Author Topic: Total Newbie and looking for some advice  (Read 2787 times)

fox908

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Total Newbie and looking for some advice
« on: March 28, 2015, 11:50:29 AM »
I'm new to the MMM blog and started reading post after post and now I'm envisioning a path to early retirement. I'm just not quite sure how to do it.

Here are the basics:
- I am single, live alone, 30 years old, I earn about $38,000 gross income per year.
- Monthly expenses are about $1,800. I am motivated to live off less after looking through this blog, but that's where I am right now.
- I bought a home 1.5 years ago for $89,000 with a 15 year mortgage, and I owe about $78,000 on it now. I am making the regularly scheduled payments and no more. Since I put less than 20% down initially I am paying a little bit in mortgage insurance every month, but that will drop off in about a year or so. I have a low interest rate of 3.5%
- I just started taking advantage of a Roth 401K through my work and contribute 6% of my income to take advantage of the full company match. I have 3 more years until that match would be fully vested.
- I have about $8,000 in my savings account, but no other investment accounts

Here are my basic questions -- I am not sure how much money I need as immediately accessible liquid cash. I was thinking that around $9-10k would be ideal, in case there is an unexpected house or medical expense, but I'm wondering if that's a realistic number or not.

I have ambitions to go into business for myself, I already have a small side business where I earn a few thousand extra dollars every year, but in the next few years I hope to be in the position where I could quit my regular job and devote more time to my side business.

I am trying to come up with a straight forward game plan so that I can begin to invest money every month. I read the post about the Vanguard Total Stock Market Index Fund and wonder if it's wise to invest the $3k minimum that is required to open an account, or if I should invest elsewhere. I have basically zero experience or knowledge about investing, and I'm trying to make up for a bit of lost time by learning what I can now.  I don't have a particular goal in mind at this point about when I would like to retire, so I'm doing some information gathering so I can create a goal for myself.

That was all over the place, but I hope someone can point me in the right direction about savings and a newbie investment strategy -- thank you in advance for your help!

GizmoTX

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Re: Total Newbie and looking for some advice
« Reply #1 on: March 28, 2015, 12:07:34 PM »
This: "If You Can; How Millenials Can Get Rich Slowly", by William Bernstein, is an excellent place to start. http://www.etf.com/docs/IfYouCan.pdf

fox908

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Re: Total Newbie and looking for some advice
« Reply #2 on: March 28, 2015, 12:17:00 PM »
Thanks, GizmoTX, I'll take a look.

I forgot to mention that I don't have any car loans, consumer debt, or student debt. The only loan I have is my mortgage.

GizmoTX

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Re: Total Newbie and looking for some advice
« Reply #3 on: March 28, 2015, 12:42:29 PM »
That's excellent!

Do you have any credit cards? They are good for emergencies, so you can keep your emergency fund in an online savings account that earns interest instead of a checking account. They provide purchase protection that a debit card doesn't, & should give you cash back rewards for stuff you need anyway, like food & gas. As long as you choose a card that doesn't charge any fees & always pay the statement balance every month, you'll never pay any interest or fees & you'll build your credit score.

Your side business may or may not scale up. Building a business is different than simply being self-employed. Either is OK, but you must know what you are getting into. Start learning now about cash flow & accounting as they relate to small business.

Retired To Win

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Re: Total Newbie and looking for some advice
« Reply #4 on: March 28, 2015, 12:48:36 PM »
... I have about $8,000 in my savings account, but no other investment accounts...

Here are my basic questions -- I am not sure how much money I need as immediately accessible liquid cash. I was thinking that around $9-10k would be ideal, in case there is an unexpected house or medical expense, but I'm wondering if that's a realistic number or not....


In your shoes, I would maintain an Emergency Reserve Fund that could cover a minimum of 6 months' worth of your basic living expenses if your incoming cash flow gets interrupted for whatever reason.  (I personally have opted for maintaining one year's worth of my basic living expenses in a separate savings account.)

I consider 6 months to be a minimum because, in case of lost employment or an unexpected disability, that is the length of time I consider to be a mid-case bad scenario as far as how long it would take to overcome the loss of income.  If, like some, you really dislike the idea of setting cash aside for such an eventuality, you can shave down the amount you set aside by (1) factoring in unemployment benefits, (2) getting yourself a disability income insurance policy, and/or (3) reducing how much money it would take to cover your basic living expenses.

Good luck.

Frankies Girl

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Re: Total Newbie and looking for some advice
« Reply #5 on: March 28, 2015, 01:11:00 PM »
For the basics of investing, I'd suggest the following reads:

http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
How to make money in the stock market. Short and sweet.

http://jlcollinsnh.com/stock-series/
^ best overall series for how it all works and what you should probably be doing
(this is what got me up to speed, and I had zero investment knowledge - amazing series)

http://www.bogleheads.org/wiki/Investment_policy_statement
Creating an investment policy statement

http://www.bogleheads.org/wiki/Asset_allocation
Deciding on your asset allocation

http://www.bogleheads.org/wiki/Lazy_portfolios
Bogleheads lazy portfolios (really hands-off basic portfolios that should perform well in most any market)


mozar

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Re: Total Newbie and looking for some advice
« Reply #6 on: March 28, 2015, 06:28:07 PM »
I found "if you can" to be condescending. Also not very mustachian (save until you die?).