Hi everyone. I am a 2014 college grad and have been working full time about 6 months. I am making about 65k per year and in addition to putting 10% in 401k I have accumulated about 9k "extra" in my checking account. I already have an emergency fund. I do not have any loans and do not plan on making any large purchases any time soon. What do I do with this 9k? Open an IRA? ETF? S&P 500 Index fund? Im open to a moderate amount of risk.
Open an account at a discount broker. Buy 100 share lots of one Dow ETF, one S&P ETF, one Russell 500 ETF, until you have no more money. It's liquid so you can sell if something urgent comes up.
At your age either maxing out your 401(k) or opening a Roth IRA would be best. No reason to worry about etfs with either of those options. Just buy cheap (Expense ratio < 0.15%) boring large or mid-cap index mutual funds at vanguard or fidelity.
Don't back yourself into a corner. Stay flexible.
Pay down Credit Cards, Student Loans.
You already have a 401K and a Rainy Day.
Next I'd try 80% domestic index ETF, 20% foreign index ETF.
Cover with 1/2 soil, water daily, plant food in spring
Given the inevitable coming deflationary death spiral, thanks to nearly a decade of liberal asinine Keynesian monetary policy, I'd say leave it in the bank account. You'll be able to buy one of those phony champagne socialist's mansions in Brookline for that amount in ten years after the wheels come off.
The liberal asinine Keynsian monetary policy has been happening for some time now. Much of my working life. Good thing I'd say.
Put all 9k on Oregon to cover the spread tonight.
Pay off your credit cards. I know you only use them to get airline miles and you pay them off each month. Yeah right.
Time for a new car bro. You've already got a $9,000 down payment and it sounds like you have about $18,000 a year in excess income, so you could afford about $1500 a month. A new lease on an SL550 roadster is looking right up your alley:
trying2invest wrote:
Hi everyone. I am a 2014 college grad and have been working full time about 6 months. I am making about 65k per year and in addition to putting 10% in 401k I have accumulated about 9k "extra" in my checking account. I already have an emergency fund. I do not have any loans and do not plan on making any large purchases any time soon. What do I do with this 9k? Open an IRA? ETF? S&P 500 Index fund? Im open to a moderate amount of risk.
You are not yet in a position to go riskier than your 401k filled with mutual funds.
IF you have any debt, use it to pay that off.
IF no debt, then:
1) Open an IRA and fully fund it and plan to put that money in each year (or at least get to 15% of your income...10% is not enough, though it is pretty good for a new grad, so props).
OR
2) Save that money in a very liquid way...CDs or Money Market Account for a time WAY down the road when you might want to buy a big ticket item...like a HOUSE for example.
Ideally, you would immediately up your 401k contribution to 15% and open an IRA with this money as a place to put additional money (future income) that you acquire above and beyond the 15% you put into the 401k. AND you would also save even MORE for the big future purchase like a home.
When ARE you in a position to be riskier? When you are doing 15% or more into retirement accounts (within mutual funds) AND you own a home outright or have enough in savings to handle rent upticks the rest of your life. THEN you go buy individual stocks.
Good luck.
Flagpole wrote:
yuipdjgd wrote:Hi, Flagpole!
NOPE! I AM NOT THE POSTER I AM BEING ACCUSED OF BEING. WEJO, DO AN IP CHECK, AND IF I LIE, BAN ME FOR LIFE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
INCORRECT!!! You posted the question from your phone and the answer from your desktop.
stooge of the day wrote:
Flagpole wrote:NOPE! I AM NOT THE POSTER I AM BEING ACCUSED OF BEING. WEJO, DO AN IP CHECK, AND IF I LIE, BAN ME FOR LIFE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
INCORRECT!!! You posted the question from your phone and the answer from your desktop.
NOPE! My hand to GOD that I did not start this thread.
trying2invest wrote:
Hi everyone. I am a 2014 college grad and have been working full time about 6 months. I am making about 65k per year.
False. There are no jobs for recent graduates in the Obama economy -- particularly jobs that pay a living wage.
Flag,
I think paying off debt instead of taking the huge long-term tax advantage of maxing out two years worth of IRA contributions with $9000 cash is generally a big mistake.
.[/quote]
NOPE! My hand to GOD that I did not start this thread.[/quote]
Brother, I always love it when people use that one, brother. Since there is no God, brother, or at the very least there's a God who's too busy allowing terrorists to kill people in France to read this message board, then you're hardly likely to get caught out, are you, brother?
If you feel like you may stay in the area you are in for a while (many do not at age 23, or simply don't know what they want), you may want to buy a house soon.
If you may go back to school, or are highly mobile for some other reason, obviously you will put that off a while.
All of what Flagpole said makes sense and if you are making $65k right away, as long as you are working you will probably never be poor, so I would not worry unnecessarily about the present.
If you want DO to buy a house, you will want to put 20% down to avoid PMI, and so you will have to plan accordingly. If you live in a reasonable part of the country you can still get a nice house for say $200-300,000, and your income alone will support a mortgage of $130-150,000. so that would be $40-60,000 for a DP. If you move in yourself (alone) you will need to be around $170,000 for purchase price.
At your current savings rate, you could have that in 1.5 yrs.
Now I remember that you said you want your savings to GROW. Try this ...
http://www.ally.com/about/investor/demand-notes/
I have been in them for years and there is no risk and the returns are about 5X better than Bank savings accounts. Still not gonna get rich off $9000 in the account, but better than CD rates and they even give you a check book that you can write checks from the account. Pretty handy.
If that is not good enough for you look at Vanguard Funds. Look at some of the lower risk investments, not the stock mutual funds. Set up (like I did) to have a chunk from your checking account put in every 2 weeks or 1 month. That way you don't even think about it and you won't be tempted to time the market.
Good luck!!
dumb wrote:
Flag,
I think paying off debt instead of taking the huge long-term tax advantage of maxing out two years worth of IRA contributions with $9000 cash is generally a big mistake.
Well, you have something to learn then.
He already has an emergency fund. He is already putting 10% into retirement (needs to do more, but he will). Those are two things necessary for a sound financial plan. Now, you also need to eliminate any debt. Really the only acceptable debt is a mortgage and only in SOME CASES student loan debt. If your student loan debt is less than you make in a year, you need to focus on it and get it gone ASAP.
You eliminate debt to avoid paying more over time (interest) AND to free up your income.
This is ideal:
1) Emergency Fund of 3-6 months of expenses
2) Eliminate debt (other than mortgage)
3) 15% minimum into retirement accounts (401k and or IRA) (can do 2 and 3 at the same time)
4) Pay off house
5) OPTIONAL - buy individual stocks (no fewer than 5 at a time and about equally split into different sectors of the market) OR up 401k contribution OR buy non-retirement mutual funds
Well I see your mommy and daddy paid for college and your back living at home storing away cash. How about you quit worrying about making a little bit of money and start by moving out and paying rent. You might even meet a girl and won't need her to meet mom and dad on the first date.
I'd start there.
Your Mama wrote:
Well I see your mommy and daddy paid for college and your back living at home storing away cash. How about you quit worrying about making a little bit of money and start by moving out and paying rent. You might even meet a girl and won't need her to meet mom and dad on the first date.
I'd start there.
You sound jealous.
Lots of people get decent scholarships that allow them to graduate with no debt, and others work through college to pay for it. Even if his parents did pay for his college (nothing wrong with that), the dude makes $65,000 a year. Why would that make you think he's living at home?