Author Topic: Scratch the house idea, how do I build wealth?  (Read 1885 times)

Bearblastbeats

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Scratch the house idea, how do I build wealth?
« on: January 12, 2018, 06:42:09 AM »
Ok. So scratch the house idea I posted earlier. I understand that I'll need to begrudgingly rent for another year or two while I build my credit back up and a nice little nest egg. I see a lot of people on here talking about investing. I perused a few sites last night (etrade, TD ameritrade, Ally invest). I don't entirely understand them, but I get that if I put , say, $200 in 3 different accounts, keep putting $200 in monthly at an average 7%, then in about 10 years I'll have significantly more. My older brother thinks investing is foolish and when my parents were around they never did any of it to my knowledge.

Not saying I want to start doing this, but I've done about everything I can think of to reduce my debits and maximize my credits and I don't feel any better off than when I joined here about 6 years ago. I understand I've been foolish with my money at times and with the spotty employment history in the beginning and buying (unnecessary) things, I'm ready to fully and entirely get back on track.

I'd like to eventually be wealthy enough to not worry about rents or mortgages and bills and the paycheck to paycheck grind. Not that I'm in terrible shape now, and I'm better off than I've ever been, but I'm ambitious and I want more.

What are some more things I can do to better my situation, other than just working more and paying off the remainder debts I have and just start socking away every penny?

Should I consider a Roth IRA? I also have an app idea I wish I knew how to get funding for, but where do I start with that?


JohnGalt

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Re: Scratch the house idea, how do I build wealth?
« Reply #1 on: January 12, 2018, 06:50:02 AM »
Maybe there's some aspect of each of us gravitating towards the posts on the site that interest us and that's just something you've avoided till now but I'm very surprised to hear someone has been visiting the site for 6 years and doesn't have the basics of investing down.  That said, congrats on being in a place and mindset to step out of your comfort zone and take the next step forward.

I think this series will cover everything you need to know

http://jlcollinsnh.com/stock-series/

Bearblastbeats

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Re: Scratch the house idea, how do I build wealth?
« Reply #2 on: January 12, 2018, 06:53:44 AM »
Maybe there's some aspect of each of us gravitating towards the posts on the site that interest us and that's just something you've avoided till now but I'm very surprised to hear someone has been visiting the site for 6 years and doesn't have the basics of investing down.  That said, congrats on being in a place and mindset to step out of your comfort zone and take the next step forward.

I think this series will cover everything you need to know

http://jlcollinsnh.com/stock-series/

Thanks. Blame it on my ADD and neuroticism.

slappy

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Louisville

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Re: Scratch the house idea, how do I build wealth?
« Reply #4 on: January 12, 2018, 07:02:19 AM »
Maybe there's some aspect of each of us gravitating towards the posts on the site that interest us and that's just something you've avoided till now but I'm very surprised to hear someone has been visiting the site for 6 years and doesn't have the basics of investing down.  That said, congrats on being in a place and mindset to step out of your comfort zone and take the next step forward.

I think this series will cover everything you need to know

http://jlcollinsnh.com/stock-series/
Yes. http://jlcollinsnh.com/stock-series/
Read it. Then read it again. Then read everything it recommends you read. Then come back with questions.

slappy

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Re: Scratch the house idea, how do I build wealth?
« Reply #5 on: January 12, 2018, 07:03:23 AM »
Maybe there's some aspect of each of us gravitating towards the posts on the site that interest us and that's just something you've avoided till now but I'm very surprised to hear someone has been visiting the site for 6 years and doesn't have the basics of investing down.  That said, congrats on being in a place and mindset to step out of your comfort zone and take the next step forward.

I think this series will cover everything you need to know

http://jlcollinsnh.com/stock-series/
Yes. http://jlcollinsnh.com/stock-series/
Read it. Then read it again. Then read everything it recommends you read. Then come back with questions.

You can also get the book from the library.

nereo

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Re: Scratch the house idea, how do I build wealth?
« Reply #6 on: January 12, 2018, 07:05:34 AM »
+1 to reading the
http://jlcollinsnh.com/stock-series/


Regarding investment ORDER, this is the benchmark around here

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153


The short version is that the path to being financially independent (FI) starts with first eliminating all high interest (>6%) debt and establishing an emergency fund so that you don't need to rely on credit card debt when emergencies strike.  Once that is done you can start investing, starting with tax-advantaged accounts (like an IRA) which will help you pay less in taxes. 


MORE to the point, if you want tailored advice to your circumstances you should consider posting a full case study. Information on how to do that is here: https://forum.mrmoneymustache.com/case-studies/how-to-write-a-%27case-study%27-topic/

Regarding your family - I'm sorry that your parents and siblings did not give you a very solid financial background. While the markets can fluctuate year to year over the span of many years the trend is always up.  On average your money will double every 8-10 years.  Very broadly speaking, this means that if you invest $250 every month and leave it there, in 20 years you are likely to have between $125,000 and $150,000, even though the total amount you have invested is only $60,000 ($250/month x 12 months x 20 years = $60,000).

That's the 'magic' of compounding.
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Bearblastbeats

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Re: Scratch the house idea, how do I build wealth?
« Reply #7 on: January 12, 2018, 08:27:28 AM »
Ok. So I contacted my works financial advisor and mentioned that I want to start investing my money to places other than my 401k contribution (currently at $12k). He is a broker through Fidelity. He mentioned I could set up a dollar cost averaging program into a well diversified manager so I would just need one account. I would need 500 to 1000 to open the account.

Is this sound advice?

slappy

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Re: Scratch the house idea, how do I build wealth?
« Reply #8 on: January 12, 2018, 08:39:26 AM »
Ok. So I contacted my works financial advisor and mentioned that I want to start investing my money to places other than my 401k contribution (currently at $12k). He is a broker through Fidelity. He mentioned I could set up a dollar cost averaging program into a well diversified manager so I would just need one account. I would need 500 to 1000 to open the account.

Is this sound advice?

Assuming you have enough of an emergency fund that you feel comfortable starting an investment, sure. Although you don't need 500 or 1000 to open the account, you may need that much to invest in a fund. Alternatively, you can an invest in a no fee ETF with any amount of money.

Sibley

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Re: Scratch the house idea, how do I build wealth?
« Reply #9 on: January 12, 2018, 08:40:51 AM »
Also assuming that you've followed the investment order, or can clearly articulate WHY it's best for you to deviate from it.

Fishindude

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Re: Scratch the house idea, how do I build wealth?
« Reply #10 on: January 12, 2018, 08:47:01 AM »
It's a whole lot easier to build wealth if you earn a whole bunch, so take a hard look at your current employment situation.   Are you working in a job that gets you the best return in dollars for the time spent?   Also, most of us have the time and could work some kind of a second job or have a side gig to bring in some extra cash.

Bateaux

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Re: Scratch the house idea, how do I build wealth?
« Reply #11 on: January 12, 2018, 08:51:25 AM »
FSTVX is the fund you should consider if using Fidelity. It's all you really need at this point.  Many of us here use VTSAX from Vanguard and it what JL Collins from The Simple Path to Wealth will recommend.   FSTAX is going to do the same thing for you because they are very much alike.  Fidelity is a great company just like Vanguard.   You're in good hands with them.   Now save, save, save.  Open a Roth IRA in either VTSAX or FSTVX once you've gotten your company match in your 401k.  The 401k can possible be Roth or traditional.   The Roth may be better if offered.  The Roth is after tax dolars but growing tax free.  The traditional is pretax dollars but taxed when drawn in retirement.  The traditional lowers your taxes right now due to being like a salary reduction.  Read the Simple Path to Wealth right now and save.  It's really that easy when you stick to it.   Good luck.
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Bearblastbeats

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Re: Scratch the house idea, how do I build wealth?
« Reply #12 on: January 12, 2018, 08:54:37 AM »
EF: $2000

401k = $12K. matched company 6%.

Side jobs (flooring installations and music) = ~$200-500/m. I made an additional $1k last month putting a floor in my boss' kitchen and living room and about $300 in playing out with my band. I have gig on the 26th of this month for another $100 and we are always getting booked.


Edit: just downloaded the path on my kindle app. thx.
« Last Edit: January 12, 2018, 09:07:18 AM by Bearblastbeats »

the_fixer

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Re: Scratch the house idea, how do I build wealth?
« Reply #13 on: January 12, 2018, 10:12:33 AM »
Spend substantially less than you make is the first step, the second step is to get it in as soon as possible and let compounding interest work it's magic.

I know I know... Hello captain obvious but it is such a simple principal yet most people do not follow it.

You can make a million a year and be broke ;) yes having a high income helps the rate at which you can put away money but only if you spend less than you make.

I have read several of your threads and your math does not add up, you are spending more than you realize.

You have to break out of the mentality that is propagated by your upbringing and family and make the decision to make the change from being broke to be on the right track until you do that you will be broke.

Your car is the perfect example of what someone that is bad with money would do.

Repeat after me, I refuse to let my upbringing or the way my family manages their money bring me down, I will rise above and make smart financial decisions.

This advice is coming from someone that grew up in a broke ass poor family and fought hard to break the cycle.

Put on your big boy pants and start kicking some financial  ass, you are already working on the side it is your spending and saving habits that are weighing you down.

Go forth and build your green army

Sent from my Pixel 2 XL using Tapatalk
« Last Edit: January 12, 2018, 11:44:25 AM by the_fixer »

TheWifeHalf

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Re: Scratch the house idea, how do I build wealth?
« Reply #14 on: January 12, 2018, 03:02:54 PM »
Ok. So I contacted my works financial advisor and mentioned that I want to start investing my money to places other than my 401k contribution (currently at $12k). He is a broker through Fidelity. He mentioned I could set up a dollar cost averaging program into a well diversified manager so I would just need one account. I would need 500 to 1000 to open the account.

Is this sound advice?

Yes. The HusbandHalf's employer has all Fidelity stuff (IRA, Roths, pension, 401k, HAS)
You sound like you are young, we are old.  He has been working, and using Fidelity for 27 years and our stache has grown from x to over 5x basically with dollar cost averaging over those years. There were years with 3 kids where we invested less, and years when they moved out, when we invested more.
We have just hired Fidelity to manage our account.

inline five

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Re: Scratch the house idea, how do I build wealth?
« Reply #15 on: January 12, 2018, 05:06:23 PM »
Well you can do it the hard way or the easy way.

The hard way involves working and living on crumbs stuffing everything you can into the stock market. For folks who make an above average income, this is pretty doable and involves little risk.

The easy way involves taking on as much debt as you can using other peoples money (known as OPM) and using leverage to increase your return. This is typically done with Real Estate. There is a reason why on most lists of wealthy folks the vast majority are in RE.

There was a fellow over on Bigger Pockets that over the course of three years built up a portfolio of 100 single family homes netting him an $8k/month income. He's retired at 27.

A buddy of mine took out a "business loan" of $100k and starting buying properties, that is how he got started without much savings. He made around $65k at the time. Folks on here would freak at the prospect of a $100k 6% loan. He made hundreds of thousands in just two years with that loan...

nereo

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Re: Scratch the house idea, how do I build wealth?
« Reply #16 on: January 12, 2018, 07:36:06 PM »
I wouldn’t call real estate “easy” - and I’d caution that those who don’t know what they are doing often lose their shirts.

Agreed it can be a powerful way to become very wealthy... but leveraging works both ways.
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Retire-Canada

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Re: Scratch the house idea, how do I build wealth?
« Reply #17 on: January 12, 2018, 10:16:33 PM »
Yes. If buying a house to live in is a step too far at the moment forget about being a landlord. Indexing is easy. Like folks have said above you can start with one fund. Just put money in and forget about it while it starts to work for you.

soccerluvof4

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Re: Scratch the house idea, how do I build wealth?
« Reply #18 on: January 13, 2018, 03:09:41 AM »
And stop blaming others for your future! Its not your parents fault, your brothers whatever you dont know or understand. Make it your mission to know and understand as its your life! At some point you need to take it upon yourself to carve out your own life! On that note as others have said read some of the links they provided and get started. I agree for now pick either VTSAX or the FSTAX and remember put money in there you don't need. Let compounding do its thing and from there take the time to read a little ever day, work on your savings rate and reduce you spending rate. You have the best thing going for you YOUTH! so get busy and good luck!
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Another Reader

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Re: Scratch the house idea, how do I build wealth?
« Reply #19 on: January 13, 2018, 04:46:27 AM »
No, it is not a good idea.  The work FA is trying to sell you a high fee managed account.  You don't want that.  Because you don't understand why you don't want that right now, I would suggest reading the JL Collins series and William Bernstein's "If you can."

Just because your parents did not invest, that does not mean you can't learn how to do it and be successful at it.  A couple of generations ago, very few individuals invested in stocks and bonds.  Somewhere along the way, people learned how to do it.  Since you are smart enough to be an IT project manager and to figure out the math of installing floors, you can do it, too.  It helps to make friends with people that are financially responsible and invest regularly.  They are people with whom you can discuss saving and investing intelligently.

In your shoes, I would start small.  You can open an IRA with Schwab for as little as $1,000.  You can buy their index funds in increments as small as $1.00.  An IRA is a good place to start.  You may be able to reduce current taxes with a traditional IRA, if you don't make too much money to qualify.  Or, you can open a Roth with after tax income and it grows tax free with no tax on the withdrawals.  You have until the tax deadline in April to fund last year's IRA.  How much of the $5,500 maximum can you come up with by then?  Then start funding the 2018 IRA.  If you can fund both, you could have $11,000 invested for retirement.

I would be a bit concerned about the cash cushion.  A few thousand in the bank at a decent interest rate will insulate you against having to use credit cards to cover unexpected expenses.  Credit cards are great for earning rewards, but alligators if you pay interest on them.

The goal is for you to be in charge of your money, and to manage it in your best interest.  If you make the right choices, that will happen.