23YO newbie looking for some help from the experienced!!

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Topic Author
Luis94r
Posts: 5
Joined: Thu Jun 15, 2017 2:01 pm

23YO newbie looking for some help from the experienced!!

Post by Luis94r »

Hello Everyone,

I'm fortunate enough to have found this thread because I have gain much more knowledge about investing and financing that I ever did in College and I went to a business school go figure. I am 23 Year old live in NYC have a government job which at the end of FY 2017 ill just break 60K. My salary will be going up steadily for the next 3.5 years which when I complete 5.5 years ill be in the 110k without any overtime completed. Overtime is inevitable in my job so that number can easily rise. I still live at home so no rent plan on staying here until i break that 110k salary the only really major responsibility I have is my Car payments $580/month with insurance, CC debt is in the 6500k and student loans around 6k. I have a 457 deferred compensation at 12% contribution. My investments as of right now are setup at; ( I noticed here on this site that many people have some investment international up to 20% which i don't have)

Equity Index Fund 10%
Mid-Cap Equity Index Fund 50%
Small-Cap Equity Fund 40%

My account is shy of breaking 10k and I have had this account now since I started my job about 2 years ago. Cant forget that when I retire ill also have a minimum 6k Pension. In the other hand I’ve been trying to increase the amount of money readily available in my checking and saving account. I have a little over 5000 dollars in an online checking account earning 1% interest and the reason i have 5k in the account is that I have a $250 deduction taken automatically from my check and deposited into this account. The account I’m hoping is for a down payment down the line 5 years from now when I decide to buy a house. I did open a Vanguard account and was thinking of withdrawing the 5k i have saved already and dumping it to the small cap index fund (NAESX) and then funneling 100 dollars a month into to make it grow or buying Bonds. (If you think I should do otherwise don’t hesitate to tell me please) I also want to build an emergency fund which I do not have would like to have at least 10k in that account.

My finances are all over the place and it seems that I have no control of my money and where it's going at the end of the month. I need some advice on how to get a hold of this problem and how should I invest the money I do have now. Hopefully with promotions I'll be breaking 160 by the time I hit 30 YO and with my girlfriend then being a doctor our HHI would be over the 250K mark. But I need to worry about the present and focus on how to better my finances and have control over my money and actually having money saved up. On a side note a friend of mine gave me an idea of every other check to completely save it and not touch it and that's one way of saving.

Any advice would be greatly appreciated!!

-Lou
-Lou
PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: 23YO newbie looking for some help from the experienced!!

Post by PFInterest »

"My finances are all over the place and it seems that I have no control of my money and where it's going at the end of the month."
"I still live at home [...] my Car payments $580/month [...] CC debt is in the 6500k and student loans around 6k"

work on this first.
MrNewEngland
Posts: 807
Joined: Sun Sep 28, 2014 11:38 am

Re: 23YO newbie looking for some help from the experienced!!

Post by MrNewEngland »

PFInterest wrote:"My finances are all over the place and it seems that I have no control of my money and where it's going at the end of the month."
"I still live at home [...] my Car payments $580/month [...] CC debt is in the 6500k and student loans around 6k"

work on this first.
That's what jumped out at me too... mainly the CC debt. Get that down to zero.

And while your car payments are high and you probably should get something more sensible I really do get the desire to have something nice and flashy at 23 YO after just graduating college.

As for the student loan debts I guess it depends what rate you are paying on them. The interest I was paying on my student loans when I graduated college (2002) was next to nothing so I deferred them as long as I could and then just paid the minimum.
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flamesabers
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Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: 23YO newbie looking for some help from the experienced!!

Post by flamesabers »

OP, I recommend you prioritize paying off your car, credit cards and student loans. Put as much as you can into an IRA and your 457 to utilize the tax advantage space, especially since you're going to be in the 25% bracket for this year. For simplicity purposes, you could put your IRA and 457 into inexpensive target retirement funds.

Since you're living at home, you shouldn't have any problems with putting most of your money towards your debt and tax-advantaged accounts. Once your debt is cleared, focus on building up your emergency fund and saving for a place to live.
BanditKing
Posts: 630
Joined: Tue Oct 29, 2013 11:11 pm

Re: 23YO newbie looking for some help from the experienced!!

Post by BanditKing »

The good news is your expenses are pretty low. If living at home is working for you and your parents (ie, you get along and you have adequate privacy), then no reason to change that any time soon. Because of that, you can do things a little different than the general recommended order.

Start buy putting all of your 457 into a target retirement fund. Keep it simple for now. You can get creative when the balances are bigger.

This is what I would probably do:
  • First, make sure you are putting the minimum for full match into your tax-deferred accounts. That's free money you're passing up otherwise.
  • Second, pay off that credit card. Even if it's on a 0% transfer or something similarly cheap, get rid of it. Never put anything on a CC you can't pay off in full going forward.
  • Third, increase your $5,000 emergency fund to maybe $20k, and and then over time up to about 6-months salary. You can keep that in your high yield savings, or in a fixed-income fund at your Vanguard taxable account (probably split between both)
  • Fourth, now start maximizing your your ROTH and then tax-deferred accounts. Doing it NOW, while you are young, is what will let you retire young too! Roth first, and once all $5500 is depositing, ratchet up your deferred.
  • Pay off your student loan
  • Pay off your car loan
  • Start saving for 30% down on your own place (to give you wiggle room for closing costs, and a possibly more-expensive house than you expected).
  • Start aggressively saving in taxable
This might be helpful: https://i.imgur.com/fb7Dtmh.png

Normally, we'd say emergency fund comes first, but in your case, since you are still at home and have a new car, I think it's safe to defer that. Your biggest risk is job loss, and you have enough ready cash to cover several months of car payments.

I'm not going to fault you for the car payment like many here might - your young and your living expense are low. So, unless your interest rate is ridiculous, I think you can put that off in favor of maximizing your use-it-or-lose-it tax-advantaged accounts. The trick is to make it worth it. To do that, you want to keep the car for at least 10 years. Take good care of it, and it will take care of you.

If you can live frugally, even after fully maximizing your tax-advantaged accounts, you're going to be set. Wish I could have gone back and done it again when I was your age - I made soooo many silly financial mistakes.
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Duckie
Posts: 7840
Joined: Thu Mar 08, 2007 2:55 pm

Re: 23YO newbie looking for some help from the experienced!!

Post by Duckie »

Luis94r wrote:I have a 457 deferred compensation at 12% contribution. My investments as of right now are setup at; ( I noticed here on this site that many people have some investment international up to 20% which i don't have)

Equity Index Fund 10%
Mid-Cap Equity Index Fund 50%
Small-Cap Equity Fund 40%
This is skewed. Equity Index is large caps which are about 80% of the US stock market. Mid caps are about 6% and small caps are about 14%. Reconsider your allocations.
Topic Author
Luis94r
Posts: 5
Joined: Thu Jun 15, 2017 2:01 pm

Re: 23YO newbie looking for some help from the experienced!!

Post by Luis94r »

I thank everyone for their input. My car payment of 580 includes my insurance which is 280 dollars a month because of my age. I will work on getting my CC down to zero and work on my students loans. Would you suggest me maxing out on a ROTH IRA and then work on my deferred compensation? Also in regards to my deferred compensation how should I allocate my investment? I can provide you with whats available with my deferred compensation and then we go from there?
-Lou
BanditKing
Posts: 630
Joined: Tue Oct 29, 2013 11:11 pm

Re: 23YO newbie looking for some help from the experienced!!

Post by BanditKing »

Luis94r wrote:I thank everyone for their input. My car payment of 580 includes my insurance which is 280 dollars a month because of my age. I will work on getting my CC down to zero and work on my students loans. Would you suggest me maxing out on a ROTH IRA and then work on my deferred compensation? Also in regards to my deferred compensation how should I allocate my investment? I can provide you with whats available with my deferred compensation and then we go from there?
Knowing what funds are available would be helpful.

Generally, at your age, ROTH before tax-deferred, then max out tax-deferred. However, if you have any company match, you at least want to put in enough to get all of that.
aspiringlawyer
Posts: 48
Joined: Fri Apr 07, 2017 10:06 am

Re: 23YO newbie looking for some help from the experienced!!

Post by aspiringlawyer »

Duckie wrote:
Luis94r wrote:I have a 457 deferred compensation at 12% contribution. My investments as of right now are setup at; ( I noticed here on this site that many people have some investment international up to 20% which i don't have)

Equity Index Fund 10%
Mid-Cap Equity Index Fund 50%
Small-Cap Equity Fund 40%
This is skewed. Equity Index is large caps which are about 80% of the US stock market. Mid caps are about 6% and small caps are about 14%. Reconsider your allocations.
+1
I believe we're at similar stages. I would reconsider this allocation and just throw it all in a target date fund until you have more money to DIY. You might consider writing up an investment policy statement. The link below contains an article that gives a great example and even has a template to build off. It will also help you to establish some goals like paying off CC debt, etc.

http://www.biglawinvestor.com/how-to-wr ... statement/
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