Author Topic: Where to start?  (Read 3229 times)

somethink.different

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Where to start?
« on: June 25, 2013, 08:05:47 PM »
I'm pretty new to the whole "financial planning" thing. I grew up with parents who, God love 'em, didn't think ahead, didn't plan well, and were (and still are) living paycheck to paycheck. I've been working through financial issues on my own, and I think I'm doing pretty well.

I've paid off my personal student loan, and am working on paying my parents back for a large loan that they took out for me. I'm working on saving some every month-- not as much as I like, but it's a start. Right now my expenses are roughly $1600/mo, which includes about $100 going into savings. I've got about $1700 socked away, and I'm thinking of investing about $1000 of it.

Questions are:
- Should I pay off my debt to my parents first? I consider it as real and binding as any bank debt, but I'm sort of planning on giving them my tax return for the next four years or so, which would cover both principle and interest for the loan they took.
- Should I save more before starting to invest?
- If I should start investing now... how? What would be a good place to start?

Thanks in advance for your input!

markstache

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Re: Where to start?
« Reply #1 on: June 25, 2013, 09:13:22 PM »
My $0.02:

1. I'd draw up a contract with your folks with a payment plan on it. If they don't think it is necessary, let them know that it is causing you anxiety and you'd like to have it order to plan.
2. My emergency fund is on the low end (only a few months of expenses). Many other people have 6 months or a year or more of expenses saved up. Think about your situtation, what you would have to do if you lost your job, and how comfortable you would be about not having access to your wealth.
3. One reason I have a small e-fund is that I also invest heavily in Roth IRAs for me and my wife. I can pull the the contributions at any time without a tax penalty (the downside is that I can't put it back in). I don't think anyone here would argue against setting up a Roth IRA via Vanguard. You can do it online and get started in one of their target retirement accounts for $1000. To be complete, you'll want to draw up an investing plan stating your goals, risk preference, investing style, but parking your stash in one of the balanced funds or target retirement funds is a good place to start while you work on that. If you have an employer that matches 401k contributions, that would be your best option as this is an immediate 100% return on your investment.

I recommend reading through the Boglehead wiki. Tons of great advice there.

arebelspy

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Re: Where to start?
« Reply #2 on: June 25, 2013, 10:55:55 PM »
As far as investing advice, I think this is a great place to start for beginners: http://jlcollinsnh.com/

It's only a year or two old, so there aren't that many posts - I'd go to the beginning and read them all.

But specifically his "Stocks" series of posts which is almost 20 posts long now.

It's simple, direct, and not too overwhelming.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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gooki

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Re: Where to start?
« Reply #3 on: June 26, 2013, 12:48:24 AM »
Start today.

Invest 50%, repay debt with the other 50%.

George_PA

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Re: Where to start?
« Reply #4 on: June 26, 2013, 07:51:33 PM »
It may depend upon how much you own your parents; if its a small amount like 5k then just keep it simple and pay it quickly so that you can move on with your life;

If we talking about a large amount like 100k, then a payment plan and long term goals may be needed.





OldKronos

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Re: Where to start?
« Reply #5 on: July 13, 2013, 02:12:14 PM »
My opinion:

Take care of your parents, first and foremost. Can you assume their debt by taking, say, a personal loan though a credit union?

Keep building up your savings account balance. Right now, your savings would be wiped-out very quickly with an unexpected job loss or emergency. Set a goal of three months of expenses or six months of expenses to have in your saving account before considering any kind of at-risk investing.

That being said, if you haven't already done it, open an IRA account and start making some small contributions.

Good luck!

Frankies Girl

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Re: Where to start?
« Reply #6 on: July 14, 2013, 08:42:29 PM »

- Should I pay off my debt to my parents first? I consider it as real and binding as any bank debt, but I'm sort of planning on giving them my tax return for the next four years or so, which would cover both principle and interest for the loan they took.

Why is your tax refund large enough for you to be able to use it to pay off someone? If you're getting more than a few hundred, then you need to go adjust your withholdings and make sure you're not giving the government an interest free loan. You'll get back more of your own money each paycheck and able to pay a little bit more each time.

I try to shoot for owing or receiving no more than $200 either way.

And once that's figured out, I'd say pay off the parents, save a little more (3 months expenses minimum for your emergency fund) and then start rolling into investments.