22 y/o Just Starting

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22 y/o Just Starting

Postby PocketChangePension » Wed Feb 13, 2013 10:52 am

Hi everyone,
My name is Kevin. I'm 22, and currently live in NJ. I will be accepting a job and moving to VA within a month or 2. I will have an income of $36,200 for a year or so, then it goes up to about $40,800. After the first year, the job is stable, but I will still keep a 1 year EF because it helps me sleep at night. The job will have a pension and benefits for retirement, so the pay is lower and there is no 401k option or anything of the sort. I feel I need to create an IRA and save/invest additional money for retirement, since the pension will not be a huge payment at retirement. I plan to try making some side income repairing computers and doing what I can so I can accelerate my savings, but that won't happen right away. I've read a decent bit so far, but there is still a ton more to do and I'm getting to it as fast as I can, but I only have so much time. I know it's a lot to ask, but if someone can recommend how to set up my portfolio, can you recommend a few ticker symbols too?


Emergency funds: I have $23k liquid cash right now all together, which is a combination of my EF and savings
Debt: $13.8k remaining @ 4.84%. Pay off date April 2016. (Making the monthly payment from now to then will only cost me another $1,200 in interest spread across more than 3 years. I'd rather continue building my credit history in that time and save money long term, and keep my cash liquid, than pay off the car loan faster on a depreciating asset)
Tax Filing Status: Single
Tax Rate: 15% Federal, 5.75% State on income over $17k
State of Residence: VA
Age: 22
Desired Asset allocation: 80% stocks / 20% bonds (Open to suggestion)
Desired International allocation: 35% of stocks (Open to suggestion)


Current retirement assets

Nothing at all - I plan to open a Roth IRA with Vanguard


Contributions

New annual Contributions
$5.5k Roth IRA (haven't started yet, this is planned)


Key Points
- I want to actively MONITOR my investments, but I won't have time to constantly read and make a ton of adjustments, so I'd like more of a "set and forget" style, where the money is just taken from my paycheck and sent to Vanguard.
- The employer take 7.5% of my salary pre-tax and combined with the standard deductions from taxes, I should sit in the 15% Federal bracket for quite a while.


Questions:
1. Is a Roth IRA the right option for me to use?

2. I plan to buy a house in the next 4 years or so, and want to have a significant down payment on the house. I also plan to pay the house off by age 35 at the latest, preferably 30. Is it worth keeping the IRA contributions going every year, even if it means delaying my goal of paying off a house early?


I'm open to any and all suggestions. You are all a lot smarter and more experienced than I am. I'm sorry if I missed any details, and if I did, I'll update this post asap.

Thanks for the help everyone,
Kevin
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Re: 22 y/o Just Starting

Postby NYBoglehead » Wed Feb 13, 2013 12:13 pm

Kevin, congrats on the job and good luck in VA.

1. Since you're in a relatively low bracket, I definitely think the Roth IRA makes sense for you. Especially since you'll have a DB pension in retirement that will fill in at least some of the lower brackets, it'll be good for tax diversification to have a Roth account. Recommend Vanguard, using the 3-fund portfolio.

2. Keep your down payment money in CDs or savings. You don't want to subject this money to market risk. I am a huge fan of paying off the mortgage early, but you should not do so at the expense of retirement contributions. You should seek to max out a Roth IRA every single year. Keep in mind that mortgage interest is deductible so your effective mortgage rate will be much lower than the amount listed on your mortgage paperwork.

For your Roth IRA, I recommend a Target Date Fund. The readjustments are done automatically, so you won't have to rebalance on your own (and won't be tempted to). You will be able so save about 8-10 basis points annually if you build the 3-fund portfolio of Total Stock, Total International, and Total Bond Index funds on your own but if you will be tempted to rebalance too frequently sticking with the Target Date Fund should serve you well.
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Re: 22 y/o Just Starting

Postby bergcy » Wed Feb 13, 2013 1:08 pm

Congratulations on your job. Starting this early will make a world of difference in your personal investing. There are folks who are better qualified on this forum to recommend investments.

The only comment I have is to be AGGRESSIVE - aggressive about saving as much money as possible, aggressive about balancing your portfolio and aggressive about keeping your investments simple.
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Re: 22 y/o Just Starting

Postby sapocanhoto » Wed Feb 13, 2013 2:19 pm

I am in a similar situation in the 15% bracket and I go with a Roth. I am planning on going to a 3 fund portfolio, but until I have enough to get admiral shares I am just leaving it all in the Lifestrategy fund with an 80/20 mix.

Definitely fill your Roth IRA even if it means you don't save as much for your house. You can always pull that money back out if you need it, but if you do that you might leave your possible house money in something like a money market until you decide what the money will be for.

If you aren't in a hurry to pay off the car loan, I would try to refinance the loan to a lower rate, I think Penfed has the best rates at 1.49%.

For you savings and EF make sure you are getting as much interest as you can, Ally is the best deal I know of right now, they are offering 0.9% on a savings account.
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Re: 22 y/o Just Starting

Postby emdoc » Wed Feb 13, 2013 3:14 pm

New annual Contributions
$5.5k Roth IRA (haven't started yet, this is planned)


If you contribute before April 15th, I would say put in up to $5k for a 2012 Roth IRA, and then put in any more up to $5.5K in a 2013 Roth IRA.
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Re: 22 y/o Just Starting

Postby BrandonBogle » Wed Feb 13, 2013 5:45 pm

emdoc wrote:
New annual Contributions
$5.5k Roth IRA (haven't started yet, this is planned)


If you contribute before April 15th, I would say put in up to $5k for a 2012 Roth IRA, and then put in any more up to $5.5K in a 2013 Roth IRA.


I was thinking of posting the same thing :)
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Re: 22 y/o Just Starting

Postby PocketChangePension » Wed Feb 13, 2013 10:11 pm

NYBoglehead wrote:Kevin, congrats on the job and good luck in VA.

1. Since you're in a relatively low bracket, I definitely think the Roth IRA makes sense for you. Especially since you'll have a DB pension in retirement that will fill in at least some of the lower brackets, it'll be good for tax diversification to have a Roth account. Recommend Vanguard, using the 3-fund portfolio.

What is the meaning of "DB Pension"?

2. Keep your down payment money in CDs or savings. You don't want to subject this money to market risk. I am a huge fan of paying off the mortgage early, but you should not do so at the expense of retirement contributions. You should seek to max out a Roth IRA every single year. Keep in mind that mortgage interest is deductible so your effective mortgage rate will be much lower than the amount listed on your mortgage paperwork.

For your Roth IRA, I recommend a Target Date Fund. The readjustments are done automatically, so you won't have to rebalance on your own (and won't be tempted to). You will be able so save about 8-10 basis points annually if you build the 3-fund portfolio of Total Stock, Total International, and Total Bond Index funds on your own but if you will be tempted to rebalance too frequently sticking with the Target Date Fund should serve you well.
You recommended above to use a 3 fund portfolio, but then here you say to use a Target Date Fund... now I'm confused.
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Re: 22 y/o Just Starting

Postby Duckie » Wed Feb 13, 2013 11:24 pm

PocketChangePension wrote:What is the meaning of "DB Pension"?

See Defined benefit pension plan.

You recommended above to use a 3 fund portfolio, but then here you say to use a Target Date Fund... now I'm confused.

A Vanguard Target Retirement fund is a three-fund portfolio. See (VTHRX) Vanguard Target Retirement 2030 Fund (0.17%). Or you could use (VASGX) Vanguard LifeStrategy Growth Fund (0.17%) which is also a three-fund portfolio.
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Re: 22 y/o Just Starting

Postby PocketChangePension » Thu Feb 14, 2013 12:21 am

Duckie wrote:
You recommended above to use a 3 fund portfolio, but then here you say to use a Target Date Fund... now I'm confused.

A Vanguard Target Retirement fund is a three-fund portfolio. See (VTHRX) Vanguard Target Retirement 2030 Fund (0.17%). Or you could use (VASGX) Vanguard LifeStrategy Growth Fund (0.17%) which is also a three-fund portfolio.

Oh. Stupid me for not reading into them further. So is Vanguard Target Retirement 2050 Fund (VFIFX) a good option for me to just invest 100% of the contributions to my Roth IRA in?
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Re: 22 y/o Just Starting

Postby NYBoglehead » Thu Feb 14, 2013 8:55 am

PocketChangePension wrote:
Duckie wrote:
You recommended above to use a 3 fund portfolio, but then here you say to use a Target Date Fund... now I'm confused.

A Vanguard Target Retirement fund is a three-fund portfolio. See (VTHRX) Vanguard Target Retirement 2030 Fund (0.17%). Or you could use (VASGX) Vanguard LifeStrategy Growth Fund (0.17%) which is also a three-fund portfolio.

Oh. Stupid me for not reading into them further. So is Vanguard Target Retirement 2050 Fund (VFIFX) a good option for me to just invest 100% of the contributions to my Roth IRA in?


Yes, Target Retirement 2050 would be a great fund to put 100% of your Roth contributions in. I apologize if I caused any confusion in my earlier post. I recommend starting the Target Date Fund because of its simplicity and since you are just starting out. After a few years you will find that you can save 8-10 bps (depending on AA) by going with the 3-fund portfolio by purchasing each of the 3 funds individually (by getting Admiral Shares).
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Re: 22 y/o Just Starting

Postby PocketChangePension » Thu Feb 14, 2013 11:42 am

NYBoglehead wrote:Yes, Target Retirement 2050 would be a great fund to put 100% of your Roth contributions in. I apologize if I caused any confusion in my earlier post. I recommend starting the Target Date Fund because of its simplicity and since you are just starting out. After a few years you will find that you can save 8-10 bps (depending on AA) by going with the 3-fund portfolio by purchasing each of the 3 funds individually (by getting Admiral Shares).


Ok, that sounds good. For now I just opened the account like that with $1k for 2012 contribution. I can't do a full $5k just yet. I should be able to make it just before the deadline. I have a question though, is the deadline April 15th period? Or if you file taxes in say March, does that become your cutoff date?

Also, I'm assuming AA means asset allocation, but what does BPS mean?
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Re: 22 y/o Just Starting

Postby NYBoglehead » Thu Feb 14, 2013 11:49 am

PocketChangePension wrote:
NYBoglehead wrote:Yes, Target Retirement 2050 would be a great fund to put 100% of your Roth contributions in. I apologize if I caused any confusion in my earlier post. I recommend starting the Target Date Fund because of its simplicity and since you are just starting out. After a few years you will find that you can save 8-10 bps (depending on AA) by going with the 3-fund portfolio by purchasing each of the 3 funds individually (by getting Admiral Shares).


Ok, that sounds good. For now I just opened the account like that with $1k for 2012 contribution. I can't do a full $5k just yet. I should be able to make it just before the deadline. I have a question though, is the deadline April 15th period? Or if you file taxes in say March, does that become your cutoff date?

Also, I'm assuming AA means asset allocation, but what does BPS mean?


You have until April 15, 2013 to make contributions for 2012. You will have until April 15, 2014 to make contributions for 2013.

-AA means asset allocation
-bps is the abbreviation for basis points. A basis point is 1/100th of 1%. For the Vanguard Target Date funds, the expense ratio is 0.18% or 18 basis points. That means you will pay $18 in fees for every $10,000 you hold in the fund. You won't cut a check to Vanguard or see any money taken out of your account, your returns will reflect the dollar value you have achieved after fees.
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Re: 22 y/o Just Starting

Postby PocketChangePension » Thu Feb 14, 2013 12:09 pm

NYBoglehead wrote:-bps is the abbreviation for basis points. A basis point is 1/100th of 1%. For the Vanguard Target Date funds, the expense ratio is 0.18% or 18 basis points. That means you will pay $18 in fees for every $10,000 you hold in the fund. You won't cut a check to Vanguard or see any money taken out of your account, your returns will reflect the dollar value you have achieved after fees.

Oh ok I understand. So what are "admiral shares", and why will it take me a few years to buy the funds individually? And by what you're saying, buying them individually will get the expense ratio down to like 0.08% or 0.10%?
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Re: 22 y/o Just Starting

Postby EternalOptimist » Thu Feb 14, 2013 12:19 pm

Save and live below your means, by doing this you have the greatest control of your outcome
"When nothing goes right....go left"
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Re: 22 y/o Just Starting

Postby PocketChangePension » Thu Feb 14, 2013 12:26 pm

EternalOptimist wrote:Save and live below your means, by doing this you have the greatest control of your outcome

I'm way ahead of you there. I've always been that way, all my life. My net worth and bank account balance climbs every month. I don't like spending money.
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Re: 22 y/o Just Starting

Postby NYBoglehead » Thu Feb 14, 2013 12:31 pm

PocketChangePension wrote:
NYBoglehead wrote:-bps is the abbreviation for basis points. A basis point is 1/100th of 1%. For the Vanguard Target Date funds, the expense ratio is 0.18% or 18 basis points. That means you will pay $18 in fees for every $10,000 you hold in the fund. You won't cut a check to Vanguard or see any money taken out of your account, your returns will reflect the dollar value you have achieved after fees.

Oh ok I understand. So what are "admiral shares", and why will it take me a few years to buy the funds individually? And by what you're saying, buying them individually will get the expense ratio down to like 0.08% or 0.10%?


Admiral Shares are achieved for TSM, TISM, and TBM funds once you hit $10,000 ($10k in the individual funds, not overall portfolio). When you hit Admiral Share status the expense ratios go down, because Vanguard achieves its low cost structure through economies of scale.

When you first start out, chances are you won't be able to get Admiral Shares in each of the funds for awhile, since you can only contribute $5.5k in 2013 to an IRA and those funds have $3k minimums to open. So you would have to add the other funds in years going forward. Once you hit $10k in a fund, you can convert to Admiral Shares.

So if you contribute to a Target Date Fund for a few years and build up your balance, you can achieve some cost savings by converting to the 3-fund portfolio with Admiral Shares. For example:

Target Date 2055
-63.2% TSM
-26.9% TISM
-9.9% TBM
-Expense Ratio is 18 bps

3-fund portfolio (high enough balance for Admiral Shares for all 3 funds)
-63.2% TSM (6 bps)
-26.9% TISM (18 bps)
-9.9% TBM (10 bps)
-Weighted expense ratio is 9.6 bps
-Mimicking the Target 2055 Fund with Admiral Shares of the same holdings will save you 8.4 bps

What does this mean for return?

Starting balance: 100k
30 years @ 7% return (Target 2055) = $761,225
30 years @ 7.084% return (3-fund Admiral Share portfolio) = $779,359
*Obviously there will some re-balancing with your 3-fund portfolio that will change the weight ER every few years so this won't be exact, but this was just to illustrate a point.
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Re: 22 y/o Just Starting

Postby PocketChangePension » Thu Feb 14, 2013 12:35 pm

NYBoglehead wrote:
PocketChangePension wrote:
NYBoglehead wrote:-bps is the abbreviation for basis points. A basis point is 1/100th of 1%. For the Vanguard Target Date funds, the expense ratio is 0.18% or 18 basis points. That means you will pay $18 in fees for every $10,000 you hold in the fund. You won't cut a check to Vanguard or see any money taken out of your account, your returns will reflect the dollar value you have achieved after fees.

Oh ok I understand. So what are "admiral shares", and why will it take me a few years to buy the funds individually? And by what you're saying, buying them individually will get the expense ratio down to like 0.08% or 0.10%?


Admiral Shares are achieved for TSM, TISM, and TBM funds once you hit $10,000 ($10k in the individual funds, not overall portfolio). When you hit Admiral Share status the expense ratios go down, because Vanguard achieves its low cost structure through economies of scale.

When you first start out, chances are you won't be able to get Admiral Shares in each of the funds for awhile, since you can only contribute $5.5k in 2013 to an IRA and those funds have $3k minimums to open. So you would have to add the other funds in years going forward. Once you hit $10k in a fund, you can convert to Admiral Shares.

So if you contribute to a Target Date Fund for a few years and build up your balance, you can achieve some cost savings by converting to the 3-fund portfolio with Admiral Shares. For example:

Target Date 2055
-63.2% TSM
-26.9% TISM
-9.9% TBM
-Expense Ratio is 18 bps

3-fund portfolio (high enough balance for Admiral Shares for all 3 funds)
-63.2% TSM (6 bps)
-26.9% TISM (18 bps)
-9.9% TBM (10 bps)
-Weighted expense ratio is 9.6 bps
-Mimicking the Target 2055 Fund with Admiral Shares of the same holdings will save you 8.4 bps

What does this mean for return?

Starting balance: 100k
30 years @ 7% return (Target 2055) = $761,225
30 years @ 7.084% return (3-fund Admiral Share portfolio) = $779,359
*Obviously there will some re-balancing with your 3-fund portfolio that will change the weight ER every few years so this won't be exact, but this was just to illustrate a point.

You have been super helpful all along. Now I have just one more question - how do you calculate weighted BPS?
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Re: 22 y/o Just Starting

Postby NYBoglehead » Thu Feb 14, 2013 12:42 pm

^Multiply the fund weigh in the portfolio by the expense ratio. The 3-fund portfolio I listed above was:
-63.2% TSM, which has an ER of 6 bps (.632 * 6 bps = 3.792 bps)
-26.9% TISM, which has an ER of 18 bps (.269 * 18 bps = 4.842 bps)
-9.9% TBM, which has an ER of 10 bps (.099 * 10 bps = 0.99 bps)
-The sum of the 3 = 9.624 bps for the weighted average (forgive my rounding before!)
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Re: 22 y/o Just Starting

Postby Optimistic » Thu Feb 14, 2013 12:56 pm

Hi Kevin,
Welcome to the forum! You've made a great first step in simply realizing the importance of saving at 22. That alone puts you in the top decile of your peers in terms of financial outlook. The only thing I would add is you should revisit your reluctance to part with your car loan. Holding onto it for another 3 years will do little help your credit history/score. It's on your credit report and will remain there for at least 7 years after you close it. Do you have a credit card? Having a credit card or two (that you pay off monthly) will help with your credit history.

Most Bogleheads would jump at the chance to get a guaranteed return of 4.84% over the next 3 years. Finally, loans are typically best reserved for appreciating assets like houses and yourself (student loan). Paying off a loan on a depreciating asset makes it an even a better idea (unless you were considering walking away from loan).
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Re: 22 y/o Just Starting

Postby PocketChangePension » Thu Feb 14, 2013 1:08 pm

Optimistic wrote:Hi Kevin,
Welcome to the forum! You've made a great first step in simply realizing the importance of saving at 22. That alone puts you in the top decile of your peers in terms of financial outlook. The only thing I would add is you should revisit your reluctance to part with your car loan. Holding onto it for another 3 years will do little help your credit history/score. It's on your credit report and will remain there for at least 7 years after you close it. Do you have a credit card? Having a credit card or two (that you pay off monthly) will help with your credit history.

Most Bogleheads would jump at the chance to get a guaranteed return of 4.84% over the next 3 years. Finally, loans are typically best reserved for appreciating assets like houses and yourself (student loan). Paying off a loan on a depreciating asset makes it an even a better idea (unless you were considering walking away from loan).

I have multiple credit cards, all rewards cards that I use to buy anything I need, and they're all paid in full each month and everything is in good standing. History is just about 4 years long, no black marks at all. I understand it will stay on my report for 10 more years (it's actually 10 years for good stuff, 7 years for bad stuff), but like I mentioned in my first post, $1,200 in interest left to go over the course of 3 more years? I don't like the idea of paying it off and cutting down my liquid money that much. If I had more liquid, I would honestly consider it, but right now I feel it would be too tight. I'll revisit it after I have the new job and everything is stabilized there and I know my monthly living expenses.
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Re: 22 y/o Just Starting

Postby PocketChangePension » Thu Feb 14, 2013 1:09 pm

NYBoglehead wrote:^Multiply the fund weigh in the portfolio by the expense ratio. The 3-fund portfolio I listed above was:
-63.2% TSM, which has an ER of 6 bps (.632 * 6 bps = 3.792 bps)
-26.9% TISM, which has an ER of 18 bps (.269 * 18 bps = 4.842 bps)
-9.9% TBM, which has an ER of 10 bps (.099 * 10 bps = 0.99 bps)
-The sum of the 3 = 9.624 bps for the weighted average (forgive my rounding before!)

Well, I have to say THANK YOU for being so informative about all of this. It really helps someone new like me understand WHY I'm doing something, and not just following orders like a robot.
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Re: 22 y/o Just Starting

Postby NYBoglehead » Thu Feb 14, 2013 1:13 pm

PocketChangePension wrote:
NYBoglehead wrote:^Multiply the fund weigh in the portfolio by the expense ratio. The 3-fund portfolio I listed above was:
-63.2% TSM, which has an ER of 6 bps (.632 * 6 bps = 3.792 bps)
-26.9% TISM, which has an ER of 18 bps (.269 * 18 bps = 4.842 bps)
-9.9% TBM, which has an ER of 10 bps (.099 * 10 bps = 0.99 bps)
-The sum of the 3 = 9.624 bps for the weighted average (forgive my rounding before!)

Well, I have to say THANK YOU for being so informative about all of this. It really helps someone new like me understand WHY I'm doing something, and not just following orders like a robot.


Happy to help. Too many people do things because they have been told by others that it is a good idea, and not because they have taken the time to understand it. I am glad I was able to help you understand what I meant. Make your decisions based on facts and reason, not what others tell you is the best way to do things.
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Re: 22 y/o Just Starting

Postby BrandonBogle » Thu Feb 14, 2013 1:42 pm

NYBoglehead wrote:Happy to help. Too many people do things because they have been told by others that it is a good idea, and not because they have taken the time to understand it. I am glad I was able to help you understand what I meant. Make your decisions based on facts and reason, not what others tell you is the best way to do things.


A very good lesson to learn. I often have to remind others that I may not disagree with them, but I'm drilling down the questions around a suggestion because I want to know the "why" in addition to the "what".
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Re: 22 y/o Just Starting

Postby Duckie » Thu Feb 14, 2013 7:56 pm

PocketChangePension wrote:So is Vanguard Target Retirement 2050 Fund (VFIFX) a good option for me to just invest 100% of the contributions to my Roth IRA in?

It depends. Earlier you wrote you wanted an AA of 80% stocks, 20% bonds. If that is still the case then TR2050 is not the right fund. It currently has 90% stocks, 10% bonds. You don't pick a target date fund by the date in the title, you pick it by what it contains, the AA inside.
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Re: 22 y/o Just Starting

Postby robocop » Thu Feb 14, 2013 8:58 pm

PocketChangePension wrote:
Optimistic wrote:Hi Kevin,
Welcome to the forum! You've made a great first step in simply realizing the importance of saving at 22. That alone puts you in the top decile of your peers in terms of financial outlook. The only thing I would add is you should revisit your reluctance to part with your car loan. Holding onto it for another 3 years will do little help your credit history/score. It's on your credit report and will remain there for at least 7 years after you close it. Do you have a credit card? Having a credit card or two (that you pay off monthly) will help with your credit history.

Most Bogleheads would jump at the chance to get a guaranteed return of 4.84% over the next 3 years. Finally, loans are typically best reserved for appreciating assets like houses and yourself (student loan). Paying off a loan on a depreciating asset makes it an even a better idea (unless you were considering walking away from loan).

I have multiple credit cards, all rewards cards that I use to buy anything I need, and they're all paid in full each month and everything is in good standing. History is just about 4 years long, no black marks at all. I understand it will stay on my report for 10 more years (it's actually 10 years for good stuff, 7 years for bad stuff), but like I mentioned in my first post, $1,200 in interest left to go over the course of 3 more years? I don't like the idea of paying it off and cutting down my liquid money that much. If I had more liquid, I would honestly consider it, but right now I feel it would be too tight. I'll revisit it after I have the new job and everything is stabilized there and I know my monthly living expenses.


Refinance at PenFed!! If you want to keep it, at least get it down to 1.49% interest and save a bunch of money you were planning on paying to your current bank.

Congrats on being so Bogleheadish at your age. If only I could go back and do things over at 22...
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Re: 22 y/o Just Starting

Postby PocketChangePension » Fri Feb 15, 2013 1:16 am

robocop wrote:Refinance at PenFed!! If you want to keep it, at least get it down to 1.49% interest and save a bunch of money you were planning on paying to your current bank.

That would save me about $650 spread over 3 years. I'll look into it.
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Re: 22 y/o Just Starting

Postby PocketChangePension » Fri Feb 15, 2013 1:17 am

Duckie wrote:
PocketChangePension wrote:So is Vanguard Target Retirement 2050 Fund (VFIFX) a good option for me to just invest 100% of the contributions to my Roth IRA in?

It depends. Earlier you wrote you wanted an AA of 80% stocks, 20% bonds. If that is still the case then TR2050 is not the right fund. It currently has 90% stocks, 10% bonds. You don't pick a target date fund by the date in the title, you pick it by what it contains, the AA inside.

I could go with 90%/10% too. I was just using one of the available models listed in the sticky thread. I'm not dead set on anything.
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Re: 22 y/o Just Starting

Postby DualIncomeNoDebt » Fri Feb 15, 2013 1:41 am

Some excellent advice above. For a young buck like yourself, let me tell you what my thought process was concerning money and what to do with it, namely investing in productive assets, instead of depreciating assets.

There's only one "you," and only twenty-four hours per day. But assets and money, you can get more of both and they can multiply over time if you follow sound advice and avoid reckless choices. Thus I realized early on I want as much of my money working for me as long and as often as it can. If I'm at work, I want my money working. I'm resting at home, I want the money working. Sleeping, I want that money working. Out with friends, I want my investments silently working away while I focus on other things. I want it working in quality productive assets like my skills and education, bonds and stocks, real estate, a new entrepreneurial business, other sound quality investments.

I also rejected young-person status symbols like cars, boats, motorcycles, wasteful spending, etc. Take cars. My thought process was this: spend lots of money on a car, which depreciates precipitously as soon as I take ownership, and 99% of the time the car sits on the street doing nothing, earning nothing, and in fact costing me money via gas, fees, repairs, insurance, and dreaded depreciation. Why do I want to do that? Does anything other than my ego care, seriously care, whether I have a new or used car?

You'll be repeatedly faced with this choice. Choose wisely, it will make all the difference to you.
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Re: 22 y/o Just Starting

Postby PocketChangePension » Fri Feb 15, 2013 10:16 am

DualIncomeNoDebt wrote:Some excellent advice above. For a young buck like yourself, let me tell you what my thought process was concerning money and what to do with it, namely investing in productive assets, instead of depreciating assets.

There's only one "you," and only twenty-four hours per day. But assets and money, you can get more of both and they can multiply over time if you follow sound advice and avoid reckless choices. Thus I realized early on I want as much of my money working for me as long and as often as it can. If I'm at work, I want my money working. I'm resting at home, I want the money working. Sleeping, I want that money working. Out with friends, I want my investments silently working away while I focus on other things. I want it working in quality productive assets like my skills and education, bonds and stocks, real estate, a new entrepreneurial business, other sound quality investments.

I also rejected young-person status symbols like cars, boats, motorcycles, wasteful spending, etc. Take cars. My thought process was this: spend lots of money on a car, which depreciates precipitously as soon as I take ownership, and 99% of the time the car sits on the street doing nothing, earning nothing, and in fact costing me money via gas, fees, repairs, insurance, and dreaded depreciation. Why do I want to do that? Does anything other than my ego care, seriously care, whether I have a new or used car?

You'll be repeatedly faced with this choice. Choose wisely, it will make all the difference to you.

I already know. I've been lucky enough that a very good friend of mine is in his 40s and I've known him for about 10 years now. He's also my current boss, and I'm General Manager of his powersports dealership at 22 years old (I've never heard of anyone else in my position at my age) because he trusts me and he's taught me so much about business, money, and not blowing it. The only reason I bought my car is because at the time, I was traveling 800 miles a week, so a Jetta TDI was a good choice to save money on fuel. More than half the payment was covered from my savings on fuel, the insurance cost the same as my previous car, and I have a 7 year/100k warranty on it. My old car needed about $3,000 worth of work, so I offloaded it. It's also nice to know that I have a solid, reliable vehicle for long trips. I didn't buy it for flashiness or anything, I bought it for a functional purpose. Did I lose a lot of money on it? Yes, absolutely. Would I do it again? No, I'd just find some beat up 4 cylinder Hyundai that's used for like $1k if I needed another vehicle. But I feel like there are some mistakes and things I had to do on my own and see why they weren't a great idea, instead of just listening to everyone. Now I'm much wiser about it all, and although there is still a lot more to learn, I'm way ahead of most people my age, and probably ahead of a lot of people older than me too.

By the way, if you're wondering why I'm leaving a good position at the dealership for a new job, it's because I finally got the career job I wanted. Running the dealership is temporary, and it benefited the owner and me greatly.
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Re: 22 y/o Just Starting

Postby 4cefedgst » Sat Feb 16, 2013 12:32 am

PocketChangePension wrote:
DualIncomeNoDebt wrote:Some excellent advice above. For a young buck like yourself, let me tell you what my thought process was concerning money and what to do with it, namely investing in productive assets, instead of depreciating assets.

There's only one "you," and only twenty-four hours per day. But assets and money, you can get more of both and they can multiply over time if you follow sound advice and avoid reckless choices. Thus I realized early on I want as much of my money working for me as long and as often as it can. If I'm at work, I want my money working. I'm resting at home, I want the money working. Sleeping, I want that money working. Out with friends, I want my investments silently working away while I focus on other things. I want it working in quality productive assets like my skills and education, bonds and stocks, real estate, a new entrepreneurial business, other sound quality investments.

I also rejected young-person status symbols like cars, boats, motorcycles, wasteful spending, etc. Take cars. My thought process was this: spend lots of money on a car, which depreciates precipitously as soon as I take ownership, and 99% of the time the car sits on the street doing nothing, earning nothing, and in fact costing me money via gas, fees, repairs, insurance, and dreaded depreciation. Why do I want to do that? Does anything other than my ego care, seriously care, whether I have a new or used car?

You'll be repeatedly faced with this choice. Choose wisely, it will make all the difference to you.

I already know. I've been lucky enough that a very good friend of mine is in his 40s and I've known him for about 10 years now. He's also my current boss, and I'm General Manager of his powersports dealership at 22 years old (I've never heard of anyone else in my position at my age) because he trusts me and he's taught me so much about business, money, and not blowing it. The only reason I bought my car is because at the time, I was traveling 800 miles a week, so a Jetta TDI was a good choice to save money on fuel. More than half the payment was covered from my savings on fuel, the insurance cost the same as my previous car, and I have a 7 year/100k warranty on it. My old car needed about $3,000 worth of work, so I offloaded it. It's also nice to know that I have a solid, reliable vehicle for long trips. I didn't buy it for flashiness or anything, I bought it for a functional purpose. Did I lose a lot of money on it? Yes, absolutely. Would I do it again? No, I'd just find some beat up 4 cylinder Hyundai that's used for like $1k if I needed another vehicle. But I feel like there are some mistakes and things I had to do on my own and see why they weren't a great idea, instead of just listening to everyone. Now I'm much wiser about it all, and although there is still a lot more to learn, I'm way ahead of most people my age, and probably ahead of a lot of people older than me too.

By the way, if you're wondering why I'm leaving a good position at the dealership for a new job, it's because I finally got the career job I wanted. Running the dealership is temporary, and it benefited the owner and me greatly.


Very humble too!
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Re: 22 y/o Just Starting

Postby PocketChangePension » Sat Feb 16, 2013 9:43 am

4cefedgst wrote:Very humble too!

I'm not out for any recognition of any sort. I really enjoy teaching people what I've learned, as long as they genuinely want to learn it. I also volunteer in emergency services (Fire/EMS), and I've been doing that for almost 6 years now. I love the field, and I will never stop doing it. My new career is in that field.
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Re: 22 y/o Just Starting

Postby StormShadow » Sat Feb 16, 2013 1:23 pm

emdoc wrote:
New annual Contributions
$5.5k Roth IRA (haven't started yet, this is planned)


If you contribute before April 15th, I would say put in up to $5k for a 2012 Roth IRA, and then put in any more up to $5.5K in a 2013 Roth IRA.

Before doing this, check that you actually earned at least that amount in 2012. Otherwise you may be in danger of making an ineligible contribution (which is a 6%/year penalty).

You just finished college, correct? Did you work at all last year? How much did you make?
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Re: 22 y/o Just Starting

Postby PocketChangePension » Sat Feb 16, 2013 3:11 pm

StormShadow wrote:
emdoc wrote:
New annual Contributions
$5.5k Roth IRA (haven't started yet, this is planned)


If you contribute before April 15th, I would say put in up to $5k for a 2012 Roth IRA, and then put in any more up to $5.5K in a 2013 Roth IRA.

Before doing this, check that you actually earned at least that amount in 2012. Otherwise you may be in danger of making an ineligible contribution (which is a 6%/year penalty).

You just finished college, correct? Did you work at all last year? How much did you make?

This is not a concern. I've made well over the minimum. I haven't gone to college since the beginning of 2012. I've been working full time. I don't agree with college, but that's another subject not for this thread. I do appreciate you looking out for the little details though.
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