Author Topic: NoVa newbie  (Read 4078 times)

fljason

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NoVa newbie
« on: February 21, 2014, 06:44:37 AM »
Good Morning,
Long time follower of the mustacian way I wanted to post today and give my story and ask for any suggestions and some advice.
The facts:
I am a 28 years old male that live in northern Virginia right outside of DC. I recently graduated from Virginia tech Graduate school and received a Masters of Landscape Architecture (my undergraduate degree was a professional degree in Architecture) I did take a loan out for graduate school but was fortunate to be able to work during school, I had to take 17,000 as a federal loan but have already paid 7,000 (I saved every penny and paid one lump sum in January of 2014. The loan begins to build interest in March so I am in my last month of interest free; the interest is the standard 6.8%.
I am employed in this region and have a comfortable salary in the mid 50痴, I was able to turn my internship into my first really job in the profession. My employer matches 4% of my 401k and currently I知 adding 11% into my 401k
My living situation I currently split a 2 bedroom apartment with my girlfriend, basic utilities are included in the rent and puts us at 1750 a month, than add 60 dollars for cable and internet, we split this right down the middle at about 900 a month for our living cost.  Than we average about 200 in grocery bill a month.
Our apartment is high because where its located, we both walk to work and only have one car between us that we rarely use, we may fill it up once every 2 months. The car including insurance and personal property tax is about 800 for the year that we also split.

Now that you know the story I wanted to ask for advice. I currently have 6k that I received ( legally) and am looking to create a long term retirement account.  I am somewhat confused on where and what I should be investing in. any advice on where should I begin reading about vanguard vs. t row vs. fidelity.

 I am not throwing this at student loan because right now I知 allocating 1000 dollars ever month to student loan and will pay it off this year.

thank you all

EK

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Re: NoVa newbie
« Reply #1 on: February 21, 2014, 06:56:36 AM »
You say you don't want to throw it at the loan, but with a 6.8% interest rate I'm confused as to why! I would do that in a heartbeat!  If you're just dying to start investing, at least think about putting half towards investing and half towards the loan?

Regarding the other stuff, 2 questions:
- do you really need a 2 br apartment?  Why not drop to a 1 br and save a little money?
- do you really need a car if you use it infrequently?

minimalist

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Re: NoVa newbie
« Reply #2 on: February 21, 2014, 07:01:01 AM »
You say you don't want to throw it at the loan, but with a 6.8% interest rate I'm confused as to why! I would do that in a heartbeat!  If you're just dying to start investing, at least think about putting half towards investing and half towards the loan?

Regarding the other stuff, 2 questions:
- do you really need a 2 br apartment?  Why not drop to a 1 br and save a little money?
- do you really need a car if you use it infrequently?

+1

warfreak2

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Re: NoVa newbie
« Reply #3 on: February 21, 2014, 07:04:19 AM »
Paying down your student loan is equivalent to making a guaranteed 6.8% investment. That's a great risk-free return!

fljason

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Re: NoVa newbie
« Reply #4 on: February 21, 2014, 07:21:06 AM »
WOW thank you guys for responsding so fast already.

maybe im very naive but i figured investing now i can begin to build the snowball of compound intrest.

- do you really need a 2 br apartment?  Why not drop to a 1 br and save a little money?
In out building we were paying 1500 for a one bedroom. They remodeled a lot of units and raised the price now if you were to move in one bedrooms are 1600 and two bedrooms are around 1900. I negotiated to upgrade to a non- remodeled two bedroom for a reduce rate of 1750. the second bedroom comes in handy for my family when they come in to town and we also run a small business out of it.    trust me i went back and forth on is this the correct desicion and it was one of those things, where i didnt act now i wouldnt get it at this rate.



- do you really need a car if you use it infrequently?  The car is already paid off and we do use it when we go visit her family in southern parts of Virginia, So it does pay to have the car. we talked about getting rid of it, but when we start pricing out, zip vechiles and bus tickets the 1000 dollars it might cost a year out weights it




lackofstache

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Re: NoVa newbie
« Reply #5 on: February 21, 2014, 07:37:15 AM »
I'm with the others; I'd throw the $6K at the loans and then start investing the $1K per month you were gonna pay the loans with rather than investing first. I'd start investing into a Roth IRA first (w/ Vanguard Index funds), up to $5500/yr and then look into an HSA, back to the 401(K) and then look into non-tax qualified Vanguard Index funds.

b4u2

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Re: NoVa newbie
« Reply #6 on: February 21, 2014, 08:04:10 AM »
It's awesome seeing younger people finding this site with little debt. I'm only 36 but 10 years ago this could have saved/helped me a lot. Good job on finding this and asking the right questions!

I agree with most of the above. Pay the student loans off. Save the interest. Then hit a Roth IRA.

Sounds like I would keep the car. It's paid off and yearly expense sounds low. If it is an expensive car though could you sell it and pick up something cheaper with better gas mileage (no idea what your car is just asking).

dumbblond

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Re: NoVa newbie
« Reply #7 on: February 21, 2014, 08:05:01 AM »
Wanted to weigh in about potentially selling the car.

DH and I are in NoVa and also need a car only to travel to family. I agree that Zipcars can be super expensive and just don't make sense in a lot of situations, but have you considered a traditional rental for family visits? We've had good success with enterprise (they seem to have a lot of locations), but I'm assuming others would be similar. It can still be expensive, but you may want to run the numbers (see what the car is costing you per month in depreciation+gas+insurance+parking) to see if renting or keeping comes out ahead. If your apt building doesn't charge you separately for the parking space, it may make sense to keep the car (ours charges $[obscene amount]/month for a space). For reference, we do a ~7 hour long weekend trip to see family every couple of months and spend around $300 on car+gas.

And, one more point in selling the car's favor--it would give you another lump sum to throw at the SL.

unpolloloco

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Re: NoVa newbie
« Reply #8 on: February 21, 2014, 08:08:03 AM »
maybe im very naive but i figured investing now i can begin to build the snowball of compound intrest.

The snowball of compound interest works both ways - when you're in debt and when you're investing.  I'd pay off debt first (unless you think you can significantly grow the home business with the cash instead...).   Guaranteed 6.8% return from paying off debt seems pretty decent to me (compared to a return that will average about the same in the market, but has a significant downside potential).

nereo

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Re: NoVa newbie
« Reply #9 on: February 21, 2014, 09:02:47 AM »
I had to take 17,000 as a federal loan but have already paid 7,000 (I saved every penny and paid one lump sum in January of 2014. The loan begins to build interest in March so I am in my last month of interest free; the interest is the standard 6.8%.
I am employed in this region and have a comfortable salary in the mid 50痴, I was able to turn my internship into my first really job in the profession. My employer matches 4% of my 401k and currently I知 adding 11% into my 401k

.... I currently have 6k that I received ( legally) and am looking to create a long term retirement account.  I am somewhat confused on where and what I should be investing in. any advice on where should I begin reading about vanguard vs. t row vs. fidelity.

 I am not throwing this at student loan because right now I知 allocating 1000 dollars ever month to student loan and will pay it off this year.

I'm going to go against the grain of my fellow mustachians and say NOT to put it towards the student loan.  Already I can hear people begin to shout "hey!  It's debt!  It's bad!  It's a virtual 6.8% return!!"
Yes, all that is true. But the OP is still in deferrement (he's not paying any interest at all this month).  He has $10,000k outstanding and he's budgeted $1,000/month towards wiping out that debt.  In all he'll pay about $300 interest on that note in the 10 months it takes to pay it off. In a sense he's already planned for eliminating that debt.

I believe what the OP was asking was where else he could or should park his funds.
I'd recommend two things; 
1) how much of an "emergency fund" do you have?  If you don't have a lot of cash on hand I'd put that $6,000 toward a money market account.
2) if you are all set with your emergency fund, definitely look into setting up either a ROTH IRA or a traditional IRA.  Both have their advantages, and you can contribute $5500 of income per year (until you reach a certain income level, which you are not at yet). 

In terms of Vanguard or t.row or fidelity... any of those can work.  I go with Vanguard because I like my long-long term savings to be in market funds (for me it's the SP 500) and I chose the one with the lowest fees, which happened to be Vanguard.  But both t.row and fidelity offer great low-fee options for index funds as well.  Any will work, just decide what you want to put your money into and check the fees before investing.  There are unscrupulous brokers that will charge up to 2% annually to do the exact same thing that the Vanguard SP 500 fund does.

just my thoughts
N

DLVT

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Re: NoVa newbie
« Reply #10 on: February 21, 2014, 06:03:15 PM »
Good Morning,
Long time follower of the mustacian way I wanted to post today and give my story and ask for any suggestions and some advice.
The facts:
I am a 28 years old male that live in northern Virginia right outside of DC. I recently graduated from Virginia tech Graduate school and received a Masters of Landscape Architecture (my undergraduate degree was a professional degree in Architecture) I did take a loan out for graduate school but was fortunate to be able to work during school, I had to take 17,000 as a federal loan but have already paid 7,000 (I saved every penny and paid one lump sum in January of 2014. The loan begins to build interest in March so I am in my last month of interest free; the interest is the standard 6.8%.
I am employed in this region and have a comfortable salary in the mid 50痴, I was able to turn my internship into my first really job in the profession. My employer matches 4% of my 401k and currently I知 adding 11% into my 401k
My living situation I currently split a 2 bedroom apartment with my girlfriend, basic utilities are included in the rent and puts us at 1750 a month, than add 60 dollars for cable and internet, we split this right down the middle at about 900 a month for our living cost.  Than we average about 200 in grocery bill a month.
Our apartment is high because where its located, we both walk to work and only have one car between us that we rarely use, we may fill it up once every 2 months. The car including insurance and personal property tax is about 800 for the year that we also split.

Now that you know the story I wanted to ask for advice. I currently have 6k that I received ( legally) and am looking to create a long term retirement account.  I am somewhat confused on where and what I should be investing in. any advice on where should I begin reading about vanguard vs. t row vs. fidelity.

 I am not throwing this at student loan because right now I知 allocating 1000 dollars ever month to student loan and will pay it off this year.

thank you all

Welcome!

I just found this community recently and it amazes me how small the world becomes on here.

I am a fellow Northern-VA living, Virginia Tech Architecture grad (07) - Go Hokies!

Pay off the debt now!  6.8% is pretty high - we're not talking .9% on a car.

Once the debt is paid, make the same monthly payment to yourself as a contribution to a broad index fund (ie Vanguard - low fees).  That way you are taking advantage of dollar cost averaging.  Dollar cost averaging is not always as profitable as investing a large sum, but it minimizes downside risk.  After the huge run-up in the stock market we've seen the last couple years, it is not certain that 2014 will produce greater than 7% returns.

Either way, seems like you're on the right path.
« Last Edit: February 21, 2014, 06:05:17 PM by DLVT »