Author Topic: Where to start?  (Read 2532 times)

Aeowulf

  • 5 O'Clock Shadow
  • *
  • Posts: 19
  • Location: VA
    • Aeowulf Forums
Where to start?
« on: October 24, 2015, 07:27:25 PM »
Hey guys. Trying to read through everything and its just making me more confused about where to actually get started. Can anyone point me to a post that breaks this down?

Just posting some info if it helps point me in the direction I want to go:

I'm late 20's with a mortgage (3.375%). Right now I'm about 6 months in and have already paid a year off the tail end of it (30 year mortgage, I know...)
I have 6 months salary in a money market account for an emergency fund (measly 0.45% rate)

Right now, every extra penny over my emergency fund goes to my mortgage to pay it off sooner. I want to earn more than what I am off of my emergency fund and still be able to reach it in case of emergency.

MDM

  • Senior Mustachian
  • ********
  • Posts: 10913
Re: Where to start?
« Reply #1 on: October 24, 2015, 08:23:32 PM »
Some "getting started" reading material:
www.etf.com/docs/IfYouCan.pdf
http://jlcollinsnh.com/stock-series/
http://www.mrmoneymustache.com/the-mmm-reading-list/ - Haven't read them all, but A Random Walk Down Wall Street by Burton Malkiel and The Four Pillars of Investing by William Bernstein were good.
Last but not least: http://www.bogleheads.org/wiki/Category:Getting_started

Note: not all the advice in the items above will be identical, but it's all good.

If you want to build a stash for early retirement, consider paying only the minimum on the mortgage and investing instead.
In the lists below, thinking "first your 457 (if you have one), then your 401k and/or 403b" wherever "401k" appears is likely correct.
Differences of a few tenths of a percent are not important when applicable for only a few years (in other words, these are guidelines not rules).

WHAT
0. Establish an emergency fund to your satisfaction
1. Contribute to 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.
3. Max HSA
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)
6. Fund mega backdoor Roth if applicable
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.
8. Invest in a taxable account with any extra.

WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks   
1. Company match rates are likely the highest percent return you can get on your money   
2. When the guaranteed return is this high, take it.   
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.   
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between (or see   
   http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/
   if you want even more details on that topic.)
5. See #4 for choice of traditional or Roth for 401k   
6. Applicability depends on the rules for the specific 401k   
7. Again, take the risk-free return if high enough   
8. Because earnings, even if taxed, are beneficial   

The emergency fund is your "no risk" money.  You might consider one of these online banks: http://www.magnifymoney.com/blog/earning-interest/best-online-savings-accounts275921001   
      
If your 401k options are poor (i.e., high fund fees) you can check http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/ for some thoughts on "how high is too high?"   

Aeowulf

  • 5 O'Clock Shadow
  • *
  • Posts: 19
  • Location: VA
    • Aeowulf Forums
Re: Where to start?
« Reply #2 on: October 25, 2015, 09:06:49 AM »
Thank you so much!

It appears I have a lot of reading to do...

Louisville

  • Pencil Stache
  • ****
  • Posts: 544
Re: Where to start?
« Reply #3 on: October 28, 2015, 01:54:11 PM »
Get started doing what? What is it that you're trying to accomplish and why?

MVal

  • Pencil Stache
  • ****
  • Posts: 844
  • Age: 39
  • Location: Missouri
Re: Where to start?
« Reply #4 on: October 28, 2015, 02:41:09 PM »
Hey guys. Trying to read through everything and its just making me more confused about where to actually get started. Can anyone point me to a post that breaks this down?

Just posting some info if it helps point me in the direction I want to go:

I'm late 20's with a mortgage (3.375%). Right now I'm about 6 months in and have already paid a year off the tail end of it (30 year mortgage, I know...)
I have 6 months salary in a money market account for an emergency fund (measly 0.45% rate)

Right now, every extra penny over my emergency fund goes to my mortgage to pay it off sooner. I want to earn more than what I am off of my emergency fund and still be able to reach it in case of emergency.

Your money market account sucks. Why not put that emergency fund in a savings account at Ally.com? You can at least get almost a full 1% there. I have under $10K in my fund and I get about $5 in interest each month. Others have put money in Mango Money which gives you 5%, but it comes with some kind of debit card.