Author Topic: Investing Help, career searching, mortgage options. Recent college grad.  (Read 689 times)

zoochadookdook

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About me:

26  (27 in may)

Assets:
Cash/assets for sale currently/stocks/bitcoin: $69,300
Roth IRA (vanguard 2060 target date) $21,800
 House: 80,000 equity (200k mrsp, I owe 120k)
Assorted house stuff (garage gym/tvs/all the other stuff/car): 5000?

Debt:
Student loans- 13200$ student loans (I graduate in fall 2018 and no interest accrues until 6 months from january at around 4%). I took them because they were interest free. Haven't used them.
Mortgage: 120k
 Credit cards: currently 700$ (they pay off every month)

Current Income:
-self employed. 25k a year plus extra (sometimes I have a renter in the house @600/month,-did 40k last year
*also plan on $500-1000 bi-annually in credit card churning the next few years using them to pay off loans and directly pay off the cards for the bonuses

Expenses:
monthly mortgage 584$
property Taxes/home insurance: around 320 a month
Utilities around 300.
Roth ira 480 or so

Extra expenses: Dog vet bills Girlfriend Gas food etc (say 200)

Total: around 1800 a month


I've been out of the nest since I turned 18 and did a stint bouncing around from house to house while working in order to save money. Hence why my assets (cash and such) are high for the income level. I also drive a junky car, buy cheap groceries, etc. My credit cards are always used for max categories and paid off monthly. I save buying on eBay sales/preowned when possible. Shoot even home contractors will knock off a few bucks if you pay cash (got 5% off attic insulation last spring by not using a cc). Pretty frugal.

I'll settle this into 3 current areas I have concerns about:  my mortgage, investing and career searching

Mortgage wise I haven't had enough after write offs to qualify on my own. My father took a loan against his 401k-i put 20% down and that's how we purchased the home in 2015. The issue is this rate is tied to the prime rate. I need to refinance for a fixed rate but have no idea where to start. Would I be better off going to smaller credit unions/paying off more of the principle prior to applying/taking less milage write offs? Mileage write offs are huge as I average around 30k a year driven at .52 a mile in my junker Honda.


Incomewise the biggest problem for me is keeping all inventory details for my business as it's all cash based. Currently I use an app and excel spreadsheet. I was considering buying the app mint but it's a bit steep at 10 a month. I also struggle with spending on food and extras every month (this month I needed tools for car repairs $20, groceries $100, eating out $100, soccer rec league $50 etc-next month it could be a random boys night bar tab that runs 50 bucks)/separating those categories.

My goals are to secure financial stability in the future. I have short term goals like purchasing a nicer car and such but I'll gladly ignore those if it contributes to a beach house and a sports car down the road. I may be getting married as well in the next year.

My question is what type of investments should I be considering at my age? I know I'm getting started later and may have to sacrifice risk for returns but aside from my roth I've never had any insight to the options of investors. My family was always under the "if you can't pay cash don't buy it" mindset. I don't have a 401k but was looking at that or at least a high yield saving account/money mutual fund. Multiple streams of income are a must with the variability in my income currently.

I'm also not sure if the path of study (management information systems) is the career I want to pursue. I worked for 12 bucks an hour this summer as a data intern (just a few months) and it seems like all entry level would hinder my 8 hours a week self employed position and pay about the same. I was considering going into the trades (electrician) as I like to work outside and they make great money and benefits (girlfriends dad is a retired master electrician) or even going back to school and getting a degree in something like engineering. All I've seen so far local is help desk and data entry in my post graduate search-neither of which offers over $15 an hour/no benefits.

Anyways any advice, direction, ideas, anything at all is appreciated.

Thanks

Z
« Last Edit: January 08, 2019, 04:24:35 PM by zoochadookdook »

Tass

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Re: Investing Help, career searching. Recent college grad.
« Reply #1 on: January 08, 2019, 04:34:19 PM »
First off, Mint is free. YNAB (You Need A Budget) costs $10/month - perhaps you got them confused?

Since you have lumped cash, assets, stocks, and bitcoin together, it's hard to see where your investments are at the moment. But I'm in roughly your position (25, $33k income, maxed out Roth and no 401k) and my strategy has been to open a normal, taxable brokerage account and just keep shoveling money into a 2060 target date fund. (There are managed and index target date funds - do you know which yours is? Index will have lower fees.) The target date is a little more expensive than a proper index portfolio you have to rebalance yourself, but I find it lets me get over my intimidation so I figure it's worth it.

For an emergency fund, or whatever money you want liquid, I use Ally bank. Hard to beat their interest rates (though not impossible). You could also look into a CD ladder but I'm no expert at that so I'll leave that to your research.

You are not getting started late. 26 is on the young end for this forum. You have plenty of time to take risks! Check out the Investment Order thread for specific guidance: https://forum.mrmoneymustache.com/investor-alley/investment-order/

But, er, I hope you don't have too much money in bitcoin.

zoochadookdook

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Re: Investing Help, career searching. Recent college grad.
« Reply #2 on: January 08, 2019, 07:06:16 PM »
First off, Mint is free. YNAB (You Need A Budget) costs $10/month - perhaps you got them confused?

Since you have lumped cash, assets, stocks, and bitcoin together, it's hard to see where your investments are at the moment. But I'm in roughly your position (25, $33k income, maxed out Roth and no 401k) and my strategy has been to open a normal, taxable brokerage account and just keep shoveling money into a 2060 target date fund. (There are managed and index target date funds - do you know which yours is? Index will have lower fees.) The target date is a little more expensive than a proper index portfolio you have to rebalance yourself, but I find it lets me get over my intimidation so I figure it's worth it.

For an emergency fund, or whatever money you want liquid, I use Ally bank. Hard to beat their interest rates (though not impossible). You could also look into a CD ladder but I'm no expert at that so I'll leave that to your research.

You are not getting started late. 26 is on the young end for this forum. You have plenty of time to take risks! Check out the Investment Order thread for specific guidance: https://forum.mrmoneymustache.com/investor-alley/investment-order/

But, er, I hope you don't have too much money in bitcoin.

Yeah so allocation is as follows:
btc 700 (if I sell)
stocks random 700
google pay 600 (consider bank)
bank 17k between checkings/savings
assets around 10k
41k cash in the safe
21,800 in unmanaged (I believe) target date 2060. Have maxed my ira every year

Tass

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By my understanding, there's no such thing as an unmanaged target date fund. Somebody has to adjust the asset allocation. I could be wrong.

Your $41k cash is terrifying to me. What if your house burns down? What if your safe is stolen? In the bank it's still losing value to inflation, but at least it's insured!

But about that inflation - you have $58k in basically negative investments right now. It loses 3% of its value every year to inflation, minus whatever meagre interest you might make in a bank account - and there's no interest in a safe! You've put the vast majority of your money into one bucket, and the bucket is leaky. That's why this community promotes index funds - put your money in many small buckets... that fill themselves over time. The metaphor falls apart, but regardless, you need to store that money somewhere where it will GAIN value over time, not lose it.

If I were you I would open a brokerage account and buy $50k of Target Date Index 2060. Keep a bit of cash around for emergencies, whatever amount you need to be comfortable. But certainly not in the 5 digits.

zoochadookdook

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By my understanding, there's no such thing as an unmanaged target date fund. Somebody has to adjust the asset allocation. I could be wrong.

Your $41k cash is terrifying to me. What if your house burns down? What if your safe is stolen? In the bank it's still losing value to inflation, but at least it's insured!

But about that inflation - you have $58k in basically negative investments right now. It loses 3% of its value every year to inflation, minus whatever meagre interest you might make in a bank account - and there's no interest in a safe! You've put the vast majority of your money into one bucket, and the bucket is leaky. That's why this community promotes index funds - put your money in many small buckets... that fill themselves over time. The metaphor falls apart, but regardless, you need to store that money somewhere where it will GAIN value over time, not lose it.

If I were you I would open a brokerage account and buy $50k of Target Date Index 2060. Keep a bit of cash around for emergencies, whatever amount you need to be comfortable. But certainly not in the 5 digits.

Yeah I need maybe 10k to run the business available at all times and enough for monthly expenses and a emergency fund in the bank....but I've just kind of been stashing it for the past year/2. I have a fireproof/lag bolted 500lb safe it's all in but yeah obviously kind of silly. I just have no idea what to do with it. Was thinking of hitting savings account bonuses but I don't have direct deposit being self employed so that kind of limits me. If anything I'm nervous of moving it out of the house to a bank-I constantly do 1000+$ transactions in a month but this is kind of my savings.

I was between a high yield savings or vanguard money market for the majority of it (at 2.54%). I can also max my Roth IRA right away which is another $5500 due.  In terms of opening a brokerage-this wouldn't be any sort of retirement fund-just simple taxed investments? Sorry I did a bit of research last year before moving all my junk out of Edward jones but it was all IRA oriented.

Tass

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If you're serious about farming savings bonuses, you can sometimes fake direct deposits with transfers from other banks. Doctorofcredit.com is a good resource for this. But this will be more complicated than investing it, so if intimidation is a factor for you (it sound like it) I would do the path of least resistance first. You can churn bonuses with only a few hundred or thousand dollars; you can still invest tens of thousands and pursue that on the side.

Maybe you can call a bank ahead of time to ask about the logistics of very large cash deposits? You might trigger some extra security provisions with that amount of money so better to be as transparent as possible. And/or maybe don't do it all at once?

The Roth limit is up to $6000 for 2019, for the record.

You should check the investment order thread I linked above to be sure what your next move is. If your situation is like mine, that will mean a simple taxable investment account. (But remember you won't pay tax until you sell.) However, you say you're self-employed, so you might qualify for certain self-employment retirement benefits like a personal 401k; I can't tell you much about that, sorry!

Here's the link again for simplicity: https://forum.mrmoneymustache.com/investor-alley/investment-order/

Laura33

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It strikes me that you are being penny-wise, pound-foolish.  You are clearly very good at managing your expenses and maximizing money-saving opportunities.  And yet you are throwing away money every year by putting all the money you save under your mattress!

As an illustration:  Assume you earned about an extra $60K over the past five years to save.  If you put that money in your safe, you'd have $60K today.  But if you had put $1K/mo. in an S&P 500 index fund for each of the past 5 years, that $60K would be more than $66K now -- even after the recent stock market, umm, "issues."  So you lost $6K by putting the cash in your safe -- just as clearly as if you'd spent that $6K on booze or shoes, just without the fun.

Same with the student loans:  you have $13K in loans that you took because they were free.  OK.  But in a few more months you will be paying 4% interest on them.  So what are you going to do with that $13K that you borrowed?  If you keep it in cash, that means you are paying over $500/yr for the privilege of keeping that cash in your bank account.  You are better off paying the loans off immediately with a chunk of that cash than paying them over time and keeping the extra cash under your mattress!  OTOH, if you really didn't need that money and had put it in a S&P 500 account 5 years ago, you'd have over $18K now -- enough money to pay off the loans with $5K to spare.*  So if you do decide to keep those loans around for some reason, at least put the money in the market, so you have a chance of making money off that cash instead of losing it to interest payments.

So my suggestion right now is to take a little bit of that mental energy you have devoted to managing your costs and devote it to learning about investing.  You have done an awesome job to date of maximizing the value of what you already know how to do, that is, keeping your expenses low and saving money wherever you can.  Especially for your age.  But now it's time to learn some new skills so you can improve the other half of the equation:  growing what you have.  Don't know where to start?  Call Vanguard, and tell them you want to start investing in either VTSAX or a target-based fund.  They will walk you through it from there.  And then set up an automatic deposit with them every month so you continue to invest without even being aware of it.  Future You will thank you.

*I should also note that this past 5 years was an unusually sucky time in the market.  If I assumed that you put your $13K in in December 2008 -- cherry-picking the market low -- you'd have over $40K now.  But I chose the "bad" more recent period specifically to illustrate that even a crappy short-term market will make you money if you let your investments ride over a period of years.

zoochadookdook

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It strikes me that you are being penny-wise, pound-foolish.  You are clearly very good at managing your expenses and maximizing money-saving opportunities.  And yet you are throwing away money every year by putting all the money you save under your mattress!

As an illustration:  Assume you earned about an extra $60K over the past five years to save.  If you put that money in your safe, you'd have $60K today.  But if you had put $1K/mo. in an S&P 500 index fund for each of the past 5 years, that $60K would be more than $66K now -- even after the recent stock market, umm, "issues."  So you lost $6K by putting the cash in your safe -- just as clearly as if you'd spent that $6K on booze or shoes, just without the fun.

Same with the student loans:  you have $13K in loans that you took because they were free.  OK.  But in a few more months you will be paying 4% interest on them.  So what are you going to do with that $13K that you borrowed?  If you keep it in cash, that means you are paying over $500/yr for the privilege of keeping that cash in your bank account.  You are better off paying the loans off immediately with a chunk of that cash than paying them over time and keeping the extra cash under your mattress!  OTOH, if you really didn't need that money and had put it in a S&P 500 account 5 years ago, you'd have over $18K now -- enough money to pay off the loans with $5K to spare.*  So if you do decide to keep those loans around for some reason, at least put the money in the market, so you have a chance of making money off that cash instead of losing it to interest payments.

So my suggestion right now is to take a little bit of that mental energy you have devoted to managing your costs and devote it to learning about investing.  You have done an awesome job to date of maximizing the value of what you already know how to do, that is, keeping your expenses low and saving money wherever you can.  Especially for your age.  But now it's time to learn some new skills so you can improve the other half of the equation:  growing what you have.  Don't know where to start?  Call Vanguard, and tell them you want to start investing in either VTSAX or a target-based fund.  They will walk you through it from there.  And then set up an automatic deposit with them every month so you continue to invest without even being aware of it.  Future You will thank you.

*I should also note that this past 5 years was an unusually sucky time in the market.  If I assumed that you put your $13K in in December 2008 -- cherry-picking the market low -- you'd have over $40K now.  But I chose the "bad" more recent period specifically to illustrate that even a crappy short-term market will make you money if you let your investments ride over a period of years.

So it's not entirely that cut and dry although yes-I definitely need to enter the market. I'm just unsure how to outside my IRA.

The loan amounts went directly into the ira. I have a 14k emergency fund (year of living expenses). I'm required along 10k to have in the business as that's generally the inventory average. Just now has inventory cleared out and the lump sum come to light. It's aggravating and annoying to realize I should have been throwing it in some sort of other account but no crying over spilt milk. By the end of this month I was between parking in vanguard money mutual or a high yield savings accounts (both for the liquidation ease if needed) but posted here hoping for more options. My Roth is all currently target date vanguard 2060 funds.

Tass

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You do realize that money market and high yield savings aren't what we mean by "in the market," right? Your Vanguard 2060 target fund will see much higher gains in the long term than a savings account of any kind. So yes - your emergency fund should go in something easily liquidated (my recommendation was Ally, but Vanguard is also good).

You should still have tens of thousands of dollars available to invest in the stock market. Have you had a chance to read the investment order post I linked?

zoochadookdook

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You do realize that money market and high yield savings aren't what we mean by "in the market," right? Your Vanguard 2060 target fund will see much higher gains in the long term than a savings account of any kind. So yes - your emergency fund should go in something easily liquidated (my recommendation was Ally, but Vanguard is also good).

You should still have tens of thousands of dollars available to invest in the stock market. Have you had a chance to read the investment order post I linked?


Alright tentative plan so far:
working with say 65k
14K (roughly 1 year expenses) in emergency funds (cd/savings/etc)
10k in business checking/assets for work
5500 going into Roth this year still
so it leaves me 35k to allocate between 401k/Backdoor Roth/debt pay down.

Right so step 0: check. Have it cash. Need to redistribute in money market/high yield/cds/treasury bonds. It mentioned the most common need for it was unemployment. Being self employed in the market I'm in should mitigate that risk considerably which allows for less cash allocation more cds/bonds.
1: I can match as my own employer and employee but it's all coming out of my pocket regardless so....skip?
2: my current mortgage is really my only interest debt-it's variable with the federal prime rate so skip (5.25%<8%)
3: I don't have a HSA-this is my last year under fathers insurance
4: First real step of work-max my Roth for 2018 ($5500 remaining after my initial $500 payment)
5:I don't have a 401k and the fees are not less than my vanguard-although they might be just as low. I suppose this could be step 2 as I have the means to max my 14k contribution.
6: Reading into this backdoor Ira
7:my 5.25% is still under the 5.75% (treasury yield +3%) although it is pretty close (start paying down)

So my student loans of 13k start accumulating interest this July at 3.8/9%. My house is around 120k is 5.25%. Both of these numbers are less than the pay down suggestions in the steps. Does this mean I should open the 401k/full match/backdoor ira/529 and if any is left over make extra payments to debt?