum match. Nothing better than free money. Nothing fancy- choose a low expense SP500 index fund.

4) Contribute the max to Roth IRA. Also in low expense index funds- Fidelity or Vanguard. Also- if you have trouble saving (as I did in my late 20's), you may want to max the 401k. It comes out of your paycheck whereas a Roth you have to earn the money, get it deposited and have the discipline to push that transfer-to-IRA button every month. If you don't have that, just max the 401k first and then max Roth.

5) If you make it here, great! You've maxed retirement accounts, have an emergency fund and are ready for a taxable brokerage account, investment real estate, etc.
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Old 09-12-2019, 04:14 PM   #10
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You are doing great! I'd keep the 20 grand handy, might be buying a house and weddings are expensive. Yeah, get the Company sponsored 401K going if you have one or start an IRA yourself if not.

Twenty grand of "ready cash" is not too much.
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Old 09-12-2019, 06:50 PM   #11
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Spend $15k of it on the honeymoon.
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Old 09-12-2019, 07:37 PM   #12
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I started this thread for you a couple weeks ago. ;-)

http://www.early-retirement.org/foru...rly-99570.html
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Old 09-12-2019, 09:29 PM   #13
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I sure would hate to be 28 years ago and starting to save for retirement--with net zero interest rates and very expensive stock market pricing. But time and compounding are your biggest allies.

My advice: Live a very frugal life. Minimize eating out. Invest in 401K's as far as the company funds are matched. Then go to Roth IRA's to the max. Pay close attention to your investments, and buy the funds that are productive.
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Old 09-21-2019, 12:34 PM   #14
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I started when I was 29.... wish I had started a bit earlier. I am 46 today. Just some things to consider. As so many have mentioned, time and compounding interest is the key. In the first decade you will say “why am I doing this” as some years might seem like you are going backwards. Remember to stick with it. I believe the things in life and the stock market are cyclical. In 2009 we had one of the worst market downturns ever. So by my thinking that will probably not happen again for a long while... this is good for you. Capitalize on that. Put in a minimum of 15%. All in ROTH 401k and IRA. Only in the last 5 years did I clear the 100k mark. I now have a net worth well over 1 million. And the only debt left is my house. And that will probably be done in less than 5 years. Slow and steady is the only way to win.

Oh.... and one more thing that is critical. Fate is comming to kick your butt financially. As it is comming for all of us. Prepare for that! So that when it comes, you can smile, and make the problem go away with cash. Statistically you WILL be laid off at least once... never think that just happens to the other guy...
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Old 09-30-2019, 09:35 AM   #15
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Originally Posted by armor99 View Post
I started when I was 29.... wish I had started a bit earlier. I am 46 today. Just some things to consider. As so many have mentioned, time and compounding interest is the key. In the first decade you will say “why am I doing this” as some years might seem like you are going backwards. Remember to stick with it. I believe the things in life and the stock market are cyclical. In 2009 we had one of the worst market downturns ever. So by my thinking that will probably not happen again for a long while... this is good for you. Capitalize on that. Put in a minimum of 15%. All in ROTH 401k and IRA. Only in the last 5 years did I clear the 100k mark. I now have a net worth well over 1 million. And the only debt left is my house. And that will probably be done in less than 5 years. Slow and steady is the only way to win.

Oh.... and one more thing that is critical. Fate is comming to kick your butt financially. As it is comming for all of us. Prepare for that! So that when it comes, you can smile, and make the problem go away with cash. Statistically you WILL be laid off at least once... never think that just happens to the other guy...
I definitely feel like I am backpedaling at times. Third kiddo on the way, jacked up daycare costs at infant rates adds extra $3k to our expenses next year... low raises of 1 to 1.5 thankfully DW has been getting decent but still never seems like enough, especially when Property Taxes jump double digits every year. 2021 we always knew would be tight, just hoping to have enough cash to weather the storm then hope when daycare costs go away things get a little easier.
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Old 10-19-2019, 08:46 AM   #16
Confused about dryer sheets
 
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I feel like being aware of this is half the battle. Imagine being willingly blind to hard times ahead like many people are...
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Old 10-19-2019, 12:28 PM   #17
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$120K, high tax bracket. Higher if working spouse. If you are a DIY and self-starter.
Think Rental Real Estate. Not REIT. Depreciation will lower your taxable income.
You have time on your side. In 20+ years, you will be sitting pretty!
Many poster's on this forum know what I'm talking about!
But it takes work and maturity. Good luck.
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