Investment for Noobs

[Aksannyi]

I'm not going to ask my family to pay off my debt. What kind of person do you think I am?

Not to mention the fact that my family doesn't just have that kind of money to loan to me in the first place. If my family had that kind of money laying around, I probably wouldn't have student loan debt to begin with, because they'd be covering my college education.

I'm 33, not 20. My parents aren't responsible for me anymore, nor do I want them to be. Seriously I'm going to put your stupid ass on ignore, because nothing you've said to me in this thread has done anything but aggravate me.

[test123]

If your pride is more important then your future then go ahead. But if you don't wanna be 40 with nothing then asking parents for help is not a bad idea. If they can take out a second mortgage with 3% interest which you pay off, you will save yourself $$$ big time.

[Kalmado]

Man he's still going at it! I usually ignore this kind of stuff, but jeez man let it go! No one here wants your advice. No one trusts you or believes in the words you type. Go ahead and think we're all idiots and you are the smart one. It's ok! Just stop!

[Ayn]

If your pride is more important then your future then go ahead. But if you don't wanna be 40 with nothing then asking parents for help is not a bad idea. If they can take out a second mortgage with 3% interest which you pay off, you will save yourself $$$ big time.

While I don't agree with a lot of what this guy says, and while I don't necessarily advocate Aksannyi do this, I actually get part of what he's saying here.
There are some parents who have the means and willingness to do this type of thing.
I imagine that many of us posting in this thread do not come from families that would be able or willing to do this, pride aside.

[Ksandra]

Not to mention the fact that my family doesn't just have that kind of money to loan to me in the first place. If my family had that kind of money laying around, I probably wouldn't have student loan debt to begin with, because they'd be covering my college education.

If your pride is more important then your future then go ahead.

If you stopped to actually learn something you might not post these uninformed posts.

[Abandon]

just ban him already and get it overwith, this is stupid

[Grey Jorildyn]

Sometimes in life you do have to buck up and do what is in your best interest even if it is difficult. That could be anything at all. Shit I'm 31 and almost moved out years ago because I didn't get along with my parents, then I lost my job, then they got divorced, so I sure am glad I stayed. I didn't leave not because of those things but because I wanted to own a home and avoiding the renting pit. But if I had moved out I would have had a roommate and I hate the idea too, and get it is what I would have had to do if I really wanted to own some day, even if that meant pushing it back a few years or whatever.

If you identify a barrier in life then address it. Being a loner is a thing, I am too, the ultimate introvert if you will, but I work through it. If it goes deeper than a simple "do not want" then find help for it. Life's too short to tell yourself you can't do this or that, especially when there are those out there willing to help.

Some of the advice here is good, some not-so-good. I can hear what test123 is saying but it isn't all relevant to her particular situation. Sometimes you just gotta sit down and prioritize and student loan repayment is just a part of it. Sounds to me like there are other things going on that are privately happening. Unfortunately this is probably not the place you'll find resolutions to those things.

[BaneTheBrawler]

just ban him already and get it overwith, this is stupid

this. it's getting annoying.

[Darus Grey]

Here's the order you should focus your money, as a general rule:

1) Get out of whatever debt you might be in. Only exception to this is a mortgage or student loans. If it's under 3% interest, don't bother because your money will make more than the interest will accrue due to inflation.
2) Create an emergency fund, 3-6 months' expenses is recommended depending on your job stability.
3) Max to whatever percentage your employer is matching in a 401(k).
4) Open an HSA if you have a high-deductible healthcare plan, max that out ($3300 for a single person for 2014, not sure how it is with kids).
5) Open a ROTH or Traditional IRA, max that out ($5500 for 2014).
6) Max your 401(k) to the annual match (I think it's $17,500 for 2014).
7) Invest your post-tax income in Vanguard index funds.

I think that's the most foolproof and straightforward way to manage your money. Keep track of every dollar you spend and find places you can cut back. Spending less is just as important as saving more.

This is pretty much the most solid investment advice I've seen on a forum. Pretty much exactly what I do as well.

[Abandon]

dont give me this fucking title if i cant do anything with it

[Dngnhack]

Also once you pay off a debt that you actively make payments on instead of being wow now i have XXX amount extra to spend a month since you're already used to living without that money put it towards another payment. If the next debt allows it make sure its marked to go towards the principal and it'll pay off the pre-interest amount and you'll end up paying it off sooner and a lower total amount paid. Then just continue snowballing as monthly debts are paid off.

[Aksannyi]

Also once you pay off a debt that you actively make payments on instead of being wow now i have XXX amount extra to spend a month since you're already used to living without that money put it towards another payment. If the next debt allows it make sure its marked to go towards the principal and it'll pay off the pre-interest amount and you'll end up paying it off sooner and a lower total amount paid. Then just continue snowballing as monthly debts are paid off.

Yes, I already have this worked into a spreadsheet I've titled "Two Year Plan." I've already outlined how I'm going to pay down the truck and student loans. If I wanted to get really technical I could break down how all of the loans will be handled individually rather than one big "Sallie Mae" label. Actually I may do that today at work if this shit is slow. (Monday, mid-month, probably.)

I really do want to pay off the truck loan. Not only am I tying up $250~/month, I've also got a ridiculously high insurance premium thanks to a fucking parking lot fender bender (lady insisted on getting the cops involved, no damage whatsoever but an increase in premium, thanks dumbass). Paying off the truck means I can drop to minimum coverage, which will probably free up about $400/month total with the payment/insurance. And all of that money is going straight to the assholes at Sallie Mae.

I've also laid out how much I need to pay monthly if I want to be debt free in 15 years, 10 years, 5 years. Obviously the goal is 5 years, but realistically, probably not. But seeing the numbers in black and white makes it easy to see what I should be shooting for and to set financial goals for myself.

[BaneTheBrawler]

two year? should make it 5

[Aksannyi]

I should, but I was getting hounded by my boss when I made it.

Productive use of company time, you know. lol

[BaneTheBrawler]

5-year plans?! DIRTY COMMIE

[Dryr]

Basically, I've never really invested money in my life. I work through a temp agency while I put myself through school (it's really better for me this way right now) so I don't have a 401k ... I do have savings accounts but I want to start investing a little more.

I've been looking at the different types of investments like IRAs, CDs, Bonds, Stocks, etc., and I'm totally overwhelmed. Whatever I do, it will probably be through USAA since I trust them, but basically, what's a good way to start investing as a noob? Basically looking at starting with like $1000, and I'm really terrified of anything risky to be honest. I had a CD a few years ago when I first returned from my deployment (that was drained by my ex-husband when he found out about it but let's not discuss that), and the yield was low but there was minimal risk. That's basically how it is, right? Low risk = low yield, high risk = maybe high yield but possibly lose?

Honestly I'm terrified of risk because I'm not usually in a great financial state. I work of course, I make what I need, but something happens like the truck breaking down and then I'm in trouble for a few months while I catch up. So the possibility of putting some money somewhere that I might conceivably lose it is not attractive to me in the slightest.

Also, I have two scenarios in mind and I'm not sure which is better:
Option A: Throw every last additional dollar at Sallie Mae in attempts to pay those bitches off and get them out of my life for good.
Option B: Throw half of every additional dollar at Sallie Mae and the other half into some sort of savings/investment account to both work on paying down debt and work on building some wealth.

Basically, is it better to grow some savings while not paying down debt as well as I could be doing or is it better to pay down the debt and then start saving?

Yeah so I'm completely lost and have no idea what I should do.

Advice?

Simple philosophy; do you want to work for two weeks now, get nothing from it, in the interest of getting two weeks + 4 hours pay in a year thanks to a low risk CD? If not, watch stocks and buy something, possibly tripling that cash in a year or, likely getting your two weeks pay back per the last two year trend. TDAmeritrade is $10/trade with no maintenance fees.

If you already have loans out at a fixed rate, determine if the interest paid is less than the possible investment income. You are the loan company's low risk investment.

[Conrad]

Stocks are for suckers unless you know what you're doing. Index funds are more consistent (less risk and potential earnings of course).

Paying off debt is really the first priority though. Think of it as a no risk, high yield investment since once you pay those funds off, you have that entire loan payment available to you in the future. Pay those off with every available penny you have available. Future You will thank you for it.

[Mayareira]

So I would recommend keeping an emergency fund in savings to cover a few months of living expenses if possible and then any extra after that should be applied to your loans in order of highest to lowest interest rates. It is unlikely your own investments will exceed the rate of return of paying down your loans which is like indirectly investing in yourself.

This, first.

1. Your basic needs are completely covered.
2. Your short-term, high interest debts are paid, future loans are covered.
3. You've got savings as an emergency funds.
4. Rest goes to the investing.

Best way is to start systematically. Investopedia is a good tool for a beginner. Buy yourself an entry level textbook (don't let the word textbook scare you, intro-levels are quite easy), any good one would do just check the curriculum of your local/national university offering investments class (usually under finance). Studying these is an excellent way to get warmed up until you are financially ready to invest. Get a good book, any edition after the crisis is fine. 2nd hand, etc. should be dirt cheap.

For a more in-depth stock approach, I suggest reading "Stocks for the long run". When it comes to stock investing, always go for the long-run approach, you won't have the tools and connections for an effective day-trading.

Follow wsj.com , forbes.com, marketwatch.com, reuters.com, bloomberg.com, ft.com, businessinsider etc. to get familiar with the language and jargon, as well as increasing your awareness for surrounding economic events and impacts. If you don't have, open a twitter account and follow these.

Reading into your current situation; I'd recommend you not to act too quick with investing. Focus on saving first, that should be your priority. Cut your costs as much as you can, get yourself a job that is stable/or make sure you are in a stable posiition that completely covers your needs, then consider investing. By systematically improving yourself with knowledge, by the time you are financially ready, you will be mentally ready as well.

[aurik]

How can you talk about inflation as an important consideration, and then in the same breath post charts that are NOT inflation adjusted in sale prices?

Quick search & source:

http://www.forbes.com/sites/rickferr...estment-again/

Or a better chart/more info here:
http://www.jparsons.net/housingbubble/

tl;dr: If you bought a house for ~$150,000 around 44 years ago (in today's dollars), you would now have a house worth ~$200,000. Congrats on earning 33% on your money over 44 YEARS.

(note: This is equivalent to making an average of a 0.66% return on your investment, per year)

BUT DONT MIND THAT LOL


EDIT: Even IF you take the price at the peak of the housing bubble at ~$220,000, you're only up to an average yearly return of 0.87%.

The inflation adjusted S&P Index, by the way, averages ~7% in returns each year. Which would turn $150,000 into ~$2,994,000 over the same period.

BUT DONT MIND ANY OF THAT EITHER LOL


EDIT2: This is all also ignoring the fact that the sale price is not what you paid on the house, if you took out a loan. A $150,000 house with a 20% downpayment and a 30-year term, and a 5% interest rate, would have a total cost of $231,906. So, 44 years later, you would actually still be in the hole on your housing investment by $10,000-30,000.

BUT DONT MIND ANY OF THAT AS WELL LOL

Ruke is correct here.

If you actually crunch the numbers, you can rent a home and invest the "nest egg" you'd otherwise put down as a down-payment, save on paying interest towards on a mortgage, and in the long run you end up doing just as well as if you owned property.

[Mojo]

Not exactly. A mortgage payment is lower than renting for the same house. Maintenance and taxes offset that cost to be about the same. The advantage is that some of your monthly living expenses are recovered in the form of equity. It can truly pay off in the long run when you consider your monthly payment is set in stone (i.e. won't be affected by inflation.) and that every month more of your monthly living expenses are recovered. You don't need a huge down payment for all loans either. The S&P index is an invalid comparison unless you're squatting somewhere and can invest all of the money you'd otherwise spend on a mortgage payment. test's logic is totally flawed although buying a home can be still be a good financial decision. It can also be a terribly bad idea though.