Irregular peach fuzz, help me grow a 'stache!

[peachfuzz1]

Hi, I'm 23 and want to get my financial life in order, but my predicament is unique-ish so I need some help on direction.

At the moment I'm transitioning from working part-time at a nice wine bar (that gets good tip money) to working full time doing PR. Right now I'm doing both hourly, both pretty elastic (and tip money is elastic too, obviously) so it's hard to say what I'm pulling in a month, maybe ~1,700/month after taxes.  When I go full time around January I will be making more (I'm guessing ~35K a year to start but it will go up when I get more clients), but we haven't established the terms yet.

I'm living at home and will for probably at least another year. When I get bumped up at work I plan on socking it away like a mad man. Right now these are my only expenses:

Car: ~60/month gas money (My mom owns the car, but it's "mine". It's been so hot all summer it's been hard to bike, but the new job is so close I won't need the car, so this will soon be negligible)
Discretionary spending (alcohol, running shoes, race entry fees, other): not positive, but ~250/month
Helping my dad (who I don't live with, parents are divorced), who is struggling right now: $500/month

The last thing is hopefully very short term, he's got a few things in the pipeline. We'll see though, but I'm not leaving him out to dry.

I have zero debt (hooray full tuition scholarship!) and I have no credit/charge card. I've thought of these more as nuisances than anything, and with no real expenses I've seen no use for them, but I am interested in travel hacking possibilities and building credit.

So, a lot of things unknown, a lot of things up in the air.  The main concern I have right now is investing my savings. I currently have 15K in a savings account right now and want to finally put it to work.  I've heard a lot about vanguard and IRA's but I don't know what's right for me. The company I'll go full time for doesn't have benefits, so i'm on my own in that regard for now.

I have no real ultimate financial goal right now other than building wealth/early retirement and a vague plan to spend some time in South America next summer, so what say you mustachians? What is a good strategy for my savings given my situation?

[Jessa]

I would say take $5,500 of that $15k and open a Roth IRA. Probably VTSMX.

Do you have benefits now, and will be losing them at the new job? Do you know what that will cost you per month?

Do you have some idea of your South American plans? Where you'll go, how long, what you think it will cost you?

[FrugalSpendthrift]

In the beginning I feel it is far more important to establish a good savings rate, then to worry about investment returns.  You cash flow seems somewhat vague, so you might be able to learn more about your habits by taking the time to track your income and spending.

so it's hard to say what I'm pulling in a month, maybe ~1,700/month after taxes. 

Discretionary spending: not positive, but ~250/month

For investment knowledge, you can start here to learn about stocks and mutual funds: http://jlcollinsnh.com/stock-series/
or here: http://www.bogleheads.org/wiki/Getting_started

[mozar]

Can your father work or get access to benefits? As long as he can make his own money, you should be focusing on yourself. At the very least you should reduce from 500 to 250.

[Tai]

You're just starting a full time job and you're assuming that you can take time off next summer? You might want to check on that.

[Spondulix]

I think it's awesome you're getting it together this early. I wish I had looked into these kinds of resources when I was 23!

Do you have a credit card? My husband was in a position similar to you (no student loan debt, paid car in cash, etc) but his lack of credit history was a problem when it came to renting an apartment and buying a house. So you might want to look into a credit card that you can put some expense on and pay it off every month just for the sake of establishing a credit history. If you're looking to travel, you could find one with good travel rewards (personally I like cash back cause then no restrictions on travel).

It's also important to stay conscious as your salary goes up. It's really easy to say, "I couldn't afford that a year ago, and now I can so I'll buy it!" Or to see friends making more spending a lot of money on silly things. Setting a budget and a savings goal will help!

[lpep]

Wow! You sound so much like me, it's weird (...so much for unique!). I'm 25 and just found this site a few months ago, after working in the real world for about $35k salary for 2.5 years, in a communications field. I also had and have no debt (gotta love free tuition) and a chunk of cash in a savings account waiting to go to work for me.

Here's what I wish I had known when I was just starting out in the working world:

• DON'T inflate your lifestyle just because you can afford to! This is most important with rent/utilities, when you get there. Keep living like a college student. I got my own apartment pretty quickly, and while it wasn't expensive, it wasn't cheap, either.
• Budget. I'm still working on this one! Start now while you're living with your parents and get used to it, because once you move out, it'll be more important.
• Cook. All the time. Eating out adds up realllllly fast, especially those work lunches when you were too lazy/rushed to pack something.

My advice is to take that cash and invest aggressively, right now. You have no financial responsibilities right now, so you don't need much of an emergency fund - money you invest is still accessible, just not immediately. Like someone else suggested, step one is to max out a Roth IRA with Vanguard, invested in VTSMX. You're in a low tax bracket and investing after-tax money, so a Roth is the best place for it. That's $5500. Take whatever else you feel comfortable investing - I suggest all but $1000 or so - and put it in a Vanguard taxable account, also in VTSMX until it hits $10k, when it will automatically roll over into VTSAX. You should always max out your IRA first, then put the remainder in a taxable account. If you had a 401(k) with employer match at your new job, that would be first priority. Keep things simple this way - if you haven't read Jim Collins's stock series, do it now!

My guess - if we really are the same person - is that you've had this nest egg growing for awhile, and you haven't had to worry about money for a good long time. One of the great things I've found about investing is that now that my bank account balance is lower than I'm used to, I'm even more careful with what I buy. Plus, now my savings are actually keeping up with inflation!

About South America - I found MMM while I was already living here in Hanoi, but my natural frugality (thanks, parents!) is what got me here. It's a really freeing feeling knowing that the decisions I make can help me do something so COOL! Good luck!

[surfhb]

I think you need a detailed budget drawn up before you can do anything.   Find out what your life is costing you to determine your savings plan.   Also, live at home as long as possible.....you'll be happy you did. 

Btw....forget the fun vacations right now.   It's time to work and work hard!   You'll have plenty of time to roam the earth once you're established. 

Getting credit is simple.   Go to your bank and ask for a secured credit card. 

Open a ROTH on Monday morning and sock away $5500 and another $5500 on January 1st.   Invested in a Total Market Index Fund.

[Terrestrial]

Agree with everyone who said dump 5500 into an IRA now and in a few months after the new year.  That will be 11k of your savings invested and working for you.   Especially important to start retirement savings now since you are young, and your company doesn't sound like they provide benefits. 

Noble of you to help your father and I won't say you shouldn't be doing it...family is more important than money and I would do the same for my parents if they needed it, as they would for me.  The only thing I will say is have a gentle (friendly) convo with your dad that your financial support should not be considered an indefinite situation.  Assuming your dad is just temporarily down on his luck and not a perpetual mooch, maybe you don't even need to do this.  500/mo will fund your IRA for the entire year though and is 17% of your gross income...it's not an insignificant ammt of money for you on 35k a year.

I disagree with surfhb on forgetting about the vacation...it's too easy to say you'll have time for stuff later, if it's important to you do it.  Mustacianism isn't about just socking away as much money as humanly possible, it's about not wasting money on unnecessary things so you have it for the things that will really make you happy. I'd say if you want to do it, the first step is nailing down how much money you need to do it and then building it into your budget to pay for it.  Travel can be done cost effectively especially while young and single...I don't see a huge problem spending a couple grand on a trip if you plan for it, and make sacrifices in other areas of your life so that you are still saving adequately.

[surfhb]

Sure,  a week or two visiting South America is fine but the guy hasn't  even started his career yet and he's already planning to "spend some time in South America".  :)

[aschmidt2930]

If I were you I would seriously consider going to South America (If this is something important to you, and not just a wishful idea) NOW.  You have a full-time job waiting for you in January, almost no bills at home, and 15k in savings.  It's pretty rare in life to be this obligation free.. Who knows if you'll even be able to take the time off this summer. 

[Jessa]

Sure,  a week or two visiting South America is fine but the guy hasn't  even started his career yet and he's already planning to "spend some time in South America".  :)

He has the cash for it, I'd argue it's the perfect time. He doesn't have a lease or mortgage to worry about, no wife or kids to bring with or care for, no real job obligations (unlikely that he'll be an integral part of the company after six months). He can start his career when he gets back, where's the harm?

[peachfuzz1]

Thanks for the help guys! You have cleared up a lot for me.  Reading your recommendations, I understand more what these investments actually do. 

I now see the advantage of putting Roth first, so that's what I'll do for now and use other vehicles when I earn more. And my dad is no mooch, just down on his luck, never asked for a thing and I give freely because that's what family is for.  And YES! Being young, single, and having no responsibilities is precisely why I should go now (and as frugally and as fun as possible).

Thanks!!