21 with a lot of time, please advise

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21 with a lot of time, please advise

Post by ItsColby » Wed Jun 05, 2013 8:57 pm

Hello fellow bogleheads, I'm a 21 year old with a bright future ahead and would like to get ahead in the game, please review my current situation and help me plan for my future!

Age: 21, 22 at end of July
Annual Income: ~50k. Post graduation (June 2014) anticipated raise to 65-75k
Tax Bracket: 25%
State: Pennsylvania
Student Loans: ~16.5k subsidized until December 2014 (For next year, will increase by another ~5-6k)
Credit Card: ~4k @ 0% APY until ~October, ~2k on uncle's card
Housing: Fully paid off current home, worth approximately ~$240k. Rental home with ~10-15k left, 600/mo, 400 going to mortgage and 200 going to uncle's CC
Car: Fully paid off 2004 toyota camry

Liquid Funds: 15k @ 1% APY
Roth IRA: ~11.4k VFIFX
401k: Ineligible until post graduation
Taxable: None

Anticipating large upcoming expenses (Within next year):
House exterior renovation (unsure): ~4k
Post graduation vacation (undecided, may take simple road trip): ~2-4k
[Minor medical procedure (personal details not needed) --admin LadyGeek]: ~500-1k

Planned asset allocation:
VTSMX: 55%
VFWIX: 30%
VGSIX: 10%
Risk tolerance : medium - high

Special Notes:
  • Live with uncle(62) and mother(47), paying for all expenses
    Cannot cut uncle out of life/stop paying for his expenses
    Monthly spending over past 10 months excluding extreme emergency (5.5k) = ~$650
    Currently supplemental employee, 95% sure will be offered job during senior year (late this year)
    Anticipate ~3k refund next year from college due to taking less credits than minimum
    No medical insurance
Immediate questions:
Since I am ineligible for my company's current 401k, should I invest some/all of my current liquid funds into a taxable account?
How is my projected asset allocation? Is it too risky even for my age?
I wish to retire at or around the age of 40, is this possible/plausible?
How can I improve my income? (obvious question, apologies)

Thanks so much for reading this post, I appreciate any and all advice/criticism!

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Re: 21 with a lot of time, please advise

Post by RenoJay » Wed Jun 05, 2013 10:16 pm

I'll save the advice-giving for the smart folks, but I want to congratulate on getting yourself to such a fantastic place financially, especially compared with most of your contemporaries. Keep doing what you're doing!

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Re: 21 with a lot of time, please advise

Post by ItsColby » Wed Jun 05, 2013 10:29 pm

Thank you so much! I'm hoping to not stop here and keep moving forward. I've done a lot of work during the past few years to get to where I am right now and I won't let any hasty decision making ruin any of it!

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Re: 21 with a lot of time, please advise

Post by z3r0c00l » Thu Jun 06, 2013 5:03 am

I think your AA looks okay, perhaps a bit too risky (taking TBM up to 10% would hardly reduce returns) but more important is your plan to pay down debts and build a solid emergency fund. At some point, youth means a need for flexibility and cash, both because you can't yet know your future plans say into your 30's, and also because you want to enjoy life! (Like your vacation money.) So at your age, I would worry less about investing and more about saving and reducing debt. Those credit cards have got to go!

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Re: 21 with a lot of time, please advise

Post by Nukeboilermaker » Thu Jun 06, 2013 5:58 am

Keep this simple, you have done great so far! You can easily afford to put any money above living expenses into debt and Roth IRA and that's it. Obviously prioritize the other larger purchases you listed accordingly. As investing goes, I would recommend just the Roth IRA and debt reduction (your choice on interest rate vs small to largest) and build up cash reserves so you can afford to max out a Roth IRA and a 401k once available. A solid efund, no debt, and solid budgeting at your age IMO are the most important/best things to have established. With those things accomplished you will have more freedom to utilize tax advantaged retirement options with a <100k income and maintain your current lifestyle once you graduate.

Nuke (26 yr old)

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Re: 21 with a lot of time, please advise

Post by Sbashore » Thu Jun 06, 2013 10:19 am

I add my congratulations as well. Just some thoughts. Your asset allocation looks ok for your age, but I think at your age you may not be completely set on your risk tolerance. That comes with time, learning and experience. As your portfolio grows, think about losing, actually expect to lose half of it and then try to imagine what your reaction would be. If you find the idea anathema, then your equity allocation is too high. Given your investing time horizon, it's probably going to happen to you at least once. It may be that you really are that risk tolerant, but it's good to have an idea so you can ride out the rough patches. Another thing that jumped out at me was your lack of health insurance. That's something to think about going forward, since an unexpected medical situation can derail a lifetime of investment. You accumulate the assets and then you protect them. :happy
Steve | Semper Fi

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