Saving early, for later

**MonkeyMama** · 06-28-2007, 06:10 AM

We saved $50k for a down payment on a home pretty quickly. Not that we were rolling in dough. You are well on the way. We did 2 things:

1 - saved money in college. I am impressed with how much you saved. I feel lucky to have gotten out with no debt, but my husband on the other hand worked since he was 15, and lived at home with a paid-for education, and so he saved MOST of his income as a teen/college student.

2 - Saved our raise out of college.

I was pretty broke in college, paying rent and tuition and all that and working many jobs. But I made on average $10k/year during school (much of it went to tuition) and $30k right out of school . So did my husband. We saved 90% of our "raise" at least, the first year.

Wala, 20% down on a home.

With kids and insane health insurance and all that we would be hard pressed to save that kind of money today. So it is definitely good to start young.

I would not make risky investments for a future house fund. Cash (money market or CD) at 5% should suffice.

If you are not going to see a large raise right out of college, you could always work a second job to save the money for a down payment. I come from a very high COL area and that is just what people do. There's really not any other option but work darn hard and save save save. Well that and ARMs, but I wouldn't recommend an ARM overall.

**Broken Arrow** · 06-28-2007, 07:00 AM

Hello Artreides! Like your alias by the way.

Do you have an emergency fund? If not, that's what I would start off with the money that you have.

**Coleroo** · 06-28-2007, 07:25 AM

If you are high risk averse, avoid individual stocks right now. Since you are new to the game, you would do best getting your money immediately put into a high interest 5% APR savings account (online ones such as HSBC).

You also need a plan for
~ Emergency fund (at your age, 500 - 1000 liquid savings will probably suffice)
~ Retirement account (take 1000 of your 5000 and immediately open up a ROTH and put it into a target retirement date fund)
~ Wedding money (if you plan to marry within the next 5-10 years?)
~ House money (housing prices just depend on where you choose to live - where I live a "good" house can be had for less than 200k. you may need to rethink what "good" means also)

Also, you should read read read as much as you possibly can on personal finance and financial planning. Reading these boards will help loads also!

You may want to consider more "riskier" investing too - because right now you have TIME on your hands. You're very young! Time is the best thing when it comes to growing your money. Im only 24 but Im WISH i would have had 5000 saved when I was your age!! you have a very good start. I think the biggest regret you would have at age 30 would be if you DIDNT save.

**anonymous_saver** · 06-28-2007, 08:31 AM

A good first read would be Suze Orman's For the Young, Fabulous & Broke book. It would give you all the basics with debt, emergency funds, down payments, retirement etc. Not everyone loves her, but it includes some really good basics.

I would say saving 3 months worth of an emergency fund in an online account like Emigrant Direct should probably be your primary goal.

Then start saving for a house and retirement. I would use Vanguard as a place to have a Roth IRA by the way. Even if it's not much money, it's important to start saving for retirement now - your going to be so much farther ahead than most people!

In addition, at the very minimum I would have saved up 3 months worth of an emergency fund (based on your expenses once you live in a house) and having at least a 5% down payment should be the bare minimum you should have before buying a home.

Also, it depends where you live for how much housing costs. For example, in some areas you could get a house for $150,000-$200,000. I would look around a bit more to see if you can get a cheaper house.

Sorry my message was just blurbs of suggestions, I'm just tired right now. I worked a total of 13.5 yesterday. Ughhhhh!

**Atreides** · 06-28-2007, 09:52 AM

Thanks

Thank you all for the help, it was all very helpful!

**MonkeyMama** · 06-28-2007, 10:47 AM

That reminds me- not sure why I didn't mention, we started with a condo. It was much cheaper. A good way to break into an expensive market. Then we moved somewhere cheaper because the idea of a $500k starter home was a bit much. Even with decent equity...

But whereas most of our friends never think they can own in the area we grew up, everyone in our family started with a condo and moved up to a house within a few years. Was much more affordable that way. An idea to consider as well if housing is expensive where you are (sounds like it is...)

**click4credit** · 07-02-2007, 10:21 PM

Probably the only 100% save option is to put your money into an online savings account such as HSBC or ING with a good rate. However, the money won't frow too fast. One option would be to look at a managed fund through a company such as Fidelity. This may be safer than individual stock holdings as your risks are spread and a pro is in charge of the fund. They can lead to very strong returns but there is always a risk which you would have to weigh up.

**savingandinvesting** · 07-02-2007, 10:27 PM

Saving for later

Key things you need to think about are:
- compounding
- diversification
- using a tax-advantaged saving vehicle
- how stock market returns smooth out historically over 10+ year periods
- diversification: stocks, bonds, cash, real estate, foreign exposure etc.
and you have to think about them a lot in that they are all key elements.

Saving early, for later