New Grad needing some advice

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Topic Author
Pitbull2o08
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Joined: Tue Jul 15, 2014 6:32 pm

New Grad needing some advice

Post by Pitbull2o08 »

Good evening everyone!

I'll cut right to the chase. I recently graduated from college, and was the first in my family to do so. Most guys in my family didn't even graduate from high school. It's not that they're dumb, it's just that they immigrated, and worked their cans off. Consequently, I have a great work ethic. I'm 24, and will be making more money this year than twice the amount anyone in my family will make. I will be utilizing this money to pay off some of my debt, which include a small credit card, small amount on my car, and a large sum of school loans. I would like to save, invest, do something with the rest of my money to make more of it.

Like I said, no one in my family has experience, especially in investing. I have been doing some reading, and most advisers tell young investors that equities are the key. However, i'm not sure which ones to look at or where to start. Another person said that I'm young enough and to not worry about equities, and to save the money in an accessible savings account for emergencies because having funds tied up is a gamble with young people.

Thank you for your advice. I know how to live simply, but one day would love to have things I've only dreamed of. Saving the money would not be hard for me but I want to make money with that money. Thanks again!
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Rob5TCP
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Re: New Grad needing some advice

Post by Rob5TCP »

First build up an emergency reserve fund - in case anything should go wrong. Banks like Ally pay close to 1% for short term emergency funds.

Keep reading on the Bogleheads.org

Where you work; find out if there are any retirement plans- especially those with a matching fund.

It might not mean much now - but go into the future - anything you put away now (doubly so with a match)
can have exponential returns over the next 30-40 years.

Avoid the temptation to spend big when you start earning - keep to paying down any debt you have.

When you have a sufficient emergency fund; start looking at what low cost index funds (you will read TONS about them here)
and knowing your risk tolerance for equities (again, there will be many posts on this as well).

Good start and good luck.
SimplyRetire
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Re: New Grad needing some advice

Post by SimplyRetire »

Congratulations on being the first in your family to graduate!

Paying down high interest rate debt and building up at least 6 month emergency fund is a great first step.

Second, I would find out if your employer provides a 401-k match and contribute at least enough to get the match. After that, start looking at IRA's, find out which vehicle (a traditional or a roth) best fits your investment needs.

As far as investments, develop a plan that fits your needs and risk tolerance and be sure to stay the course. Starting young and developing good savings and investing habits will be a great start to reaching your retirement goal.

Main thing: Save and invest, spend the rest.
RadAudit
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Re: New Grad needing some advice

Post by RadAudit »

When you are finished implementing the above information, you may want to read over the stuff here, watch the videos and read some of the recommended books http://www.bogleheads.org/wiki/Getting_started
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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Watty
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Re: New Grad needing some advice

Post by Watty »

The book “The Bogleheads' Guide to Investing” is a good place to start and it is very readable.

http://www.amazon.com/s/?search-alias=a ... Bogleheads

If you like it then as I recall it has been translated into a number of languages so it might be useful for your relatives if they are more proficient in a language that it has been translated to.

There is also a getting started wiki page if you have not seen it yet.

http://www.bogleheads.org/wiki/Getting_started
Pitbull2o08 wrote:Another person said that I'm young enough and to not worry about equities, and to save the money in an accessible savings account for emergencies because having funds tied up is a gamble with young people.
There is a lot more to having good personal finances than investing for retirement so there are a lot of choices on what is the most important now. If you have an account like a 401K with any employer match then that is something you should always contribute enough to get the match.

One thing that I did when I was younger was commit to putting half of any future pay increases into my retirement savings. If you can do that then by the time you are in your 30's you will be putting a large percentage of your income into retirement savings. For your retirement accounts an easy first choice of what to invest in would be Target Date Fund like a 2055 fund. These have some pros and cons but they are a good safe choice to start with and you can change that later if you want to.
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dumbbunny
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Re: New Grad needing some advice

Post by dumbbunny »

Track your inflow and outflow of money with financial software or with an Excel spreadsheet.
Congratulations and good luck.
“It’s the curse of old men to realize that in the end we control nothing." "Homeland" episode, "Gerontion"
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RyeWhiskey
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Re: New Grad needing some advice

Post by RyeWhiskey »

1. Set up an emergency fund. Look at the Bogelhead wiki for more information.
2. Set up a Roth IRA. Again, see the wiki.
3. Check out your employment for a 401k or other retirement plan (with a match if possible). Again, see the wiki.
4. Keep reading the wiki or get the Boglehead's guide books if you'd prefer. Educate yourself here until you feel comfortable with general investments terms and theories.
5. Keep things simple and straight-forward. Live below your means, think long term, keep costs low.

I'm close to your age and sympathize with your situation. Be smart and thorough. This forum and wiki are bastions of excellent and honest information. Good luck and congratulations. :beer
This post was brought to you by Vanguard Total World Stock Index (VTWSX/VT).
Topic Author
Pitbull2o08
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Re: New Grad needing some advice

Post by Pitbull2o08 »

I can't tell you how thankful I am for all of your replies! They've definitely given me much to think about. I have also reviewed the pages you recommended.

Today, the hospital I started at presented their retirement plans.

They offer a 401a through Hewitt Associates post tax. They match in a exponential manner. Employee contributes 1%, They give 2%. Employee 2%, they do 2.5%. Employee gives 3%, they match 3%. Then if Employee gives 4%, they give 3.5%. Then if employee gives 5%, they give 4%.

When the employee invests 6%, the amount of match depends on years vested with the company. <20 years, company matches 4.5%. >20 they match 6%.

Thinking 3% would be more adventitious for me.

They also offer a 403b through Lincoln financial, pre-tax, with no company match.

They also have a College Savings 529 plan through lincoln. I was thinking about doing this so I have some money to offset gradschool.

What do you guys think? I was caught off guard because there was no 401k or IRA offered.
eschaef
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Re: New Grad needing some advice

Post by eschaef »

The company match is free money on the table that you walk away from if you don't take advantage of it. Do everything you can to get up to that 6% contribution so you get the maximum match.
BigJohn
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Re: New Grad needing some advice

Post by BigJohn »

Congratulations on being first in your family to graduate from college!!! I was in your shoes 37 years ago and still remember how awesome it felt.

Agree with above advice and reading. In addition I would strongly recommend Bill Bernstein's booklet "If You Can". It is written specifically for someone your age. It is very short and an easy read but will give you all the right info for a good start (save early, low cost matters, watch out for investment advisers, etc). It also contains excellent recommendations for additional reading. I was so impressed by the simple yet very effective advice, I sent a copy to all my children, nieces and nephews.

Here's a link to the pdf version https://dl.dropboxusercontent.com/u/290 ... %20Can.pdf, well worth the hour or so it will take to read.

Best of luck!!
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
mnvalue
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Re: New Grad needing some advice

Post by mnvalue »

Step 1: Put in 6%. Do not turn down free money. Surely you can afford the 6%. Step 2: Pay off any credit cards and high interest debt. Strive to never carry a credit card balance again. Step 3: Build an emergency fund of 3-6 months required expenses. Start in a savings account at a place like Ally Bank. Once you have $3,000, I strongly recommend you move that into a short-term bond fund in a Roth IRA at Vanguard. You can withdraw your contributions (the money you put in) from a Roth IRA at any time (though this should be a last resort, because you can't put in more than the yearly limit). You can't withdraw earnings (the growth of the account above what you put in) without paying taxes or penalties, unless you meet one of the exceptions. Step 4: Increase your retirement savings to 15-20% of your income. Step 5: Only at this point should you pay extra on low interest loans.

Also, even though I and some others have outlined a number of steps, don't feel like you have to complete them all before asking more questions. If you have questions on anyone's step 2 or even step 1, please keep asking. :)
Last edited by mnvalue on Thu Jul 17, 2014 11:02 pm, edited 2 times in total.
v1rtus
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Re: New Grad needing some advice

Post by v1rtus »

Congrats,

I will second Bernstein's "If You Can." Read as much as you can, read the forum, start making your way through the recommended books here on Bogleheads (http://www.bogleheads.org/wiki/Books:_r ... nd_reviews).

It's great that you are going to be making substantially more than anyone in your family but be careful of lifestyle inflation. Don't start buying stuff just because you can. The more money you can save today the better your future financial situation will be. Definitely make sure you get the entire employer match in the 401a. As far as contributions go I would say to start higher than you think you need to. You can always dial it back if you're unable to make ends meet, but if you start saving you won't miss the money. It's much harder to up the contributions later once you're accustomed to that money being in your paycheck.

Good luck!

-Will
Topic Author
Pitbull2o08
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Joined: Tue Jul 15, 2014 6:32 pm

Re: New Grad needing some advice

Post by Pitbull2o08 »

Wow. Thank you to everyone helping me out! I am blown away by your support!

So I should do the max 6% in the 401a. Should/could I also invest in the 403b?
mnvalue
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Re: New Grad needing some advice

Post by mnvalue »

I think you should pay off the credit cards and build up an emergency fund before you do more than the 6%. But once those steps are done, you should invest another (edited because I forgot the employer match :oops:) 5-10% (to get to 15-20% total) of your income somewhere: start with a Roth IRA, then back to the employer accounts if they have decent choices.
Last edited by mnvalue on Sat Jul 19, 2014 11:16 am, edited 1 time in total.
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Watty
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Re: New Grad needing some advice

Post by Watty »

Contributing at least 6% to get the maximum match is an easy choice and combined with the employers match that will give you over a 10% contribution.
You have a lot of other financial goals that likely include things like;
Paying down your debt.
Saving up a good emergency fund. (using the Roth like was mentioned is a good idea)
Saving up to be able to pay cash for your nest car.
Starting to save up to be able to buy a house someday (there is no hurry, and lots of good reasons to wait)

As long as you are also saving up a lot for your other goal starting off with 6% is plenty. If you increase that a couple of percentage points each year as you get raises then you will be saving a lot each year.
Topic Author
Pitbull2o08
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Re: New Grad needing some advice

Post by Pitbull2o08 »

So I received this in the mail. From what I can recall, this seems to be the 401a (Sharp Saver) but there seems to be a variety of plans I'm so sorry to keep bugging most of you as i'm sure you're very busy yet knowledgeable people. This is just plane Greek to me and I have no idea what works best for me. I thought there was just a 401a and 403b, so i'm not sure what i'm looking at here. If anyone could help, I'd appreciate it and i'd love to get any of you more information if need be.
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rankl
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Re: New Grad needing some advice

Post by rankl »

Congrats on your graduation.

When you contribute money to your 401a, it needs to be invested in one of the funds listed in your plan.

From the list Russell Large Cap Equity Index with 0.18 ER is a good option for you to start with.
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Zabar
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Re: New Grad needing some advice

Post by Zabar »

It looks like you work for Sharp Health Care. This is their 401(a) plan. If they offer a match for your contributions, you should definitely contribute up to the maximum match since that gets you free money. The Russell Large Cap Equity Index, which has a low expense ratio (an annual fee, so it adds up quickly) and is obviously an index fund looks like the best choice for you among these. Once you've hit their match, then you can contribute more to a Roth IRA.

If you don't receive a match, then your options are more open. You can begin by funding a Roth IRA at Vanguard, which will let you purchase a target retirement fund for $1,000. If all you were planning on saving in a retirement plan this year is <$5,500, then you can simply do that and avoid the 401(a) altogether. But once you decide to save more, then you'll need to funnel money into the 401(a).

Take your time. Read some of the books recommended in the Wiki. In the beginning, what's most important is the amount you save, not the specific investments.

And congratulations on making it through college. :beer
Shredder
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Re: New Grad needing some advice

Post by Shredder »

I am excited for you just reading this. I can sense your enthusiasm. Don't let that dwindle.

1. Emergency Fund
2. 6% contribution to get match
3. Roth IRA contributions at Vanguard
4. Pay down debt

If you have high interest loans/debts focus on them before low interest items. If you have specifics we can help you get a plan together but you are getting off to a great start as it is. ABI - "always be investing!" :)

Even if you think you may not need it - create a simple budget in Excel or using Mint or another app on your smart phone and stick to it. It has really helped hold me accountable for my spending and has allowed me to pay down debt more quickly than if I just went at it willy nilly.

Please ask questions along the way. This forum is a great source of information.
Topic Author
Pitbull2o08
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Joined: Tue Jul 15, 2014 6:32 pm

Re: New Grad needing some advice

Post by Pitbull2o08 »

Wow thank you so much! I'd love to get a hold of you to get more information. You seem excited that i'm excited! And that makes me feel very welcomed!
This sheet is my companies 401a. They also have a 403b that I believe they do not match. Should I not invest in that?
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