Graduate student looking for investment advice

[NineQuarts]

I'm looking for advice on how to allocate my available funds to start getting my employees working for me. I'm a 24 year old graduate student, so my income does change from full time to part time during the year. Here's a breakdown of my finances:

Income: $30,000/year
Debts: None
Property: $18,000 (got a new car before becoming a Mustachian)
Investments: $4,000 in Roth IRA, $400 in retirement account (just started and university forces a 7% contribution each month)
Available cash: $5,000

I want to put most of the $5,000 in an investment account and add about $1,000/month to start saving for a house or just let it grow. I've been looking at Vanguard accounts (VBINX, VFINX, VTSMX) but I'm not sure which to go with if it even make much difference.

I'm a newcomer to investing so any help will be very appreciated!

[frugaliknowit]

I'm looking for advice on how to allocate my available funds to start getting my employees working for me. I'm a 24 year old graduate student, so my income does change from full time to part time during the year. Here's a breakdown of my finances:

Income: $30,000/year
Debts: None
Property: $18,000 (got a new car before becoming a Mustachian)
Investments: $4,000 in Roth IRA, $400 in retirement account (just started and university forces a 7% contribution each month)
Available cash: $5,000

I want to put most of the $5,000 in an investment account and add about $1,000/month to start saving for a house or just let it grow. I've been looking at Vanguard accounts (VBINX, VFINX, VTSMX) but I'm not sure which to go with if it even make much difference.

I'm a newcomer to investing so any help will be very appreciated!

Not sure what you mean by "getting my employees working for me".

I would start with an emergency fund of about 8 months expenses.  Given that you probably bring home around $1875 per month minus state and local taxes, that would be some fraction of $15,000 in a no-risk account.  Then, I would maximize any 401K match available (you don't say whether your employer matches), then I would max out my Roth IRA ($5500 per year).

Once that is accomplished, if you would like to be a homeowner, save up for a down payment on a home, otherwise invest in no load index funds.  I like Vanguard Total Market and Vanguard Total International (75/25, 80/20, or 85/15 depending on your view).  My views are a combination of myself, MMM, Suze Orman, and Dave Ramsey.

[NineQuarts]

Oh, it's something he always says in the blog to mean getting your money to make money for you by investing.

I would start with an emergency fund of about 8 months expenses.  Given that you probably bring home around $1875 per month minus state and local taxes, that would be some fraction of $15,000 in a no-risk account.  Then, I would maximize any 401K match available (you don't say whether your employer matches), then I would max out my Roth IRA ($5500 per year).

The $5,000 I currently have has been my 'emergency fund', but it is really only valid for about 5 months of expenses. Is it not a good idea to have a smaller fraction of that in a checking account and use a rewards credit card to pay bills which would then be paid off at the end of the month? Then I could start growing that money rather than losing it to inflation is my thought.

[frugaliknowit]

If you are disciplined and careful, sure use the rewards credit card.  Keep in mind there's a reason why McDonalds accepts credit cards (because on average people spend more).

An emergency fund can be in anything liquid (checking, savings, Money Market account).  Personally, I use "kasasa accounts" which are rewards checking accounts (with hoops you need to jump through).  Check out kasasa.com.  If you want to keep it at 5 months, that's up to you.

[NineQuarts]

Thanks. I'll look into that. I appreciate the advice!