Author Topic: Noob looking for guidance!  (Read 4697 times)

Merdox

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Noob looking for guidance!
« on: November 29, 2014, 12:37:47 PM »
Hi friends,

BRAND new Mustachian here looking for initial advice. I'm 30, single, and make a good salary, but I have very little free time and would love to retire early, so I'd like some help with my initial investment. I have about 180k burning away in a savings account (please feel free to judge away). I'm thinking I'll put the bulk into an index fund and/or ETF to start seeing a little passive income. Here are my questions:

1. How much should I put in? I'm thinking I'll start with around 100k and leave the rest for other investments or purchases, e.g., in case I get married or have kids. Thoughts?

2. Vanguard or Betterment? Sub-question: VTSMX, VTSAX, or VTI? Or a mix of the 3?

As it stands now, I'm leaning toward opening with Vanguard and dumping the whole 100k into VTSAX. If that's dumb, please tell me why. Also, please feel free to share any other advice!

Endless thanks,
Merd

lizzigee

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Re: Noob looking for guidance!
« Reply #1 on: November 29, 2014, 01:15:41 PM »
Welcome to this forum. 
Have you read all of MMMs blog? It's a great window into a whole new way of thinking.  You don't have to transform into him, but there are sure to be many valuable points for you to ponder.
I'm outside of the States so I'll leave the vanguard type questions to others. What would also be helpful though, is a brief outline of your take-home income and fixed and variable expenses, also any other money in retirement accounts. Info regarding how much of your $180K to invest and where may change markedly dependent upon your answers (if you feel like providing them) If you're earning $120K p year it's a whole different kettle of fish to having that much to invest if you're earning $40K per year IMO.

Terrestrial

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Re: Noob looking for guidance!
« Reply #2 on: November 29, 2014, 01:29:03 PM »
180k is a lot of money to not be earning any meaningful return on, especially for someone who wants to retire early.

What is the 'likelihood' that you would be getting married/having kids in any short term period of time.  Is it just a philosophical 'what if' quandary or are you actually close to said event.  When you say single does that mean 'not married but in a relationship and probably will be soon' or...no current relationship prospects for marriage.  The reason it matters is...investing 100k is a good start but i wouldn't be leaving 80k out there earning nothing if these types of things that require your cash aren't actually likely to happen anytime soon.

Also...why would you need the 80k in cash even if you do get married/have kids somewhat soon.  Neither of those requires particularly large up front cash needs (unless you make it that way...50k wedding or such, or feel that means you must buy a house).  If you don't think you will really need this cash any time soon i'd dump a lot more of it into investments, and if you make a good income, use your savings to rebuild over time whatever you anticipate needing for some point in the future for the marriage/kids.  Maybe for example keep 20k around in cash and invest 160k, and split any incoming savings between cash and investing in some proportion that makes sense for you.

« Last Edit: November 29, 2014, 01:40:31 PM by Terrestrial »

Terrestrial

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Re: Noob looking for guidance!
« Reply #3 on: November 29, 2014, 01:33:16 PM »
Thanks for your response, Lizzi! I have read a good deal of MMM which is what led me to this question, but I can't find a clear idea from him on where exactly to put my money (he says good things about all of these choices). To answer your questions, I make 125k/year and save the vast majority of it which, after taxes, comes out to probably around 70k (the savings). I don't have any retirement accounts and no employer match.

Just saw you posed this after I finished typing.  Do you have access to a 401k or similar...even with no match? 

Set it to max out (18k/year)....like first thing Monday morning. If you can jack up this years withdrawal to the highest you possibly can even if you have to live on some of your spare cash for this month (december), in order to get the most benefit you can before the end of the year.  Or figure out if you can retroactively max fund it to the max for this year (17.5k)

Zero reason that making 125k/year and saving 70k that your 401k shouldn't be maxed out.  If you don't have access to a 401k..perhaps others can chime in with what other tax deferred options are available?  I've never been confronted with not having one so I'm not super knowledgable in that area.
« Last Edit: November 29, 2014, 01:36:10 PM by Terrestrial »

lizzigee

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Re: Noob looking for guidance!
« Reply #4 on: November 29, 2014, 01:36:28 PM »
Hi again Merdox. Bummer about no employer match, even here in NZ we get a match up to 3%. Is it the middle of the night or something over there? Normally wisdom would be pouring forth by now (its 9.30 am here, I need to go do some housework. Joy!) Congrats on finding MMM, I don't earn anything near what you do, but it's enabled me to make some serious life-improving changes in my strategies. Choose what information fits your situation and personal philosophies, then go for it. 
I see someone else has just posted, so .... it begins!

arebelspy

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Re: Noob looking for guidance!
« Reply #5 on: December 03, 2014, 07:54:20 PM »
Welcome Merdox!

I'd recommend you read JLCollins' Stock Series here: http://jlcollinsnh.com/stock-series
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Chrissy

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Re: Noob looking for guidance!
« Reply #6 on: December 03, 2014, 09:33:21 PM »
Hi friends,

BRAND new Mustachian here looking for initial advice. I'm 30, single, and make a good salary, but I have very little free time and would love to retire early, so I'd like some help with my initial investment. I have about 180k burning away in a savings account (please feel free to judge away). I'm thinking I'll put the bulk into an index fund and/or ETF to start seeing a little passive income. Here are my questions:

1. How much should I put in? I'm thinking I'll start with around 100k and leave the rest for other investments or purchases, e.g., in case I get married or have kids. Thoughts?

2. Vanguard or Betterment? Sub-question: VTSMX, VTSAX, or VTI? Or a mix of the 3?

As it stands now, I'm leaning toward opening with Vanguard and dumping the whole 100k into VTSAX. If that's dumb, please tell me why. Also, please feel free to share any other advice!

Endless thanks,
Merd

1)  Invest all but 6 months of expenses.  You have so much coming in that you could easily rake up a stash in just a few months time for a wedding or house.  And, remember, your SO should contribute to these things too!

2)  Go for what's easy: Vanguard VTSAX. 

You don't qualify for the tax deduction on a traditional IRA, and you are already in the phase-out bracket on a ROTH ($114,000-$129,000 income).  Put in the max you're allowed.  http://www.irs.gov/publications/p590/ch02.html#en_US_2013_publink1000231012  Use worksheet 2-2.  You have until Apr. 15, 2015 to contribute, so no need to rush!  You can buy VTSAX in the ROTH.

Yeah, I think you can only do the ROTH for this year, unless you are self-employed... individual 401k are for small business owners/self-employed folks.

catccc

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Re: Noob looking for guidance!
« Reply #7 on: December 03, 2014, 09:39:41 PM »
Are you self employed? 

When people are asking if you have access to a 401K, they are usually asking if your employer offers a 401K plan as an employee benefit.

arebelspy

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Re: Noob looking for guidance!
« Reply #8 on: December 06, 2014, 11:11:20 AM »
Thanks for the responses, guys! I've since reduced my ignorance a bit. I don't have access to a 401k. I did, however, set up my portfolio this week with Vanguard. I maxed out a Roth (VTSMX because I can't put enough in there for the admiral shares yet, but I plan to transfer next year when I do) and I put the rest in VTSAX and VTIAX at about an 85/15 split. I feel okay being a little aggressive and keeping bonds out of the portfolio for now. I left a modest amount in the bank to cover immediate expenses/emergencies, not far off from your 6 month suggestion. Not the fanciest portfolio, but I think it covers the bases.

That's an awesome start!  Continue reading and educating yourself and stick with your plan that you set up.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.