19, just graduated high school with 60 free community college credits. Working minimum wage right now, living with parents. University in the spring next year (not by choice.. MSU didn't accept me for the fall).
What should I do with my money ($2k currently).. I have an urge to blow it on dumb shit, so should I buy a bond or something else with low liquidity? Would such a sum, which will likely seem meager 5-10 years from now, grant me more utility if I spent it now versus saving/investing it?
My family is bad with money, and I want to break the pattern, so would it be wise to use my minimum wage earnings as a sort of "practice" for financial discipline?
Finances have almost been cause for divorce between my parents---they make above-median salary, but still live at their means. Is this the story of every first world family, or can I be happy and stress-free if I manage my money well? General life tips/advice for someone my age welcome. I still don't know what I want to do for a career.
Lastly, does savings interest only counter inflation, or does the principal investment actually gain purchasing power over time?
if you have nothing to defend yet, hold off on pic related. you should put the money in the bank and set aside 1 k for this semester and 1k for the next. take out 2k less in loans, and get a part time job in school and keep that habit up of putting aside 1k per semester
Grayson Reed
Put your money on a down payment for a nice car to pick up chicks. Life is short, and you only live it once. Don't fall for the saving your money meme where you'll be a senile old man before you can ever enjoy it.
Owen Cooper
also for the 1k u already have fore next semester, throw it in pharma stocks or something
David Watson
Hm, I've wanted a motorcycle for 4 years now. I didn't expect a response like this on biz.. aren't you all supposed to be frugal-minded savers? (granted you might be memeing me atm).
I want to get into stock trading, even if it's higher risk, but what I read into it recently lead me to believe that going in with less than 5k is not really worth it unless you throw all your eggs into one basket (maybe I'll do that though.. high risk is fun and I don't have much to lose).
Elijah Peterson
1k is enough. you can even split that 2/3 ways and still have good chances of beating out a cd. plus it would get you into it earlier rather than ten years from now.
shit i had 500 make me 150 just this last friday. thats enough for something like pic related right there holding off on paying taxes. hell if youre in usa u get 1k or 1500 in returns just for going to school and making enough to file.
David King
Saving is a long term goal. Its good when it becomes a life style, but saving more than you could ever possibly need is a scam and a bad habit.
Figure out what you want to have for the next 50 years of your life and aim for it. People that die with 2 million in the bank because they lived with absolute bare minimum spending for 50 years are only SLIGHTLY better than people that live paycheck to paycheck until they die.
Saving without purpose is just as pointless as reckless spending.
Owen Barnes
what do you mean by "beating out a cd"?
Owen Morales
Good point. I will have to find a good balance then, is what you're saying.
Read I will teach you to be Rich by Ramit Sethi Watch Money and Business Essentials by Ramit Sethi Watch Self Made Wealth by Eben Pagan
do what they tell you. links in above link under files: PinchapooRacingOnDesignatedStreets & HustleMuscleRehab
come back here once you've set up automatic payments
You don't even know what the fuck a bond is. You don't even know what liquidity is.
First rule of investing. Invest in what you know.
Second if you want to invest come back here with $35k
There was a course called money for couples with Robyn Crane, if its bad make them watch it. If you're not on teh same page money wise with your partner shit happens. Also I don't generally like Dave Ramsey but he has some really practical advice on dealing with your partner.
Savings interest does run counter to inflation. However, No bank in the world would give you more than inflation, unless they were willingly losing money.
If you want stocks, tastytrade.com is good. but you'll need like at least 5k minimum to get permissioned. but thats after you secure a better paying job, place to live on your own, etc... its all in the book
general rule is cut the crap and only splurge on the things you fucking love.
certificate of deposit. Not worth most peoples time. Ties up your money for little to no return, there are better investments for this return.
Hunter Morgan
Name on fixed-income debt based instrument with a higher ROI that someone with only $2k can afford to invest in? Two thousand dollars in a CD would net OP around 1% if not a little more for his money while only tying it up for 1 year.
Carter Gutierrez
A motorcycle has its ups and downs. Mostly ups transportation wise. But don't drop 2k on a vehicle if you already have one.
Unless you're mechanically inclined and you can flip it.
Gabriel Martin
> 7% annual growth doubles you money in less than a decade > You have to be an old man to see any profit
David Barnes
I echo the opinion that you should keep that money relatively liquid for your college expenses, but if you want to look at investing, here's my two cents:
If you're looking to invest for the long term (like more than 20 years), I would recommend putting some cash into an index fund with a low expense ratio (you can get these through Vanguard, in my experience they have some of the lowest rates around). If you get a stock fund that covers the S&P 500, on average you can get 7% growth, which covers inflation and then some. Of course, stocks are risky, and if the market tanks, then your principal investment will go down in value, but this doesn't matter to you until you're going to cash out, which is not for a long time.
Some other pointers:
If you have the option, before buying index funds or bond funds or any of the fun taxable options, check if your future employer has a 401k plan or something similar. If they match up to a percentage of the amount you put in, ALWAYS contribute at least that much to it, unless you have crippling debt that will wreck your credit score unless you pay it off ASAP. Employer contributions are free money.
1/3
Elijah Long
Also, you should open up and contribute to an Individual Retirement Account (IRA) as soon as you can afford one and max it out each year if possible. Your employer won't have an IRA, so you have to do this yourself, but luckily it's super easy, and no more involved than buying something on eBay apart from deciding which fund you want to invest in. Again, I'd go with Vanguard as a provider because of their super-low expense ratios (meaning you pay less in upkeep. A 2% cut of 1,000 is only $20, but a 2% cut of 100,000 is a cool 2k. Not money I'd be comfortable losing to something that doesn't require much maintenance). Also, depending on how much money you expect to make throughout the course of your career, you may find it wise to get a Roth IRA. The difference between a Roth and a regular IRA is that for a Roth, you pay into it with money that's been taxed (i.e. the money you get from your paycheck after Uncle Sam wets his beak), but for a regular IRA, you put the money in before it’s taxed, so you pay tax when you take the money out. I personally use a Roth, so I’m not 100% sure how contributing to a regular IRA works, but I’d imagine you would have to go through your employer to get the pre-tax money sent directly into the IRA.
2/3
Leo Davis
Once you've maxed out your IRA (the limit in 2016 is $5,500, but this will probably increase with inflation over the years), go back to your 401k and max that out too (2016 limit of $18,000). You want to max out your tax-deferred options (401k and IRA) first because they effectively reduce your income level, which is useful for tax purposes (if you make less money, you may be taxed less). If you managed to max out your IRA and 401k and you still have money left over to invest, NOW we can talk about taxable investments. Go back over what I said about index funds. How you allocate your portfolio will depend largely on your tolerance for risk, but I think a good ratio would be 70% stocks and 30% bonds, give or take. Save to your comfort level here, because if you manage to consistently max out your 401k and IRA starting at an early age, you will very likely retire with a high amount of wealth. On the other hand, if you choose to keep your savings rate high and your personal expenditures low, you can accomplish what is known as FIRE (Financially Independent, Retired Early). This is a point at which your investments have accumulated so vastly, that you can live off the passive income that they generate and never need to work again. There are plenty of excellent online resources on methods to accomplish this, so I won’t waste space here trying to reinvent that wheel.
3/3
Henry Thompson
Assuming $2k is all the money you have, save it. This is your emergency fund. Add to it when you can. Everyone should have a few months' living expenses in the bank. Even though your living expenses might be minimal now since you live at home, it is good to be in the habit of having a liquid emergency fund at all times. At some point in your life, you'll be really glad you have it.
Jaxon Foster
shhh let him buy his shitty toys.
Jaxson Morgan
So say I have ~$30k saved up and was too stupid to invest it until now. I should open up a roth IRA, max that, max 401k at the end of the year and put the rest in low expense ratio index funds?
Joshua Brown
Sort of. Definitely do the Roth IRA and max it out, but you can't put money into a 401k, only your employer can (if you're self-employed you can actually exceed the $18,000 limit, but I'm assuming you aren't). If you wanted to max that out, you'd have to set your pay period contributions so that they hit $18,000 by the end of the year.
Once those are done, then yes, you can move into index funds, but I would also hold on to six months or so worth of expenses as an emergency fund. You can just stash that in a savings account. The interest isn't really relevant here, the value of the account is a highly stable, liquid asset that you can draw from in case of emergencies such as job loss or medical mishaps.
