18, Looking for Advice

[enorth]

I'm 18 years old and I graduate from high school on May 30. I have a good job with ConocoPhillips and I plan to live with my parents, attend a local junior college, and continue working there for a year or two. Living with my parents means the only real expense I'll have is gas (so liquidity is not really an issue for me) and I have a decent amount of cash saved up (around $2500 now) in a checking account that I'd really like to invest. I'm basically at a loss for what to do with it, but I feel pretty strongly about investing it in some way. Over the next 3 or so months I'll be making an additional $3000ish, most of which I'll probably be able to put back as well... Please ask any questions and I'll do my best to answer them. I'd love to hear anything you have to say.

EDIT: I also have a little over $650 in bonds, most of which can be payed now... Should I put that money elsewhere?

[maat55]

If you put the money into a roth ira invested in a mutual fund that earns 12%, it will grow to 684,000 when you are 65. Question is, what are you investing it for.

[enorth]

I think the roth idea is probably pretty good. I'd like to have some long term investments for retirement, but I also wouldn't mind slightly shorter term as well... Really what I'm looking for is people who have grown up and know what they wish they would have done. Also, if I was to decide to go with your suggestion, where should I start looking?

[maat55]

I would suggest at your age to start reading books on personal finance. I didn't learn the inportance to good money management till too late in life. Here are some books that will help you a lot.

The Total Money Makeover by Dave Ramsey.
The Millionaire Next Door
Rich Dad Poor Dad
The Wealthy Barber
Master your Money by Ron Blue

The core of what you learn in good money management is to not take on consumer debt and invest at least 10% of your income no matter what. In the book Rich Dad Poor Dad it teaches that most people use most of their income to buy liabilities and not enough assets. Your home is also a liability.

Learn to save and invest at least 10% of your income.
Do not run up balances on any credit cards. (Always pay in full every month)
Pay cash for your cars and tv's etc.

You can setup an account at Scottrade's to buy Mutual funds through their NTF program. Or check your bank for an investment adviser, but do not pay any commissions. Good luck.

[Broken Arrow]

Can I ask a quick question? What exactly do you do for ConocoPhilips and what do you think of that company in general?

[Like2Plan]

enorth,
I am assuming that you are not going to need the $2500.00 in the near future for college (or other) expenses. By near future, I mean within 5 years. If not, a roth would be the first thing I would invest in if I were you. You should read up on the Roth IRA as it is a pretty nifty way to save for retirement, but you can also withdraw the money under certain conditions penalty free. If you start one now, you have started the clock ticking towards having it established for 5 years.
Link to Roth IRA
Link to IRS info on Roth IRA

Vanguard is another very good company. However, Vanguard has a 3,000 minimum to invest, (I don't know how doable it would be to come up with another $500.00 to establish a Vanguard account) Link to Vanguard

[BTC]

Don't spend it on drugs and alcohol, or at least not all of it.

[jIM_Ohio]

I would look to contribute yearly max to a Roth IRA (5k). $500/month for 10 months would work.

Because we are late in year, use January-April contributions as prior year (until you hit 5k max).

I would also keep around 5-10k in a savings account or moderate investment of sorts. Liquidity is important. What if your car breaks down? What if parents kick you out? What if something unexpected happens?

I think 5k in a high yield savings account or laddered CDs makes sense. Then keep another 5k in a non retirement account for other reasons (larger car repair, something else).

Leave the Roth IRA alone (just add to it like a good habit).
Use the taxable account to fund intermediate goals. Maybe get a condo in a year, then rent out rooms to other students while in school (to help pay the bills).

Use these next two years to get cash heavy. Once you are cash heavy you will have more choices.

[LuxLiving]

First set aside a portion of it for an emergency fund. What about car repairs? How will you take care of those if they come up?

Once those areas are covered, then, I'd look at doing a Roth IRA invested in index funds.

[disneysteve]

Are you getting a free ride at home or are you paying rent, contributing toward groceries and utilities, etc.?

How about college? Who is paying for tuition, books, fees, etc.?

How soon do you plan to get your own place? You need to save up for that - security deposit, a couple of month's worth of rent, furniture, etc. I would do that in a high yield money market account.

I think a Roth is a great idea, too, of course, but I suspect there are short-term needs that need to be addressed.

[enorth]

Originally Posted by maat55

I would suggest at your age to start reading books on personal finance. I didn't learn the inportance to good money management till too late in life. Here are some books that will help you a lot.

The Total Money Makeover by Dave Ramsey.
The Millionaire Next Door
Rich Dad Poor Dad
The Wealthy Barber
Master your Money by Ron Blue

The core of what you learn in good money management is to not take on consumer debt and invest at least 10% of your income no matter what. In the book Rich Dad Poor Dad it teaches that most people use most of their income to buy liabilities and not enough assets. Your home is also a liability.

Learn to save and invest at least 10% of your income.
Do not run up balances on any credit cards. (Always pay in full every month)
Pay cash for your cars and tv's etc.

You can setup an account at Scottrade's to buy Mutual funds through their NTF program. Or check your bank for an investment adviser, but do not pay any commissions. Good luck.

Thanks for the advice. I'll look into getting a book or two.

Originally Posted by Broken Arrow

Can I ask a quick question? What exactly do you do for ConocoPhilips and what do you think of that company in general?

I work in A&OI, which is Assets and Operating Integrity. Most of what I do has to do with equipment inspections, maintenance scheduling, and that sort of thing. I use a computer program you mnay have seen advertised called SAP. Overall my experience with ConocoPhillips has been good. I'm learning an incredible amount, making pretty good money, and growing my social network with people that will be able to help me succeed in the future. I really like Conoco...

Originally Posted by Like2Plan

enorth,
I am assuming that you are not going to need the $2500.00 in the near future for college (or other) expenses. By near future, I mean within 5 years. If not, a roth would be the first thing I would invest in if I were you. You should read up on the Roth IRA as it is a pretty nifty way to save for retirement, but you can also withdraw the money under certain conditions penalty free. If you start one now, you have started the clock ticking towards having it established for 5 years.
Link to Roth IRA
Link to IRS info on Roth IRA

Vanguard is another very good company. However, Vanguard has a 3,000 minimum to invest, (I don't know how doable it would be to come up with another $500.00 to establish a Vanguard account) Link to Vanguard

I will not need this money in the next five years... Almost for sure. I'm definitely going to see what I can learn about the Roth IRA because starting this early, I hsould be able to have a pretty good sized one by retirement age. I'm going to look into Vanguard. $3,000 is certainly within reach for me. Would you say cashing in my bonds and throwing them into a Roth would be a good move right now? Thanks for the help!

Originally Posted by BTC

Don't spend it on drugs and alcohol, or at least not all of it.

No sir. Drugs and alcohol are NOT assets, ha.

Originally Posted by jIM_Ohio

I would look to contribute yearly max to a Roth IRA (5k). $500/month for 10 months would work.

Because we are late in year, use January-April contributions as prior year (until you hit 5k max).

I would also keep around 5-10k in a savings account or moderate investment of sorts. Liquidity is important. What if your car breaks down? What if parents kick you out? What if something unexpected happens?

I think 5k in a high yield savings account or laddered CDs makes sense. Then keep another 5k in a non retirement account for other reasons (larger car repair, something else).

Leave the Roth IRA alone (just add to it like a good habit).
Use the taxable account to fund intermediate goals. Maybe get a condo in a year, then rent out rooms to other students while in school (to help pay the bills).

Use these next two years to get cash heavy. Once you are cash heavy you will have more choices.

Great points. I'll keep them in mind. Thanks!

Originally Posted by LuxLiving

First set aside a portion of it for an emergency fund. What about car repairs? How will you take care of those if they come up?

Once those areas are covered, then, I'd look at doing a Roth IRA invested in index funds.

You say set aside a portion, how much do you recommend and where would you recommend I put it? Savings?

Originally Posted by disneysteve

Are you getting a free ride at home or are you paying rent, contributing toward groceries and utilities, etc.?

How about college? Who is paying for tuition, books, fees, etc.?

How soon do you plan to get your own place? You need to save up for that - security deposit, a couple of month's worth of rent, furniture, etc. I would do that in a high yield money market account.

I think a Roth is a great idea, too, of course, but I suspect there are short-term needs that need to be addressed.

I'll get basically a free ride as long as I'm living at home. I'm not sure how long that will last, but not more than a year - maybe two. I'll work something out with my parents for college. Because I'm staying home and going to a junior college, it will be considerably less expensive, though. I'll probably pay for some of it. I'm not really thinking about my own place as of right now, but thanks for that advice. How much do you think it would be wise to have ready for that?

[maat55]

Originally Posted by enorth

Thanks for the advice. I'll look into getting a book or two.



I work in A&OI, which is Assets and Operating Integrity. Most of what I do has to do with equipment inspections, maintenance scheduling, and that sort of thing. I use a computer program you mnay have seen advertised called SAP. Overall my experience with ConocoPhillips has been good. I'm learning an incredible amount, making pretty good money, and growing my social network with people that will be able to help me succeed in the future. I really like Conoco...



I will not need this money in the next five years... Almost for sure. I'm definitely going to see what I can learn about the Roth IRA because starting this early, I hsould be able to have a pretty good sized one by retirement age. I'm going to look into Vanguard. $3,000 is certainly within reach for me. Would you say cashing in my bonds and throwing them into a Roth would be a good move right now? Thanks for the help!

No sir. Drugs and alcohol are NOT assets, ha.


Great points. I'll keep them in mind. Thanks!


You say set aside a portion, how much do you recommend and where would you recommend I put it? Savings?


I'll get basically a free ride as long as I'm living at home. I'm not sure how long that will last, but not more than a year - maybe two. I'll work something out with my parents for college. Because I'm staying home and going to a junior college, it will be considerably less expensive, though. I'll probably pay for some of it. I'm not really thinking about my own place as of right now, but thanks for that advice. How much do you think it would be wise to have ready for that?

I think you are starting on a good foot. Read some of those books and get your education and don't forget to invest at least 10% all through your life.

[Like2Plan]

Originally Posted by enorth

Thanks for the advice. I'll look into getting a book or two.
Would you say cashing in my bonds and throwing them into a Roth would be a good move right now?

enorth,
It depends on several variables. Are they in your name? Are they savings bonds? Are they earning an excellent interest rate? Would you take a penalty by cashing them in now? Also, you need to make sure the kiddie tax rules won't impact you. The kiddie tax kicks in when you can be claimed as a dependent by your parents on their tax return and you have unearned income over a certain threshold. ( It results in a bigger tax bill for you. If this might apply, you should carefully time cashing in your bonds so as not to trigger this extra tax. )

[enorth]

Originally Posted by Like2Plan

enorth,
It depends on several variables. Are they in your name? Are they savings bonds? Are they earning an excellent interest rate? Would you take a penalty by cashing them in now? Also, you need to make sure the kiddie tax rules won't impact you. The kiddie tax kicks in when you can be claimed as a dependent by your parents on their tax return and you have unearned income over a certain threshold. ( It results in a bigger tax bill for you. If this might apply, you should carefully time cashing in your bonds so as not to trigger this extra tax. )

They're in my name and are EE savings bonds. I just checked and noticed they're earning anywhere from 3.0 to 4.11, so that's not bad at all. Some of them would have a penalty so I'd definitely wait on those, but most wouldn't. I'm going to read up on the kiddie tax, but I'm almost positive it wouldn't apply. Thanks!

[red92s]

Best financial advice for an 18 year old male: DON'T develop an interest in modifying cars. There is pretty much no faster way to spend lots of money, only to run it into a tree, curb, or another car.

[enorth]

Originally Posted by red92s

Best financial advice for an 18 year old male: DON'T develop an interest in modifying cars. There is pretty much no faster way to spend lots of money, only to run it into a tree, curb, or another car.

Thank you! That's some very valuable advice

[disneysteve]

Originally Posted by enorth

I'm not really thinking about my own place as of right now, but thanks for that advice. How much do you think it would be wise to have ready for that?

You need to plan on having 2 month's rent plus a security deposit up front to get an apartment. Scan the classifieds to see what an average apartment is renting for in the areas where you would be likely to live. If rent would be $800/month, you'll need about $2,000 to get started. You'll also need money for furnishings and supplies. And you'll need your emergency fund to reflect your higher expenses, so an additional $2,400 to cover rent for 3 months and more to cover utilities and other living expenses in case you become unemployed.

[rennigade]

Originally Posted by maat55

If you put the money into a roth ira invested in a mutual fund that earns 12%, it will grow to 684,000 when you are 65. Question is, what are you investing it for.

What investment guarantees 12%? Let me know so I can jump on that gravy train.

[jIM_Ohio]

Originally Posted by rennigade

What investment guarantees 12%? Let me know so I can jump on that gravy train.

12%- no guarantees, but I think microcaps and tech could hit 12% returns over next 10-15 years.

But if it doesn't then the ride will be crazy. And if those sectors do hit 12%, get out quickly.

[LuxLiving]

Size of emergency fund?

hmmm...I have two sons about your age right now, and they both are living at home saving to move out...they own their own cars and the expenses that come along with them....so, for them we've set a minimum of $1000 right now in the Emergency Fund with goals to move it up a bit at a time to $3000 before they move out. That is in addition to the money they keep in their Car Repair Fund.

I'd also like to ask you about your health care situation, I'm assuming you are going to be covered at your work? If not, then you need to be planning for health coverage. My one son got sick during the time when he left one employer (against parental advice) and before he was eligible for the open-enrollment date at his new employer. The result? A $1600 hospital bill that he now is paying off a bit at a time. Sucks.

He had a little bit put back in his Medical/Dental/Prescription/Co-Pay Fund, but not nearly enough.

MORE in his Emergency Fund would've been helpful.

Guess where most of his stimulus check is going???? He got back $600. So, he's taken $100 to have fun with, $200 to pay back his Dad, and $300 towards replenishing the Emergency Fund.

I just think you'd want to overestimate here and not stint. Something will come up. Best be prepared.

My boys also have savings bonds. We are not cashing them in to invest them elsewhere. We consider this part of their liquid emergency money. If push came to shove, it's easy to get at.