Author Topic: What should be my next move? Should I buy a house? 24 y.o  (Read 5298 times)

astvilla

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What should be my next move? Should I buy a house? 24 y.o
« on: September 10, 2014, 08:44:50 PM »
Hi everybody!

Just stumbled on this forum today and really enjoy surfing the site. I feel I have some similar tendencies as other Mustachians, but I've got almost zero experience/knowledge about financial planning. I know the basics and definitions of things like 401k, Roth IRA, economy, real estate etc but feel like a complete noob seeing many of the posters. So I figured I could turn to you guys for advice.

Right now, my financial situation is much better than most I think because of my amazing parents. I carry no student debt whatsoever and have roughly $30k in savings/stock. I am working 2 jobs while still in school that will pay much more now potentially giving me $50-60k (total including savings) by the end of 2014 hopefully while most of my expenses (car, house, food) are still covered by my parents. I want to move out though by the end of the year and become more independent and less reliant on them since they've done a lot for me so I was thinking I could purchase a house with the money I've saved up (supposedly housing is cheaper to buy in the winter?) That does mean more expenses for myself, less on parents like car insurance because change of address, groceries etc but the independence is really important to me even if it seems antiMustachian.

The area I'm looking in I feel is a VERY convenient location for commutes and near critical public transportation to nearby city so I figure a house in that area would be easier to resell. It's also a decent neighborhood. I also plan to rent out a room or 2 to help cover property taxes and maybe some of the mortgage but not much. Ideally I'd like to put down as much of a down payment as possible and borrow as little as possible. Right now, most of my money is in the stock market, and I've had probably 10% return for someone who is completely amateur and doesn't spend a whole lot of time on it. Just trying to beat inflation I guess but I'm worried about drastic losses.

I'm wondering if all this is a good idea/plan. Of course I don't want to reveal all my personal details and in the end I must make the best decision I can think of but wanted some input to know if this is a good idea for having a more stable, secure future. I'm not focused on trying to retire early like MMM but I do want a more stable future. And is it a good idea to invest in stock, 401K, Roth IRA? I'm worried about potential downturn cause I know several family friends who lost millions in the crash and lost everything essentially. The panic, fear, depression, decades lost, doesn't seem worth the gains you make in the market. I still feel addicted to stock though, I guess because money stimulates the same center of the brain as cocaine and I'm somewhat reluctant to have no money to play or invest with while knowing the risk of losing a lot in a single day. So should I put all the money into a house or put some into a Roth IRA? And should I spend less money on paying a mortgage and put some on index funds or stocks (as everyone seems to talk about) or focus 100% on the mortgage. There are so many (maybe too many?) different ways to invest money I'm not sure which way I should go.

Sorry for the rambling and thanks for your time!

Eric

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #1 on: September 10, 2014, 09:07:40 PM »
You're in school right now?  So you'll presumably get a new "real" job soon, right?  I wouldn't consider buying anything until I had that nailed down.  And even then, I'd want to be at that new job for probably at least a year to make sure it's where I wanted to stay for a while.  Housing has tremendous transaction costs, so unless you're 99% positive you're where you want to be for the long term, renting is the way to go.  You'll also want to make sure that where ever you land, you do your best to eliminate that commute.  That's one of the biggest killers of both wealth and time.

As far as the stock market, the volatility is part of the deal.  But if you can stomach that, you'll end up with tremendous gains.  I was fully invested in stocks during the crash but I didn't lose a dime.  You know why?  I didn't sell anything!  In fact, I just kept buying on my normal schedule.  And now, a few years later, all those cheap shares are worth a lot of money.  So I'd challenge you to shift your perspective on investing.  You're young, so when the market goes down, that's a good thing for you.  It allows you to purchase more shares cheaper.

I'd start reading through this for a good primer:

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

johnhenry

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #2 on: September 11, 2014, 07:31:06 AM »
That's great advice from Eric.  Don't buy a place until your 5 year plan is a little more solid. 

I'm guessing your part-time employers don't offer your a 401(k) with a match.  If they do, contribute at least up to the full match.  You should definitely be maxing out a Roth IRA at this point!! And continue to do so until you are making enough to switch to a Traditional (or combination).

As long as rates are low, I would advise just putting down 20% to avoid PMI, but no more.  This leaves you max flexibility and ability to have that money invested in something that will return a higher percentage than your mortgage rate.  You can always pay it down more aggressively later.   Even though I don't think you should pull the trigger on a house yet, you should be getting your down payment planned out.  As you pointed out, you've enjoyed some decent returns from your investments.  As Eric pointed out, those gains are a result not of your skill, luck, time spent, etc, but of the volatility (risk) you can afford to take at a young age.  You don't need to get scared out of investing if the market takes a fall.  But you do need to understand that if you want to have available, on short notice, within the next 2-3 years, a down payment of say $20K, you should start accumulating all or most of that amount in a money market or other liquid account.  If your portfolio value drops in half you have nothing to worry about unless that happens to the time you need $20K for a down payment!

Hope that helps.  You are off to a great start!

so.mpls

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #3 on: September 11, 2014, 07:58:41 AM »
Hi fewaopi,

I purchased a house at a pretty young age, so hopefully I can share some insight coming from a similar situation.

As others have said, you should wait until you're done with school to buy a house.  In fact, you'd probably have a tough time getting a mortgage working part time and going to school.

After that though, I'd absolutely say purchasing a house can be a good idea IF:
a) you can commit without question to living there for at least 5 years. 10 is better.
b) you have enough cash to handle the random large expenses that can and will pop up (i.e. 10-20k on short notice to fix a roof/foundation/water damage/whatever can't sink you) 
c) you can maintain a savings rate equal or above what you'd be able to in an apartment.  Renting out one or two rooms can be a tremendous help for this.

Another piece of advice is to really look hard for first time buyer programs.  They aren't always easy to find, and although your Realtor should be aware of what out there, sometimes they aren't.  My wife and I found a program that paid $15k toward our principle, and the whole process of applying/qualifying probably took 3 hours.

EDIT: On the investing question:  If you're serious about buying a house, run the math and see what mortgage insurance would cost you if you can't put 20% down right away.  You might be better off saving all your additional cash to get to 20% instead of putting it in a Roth IRA (which should be your next move)
« Last Edit: September 11, 2014, 08:02:03 AM by so.mpls »

frugaliknowit

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #4 on: September 11, 2014, 08:50:56 AM »
Echo what others said, plus:

Housing is not cheaper in the winter, per se.  Sometimes you can try "lowballing" listings that have been on the market a long time (especially around the holidays when buyer traffic is low) and have a higher success rate in the winter, but prices are not necessarily lower in the winter.

norabird

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #5 on: September 11, 2014, 08:56:54 AM »
Where are your stocks held? Usually the advice is to have a balance of Vanguard or Spartan mutual funds, not actively managing them but letting the index do that work for you and counting on the long term gains (without taking a hit on fees). You don't really need to beat the market per se, or to worry about downturns, if you are investing for a stable future and don't plan to touch the funds until later.

astvilla

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #6 on: September 12, 2014, 06:33:42 AM »
Wow this is some pretty solid advice, thanks so much everyone for taking the time and effort, not too often you find forums where people type in proper English and willing to help out, what a great community here!

To answer some good points raised, I plan on staying in the house for at least 3 years almost guaranteed and rent it out if I decide to move to another location or stay if I find work. I skimmed some of MMM mentioning rental properties so that's where the idea of renting it out sort of came from. I know renting a house out isn't always easy as there's upkeep, maintenance, etc, maybe I'm not ready or fully appreciative of the responsibilities yet but if there are details others would like to offer about rental responsibilities and time requirements, please offer.

Housing has tremendous transaction costs, so unless you're 99% positive you're where you want to be for the long term, renting is the way to go.  You'll also want to make sure that where ever you land, you do your best to eliminate that commute.  That's one of the biggest killers of both wealth and time.

As far as the stock market, the volatility is part of the deal.  But if you can stomach that, you'll end up with tremendous gains.  I was fully invested in stocks during the crash but I didn't lose a dime.  You know why?  I didn't sell anything!  In fact, I just kept buying on my normal schedule.  And now, a few years later, all those cheap shares are worth a lot of money.  So I'd challenge you to shift your perspective on investing.  You're young, so when the market goes down, that's a good thing for you.  It allows you to purchase more shares cheaper.

I'd start reading through this for a good primer:

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


The reason I thought of buying a house is mainly because I do not want to live with my parents. It's probably not Mustachian to move out and better to stay at home but mentally for my development as a more reliable and independent person, I want to move out and maybe that could help me improve as a person and have more career success in terms of staying sane perhaps. I guess I want to go through society's definition of "growing up", whatever that definition is. I have nothing against my parents and love them a lot but I have a strong urge to move out (my parents a little too) and the options are either rent myself or buy a house and rent to others. I figured home ownership is better than losing money to rent (which I did before) especially when rent is somewhat high in my area. But I guess if I find very cheap rent, it might be better than buying a whole house. My parents are also seeing the house as somewhat an investing opportunity as well and for the issue of getting a mortgage, I think they'll be signing on and I'm paying them back since I'm a student working part time. The part time job, not sure if relevant, does make a fair amount I think, perhaps 30-50k/yr. My tuition at the moment is free and adds another 25k or so. My parents also take on the costs for a lot of my expenses and I want to have more financial responsibility of my life since they've done so much for me already. My parents are also still close by if that means anything. In regards to transaction costs, err well my dad is a real estate agent on the side so that would cut some costs and I feel I can trust him, I should right?!

Agree on the volatility. I heard seniors didn't recover despite market gains cause they sold, whereas young people w/little to lose and not much invested benefited tremendously. I guess the gains are slowing down though and maybe heading for another downturn as part of the cycle? I do wait for stocks to dip, like that recent 300 point drop at end of July so you're definitely right there! I actually keep rooting for the market to go down but also don't want to miss the boat if it's going up. 

That's great advice from Eric.  Don't buy a place until your 5 year plan is a little more solid. 

I'm guessing your part-time employers don't offer your a 401(k) with a match.  If they do, contribute at least up to the full match.  You should definitely be maxing out a Roth IRA at this point!! And continue to do so until you are making enough to switch to a Traditional (or combination).

As long as rates are low, I would advise just putting down 20% to avoid PMI, but no more.  This leaves you max flexibility and ability to have that money invested in something that will return a higher percentage than your mortgage rate.  You can always pay it down more aggressively later.   Even though I don't think you should pull the trigger on a house yet, you should be getting your down payment planned out.  As you pointed out, you've enjoyed some decent returns from your investments.  As Eric pointed out, those gains are a result not of your skill, luck, time spent, etc, but of the volatility (risk) you can afford to take at a young age.  You don't need to get scared out of investing if the market takes a fall.  But you do need to understand that if you want to have available, on short notice, within the next 2-3 years, a down payment of say $20K, you should start accumulating all or most of that amount in a money market or other liquid account.  If your portfolio value drops in half you have nothing to worry about unless that happens to the time you need $20K for a down payment!

Hope that helps.  You are off to a great start!

Not sure about 401k matching, I think they might after 1 year of working (6 months so far) as I got a book about their 401k plans. I'm still paranoid about 401k, I heard there's a lot of fees with mutual funds in 401k, or are 401k also index funds like Vanguard, etc? And a lot of people were trapped in their 401ks during the crash right? I heard there's money market funds or something you can use to escape but it seems risky as it takes just 1 month to wipe everything and I'm not so certain about the future based on populace sentiment. The matching does sound good though and my parents also encouraged contributing. As for Roth IRA, I'll have to do research but that seems all the rage I hear these days so that's definitely something I want to do in the near future, ASAP.

Great advice on securing a downpayment, didn't think of that. As of now, a lot of money is in stock and I should probably work on building that than gambling so much of it or risk losing my down payment. I know I'm a complete novice investor and it's a lot down to luck and some educated guess (luck mostly) and I know that being young I can afford more risk, even Jim Cramer tells me that though I feel I can't trust that guy. I'll gamble less of the money and research other safer ways. Are there any suggestions as to safe ways to invest like bonds, etc? I'm a complete novice so if you could point me to references if you don't want to waste time lecturing that would be tremendous help.

No idea what PMI is, but it sounds like you don't want to put too much down? I always thought it's best to buy as much of the house as you can with cash or what you have and borrow as little as possible so putting down a big downpayment is a good thing but maybe not? I'm a bit confused here. 

Echo what others said, plus:

Housing is not cheaper in the winter, per se.  Sometimes you can try "lowballing" listings that have been on the market a long time (especially around the holidays when buyer traffic is low) and have a higher success rate in the winter, but prices are not necessarily lower in the winter.

This is right. I assumed that because people move usually when kids are not in school, summer is better for sellers, not as much for buyers and no one is really moving in the winter as much so I thought you would have better leverage to negotiate prices down lower when there's less buyers. Also days on market gives leverage too although I know some have long DOM because they know someone will buy at listing price.

Where are your stocks held? Usually the advice is to have a balance of Vanguard or Spartan mutual funds, not actively managing them but letting the index do that work for you and counting on the long term gains (without taking a hit on fees). You don't really need to beat the market per se, or to worry about downturns, if you are investing for a stable future and don't plan to touch the funds until later.

I just have stocks in 2 companies now, (just sold 1, I'm pretty new to all this) I'm not in any fund or anything and don't know much about how to trade them, will have to teach myself that. I've heard about Vanguard because of low fees but there's less choice? But it's very good I heard; never heard of Spartan before. I'd like to follow the index up but not down but the funds you mentioned are also important plans for the future. Stocks also have those darn $8 trading fees that can really build up! So it forces me to hold and not trade constantly.

Hi fewaopi,

I purchased a house at a pretty young age, so hopefully I can share some insight coming from a similar situation.

After that though, I'd absolutely say purchasing a house can be a good idea IF:
a) you can commit without question to living there for at least 5 years. 10 is better.
b) you have enough cash to handle the random large expenses that can and will pop up (i.e. 10-20k on short notice to fix a roof/foundation/water damage/whatever can't sink you) 
c) you can maintain a savings rate equal or above what you'd be able to in an apartment.  Renting out one or two rooms can be a tremendous help for this.

Another piece of advice is to really look hard for first time buyer programs.  They aren't always easy to find, and although your Realtor should be aware of what out there, sometimes they aren't.  My wife and I found a program that paid $15k toward our principle, and the whole process of applying/qualifying probably took 3 hours.

EDIT: On the investing question:  If you're serious about buying a house, run the math and see what mortgage insurance would cost you if you can't put 20% down right away.  You might be better off saving all your additional cash to get to 20% instead of putting it in a Roth IRA (which should be your next move)

Never really thought of the large expenses, definitely something to weigh whenever purchasing a home. Never knew about 1st time buyer programs either but will definitely look into that, sounds very interesting. Though I think my parents are cosigning or something don't know too much detail but it's because I probably won't be approved for mortgage when they will. I guess save for down payment then put to Roth IRA sounds like a good move many are saying, I'll definitely try and do that.

I know I sound a bit spoiled in my situation with more things working out for me than others my age but seeing others struggle financially makes me want to use all the cards and chips I have while contributing as much as I can to help build a stable, secure future when times are less certain. I'm more interested in a life of minimizing and frugality than of luxury or wasteful spending though I'm not say very stingy. Rather I strive for a low-cost lifestyle and spending habits but not penny pinching to the point of annoyance. Thanks so much guys for the advice, any further thoughts are most welcome.

thedayisbrave

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #7 on: September 12, 2014, 07:41:28 AM »
Hey OP, I'm 24 as well so I totally hear where you're coming from.  I think it's great that you want to move out from your parents -- it's the logical next step, IMO.  I know someone who is 35 and still living with her parents... that to me is just so messed up in many ways.  I won't go into the details here but I'm pretty surprised her parents are still letting her stay.  So I think the desire to move out at 24 is a healthy one :)

Now... there's no reason to rush to buy a house.  This coming from someone who just bought a house in a new city where I just got a new job so take it with a grain of salt if you'd like.  I think the key is knowing yourself, your situation, etc.  Me personally, I can't stand "wasting" money on rent to pay someone else's mortgage (I invest in real estate too) so even if it's a break even scenarion in the end, living in my own home makes me happy :) You gotta figure out what's right for you and do that. 

Have you ever lived with others besides your parents? It might be best for you to wait a year - find a cheap place to rent with some non-sketchy people, learn a little more about your living style, what you do and don't like in a house, etc. and in the meantime keep saving.  PMI = Private Mortgage Insurance.  Basically an added cost if you don't have the 20% down.  So you really want to have the 20%, but honestly with rates where they are right now I wouldn't put more than 20% toward the property (that could change though).  You can always pay down principle later if you find that it IS the route you want to take, but I wouldn't have that amount of cash sunk in the property initially if I were in your shoes. 

Anyway, I know what you mean about the spoiled part, I feel that way sometimes cause I'm in a similar boat.  Seems like you have your wits about you so just keep posting and reading here, and reading all you can about personal finance, economics, real estate.  Being a good steward of what you've been given is what it's all about :)
« Last Edit: September 12, 2014, 07:43:36 AM by thedayisbrave »

former player

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #8 on: September 12, 2014, 08:07:59 AM »
Your biggest financial win at the moment will probably be to get a full-time graduate-level job with benefits when you leave college.  That may be in your current location or it may be somewhere else: tying yourself down to a specific location with a house could reduce your options for your first job after college, which could impact your earnings for the rest of your career.

Now, I may be wrong, and your current two part-time jobs are awesome, or will lead to awesome opportunities, for instance through promotion in the same organisation.  But if the two part-time jobs you currently have are all you want to do, why did you go to and complete college?  And if they are not, then give yourself the flexibility of getting your dream job wherever it leads you, or even using your funds to set yourself up in business.

If you want to move out of your parent's house, which is a very reasonable ambition at 24, I'd say find a flat share or rent something small and cheap on your own.

Joel

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #9 on: September 12, 2014, 10:10:54 AM »
I would never buy a place until I had actually lived on my own first. You aren't used to paying for anything at this point. You need to get used to what your lifestyle will cost you.

Second, you are still in school, and do not know where you will end up. You do not want to tie your job search to a specific area. That really limits things.

Wait. Be patient. There's never a rush to buy housing, especially if you can't guarantee at least 5 years in a location.

norabird

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #10 on: September 12, 2014, 11:06:03 AM »
Buy and hold is far far better than constantly trading in the long run! Of course some really enjoy following the market and there are definitely active investors on here. Have you bounced around the investing forum?

for cautionary, don't bother style input:

http://forum.mrmoneymustache.com/investor-alley/are-individual-investors-really-this-bad/

for active investing info:

http://forum.mrmoneymustache.com/investor-alley/active-investorsday-traders-thread/

I am sure there are better threads but I just have a Vanguard Target Fund and then a mix of Spartan funds in my 401k (it's Fidelity's Vanguard equivalent), so I am in the 'choosing the lowest involvement possible and letting it ride' crowd.

I do think you should keep funds in an index as well as keeping other money in more active investing rather than only relying on the latter.

astvilla

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #11 on: September 12, 2014, 08:26:52 PM »
Hey OP, I'm 24 as well so I totally hear where you're coming from.  I think it's great that you want to move out from your parents -- it's the logical next step, IMO.  I know someone who is 35 and still living with her parents... that to me is just so messed up in many ways.  I won't go into the details here but I'm pretty surprised her parents are still letting her stay.  So I think the desire to move out at 24 is a healthy one :)

Now... there's no reason to rush to buy a house.  This coming from someone who just bought a house in a new city where I just got a new job so take it with a grain of salt if you'd like.  I think the key is knowing yourself, your situation, etc.  Me personally, I can't stand "wasting" money on rent to pay someone else's mortgage (I invest in real estate too) so even if it's a break even scenarion in the end, living in my own home makes me happy :) You gotta figure out what's right for you and do that. 

Have you ever lived with others besides your parents? It might be best for you to wait a year - find a cheap place to rent with some non-sketchy people, learn a little more about your living style, what you do and don't like in a house, etc. and in the meantime keep saving.  PMI = Private Mortgage Insurance.  Basically an added cost if you don't have the 20% down.  So you really want to have the 20%, but honestly with rates where they are right now I wouldn't put more than 20% toward the property (that could change though).  You can always pay down principle later if you find that it IS the route you want to take, but I wouldn't have that amount of cash sunk in the property initially if I were in your shoes. 

Anyway, I know what you mean about the spoiled part, I feel that way sometimes cause I'm in a similar boat.  Seems like you have your wits about you so just keep posting and reading here, and reading all you can about personal finance, economics, real estate.  Being a good steward of what you've been given is what it's all about :)

Again great advice I can agree with. I have lived away from my parents, many years actually, 4 on campus, 1 off-campus. The year off-campus was when I was renting and it didn't feel good to pay someone else's mortgage granted it was pretty cheap compared to others and they were also doing it as an investing opportunity but rarely involved themselves in the property and it kinda went south because of their neglect. I lived with roommates I didn't know and there were some troubles (won't go into details but 1 did cause hundreds of dollars of damage to my car as well as keyed it, also alcoholic, weed smoker, gambler, messed up, ehh well you know...). I didn't get to choose roommates, my landlords weren't great either at the end so I was in a rush to move out. But I thought it was a good experience to learn from and I understood more of my habits and to pick your roommates as well as trying to live with others. I did like living away, and got along with the other roommates. I was much healthier eating my own cooking and I'll definitely look back on the experience to better understand myself and what I also need to change which I'm trying to right now. I definitely feel some things are more important than money, that money isn't everything and I'm okay with spending on important things like gifts, a vacation, or a situation that I'm more comfortable with so gotta figure what's right for myself.

Your biggest financial win at the moment will probably be to get a full-time graduate-level job with benefits when you leave college.  That may be in your current location or it may be somewhere else: tying yourself down to a specific location with a house could reduce your options for your first job after college, which could impact your earnings for the rest of your career.

Now, I may be wrong, and your current two part-time jobs are awesome, or will lead to awesome opportunities, for instance through promotion in the same organisation.  But if the two part-time jobs you currently have are all you want to do, why did you go to and complete college?  And if they are not, then give yourself the flexibility of getting your dream job wherever it leads you, or even using your funds to set yourself up in business.

If you want to move out of your parent's house, which is a very reasonable ambition at 24, I'd say find a flat share or rent something small and cheap on your own.

The area I'm looking in actually maximizes or most convenient in reaching as many different employers as possible but you're right it can tie people down. I'm imagining if that happens my parents might want to handle renting out the property since they too want to invest a little as well and have something to keep busy (both retired). The 2 part-time jobs are not what I want to do for my whole life, though I'm enjoying learning from them. They are there to just help me go through graduate school and move to a different type of job, which may or may not be in my area. I guess I really have to think about that tying people down now that I think about, it might be better to rent small and cheap while saving a large amount for a downpayment and rest in Roth IRA and mix of index fund and active investing?  It depends if my parents want to handle renting it out if I do choose to move as they likely will sign the mortgage and view it as opportunity for them to keep busy while making some money.
Buy and hold is far far better than constantly trading in the long run! Of course some really enjoy following the market and there are definitely active investors on here. Have you bounced around the investing forum?

for cautionary, don't bother style input:

http://forum.mrmoneymustache.com/investor-alley/are-individual-investors-really-this-bad/

for active investing info:

http://forum.mrmoneymustache.com/investor-alley/active-investorsday-traders-thread/

I am sure there are better threads but I just have a Vanguard Target Fund and then a mix of Spartan funds in my 401k (it's Fidelity's Vanguard equivalent), so I am in the 'choosing the lowest involvement possible and letting it ride' crowd.

I do think you should keep funds in an index as well as keeping other money in more active investing rather than only relying on the latter.

I guess I'm more of an active investor. I feel that active investing as a novice will help me get an idea of how the market works, what drives stocks up/down, the details, current event influences, etc and just learn more about the market. I do plan on buying and holding onto safer investments too once I start understanding more about the stock market. Buying and holding is also just less stress and I don't want to spend all my time doing so much active research.

I'm also curious where this 5 year rule came from that people are mentioning. Is that a hard stop, 5 years or roughly. I'm guessing it varies based on price of house, income, other factors, just wondering if there's evidence for it or past experiences? 
« Last Edit: September 12, 2014, 08:31:51 PM by fewaopi »

Chrissy

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #12 on: September 13, 2014, 12:06:47 PM »
...You aren't used to paying for anything at this point. You need to get used to what your lifestyle will cost you.

Second, you are still in school, and do not know where you will end up. You do not want to tie your job search to a specific area. That really limits things.

Wait. Be patient. There's never a rush to buy housing, especially if you can't guarantee at least 5 years in a location.

Yes, yes, yes to this.  You were wondering if you had a good plan.  Facepunch:  you don't.  In fact, you have no plan at all.  "Buy a house" is not a plan, it's just a declarative sentence.  You don't know about first-time home-buyers programs, you don't know about PMI, you THINK your parents will cosign, you ASSUMED summer was better for sellers.  You don't have a job, but if you want to move away for one, your parents can just rent the place out FOR you???   

Also, you're anxious to be independent from your parents, but you want to get into a business deal with them???  You have a serious lack of education and experience.  Of course, this is where everyone starts, and it can be remedied, but you will need to apply the same diligence that has gotten you through graduate school.

...it might be better to rent small and cheap while saving a large amount for a downpayment and rest in Roth IRA and mix of index fund...

This is the only sensible course.  Right now, move your investments, which are not diversified at all, to an index fund.  Once you have a full-time job, get 3-6 months of expenses into your checking account.  That's your emergency fund, and your first priority.  Then, contribute $5,500/yr to a ROTH.  Once you qualify for the 401k, which might take a year, contribute to it in the amount that gets you the maximum employer match.  You'll have to decide if you want to contribute the maximum amount allowed by law ($17,500), or if you want contribute less in order to accumulate some cash for an eventual down-payment on a house. 

In the meantime, for the love of God, please take some serious time to educate yourself both about real estate and investing.  Especially investing.  I mean, you're paranoid about 401ks--where you're almost guaranteed to make money because your employer GIVES it to you--but you're not paranoid about losing your shirt by being invested in a grand total of TWO individual stocks?  You only own two stocks, and feel you can't do more because of $8 trading fees?????  WHY are you paying trading fees?  [face/palm]  I don't even know where to start...

astvilla

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #13 on: September 15, 2014, 09:00:51 PM »

Yes, yes, yes to this.  You were wondering if you had a good plan.  Facepunch:  you don't.  In fact, you have no plan at all.  "Buy a house" is not a plan, it's just a declarative sentence.  You don't know about first-time home-buyers programs, you don't know about PMI, you THINK your parents will cosign, you ASSUMED summer was better for sellers.  You don't have a job, but if you want to move away for one, your parents can just rent the place out FOR you???   

Also, you're anxious to be independent from your parents, but you want to get into a business deal with them???  You have a serious lack of education and experience.  Of course, this is where everyone starts, and it can be remedied, but you will need to apply the same diligence that has gotten you through graduate school.

...it might be better to rent small and cheap while saving a large amount for a downpayment and rest in Roth IRA and mix of index fund...

This is the only sensible course.  Right now, move your investments, which are not diversified at all, to an index fund.  Once you have a full-time job, get 3-6 months of expenses into your checking account.  That's your emergency fund, and your first priority.  Then, contribute $5,500/yr to a ROTH.  Once you qualify for the 401k, which might take a year, contribute to it in the amount that gets you the maximum employer match.  You'll have to decide if you want to contribute the maximum amount allowed by law ($17,500), or if you want contribute less in order to accumulate some cash for an eventual down-payment on a house. 

In the meantime, for the love of God, please take some serious time to educate yourself both about real estate and investing.  Especially investing.  I mean, you're paranoid about 401ks--where you're almost guaranteed to make money because your employer GIVES it to you--but you're not paranoid about losing your shirt by being invested in a grand total of TWO individual stocks?  You only own two stocks, and feel you can't do more because of $8 trading fees?????  WHY are you paying trading fees?  [face/palm]  I don't even know where to start...

I apologize for coming to the forum with almost no real knowledge of financial planning or education, I merely sought the advice of members of this board to get second opinions to ones I've seen or heard. Financial planning isn't a course I was ever required to take in school and I did ask for suggestions on references I could use to self-study, I have looked for a couple but wonder what other people might read. As a member, I know my experience and knowledge is probably 1 of the lowest on the forums, that's why I asked for help.

I'm paranoid about 401ks cause back then people couldn't pull out their money or else pay a severe penalty I believe which I think has changed. I know family friends who have lost millions and never recovered and are still working when they could've retired. I also know a person who committed suicide though this was just right before the crash and I don't know if it was related but it was during that time 2007 when you sensed things were going to go bad and it was business related. I remember because I was applying to colleges at the time before the crash and schools were admitting students based more on ability to pay and not just their academics. In either case, I've seen suffering especially in older people and young people my age I feel don't seem to understand the risk or know what it's like the emotion, panic that sets in when you lose $1.5 million dollars in a month, everything and at that time of uncertainty, not knowing what will happen next. For a number of young people, they have had great benefit since the crash and I know a couple like that. But people's investing behavior and advice to others I feel is based on their experiences and their stage in life and while I think it's wise and important to keep calm and hold like another poster mentioned during that time, many did not feel that way or have the nerve too or be able to afford the risk to hold. And it's unlikely we'll have a huge crash like that for a while. But my dad described it as losing 20 years of his life and I've seen the depression and the emotional toll it has had on our family and can only imagine it's worse for many others, though luckily we don't spend much money and take care of all debt quickly as possible so we're still in a good situation compared to most others. He is also much better now and has found some measure of peace.

I would also like to find a cheap place to rent, but the problem is rent is pretty high and constant pretty much wherever I am. I'm not a fan of renting to pay someone's mortgage but if it's dirt cheap enough, it can be better than buying, maintaining a property while saving money elsewhere. And again I did say that I was a complete novice. And if you thought I was bad, you have no idea how little many of my peers know. There definitely need to be classes on personal finance because so many of us I imagine are being taken advantage of.

I would contribute to 401k but I'm not sure I'll stay for more than 5 years with my employer. If I stay less, supposedly all the matching is taken away. But I would contribute even if there is no matching for the sake of contributing and getting started.  I was thinking more money market funds, index funds, bonds, just somewhere safer and I do plan on being a less active investor to focus on school, other responsibilities more. It's reassuring to see a pattern in the advice of many here and it's definitely helped.
« Last Edit: September 15, 2014, 09:05:52 PM by fewaopi »

norabird

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Re: What should be my next move? Should I buy a house? 24 y.o
« Reply #14 on: September 16, 2014, 08:17:12 AM »
There are or have been 401ks that were all in company stock--that is obviously a horror story. But a 401k invested in a mutual fund that uses an index and is diversified, especially one targeted to be more aggressive when you are young and more conservative as you get older, is extremely safe--at least as safe as any investment vehicle. It maybe feels scary to you because it's out of your hands? But your making the decisions about buying or trading stocks, while it gives you control, does not mean that it's wise or that you will know how to use that power to actually make a profit. Short term profits aren't really the point of retirement savings anyway! that's why you buy and hold in something with very low fees--because the money doesn't need to be actively managed, it just needs to be given the space and time to compound. Don't worry about what the market is doing, because on that level it's irrelevant. 401ks can be converted later to give you access to the money through other ways (there are explanations of this elsewhere in detail) but basically you should not be touching them for years/decades so that shouldn't worry you at all.

Everyone has a set of assumptions and fears about money, educating yourself will let the light in so you aren't operating on the basis of those fears but rather on, you know, reality :)