No Plan, No investments, No Idea. Need Help

[ftblstr2319]

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[dsstao]

ROTH IRA. Can not stress this enough. Investments are about time more than money. If you contribute the limit each month (about $416), starting at your young age, you will be a lot better off when you retire than most other people.

ROTH IRA. This is your primary thing to do. Next, save enough money in a savings account to last you for a year. Next, save enough money to put in a no-load index fund in the stock market.... ROTH IRA is first, no matter what. Savings is second. Investments are third - and your first $10,000 goes into an index fund.

[maat55]

You need to have a prioritized plan such as:

First 10% into Roth. (Invested in growth stock MF's)
Living Expenses (rent, utilities, etc.)
EF (4,400 is sufficent for now)
Setup house and auto funds.
Fun money.

Try to always live on 90% of your income first. (This will mean having a little less house, car, so on). Always pay your living expenses on time. Always make sure you have a EF 3 to 6 months of expenses.(Do not use this money for down payment money) Instead of borrowing to buy cars and other consumer goods, save and pay cash.(Set up high interest online savings accounts, for your EF, car fund and house fund.)

If you have an emergency, refund the EF before anything else, and so on in order of priority. Always live on a budget and always stick to your plan. Good luck.

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[ea1776]

I second maxing Roth. You are in a low tax bracket. As long as you stay under 25% tax bracket and you don't have any employer sponsored 401(k), I would always put 5k/year in Roth and invest 100% in stocks (index funds or good mutual funds with a long track record of success) until you get closer to retirement (long ways away for you).

Also, I would double the $4400 emergency fund and place it in a higher yield online savings account. You can do much better than 1% in a liquid account. Doing so will protect your very strong retirement position, and makes sure you never have to raid any retirement accounts (last resort).

Your doing a good job. Stay out of debt, and take others' advice on this forum.

Good luck!

[jIM_Ohio]

$944 extra per month. I would send $500/month to Roth or a deductable IRA (the deduction gets you 25% back- so I would consider the deductable IRA in this case). I would choose one or two funds for starters- a large cap fund and a small cap fund for starters. Or maybe a domestic large cap fund and an international large cap fund.

I would put $100/month into savings.
I would put $100/month into HSA
I would put $240/month into a house/car fund.

I would keep savings and house/car fund seperate.
I would contribute to Roth and HSA until
a) the max per year has been set aside (5k for Roth and ~5k for HSA)
b) The HSA has two years of your out of pocket max set aside.

I would use the savings to build up an emergency fund of ~$10000 (6 months expenses). The 4k you have now is a good start, I am suggesting $100/month because $1200/year increases EF by 1 months expenses per year, and you already have close to 3 months expenses.

The $240 for house/cars is a race. Can the current car last until you have about 40k saved for a house (40k is 20% down for a 200k house). If the car needs to be replaced, pay cash from this pool of money, then continue to set aside cash.

The IRA being maxed takes priority over the house and car savings. The goal should be at least 15% of gross salary going to retirement.

If you contribute to a deductable IRA, for every $1000 you send in, you get $250 back on your tax return. I would strongly suggest considering this over the Roth.

[ftblstr2319]

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[jIM_Ohio]

Originally Posted by ftblstr2319

Thank you everybody for the great advice! I really had no idea where to start putting my money. This is definately a swift kick in the ass to get me into gear.

As for the house, i MAY be lucky enough to be splitting the down payment with the g/f (but who knows) ...Damn women... want rings, weddings, kids..they try to make it tough on me. So I will probably keep a little of my monthly's for a just in case fund

I've never heard of a deductible ira. I am definitely going to be looking up the benefits of that over a ROTH.

My understanding of a deductible is that, I will get the 25% back on tax returns, but won't I still have to pay that out when I "retire" in taxes again?

My HSA deductible is 1100 for the year. Then they cover 100% of all medical bills after that is paid.

As for the High Yield Checking accounts, I've seen Countryside at 3.6% and Wamu 3.3% . Do you guys have any recommendations on accounts? I've read a few bad things about Countrywide.

The IRA. This is the tough one. I know of Vanguard, Ing Direct, and T-Rowe price...are any of these good starters for an IRA??


Again thank you all mucho mucho

40k per year as a single man puts you square in middle of 25% tax bracket- assuming your deductions do not reduce your taxable income down to $32550. $32550 is highest income taxed at 15% for single people.

So 5k into a deductable IRA (a deductable IRA is a traditional IRA which qualifies for a deduction). Make sure you qualify for the deduction.

On a gross pay of 40k, your tax liability will be $2665
With a deductable IRA, the 5k is removed from income before taxes, so taxes on 35k would be $1415. Almost cuts your tax liability in half.

Yes you would have to pay taxes on withdraws later.

My logic is this- you earn in the 25% tax bracket now. 75% of the country files taxes in the 15% tax bracket (max income of $32550 single or $65100 married). You are in the top 25% of wage earners. Take any tax break you can find now.

When you marry (if you marry?) the 40k you make will only be in 15% tax bracket, at that time use a Roth IRA (because 15% is cheap taxes to pay). In addition you could convert the deductable IRA to a Roth and pay 15% at time of conversion. In general, pay taxes when taxes for you are lowest. 25% is NOT a low tax rate. 15% is. That simple conversion saves you 10%- and I know few places where you can get a 10% return like that.

[ftblstr2319]

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[jIM_Ohio]

Originally Posted by ftblstr2319

A little something I completely forgot about...I have two houses in my name that 1 is currently being rented out and the other my father lives in....We went in on them last year (which I am not completely comfortable with but he's my dad what can I say). I am not worried about the mortgages getting paid (he has the money), and he is well aware that in the next two years they are going bye bye regardless.

This is the first year I get to write the interest off. An $1800 and a $1300 mortgage a month.

Does that affect me investment wise at all?

This may affect the advice I gave earlier. If you are writing off interest, I assume you are also claiming the rent as income?

What is the total amount of rental income received?
What are the total amounts of deductions you are taking?

It's possible you are in 28% tax bracket with the higher income (so the deductable IRA saves you even more).
It's possible you are in 15% tax bracket with the increased deductions (so the Roth IRA is a better deal).
It's possible you are still in 25% bracket because the rental income was offset by the rental deductions.

I would suggest using turbo tax this year (or a similar program) so you can add tax planning to the list of things you need to learn about.

[ftblstr2319]

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