First salary job, fresh slate, where to begin?

[rmiecz]

Ok, so here's a quick rundown of my situation at the moment.

I'm 20, make 25000 a year, and I bring home 1700 a month, (bonuses usually add ~500)
I live with my girlfriend who makes the same. These are our first positions outside of minimum wage that allots us extra money each month. So we want to minimize our mistakes if possible.

Outgoing (these are split between the two of us):
Rent/utilities: 863
My bills (paid by myself only)
Cell: 100
Auto loan: 282
Auto ins: 230

Outstanding debt:
Credit card - 750
Auto (13k left, total value as of today at 13k :\ ) - Gasoline costs average 200-250 a month
Student loans: 7k - currently on a forbearance and no payments come due until I am no longer enrolled (I'm in school and this may increase based on how/if i can benefit from taking out additional loans)
My apartment lease is up in Feb 2012, at which point I plan on taking out a mortgage on a fairly cheap condominium (40k or less)

My work offers tuition reimbursement, full health/dental/vision, and I'm contributing 7% to my 401(k), 6% of which is being matched. (only up to 2400, I've had this job for 8 months)



So, with money already seemingly tight, where to begin? I've heard great things about starting up an IRA contribution when you're young, but I also am reading up on (and very interested in) real estate. I'm learning the process of landlording and was considering purchasing up a few REO condos (living in one) over time and renting out the mortgages hoping for an upturn in the market.

Only downturn is I have minimal knowledge and zero experience. Where does my road to financial intelligence begin? What are some of the most lucrative options?

[rmiecz]

Update..may go in on a condo next few months around 30k on a short sale. But nothing? Just looking for smart places to begin..

[humandraydel]

Originally Posted by rmiecz

Where does my road to financial intelligence begin? What are some of the most lucrative options?

Well, unfortunately the honest truth is that it isn't nearly as glamorous as you want it to be. The road to wealth and financial independence is a long, slow journey of saving for years.

Do you have an emergency fund? Do you have down payments for all those condos? What happens if you lose your job and 1 of the rentals doesn't have tenants - how are you going to pay 2 mortgages when you already feel that money is tight?

Don't get me wrong, the fact that you are aware of and interested in personal finance at age 20 is GREAT! If you start making smart decisions at such a young age, you can't go wrong. However, I don't think buying "a few condos" right now is a smart decision.

[Shewillbemine]

Advice for one of the first mistakes young people with first jobs commit:

Get rid of your car payment. Sell that car, buy a $5000 beater (or less) and suffer for a couple years.

Take that $282/month payment and save yourself at least $3384 a year. Your car insurance will probably go down so let's call it $3600 a year. Don't forget the money you're saving not paying interest. That $13,000 you're spending on this current ride could easily end up being $15,000+ by the time you're done paying it off.

If you are truly serious about financial independence, that is one of the most effective ways you can reach your goals.

Plenty of young starters such as yourself find themselves enamored with their first, consistent paychecks (no matter the amounts) and decide they "owe it to themselves" to begin living the American Dream. If you can find an older relative who owns an older car they will loan, give or sell to you at a much cheaper price (and you know the car's history too), try that route.

[Frugal]

As someone who was once in school like you, the only thing I can say is do whatever you can to avoid taking out as little loan as possible. I did worry about it at the time, but I worry a lot more about it now, that I have been out of school awhile. Like most people, it is a huge burden to have when you are out, and I am trying to pay it down, but it is really hard. Even if your loans come due when you are out of school six months (as in my case), it was best that I did what I had to, and started paying down as quickly as possible.

[rmiecz]

..hehe so yeah I'm talking some sense into myself, establish an emergency fund and stick with one reo (to live in). May try and sell the car to get that one huge monkey off my back..just need to familiarize the costs of swapping out a vehicle vs. a residence.

On the note of saving, I hear good things about IRAs (but can't find a good site to compare rates), and maybe a money market savings (for liquidity, maybe prove a good home for the emergency fund?

And i'm trying to avoid the "ill pay it later" mentality most students I know have about loans, helpful as they are....

[Shewillbemine]

Roth IRAs won't have fixed "rates" since they are investment accounts. Talk to a CPA or older relatives who have IRAs/Roth IRAs

Money market accounts are ok for liquidity, but cash can definitely be king if you need something in a bind. A simple savings account in addition to your other investments should be good.

[snafu]

Being a landlord is fraught with problems. If you want to know how it feels, seek a job as apartment manager to co incide with your lease expiration. If you find that responsibility along with your current work requirements acceptable, you will be better able to judge property from the perscpective of a landlord and have the added benefits of on-the-job learning and more savings via reduced rent.

There is likely a 2 year buying window since all the mortgage defaults have not yet been processed and getting a loan is still akin to getting blood out of a stone.