Dappered Financial Talk

[RiveDroit]

I feel like we're all like minded guys (we appreciate style AND value), so I figured a personal finance discussion may be a good place for guys across all demographics to share questions and tips.


So without going into specific dollar amounts (so this thread won't turn into a whiz contest) I had a question:


So I'm well out of college, taking a few grad school classes, relatively stable financially. I have checking/savings, 401K, CDs, IRAs, even an FSA. No stocks or investing. Pretty conservative if you ask me. I'm not looking to be Yacht rich, just want a level of comfort later on. Is there anything else you guys would recommend? I've thought about a personal finance advisor, but always thought it was for upper echelon fellows.

[thmage]

I have a bank account and student loans! And no, I don't think all personal advisers are for the wealthy.

[nicholascrawford]

Let's just say I'm the kind of person who leaves the receipt in the ATM just to give the next person a complex. ;-) Whiz contest!


Spend less than you make. Set aside money aggressively. Look at a Roth contribution max as the starting point. It's human nature to believe that we'll be better able to set aside money in the future. Now is the time.


Homeownership should not be considered an investment. Ever ever ever. Investment property is an investment and should be treated like one. We've decided to put our money elsewhere.


The most frequently overlooked topic in these discussions tends to be the principle of *make as much money as you possibly can* because folks tend to have a fatalistic attitude about their earnings. "Oh Nick, you don't understand, I can't get a raise/promotion/another job..." Whatever. You can do anything. Set income goals and steps to achieve them.


Send your kids to coding camp and teach them Chinese. That's a winning retirement strategy.


I'm in favor of being conservative with savings and investments while being aggressive with earning money and finding as many ways to come up with an income stream as possible. We're renting out our spare bedroom, I drive at night to pick up extra money, we both work full-time, we get a check until our kid turns 18 from adopting through foster care...you see my philosophy.


Just asking the question shows that you're thinking about the future which is most of the battle. It's not worth freaking out about losing all the money you have...you'll always be fine. But it's worth structuring that future.

[RiveDroit]

Some wise words, Nicholas. Increasing and maximizing income streams is a great mindset. I also have a mortgage, but gone are the days where it's considered an investment.


In the spirit of Dappered, I've also cut down on trendy/designer clothes and concentrated on well-made timeless pieces.

[mdwsta4]

Have to agree with Nicholas.


I do pretty well for myself now, but after college I was about $20k in credit card debt and about $20k in student loans. Fast forward to when I was 25, and had no more debt period, 401k, and roughly a full year's salary in savings. Half of my savings is handled through a Chase rep who plays the market and has earned me roughly 10-12% return off it.


As far as an actual advisor though, I'll admit, I think about it only because I know I can be saving more. But at the end of the day, I can't justify that expense for something I can (and have) done by myself if I stick to my guns.


Simply lay out your priorities and go from there. If you have debt, put as much money aside a month as you can and pay down higher interest loans/cards first. From there start small, put $5o a week, paycheck, month, whatever away in a savings account. Auto deposits make this super easy to do and if you don't think about it, it's money you automatically save. Slowly start to increase that amount, then start putting away more yourself manually. Before you know it, you'll have a pretty nice cushion.


So while I hardly consider myself rich, I do live comfortable, have enough savings to keep me afloat for a long time in case of a rainy day, and enough 'play' money to really start enjoying myself (like buying a Leica camera earlier this year, or taking a European vacation next week).


Biggest thing in my eyes is simply to get out of any debt you may have and then spend/save smart. It'll help you out in the long run.

[ryan3]

I just graduated a few months ago with my doctorate in pharmacy. I practice as a pharmacist so I make very good money, +$120k. I do have a substantial amount of student loan debt, +$150k. I also am taking care of my father who is disabled.


I have begun saving and working insane amounts of overtime because I hate being in debt. I would ideally like to eliminate that debt in 5 years. I have an HSA, and IRA already, and I am looking at 401k through my company. I also plan on playing around with CDs. Just throw a couple grand in a CD for a year or 2. It will do more there than it will sitting in my savings, so why not?


I have 0 intention of buying a house. I feel there is great value in mobility. A mortgage is the last thing on my mind. I will only consider buying a house once I start a family. Until then, I think it is a waste.


I hate being in debt. It truly irks me. Individuals should live their lives for themselves, not as debt slaves to a banker. There is something about the piece of mind that comes with being debt-free that is priceless.

[AedanM]

Being just a couple years out of college, my financial knowledge (and my finances) are pretty limited. My only debt is a small student loan. I could probably pay it off in full in just a couple months, but I'm trying to move into the city at some point... so all the money I have saved will probably be needed to help me pay rent. I know that's not a very smart choice but my commute is killing my soul right now.


I've never had a credit card. I know I should get one but I just don't see any practical point. If I can't afford something, I just don't buy it. And I don't see why I need a middle man credit card in the process of making purchases. Seems counter intuitive to me. But I guess I need to give in to societal pressure so I can build credit.


That's about it. I do also have a 401k through my job benefits. I don't even really know what that is, to be honest. Retirement freaks me out.

[Standard_Deviance]

It sounds like you're conscientious about your short and long term spending habits, which, in general, leads to good money habits and good financial health.


A financial advisor doesn't have to be for the 1%, though it's likely to be less beneficial (though still beneficial, on the whole) the lower your net worth is and the better your spending habits are. In your case, I'd imagine a financial advisor would suggest a less conservative investment strategy. Whether or not you'd be comfortable with that is a personal matter.


Because you seem to be doing many of the right things, I'll share a small tip that can add up over time...


Be much less indulgent of your small spending vices. I'll give an personal example. When I moved into my neighborhood about 4 years ago, I was stoked that a kick ass juice place (like a really super tasty, high quality one) was on my walk home from the gym and got in the habit of getting a $6-8 smoothy ~5x a week. That's an expensive habit. Even after I started making my own post-gym protein shakes at home for ~$1.25 each, I was still going to the juice store very often, just for other stuff (it's very easy to justify spending $8 4x a week for something as healthy-sounding as a "Supa Dupa Greens"). When I realized I was still spending over $100 bucks a month (ie, over $1200 a year) on smoothies and juices, I kicked the habit cold turkey and frankly don't miss it all that much if at all.


Once you start to think about your small expenditures, you can apply this same self-discipline to other innocent-seeming habits (your extravagant morning coffee, buying bottled water from a deli instead of bringing your own from home, taking a cab instead of the subway, the subway instead of walking, etc). Some small spending habits are indeed necessary and worthwhile, but others might turn out to be unnecessary and wasteful.

[Verloren]

CDs with these interest rates? It seems like it would be hard to outpace inflation and maintain the value of your holdings.

[zerostyle]

Here's an investment post I made on another forum to help some people out. You do NOT need a financial advisor - they will rip you off at 1%+ a year.


Order you should invest in:

1. Contribute until your 401k match at work

2. Contribute the full $5k to a ROTH IRA (if you don't make too much to do this)

3. Contribute to the rest of your 401k max (16.5k)

4. Contribute to taxable space


A good basic portfolio for those that don't want to micromanage:


60% total stock market

30% total international market

10% total bond fund (or intermediate bond fund)


General rules:

--------------------

The rule of thumb is to take your age minus 10 and that is the rough percent you should have in bond funds.


Once you have a bigger account, you may want to "tilt" some of your total market fund to some small cap value funds instead. (Total market is typically ~ 10% small caps, 20-30% mid caps, and 50-60% large caps)


Always check the EXPENSE RATIO of the funds you buy. You generally want no-load, index funds. These should have expense ratios around 0.1 - 0.3%. If you see active funds like 1%+ get the hell out.


--------------------------

Tax tricks: (if you run out of tax advantaged space like your 401k and ROTH IRA)


1. Keep your international funds in taxable space to take advantage of the tax credits

2. Keep your bond funds in your tax-advantaged space since these are the least efficient

3. Total market index funds are the most efficient and can go in taxable space

4. Small cap value funds are a little less tax efficient and should go into tax advantaged accounts if you have room


*** I am not a financial advisor, so please invest at your own risk. My advice from above is based on portfolio strategy from Bogleheads.org. This is a forum of people who follow simple investing advice from John Bogle, the founder of vanguard.

[zerostyle]

Also, a general thought:


If you are young, your focus should be 90% on making MORE money somehow (improving your career through education or learning new skills), and about 10% on saving money.


Obviously you shouldn't go out and blow all your money, but saving $1k a year by drinking less coffee is a hell of a lot less effective than setting yourself up to make $200k a year instead of $80k a year.


I'm a super frugal guy and could go through tons of tricks I use to save money, but it's a small factor compared to salary differences.

[nicholascrawford]

zero - Very good, specific steps. I agree wholeheartedly.

[adivvela]

I recommend the Book, "I will teach you to be rich." It's good for introducing financial tools and best practices without breaking the bank.


http://www.amazon.com/Will-Teach-You...you+to+be+rich

[Bulldoggery]

I guess I'm kind of playing devil's advocate here, but @zerostyle, how young is "young?"

[thmage]

How do you guys do that kind of investment. I would have zero clue where to start except to call up my dad (who's an investor) to walk me through it.


For example, How do you contribute to a ROTH IRA? How do you invest in the stock market or international market without micromanaging? How do you keep track of all these accounts?

Obviously, I don't expect you guys to answer all this stuff for me; but, if you know any links to easily digestible material, that would be great.