Author Topic: Hi All, My name is Darkshark and I'm a former Consuma-Sucka  (Read 9502 times)

darkshark16

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Hey guys & gals,

I just wanted to explain my current situation and thoughts and ask if you guys thought I was on the right track, had any input, or think I'm doing something completely wrong. So let me start by explaining my situation:

I have a job I love, but there's not much pay in it and I'm here for now mainly because I like it (easy work, great boss) and I'm a young professional farming experience that is just lucky to have any job in my depressing career field (communications). I know, not the best booming business to be in, but I enjoy it and even though I've thought about getting additional schooling, the debt of another degree, plus not knowing if I would like being in any of the handful of STEM fields keeps me away (I do know I hate programming!) and after a few years of experience I have found jobs in the field with decent pay, but they just may require me moving. The only debt I have is from a car (11.6k) so I've decided to take on a second job for the next few months to try and pay it off and save a little on the 2.9% APR. Even though my primary job doesn't pay well, it does have some notable perks (I work for the state) I get free healthcare, a gym on site that is fantastic and only $30 a month, and a pension that if I were to stay in for until I'm 60, would pay me 69% of my five years' highest salary, but 6.75% of my paycheck goes to funding the pension (still a good deal though) but this blog has had me dreaming of early retirement. My finance situation is as follows:

Assets:
2.4k emergency fund (should be 3k but I'm waiting on my roommate to pay me back on some damages he made to my car)
1.8k roth mutual fund
2.4k owned on Car. It's valued at 14k, but has 11.6k remaining on it (I've been paying 3x the minimum on it for the past few months)
$20 invested in Acorns app (just trying to see how it goes let me know if anyone has any thoughts on this!)
$500+ sitting in credit card rewards points that I plan to use on my next 6 month car insurance payment (I pay the 6 months up front for a discount)
Various old games and crap that I plan on selling on eBay/Craigslist

Take-home pay:
1800 primary job
1100 secondary job
Total 2900

Monthly costs:
rent+utilities 500 (rent 400 w/roommate, internet 20, electric 50, water&trash 30)
Gym+netflix 40
Groceries 160
Gas 80
Fun money 100 (used on eating out and entertainment and hanging with friends)
random expenses that come up 25 (gifts/oil changes)
Total Monthly Costs 905

Remaining amount for the sake of ezyness: 2k

Questions:
Right now I'm living at around less than 30% of my income and am trying to figure out what to do with the remaining 70%. My first thought was to just work the second job a few months and pay off my car and then I could quit and still live on about 50% of my income and have more of a work/life balance, which I value. But if I could handle it, I would ideally want to work the 2nd job for longer at least until I could find a main primary job that pays more.

My best friend is big on investing and is an accountant and told me about a fantastic mutual fund (been around for 20 years with a great return) that is closing to new investors at the end of this month, but requires $2500 to open. I figured it would be worth foregoing about a month's worth of my car payment to go into just opening the account and getting in.

Even though the APR isn't super high on the car, I would like to pay if off as soon as possible because if I lost my roommate then my rent would double until I got another one, and that's not sustainable for me to pay 1k on rent. However, I have thought about if that happens getting an apt thats $750 but close to work, and then just walking to work every day, and selling my newish car and buying one that's older and making about 5k doing that and investing it (I'd feel more comfortable owning an older vehicle if I could walk to work.) But I'm not sure. I've also thought about looking into jobs that would pay more even if it causes me to move because then I could move and just find a room to rent in a house nearby to my job and still have a fairly low cost of living anywhere I went—but I'd be giving up my pension. Also, I'm wondering if I'm too worried about paying off my car, and should be using the extra money to invest since its not a high-interest debt and then just pay the minimum 320 on my car and invest 1680 each month. I've also drawn up a post-car debt budget as well but for the sake of brevity I'll make a separate post to get opinions on it.

Thanks for reading and let me know what you guys think!

Frankies Girl

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #1 on: May 08, 2015, 12:12:52 PM »
Overall, you're not doing too bad, but I had to jump in to say please do not invest with your friend's "hot tip." If you don't know about how to invest and how the whole investing thing really works, you should do some investigating/research yourself and make your own decisions on whether this is really good advice (what happens to the friendship if you lose a bunch of money?).

I'd suggest you do some more reading around the MMM forum and also add in this stock series (helped me out anyway):
http://jlcollinsnh.com/stock-series/

As you're capable of living off of even half of your salary, the fact that you're not making a crazy high salary right now isn't as big of an issue as you'd think. The amount of money you make isn't as important as your savings rate, and you're doing amazingly well with that at the moment. The next step is to continue to keep your costs/expenses low, pay off the last of your debt and get that extra money working hard for you ASAP. The stock series referenced above is going to point you to index funds investing, and frankly that's probably one of the best and easiest ways to get your money growing.

Vanguard, and all in the VTSAX mutual fund (not sure of your age, but if you're in your 20s, then you wouldn't be wrong to go  100% in that fund).

Jim Collins' advice for his own daughter (at the time early 20 year old) would be a good thing to read and mull over:
http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/

You should also look at the Bogleheads site as well, as they have a plethora of suggestions, and just great investing tips in general.

Fact is, you are in a great position to be done in 10 years with your current savings rate. So good job, and keep it up!


darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #2 on: May 08, 2015, 01:31:14 PM »
Thanks for your feedback Frankies Girl!

I am in my 20s and I've done a little bit of research into investing but there's always more to learn! Those are some good pointers and your advice on looking more at the percentage rather than the income number really nailed home for me!

I looked into the fund that my friend recommended. Its expense ratio is higher than the vanguard account you recommended, but I'm still leaning more towards that one for a few reasons: its a health/science fund and the occupational handbook states this as one of the fastest developing markets in the years to come, the fund has been around for about 20 years and has averaged a 16% return in that 20 years time. In the past few weeks when the stock market has gone down, it has still gone up. Also the boomers will be retiring soon and that will bolster the health field even more over the next few decades. Another good sign about this fund is its closing for investors in a month (this seems to be a common trend for good fund.)
You can learn about the fund here: http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=PRHSX let me know what you think!

We're best friends and I know I can't be mad at him if I lose the money from the market going down a few weeks/months/years because I'm in it for the long term so when I see a market crash I just think oh! Sweet! Stocks are discounted right now! He also owns a lot in this fund now so he'd be in the same boat as me on this.

Again, thanks for all the pointers!

ShoulderThingThatGoesUp

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #3 on: May 08, 2015, 01:47:04 PM »
You aren't educated enough or rich enough to invest in particular sectors betting on appreciation. And neither am I.

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #4 on: May 08, 2015, 02:04:35 PM »
What would you suggest I do then ShoulderThingThatGoesUp?

zolotiyeruki

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #5 on: May 08, 2015, 02:46:49 PM »
First, I think you've got a great handle on your expenses.  Kudos there.  In fact, I can't find any solid reasons to facepunch you.  The fact that you have a high savings rate in your 20's is a Good Thing.

That said, here are my thoughts:
You have about $24k/year worth of savings contributions, with a total income of about $35k.  That puts you comfortably in the 15% tax bracket.
Option 1:  contribute $18.5k to 401k (if available), $5.5k to Roth.  This puts your AGI at about $16.5k, and taxable income around $6.5k.
Option 2:  contribute $18.5k to 401k (if available), $5.5k to a traditional IRA.  This puts your AGI at $11k, and taxable income at $1k.
Contingency for both:  If you don't have a 401k available, max out an IRA (either sort, but I'd suggest traditional first), then sock the rest in a traditional investment.

What type of investment/Roth/IRA?  I say stick with the simple stuff--pick a low-fee Vanguard Index fund and quit worrying about it.

thd7t

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #6 on: May 08, 2015, 02:48:05 PM »
1. Invest in VTSMX through Vanguard.  When it hits $10k, it will automatically convert to VTSAX.
2. What's the rate on your Car loan?  You didn't include that payment in your expenses at all. 
3. Your expenses are really low.  Focus and keep it that way.  Great work on that!

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #7 on: May 08, 2015, 03:01:28 PM »
@zolotiyeruki
Thanks for breaking the numbers down for me that helps give me the big picture view of my income! I've been hesitant to pour money into an employer's 401k for a few reasons, because my primary job offers the pension, it doesn't offer a matching 401k, so I'm not getting any free money there as opposed to just investing in a mutual fund that yields higher returns. I do have a match with my secondary gig but I'm not planning on staying there long and when you leave the job you incur fees on that account. I could roll it over after but I'm not sure what the penalty/fees would be involved on that one, and as mentioned before, I'm mainly only there to throw my assets towards paying off the car.

So with those things in mind I've made a roth account with this mutual fund: http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=PRWCX
Its a long-term fund that has been around for about 40 years yielding an average of almost 12 percent since inception. I understand that the expenditure is a bit higher than vanguard, but the bottom-line return and the fact that its a moderate-risk is the reason I went with it. I chose roth over traditional because of my current low tax bracket and the easy way I always understood it was, if you plan to make more money in the future, go with roth, and like I said earlier, I'm a young-buck expecting to make more in my later years! Thanks for replying and giving some pointers!

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #8 on: May 08, 2015, 03:06:20 PM »
@thd7t I have 11.6k left on the car loan at a 2.9% APR. I didn't include it because I'm currently planning on throwing all my savings/remaining income towards it to pay it off and then when its gone that's what I'll be left with.

thd7t

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #9 on: May 08, 2015, 03:09:33 PM »
@zolotiyeruki
Thanks for breaking the numbers down for me that helps give me the big picture view of my income! I've been hesitant to pour money into an employer's 401k for a few reasons, because my primary job offers the pension, it doesn't offer a matching 401k, so I'm not getting any free money there as opposed to just investing in a mutual fund that yields higher returns. I do have a match with my secondary gig but I'm not planning on staying there long and when you leave the job you incur fees on that account. I could roll it over after but I'm not sure what the penalty/fees would be involved on that one, and as mentioned before, I'm mainly only there to throw my assets towards paying off the car.

So with those things in mind I've made a roth account with this mutual fund: http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=PRWCX
Its a long-term fund that has been around for about 40 years yielding an average of almost 12 percent since inception. I understand that the expenditure is a bit higher than vanguard, but the bottom-line return and the fact that its a moderate-risk is the reason I went with it. I chose roth over traditional because of my current low tax bracket and the easy way I always understood it was, if you plan to make more money in the future, go with roth, and like I said earlier, I'm a young-buck expecting to make more in my later years! Thanks for replying and giving some pointers!
Put money into the 401k at your second job up to the match!  You won't get an ROI like that anywhere else.  I don't care if it's a shitty match.  It beats other investments.  There's no cost and really no effort to rolling over.  It will also lower your taxes further.  I'd advise a tIRA, but if you insist on going Roth (which is still good), get your taxes as close to zero as possible.  You have plenty of money to invest, so get it into tax protected accounts.  Head over to mrmoneymustache.com and read about investing.  It's really accessible, there.

RetireAbroadAt35

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #10 on: May 08, 2015, 03:15:53 PM »
If you wanted to do something about the car ... the smartest financial move would be to sell it and buy something cheaper in cash.  You can do a lot with a $3k used car.  That said, your 2.9% APR isn't bad.  I wouldn't be in a huge hurry to pay it off.

If you have a 401k, max it as much as you can, especially if the funds it offers are low-fee (like Vanguard index funds).  Even if you don't get a match, you can still take advantage of those sweet, sweet tax protections.

Then I would definitely open an IRA and contribute to that.  Lower's your AGI, lowers your taxes, and gives you tax-protected savings.  Open it at Vanguard and choose low-fee index funds.

I would also ignore your friend's hot tip.  You've got no idea what's going to happen with that sector.  You'd do much better with the power of compounding interest in the tax-protected 401k/IRA accounts.

As for what funds to invest in, it's hard to go wrong with a Lazy portfolio.

Read this: http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/
Then this: http://www.bogleheads.org/wiki/Lazy_Portfolios
Then this: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

Let the power of compounding compel you!

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #11 on: May 08, 2015, 03:22:41 PM »
@thd7t
The only thing about the 401k match is they have a vested timeline so I have to stay with them for a certain amount of time and not touch the funds for a certain amount of time, and I'm only planning on staying there for a few months and I think you have to be there for a year to hit it, so I think I'd rather just throw the extra money at the car since I won't get the match.

Frankies Girl

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #12 on: May 08, 2015, 03:28:53 PM »
That TRowePrice fund you mentioned earlier isn't great. In fact, another overly eager poster just brought it up as well here siting exactly the same "perks" you did: http://forum.mrmoneymustache.com/investor-alley/what-do-you-guys-think-about-this-fund/msg655153/#msg655153

Gotta say, they must have a kick ass marketing department to get so many fish to bite...

That fund you mentioned is a sector market, and putting all of your eggs into that one basket is dangerous when you have such a small basket to begin with. Coupled with the high expense ratio, it is an unnecessary risk to be taking right now (Just an FYI, I read over the fund's performance, investments and such, and still I wouldn't touch this fund with a 50 foot pole, and I have money to spare in speculative ventures... you don't.)

Passing up a 401k that has a match (or even if it didn't) is leaving money on the table. It is very easy to rollover a 401k after you leave a job and in general it won't cost anything to do so. Or at least it has been my experience that it costs nothing, unless you move it to another company, in which case there may be small fees involved with the transfer process.

I think from what you've posted so far, you are rushing forward without taking the time to really think and digest the advice you've received and still might receive (this board has many highly intelligent investors that may still chime in), so you might want to step back, slow down and do some more research and get some more opinions. Not sure why you'd ask us for help and then not take it (or even take a few days to consider) before investing in that (or any) fund, as it will still be there a few days or even weeks from now.

Take some time to figure out your investor policy statement, your asset allocation and then what funds best fit your investing goals and style. 

http://www.bogleheads.org/wiki/Investment_policy_statement
http://www.bogleheads.org/wiki/Asset_allocation
http://www.bogleheads.org/wiki/Lazy_portfolios


RetireAbroadAt35

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #13 on: May 08, 2015, 03:35:43 PM »
@thd7t
The only thing about the 401k match is they have a vested timeline so I have to stay with them for a certain amount of time and not touch the funds for a certain amount of time, and I'm only planning on staying there for a few months and I think you have to be there for a year to hit it, so I think I'd rather just throw the extra money at the car since I won't get the match.

Try as I might, I cannot grok that sentence.

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #14 on: May 08, 2015, 03:36:57 PM »
@RetireabroadAt35
I've seriously thought about doing that with my car! but I like my car it has low miles, a 10 year warranty, solid mpg and is a good size for me (2014 Hyundai Sonata) but still I have been tempted to trade it out for an older Elantra and I've been actively looking to see if a good deal pops up! But like you said the 2.9 isn't too bad, and I do like the car. So you're thinking I should invest more now and pay the minimum instead of paying it off? I like that idea but the only problems I have with that is my living situation is volatile. If my roommate leaves my rent would double for a couple months until I find one, that combined with a 320 monthly payment for the car raises my fixed costs by almost 1k. Not pretty, especially if I quit the second job. But I can insulate myself from that sooner/better if I have the car debt completely gone, and get that additional cashflow.

I'm all about lowering my AGI, but right now I'm in a pretty low tax bracket—for my income—so should this be a high concern for me now? Especially since I'm pretty sure I'll be making more later with more experience and then I'll shift into a thinking of lowering that AGI and I'll be loving my Roth more in my later years when its all tax-free!

Thanks for the replies and great conversation! I'm loving it.

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #15 on: May 08, 2015, 03:38:50 PM »
@retireabroadat35
I won't be with the company long enough to ensure the match. The tax benefits mentioned earlier may still be worth it though.

Fuzz

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #16 on: May 08, 2015, 03:45:44 PM »
I'm having a hard time wrapping my head around the fact that your take home pay is $2900, you're living on $900/month, and your total assets are $3200.  You should have a bigger stache after 2 months. So either your arithmetic is off, or you've blown your $900 budget every month. I guess my advice is to focus on actually saving the $2K/month. I wouldn't make any extra payments on the 2.9% loan, and just put $24K/year into your retirement accounts.

Also, communications can be really lucrative if you do it right. While you say you're not interested in programming, wordpress+marketing=money, and you can do a lot with drag and drop builders in wordpress. Get rid of the idea that because you're in communications, you're limited to a low income. Lots of people that primarily communicate (sales, lobbyists, marketers) can do really well.

good luck!


Fuzz

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #17 on: May 08, 2015, 03:48:19 PM »
I'm having a hard time wrapping my head around the fact that your take home pay is $2900, you're living on $900/month, and your total assets are $3200.

Just wanted to clarify, I don't consider $500 in credit card points an asset; nor is $2000 in "car equity." Maybe if you traded the credit card points for a gift card, which you sold for cash...or if you sold your car, but since you're not going to do either of those things, they're not assets. :P

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #18 on: May 08, 2015, 03:54:26 PM »
I'm having a hard time wrapping my head around the fact that your take home pay is $2900, you're living on $900/month, and your total assets are $3200.  You should have a bigger stache after 2 months. So either your arithmetic is off, or you've blown your $900 budget every month. I guess my advice is to focus on actually saving the $2K/month. I wouldn't make any extra payments on the 2.9% loan, and just put $24K/year into your retirement accounts.

Also, communications can be really lucrative if you do it right. While you say you're not interested in programming, wordpress+marketing=money, and you can do a lot with drag and drop builders in wordpress. Get rid of the idea that because you're in communications, you're limited to a low income. Lots of people that primarily communicate (sales, lobbyists, marketers) can do really well.

good luck!



Thanks Fuzz! I've had some experience with Wordpress and I don't mind it at all! I've taken a couple classes in Java though and that's what I really hated. As for the take-home pay vs. the total assets question, I guess that does require a bit of a backstory. For one I only just picked up this second job last month so my original primary income was only 1800. Secondly, I dated a woman that had to move back to another country and although I was still living on 900 a month, all my additional income went towards her and our traveling to be together. Sadly, or not so sadly, we broke up 2 months ago. But as for current up-to-date numbers, these are where the numbers for where I am now. Also, I've been paying extra on the car, a few months ago I owed 14k on it and I've brought it down to 11.6k since then.

Given my volatile ups and downs living situation, do you think it would be better to pay off the car? or put it towards investing? And you're right, there can be more opportunity in my field once I've gotten more experience and more familiarity with the software in my field, but as mentioned earlier, for where I am right now, my savings percentage is decent even with my low income, and so I shouldn't get too hung up on that for right now I think? Great advice everyone!

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #19 on: May 08, 2015, 03:58:38 PM »
I'm having a hard time wrapping my head around the fact that your take home pay is $2900, you're living on $900/month, and your total assets are $3200.

Just wanted to clarify, I don't consider $500 in credit card points an asset; nor is $2000 in "car equity." Maybe if you traded the credit card points for a gift card, which you sold for cash...or if you sold your car, but since you're not going to do either of those things, they're not assets. :P

Fuzz,
the 500 I'm planning on allocating to an upcoming 6 month auto insurance charge, because I'll put the charge on my credit card, then use the rewards to cancel it out. I'm not planning on selling my car, I was just counting its value against what is owed on it bc its factored into a value of my net worth on Mint, the budgeting app I've been using. But I understand your points, too.

Fuzz

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #20 on: May 08, 2015, 04:06:24 PM »


[/quote]

Thanks Fuzz! I've had some experience with Wordpress and I don't mind it at all! I've taken a couple classes in Java though and that's what I really hated. As for the take-home pay vs. the total assets question, I guess that does require a bit of a backstory. For one I only just picked up this second job last month so my original primary income was only 1800. Secondly, I dated a woman that had to move back to another country and although I was still living on 900 a month, all my additional income went towards her and our traveling to be together. Sadly, or not so sadly, we broke up 2 months ago. But as for current up-to-date numbers, these are where the numbers for where I am now. Also, I've been paying extra on the car, a few months ago I owed 14k on it and I've brought it down to 11.6k since then.

Given my volatile ups and downs living situation, do you think it would be better to pay off the car? or put it towards investing? And you're right, there can be more opportunity in my field once I've gotten more experience and more familiarity with the software in my field, but as mentioned earlier, for where I am right now, my savings percentage is decent even with my low income, and so I shouldn't get too hung up on that for right now I think? Great advice everyone!
[/quote]

Ha! Understand that dating can complicate life. The least mustachian thing I ever did was date a Swiss girl.

I think you're point about having a volatile situation supports the idea that you *not* pay down the 2.9% car loan. Would you rather have $11K in semi-liquid investments, or no car loan? If something happened, you can always use your investments to make your monthly payment. Having some liquid assets is pretty important. Once you get above some threshold number, then I'd worry about the car. Good on you for the credit card plan too.

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #21 on: May 08, 2015, 04:16:56 PM »



Thanks Fuzz! I've had some experience with Wordpress and I don't mind it at all! I've taken a couple classes in Java though and that's what I really hated. As for the take-home pay vs. the total assets question, I guess that does require a bit of a backstory. For one I only just picked up this second job last month so my original primary income was only 1800. Secondly, I dated a woman that had to move back to another country and although I was still living on 900 a month, all my additional income went towards her and our traveling to be together. Sadly, or not so sadly, we broke up 2 months ago. But as for current up-to-date numbers, these are where the numbers for where I am now. Also, I've been paying extra on the car, a few months ago I owed 14k on it and I've brought it down to 11.6k since then.

Given my volatile ups and downs living situation, do you think it would be better to pay off the car? or put it towards investing? And you're right, there can be more opportunity in my field once I've gotten more experience and more familiarity with the software in my field, but as mentioned earlier, for where I am right now, my savings percentage is decent even with my low income, and so I shouldn't get too hung up on that for right now I think? Great advice everyone!
[/quote]

Ha! Understand that dating can complicate life. The least mustachian thing I ever did was date a Swiss girl.

I think you're point about having a volatile situation supports the idea that you *not* pay down the 2.9% car loan. Would you rather have $11K in semi-liquid investments, or no car loan? If something happened, you can always use your investments to make your monthly payment. Having some liquid assets is pretty important. Once you get above some threshold number, then I'd worry about the car. Good on you for the credit card plan too.
[/quote]

Thanks Fuzz! foreign women, I tell ya! Haha. Yeah I think that's what I was mainly thinking about was if it would be better to pay off the car or put the money towards assets. I guess bottom-line I could pay off the car and have a depreciating asset, or invest and have an appreciating semi-liquidable asset. I just always had it planned out in my head to do things in this order: 1) build emergency fund 2) pay off debt 3) invest with your debt-free cash flow.

But then when I realized I wasn't losing out too much on interest, because I'm not in high-interest debt, that maybe it would be better to invest. So you'd suggest I'd pay the minimum 320 for the car payment and then send the remaining ~$1680 a month to saving to open the vanguard account? And then if I lost my roommate, and couldn't find another, use the vanguard money towards paying off my car? I just hate being saddled with a loan that still has 3.5 years left! Ugh!

Hey It's Me

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #22 on: May 08, 2015, 04:37:57 PM »
Okay, OP. everyone else here has been super nice because you seem like a decent guy and that 70% "saving rate" Makes it seem like you're rocking it.

First, let's admit the obvious: you do not have a 70% saving rate, and cannot claim it unless you've shown you can sustain it for several months. I'll drink that koolaid when I've seen it.

Let's talk about your job first. $1,800 per month is 11.25 per hour. Thats freaking insane... to put it into perspective, I made more than that as an intern in college. In communications, mind you. Your employer is basically robbing you, and its time for you to fond a new job. Newsflash: marketing is NOT a depressed field, in fact it's one of the only fields that seems to grow each year in the US despite stagnation elsewhere. It's all about being in a growing sector of marketing. If you work for some local government's social media team, you're basically doing an intern's work for an intern's pay. Don't believe the nonsense of being able to move up, either. Most governments will start hiring private agencies and bringing in agency people once they get out of the 20th century. The career grown areas in marketing are advertising agencies and ad tech vendors. Government is where you go after building a career to live off of a cushy do-nothing job with good perks. Do yourself a favor and make some career moves.

Next, your car is ridiculous. You owe nearly half of your income on that car, and your monthly expenses for the car exceed your rent. Let's just take a moment to bask in the silliness of that. This is why I don't like the fact that soany people on this threat are telling OP he has his crap together: you're basically encouraging this type of behavior.

Now the specifics:

You seem really eager to pay off your car loan. The wise investment is to pay the minimum (if you're going to keep it) amd invest the rest. The logic is if you would save $200 in interest this year by making extra payments, but the money you paid off the car with would have earned you $400, you actually lost $200 in opportunity because of your sub optimal decision. That said, I know some people like to pat themselves on the back for getting rid of debt, so up to you. Just pick a strategy and stick to it. Don't go back and forth, because you'll just end up doing a poor job of both.

Invest on a total stock market fund, or your friend's hot tip. Doesn't really matter because your assets are so low. If the fund does great, well good. Of the fund does poorly, which is the advice you're getting, you learned not to listen listen to your friend's hot tips - because trust me, this won't be the last hot tip you're going to get. (Aside: did you know the average onvestor in the market doesn't even break even in the long term? What do you think they do wrong?)

Finally, admit that you don't have a handle on this investing thing - that's the first step of learning. The difference between a fool and a wise person is the wise person will continuously do research and be open to new advice, while the fool will stick to the first piece of advice he got and hold fast to it. You got some great advice so far on this thread, so put it to use. Start by actually tracking your expenses for a few months and tell us where that extra $2000 is going.
« Last Edit: May 08, 2015, 04:40:09 PM by moe_rants »

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #23 on: May 08, 2015, 05:26:55 PM »
@moe_rants

Thanks for the feedback, I appreciate you giving it to me straight, because I don't want it any other way. I found myself nodding along a lot when I read your post. My pay comes out to 13.50 but is closer to what you stated after they take out the 6.75% for the pension. But yeah it does seem pretty low for someone that has a degree, but I've so far justified it by saying its because I'm just getting my feet wet in the field (I've been here for only a year and before that I have about a year of internship experience, if you count that as well). But all in all, I have still been seriously thinking about finding another primary job that pays more, it would probably have me moving to a place that has higher fixed costs though, because the marketing fields you mentioned aren't the strongest in my city. Still I think I could find ways to still lead a low-cost lifestyle and come out on top with some job swaps, but it is a risk moving and taking on a job, which is part of the reason why I've been so eager to shed the skin that is my car debt.

Now understand the reason I'm claiming a 70% saving rate now is because for the past few months, I have lived off 900 a month and the other 900 has been going towards paying down my car. At the beginning of the year I owed about 14k on it and now its down to the 11.6. Just last month I took on the secondary job and have now I've seen what my paychecks look like.

I completely agree my car is ridiculous! Buying a new car a year and a half ago was the worst financial decision I ever made! (that's why I started this thread with being a consuma-sucka) Rest assured, I've learned my lesson now, and discovered MMM, and I'll never buy new again! Hell, I don't ever even want to finance a car again. But my rent is 400 a month and my minimum car payment is 320 (which isn't due until October now since I've paid so much extra into it) so my rent doesn't exceed it, but it is a little over 3/4s of it—mostly because I have cheap rent and a ridiculous car payment, which I completely agree with you there!

I think I am one of the back-patters for paying off debt haha. I like the idea of not owing anyone anything and knowing that if I were to lose my job, thats one less expense that I have to account for, and the sooner its paid off the more cash flow I can shove into my investments rather being saddled with a minimum payment and the interest with it for the next 3.5 years, I'd like to pay it off and then put that extra money into investing. For the past few months this has been my course of action, so even if its the subpar choice I think you're saying I should stay on it rather than flip-flop around with my financial decisions? So that I don't do a poor job with both?

As for the average investor not breaking even the thing they do wrong I believe is moving their money around too often rather than just sticking to one fund? Is that the point you're getting at there? Just to stick it out in one place?

I have been tracking my expenses for a few months now and I can tell you that the 900 has been in living expenses, and the remaining has been going to my car.

Thanks for your advice! Just to recap, here's what I'm thinking:
1) Pay off car since this is the course of action I've been on.
2) look for a higher paying job—maybe after the car is paid for so there's less risk in moving for a new job?

electriceagle

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #24 on: May 09, 2015, 02:34:14 AM »

So with those things in mind I've made a roth account with this mutual fund: http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=PRWCX
Its a long-term fund that has been around for about 40 years yielding an average of almost 12 percent since inception. I understand that the expenditure is a bit higher than vanguard, but the bottom-line return and the fact that its a moderate-risk is the reason I went with it. I chose roth over traditional because of my current low tax bracket and the easy way I always understood it was, if you plan to make more money in the future, go with roth, and like I said earlier, I'm a young-buck expecting to make more in my later years! Thanks for replying and giving some pointers!

Good job picking the Roth!

Traditional tax deductible accounts benefit you if you contribute to them when you are in a high tax bracket and withdraw from them when you are in a low tax bracket. They're great for people who are making $80k and expect to withdraw $30k in retirement.

My rough rule of thumb is that it is better to use a traditional account if your marginal federal tax rate is 25% or higher and a roth if it is less than 25%.

Like everyone else here, I recommend a broad, low cost index fund rather than a sector specific fund. For any given sector, everybody has the same information as you and they have already run the price up or down as appropriate.

On the other hand, I know what its like to start off feeling your way towards understanding of investments. When I first started investing, I purchased a mutual fund that had been around for decades and was invested in a growing sector of the economy.... the only downside was that it had fees.

Eight years later, my investment was worth about what I had put in, minus eight years of inflation. Had I put it in a broad, low-fee index fund, it would have more than doubled.

By the way, you can get 5% interest on your savings by putting it in a Netspend account (follow this guide for instructions on avoiding fees: http://www.fatwallet.com/forums/finance/1432026/)
« Last Edit: May 09, 2015, 02:43:20 AM by electriceagle »

ShoulderThingThatGoesUp

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #25 on: May 09, 2015, 04:37:51 AM »
What would you suggest I do then ShoulderThingThatGoesUp?

As you seem to have done, invest in a total market fund from a major provider. I'm just shoving everything in SCHB right now.

darkshark16

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #26 on: May 09, 2015, 08:10:43 AM »

So with those things in mind I've made a roth account with this mutual fund: http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=PRWCX
Its a long-term fund that has been around for about 40 years yielding an average of almost 12 percent since inception. I understand that the expenditure is a bit higher than vanguard, but the bottom-line return and the fact that its a moderate-risk is the reason I went with it. I chose roth over traditional because of my current low tax bracket and the easy way I always understood it was, if you plan to make more money in the future, go with roth, and like I said earlier, I'm a young-buck expecting to make more in my later years! Thanks for replying and giving some pointers!

Good job picking the Roth!

Traditional tax deductible accounts benefit you if you contribute to them when you are in a high tax bracket and withdraw from them when you are in a low tax bracket. They're great for people who are making $80k and expect to withdraw $30k in retirement.

My rough rule of thumb is that it is better to use a traditional account if your marginal federal tax rate is 25% or higher and a roth if it is less than 25%.

Like everyone else here, I recommend a broad, low cost index fund rather than a sector specific fund. For any given sector, everybody has the same information as you and they have already run the price up or down as appropriate.

On the other hand, I know what its like to start off feeling your way towards understanding of investments. When I first started investing, I purchased a mutual fund that had been around for decades and was invested in a growing sector of the economy.... the only downside was that it had fees.

Eight years later, my investment was worth about what I had put in, minus eight years of inflation. Had I put it in a broad, low-fee index fund, it would have more than doubled.

By the way, you can get 5% interest on your savings by putting it in a Netspend account (follow this guide for instructions on avoiding fees: http://www.fatwallet.com/forums/finance/1432026/)

Thanks electriceagle!

That's good advice, from what I've gathered, the only things that are certain about investing in the long-term is that the overall market should grow and then whatever the expense fee is for the account haha. Vanguard seems to cater to both of these things. So now I'm wondering what you guys would think of this, I'm thinking now that I could just open the 2500 min in the health fund while health is hot and put some in there while my assets are still low, until the fund then hits 10k, and then roll it over into a vanguard. There's some risk I know, but I've heard its better to be risky while you're young and this way I can at least get my money working for me before I get up to the 10k mark and its just not sitting around being chipped away by inflation while I save up an additional $7.5k. 10k is a lot of money for me to wait around to get into before I can have my money work for me.

Also, I think I should pay off the debt first. I found a couple quotes from MMM that I think support this when he says:

Paying off debt: Your 'return on this is equal to the interest rate on the loan. I happen to have a line of credit that I used to partially fund the new house we moved into (the rest was paid with cash). The credit union has been charging me 3.5% on the $160k balance, which is about $466 per month. In this case, I paid it off, which accounts for the first chunk of that $400k. The reason: I value safety and stable cashflow above higher returns, so I only used this loan as a temporary measure to bridge between the houses."

I like the part about valuing safety and stable cashflow above higher returns that he mentions there. Also I like this one by him:

"The good news is, you don't need to know anything about investing to start saving for financial independence and early retirement. Learning frugality and how to live an efficient lifestyle is by far the most important part. Paying off all your debt is a good first step. And after that, while your savings are still small, your loss from not investing is small."

I like the part about learning frugality and how to live an efficient lifestyle as being by far the most important part because so far that's all I kind of have going for me haha. But it does make me wonder if maybe I should just not open the health fund and pour it all into paying off the car debt, and then go from there with investing. That way I would just be taking that good first step! What do you peeps think?

ShoulderThingThatGoesUp

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Re: Hi All, My name is Darkshark and I'm a former Consuma-Sucka
« Reply #27 on: May 09, 2015, 08:16:52 AM »
Better to be risky when young means you can expose yourself to greater volatility. For example, my brother-in-law puts a big portion in emerging market funds because over time those will have the most growth, but they'll also have the most volatility because sometimes emerging markets get wrecked (if Boko Haram takes over major Nigerian cities, the Nigerian stock market will not look so good - but it won't affect Vietnam's). But he can do that because he makes big money and doesn't need it now, he's saving for decades from now.

Putting a substantial portion of your net worth in a single emerging market sector is less "high risk tolerance" and more "very poor diversification". Risk is not the same as being stupid.