Investing tips for a clueless twentysomething?

April 11 2014 | offbeatbride
Offbeat Home & Life runs these advice questions as an opportunity for our readers to share personal experiences and anecdotes. Readers are responsible for doing their own research before following any advice given here... or anywhere else on the web, for that matter.
I invested in a money tree, and a piggy bank… what else can I do? (Thanks to Elisa for uploading this photo to our Flickr pool.)
I'm a 27-year-old mother of one, part-time barista, freelance editor, and clueless investor.

My husband pays into a pension plan, but I know I should be putting something away for retirement, too. I've only got a little to spare, risk makes me nervous, and I am CLUELESS when it comes to funds/stocks/bonds/etc.

Does anyone have any advice on the best ways to start growing a tiny nest egg?Teegan

I love this question! I'm a thirty-something, still with nothing put away for retirement, which means… I have absolutely NO advice. Except maybe spending some time over on the much-beloved-by-Homies website Mr Money Mustache.

Of course, as a BIG reminder: y'all are responsible for doing your own research before following any advice given here. But I'm curious, do we have some knowledgable and educated Homies under our roof who can share helpful resources to aid in making informed decisions?

  1. Good for you! First, I'll plug two resources that really helped me in thinking about financial priorities, and offer great tips on how to split the pie (even if it's not very big) – getrichslowly.org and everything Suze Ormand has ever written.

    Second, I'll say that a good first step for me when I wasn't making much money was to open a Roth IRA. There's a lot that's been written about traditional IRAs versus Roth IRAs, but in a nutshell, a Roth is good for people who don't make much money currently. They're also available everywhere, from traditional banks to online brokerage accounts, so you should find it easy to find a place you're comfortable with.

    Third (and for me the hardest) was deciding how to invest the money in said Roth IRA. The general rule of thumb is that you shouldn't put anything in the stock market unless you're prepared to pretend it doesn't exist for at least 10 years. The rationale for that is that the stock market can be volatile in the short term, but it generally performs well over the long term. If you're 27 and only planning on this money being used for retirement purposes, this may be a good fit for you.

    Once I decided to put my money in the stock market, I decided two things – I wanted it to be subject to the lowest fees possible, and I wanted to only be investing in companies whose ethics didn't make me squirm. The answer to my prayers was this nifty thing called socially responsible index funds. This was a very personal decision guided by my values, and it certainly isn't for everyone, but it suited me.

    I highly encourage you to do your own reading about index funds versus actively managed mutual funds (the two resources above have a lot of helpful, easy-to-read stuff on these topics), but don't worry about it too much if it feels overwhelming. The important thing when you're getting started is to just do it, not necessarily to maximize every possible dollar – that stuff can come later, once you're comfortable with the baby steps. Good luck!

  2. A Roth Ira is an excellent way to start. Go to your local bank branch and have a sit down with someone there. Most banks won't charge customers for simple financial and investment advice and to go over the options available and how they work.

  3. I see some of this was covered by other Homies, but I wrote this monstronsity of a post already, so it stays 🙂

    Have you considered an IRA or Roth IRA? You had mentioned you are risk-averse, but mutual funds are not all created equal. It's best to meet with an adviser (an investment in and of itself, I know) and look for stable, safe mutual fund mixes. Often these are Indexes that cover a variety of stocks, the idea being your losses and gains are spread equally. Having a stable, low risk mutual fund mix will yield less than a riskier portfolio, however you'll get a larger nest egg than if you were to sock money away in regular savings account, under your mattress, or save nothing (obvs).

    An IRA is like a 401(k) but without your employer's sponsorship. If your employer has a 401(k) match — get ON THAT. It's free money. 401(k)s and IRA are before-tax funds that are put away and then you are taxed when you receive your money in retirement. Roth IRAs are taxed first, then put away, so you can take your money out with no extra tax. If you think you'll be in a higher tax bracket in retirement, it makes sense to put most of your money in a Roth IRA so you are taxed at the lower rate (where you are now). If the reverse is true, you'll have a lower tax rate later in life, then 401(k)/IRA is most beneficial to you. The catch is that you cannot withdraw on retirement funds until a certain age (I think 59 1/2? 60?) without a major tax penalty (about 40%). If this scares you, you can try setting up a high interest savings account (like Capital One 360), whether in conjunction with your retirement account or on it's own. Again, talk to a pro about your specific situation and s(he) can provide insight into what might be appropriate for your family. S(he) will take into account your current income, current tax bracket, what you think your future income and tax bracket might be, your husband's pension, your long terms goals (saving for college? traveling the world during retirement?) and the monthly income you want in retirement.

    Long post short, it's never too early to start saving for your nest egg. Putting away $100 today and adding $10 a month would be better than doing nothing. Research your local financial advisers and find one you feel comfortable with. No adviser should ever be judgey or snarky about a potential client's income or lifestyle and if s(he) is, bail.

  4. This is for my Canadian friends:

    1-Open an RRSP with your bank ASAP!!!
    You don't need much to get one going and your monthly contributions don't have to be high. Talk with someone at your bank for advice on how conservative or risky you want your investments to be. The safest thing (in my opinion) is to invest in GICs. Note: RRSP contributions are tax-deductible which is awesome. BUT when you take money out it is is considered taxable income.

    2-Open a TFSA
    Tax Free Savings Accounts are awesome. It's pretty much a regular savings account, except it has a higher interest rate and you can only save (I think) $5500 per year in one of these babies. The benefit to a TFSA is that you can take money out whenever you need it. I saved $10,000 in my TFSA throughout university (while paying my own tuition, rent etc) which I then used to pay for grad school. I saved up a bit more during grad school and bought a new(er) car. Now I'm just saving. The money is there as my rainy day account if I ever need it but until I do it just accumulates and keeps me feeling very secure.

    3-Talk to your bank and get them to invest some dollars for you.
    Banks love to invest your money for you. If you are a non-investment savvy person (like me) the easiest way to do this is to go to your bank and tell them you want to invest $x and have a conversation about what kind of risks your are willing to take. They are great at explaining things to you, you don't pay any additional fees for their information, and you can take your time to think things over. But seriously… do it. It is great to know that you have access to a bit of extra cash just in case.

    • I'd like to add that once you've figured out how you want to invest / save, I'd recommend setting up an automatic deposit into that investment account. Even a little ($50/month) really adds up quickly and you won't miss it.

      Quick math: $50/month = $600 in 1 year = $3000 in 5 years = $6000 in 10 years

      Add $25 more per month:
      $75/month = $900 in 1 year = $4500 in 5 years = $9000 in 10 years

      Remember this is the money if you just put it in a separate savings account and do nothing with it. You'd have your money grow a lot more if it were an investment account (yey compound interest).

      If you get paid directly into your account for your work, another tip is to set up that automatic savings deposit soon after you get paid so its like you "never" have that money. For example, lets say you get paid $1000 (for easy math) on the 15th of every month and you want to deposit $50 into your savings every month. Set up an automatic transfer of that $50 also on the 15th. What you'll see overall is getting paid the $950 every month.
      Visually:
      April 15th = work pays $1000
      April 15th = transfer to savings accout

      • Gah I pushed something and I cant edit the above. To continue:

        April 15th = ABC Company + $1000
        April 15th = Funds transfer to savings – $ 50

        Total +$ 950

        I hope this helps.

        • Yes! This idea was integral to not only paying off my credit card, but starting my savings! I have a couple different income streams, so I chose one that I would just siphon off into a separate savings account. That money never touched my checking account, and I never got used to needing that money. Best idea I ever had.

          • Same here. I used it to pay off my credit cards first, and then I plan to save the money for a rainy day.

            Side tip for credit cards: Pay off the smallest one first. Then after that is paid off (and cut up), pay off the next smallest card and so on. It's called the debt snowball and it's working out pretty well for me.

            As for the 401K, if it is offered at work, jump on that. Most companies will match your contribution (meaning, if you take $50 out of your paycheck, they will add $50 to it – free money!). If not, then the roth ira works well. It sounds like a large chunk of change in the beginning, but after a while, I don't even notice the difference.

          • Addendum to Chrissy's comment:

            It's best to pay credit cards with higher interest rates off first, rather than going by the amount owing. Doing it that way will mean you pay less interest when you're paying things off, meaning more money going towards the actual debt. $1000 on a 10% interest credit card and $500 on a 20% credit card will both charge the same $100 interest, so take care of the higher interest first and you'll get more bang out of your debt repayment buck.

          • Addendum to addendum to Chrissy's comment:

            A key part of the debt snowball is that when you finish paying off Debt #1, you add any payments you were making toward Debt #1 right into your payment to Debt #2–that's the snowball part, that you're paying the same amount every month regardless of what's paid off and what's not, but the longer you go and more you pay off, the more effective that chunk of money is because it's going toward less debt. And you don't even notice because you get used to not having that chunk of money available.

            Ex:
            Debt #1 min. payment $100
            Debt #2 min. payment $150
            Debt #3 min. payment $200
            Extra payment $100

            So you pay $200 to #1 until it's paid off. Then you pay $350 to #2 until it's paid off, then $550 to #3.

    • I say get a TSFA first, and use it as your emergency fund. What's that? It's about 3 months worth of living expenses that you keep in an account where you will be able to access it whenever you need it. Although it might be tempting, don't invest that chunk of money. It is your safety in case anything goes wrong with your job, health, etc. Having it in a TSFA is usually the best interest you'll get on univested money. Shop TSFA univested interest rates. Some banks have seasonal promotions.

      Once that is done, move on to choosing between an RRSP or a TSFA as your main savings vehicule. An RRSP has the advantage of being available for an HBP, if you are going to be in the market for a first home. The money you put in there is also tax-sheltered until you withdraw it, later in life when your are, presumably, in a lower income tax bracket.
      On the other hand, a TSFA will allow you to pay no taxes on the interest accrued in it. That means, it is great for safer investments like term deposits that are taxed at a higher rate than dividends (especially dividends from Canadian companies).
      As has been mentioned before, if you are to invest in stocks, index funds will maximize your return because they have much lower management costs. You can invest in those quite easily with a self-directed account. But that might be a bit advanced for your current needs.

      Don't hesitate to ask your bank for advice. At that starter level, they usually won't charge you anything for it. (while a financial planner will, and that's a whole other kettle of fish). Take your time to think about what they tell you and make your own decisions.

      • Ooh, that RRSP thing sounds awesome. I'm saving for a down payment, and I'd love to do something with the money while it just sits in my account, but I worried about putting the money into something that wouldn't let me take it out for when I want to buy a house. Innnteresting….

        • Yes, that's a pretty nifty program. You can borrow up to 25 000 $ (if I remember correctly) from your own RRSP towards a cash-down on a first house/condo. Then you have to refund a certain percentage to yourself every year. There are penalties if you don't refund enough every year, though. So one has to be careful with how it is managed. Not hard, but requires attention.
          It gets young people saving early though, as it's not such a faraway goal as retirement.

        • You might want to look into your state's house buying assistance programs. My sister in Tennessee used the Tennessee Dream program to buy her first home and I'm using the Georgia Dream program to buy my first home currently.

          Basically, you have to have a credit score in the 600's, a down payment of $1000, make the required wage for the program in your state, and pick a home within the amount allotted for your state and area. From there, the program will add in $5,000 into the down payment (and your overall home loan), and qualify you for the loan itself. Usually it's a fixed interest rate over 30 years at 3%. Kinda nifty, and helps get the person in a house quicker. =)

        • A Roth IRA would be a very similar program. You can use the money towards a home or educational expenses without having to worry about paying penalties for taking out the money before retirement.

      • In addition to using money from your RRSP toward the downpayment of your first home (which you do have to pay back into your RRSP within 10 years or get hit with taxes) you can also withdraw the same amount to use for post-secondary education – with the same amounts & payment back into your RRSP counting.
        This is useful if you are thinking about going back to school in the future.

      • I totally agree with this. For the last five years (since I finished my Masters) I have had a very agressive savings plan (with the goal of buying a house with a 20% downpayment). I maxed out my TFSA every year and then I started maxing out my RRSP contributions (I have a low RRSP contirbution limit because I have a pension through work – be careful not to go over your limit). Since everything was maxed out I had to open another investment account. Before our wedding last year we had just about enough for our downpayment (between HBP and the TFSA) but we weren't ready to buy yet because my husband was still a student. After our wedding we started looking for a house and we moved into our house in January.

        This was mentioned other comments too, but having a emergency fund is important. That was another reason we didn't jump into home ownership before our wedding.

        One piece of advice I was given was to max out your TFSA first and then think about contributing to an RRSP. This is especially important when you are just starting your career because you are mostly likely in a lower tax braket. I might not even make all that much sense for low income people to use a RRSP.

        It is really important to make sure you do research on things before you agree to anything. My financial advisor did not know how to properly transfer funds between TFSAs (this was in the second year so it was pretty new – luckily I looked into it before I met with her about the transfer). My BIL was given bad advice about RRSPs (some of his money ended up in a locked-in RRSP). And my husband went to the bank to take money out of his RRSP for college (this is a similar plan to the HBP to help pay for school) and his bank did a straight withdrawl so he had to pay tax on it and he lost that contribution room (it wasn't much so it wasn't a big deal).

        • Just a quick note – while it usually does make more sense to start with a TFSA first, it is possible to defer RRSP deductions. So you can contribute to a standard RRSP and claim the contribution in later years when you would be paying more tax.

  5. Nothing super specific, esp. since others have already mentioned IRAs, which are the main way to save. What I will say is A) Do it now, & yay for you thinking about it in your 20s! the power of compound interest is on your side. Anything you save now will be multiplied by a TON when you get to retirement ages. B) Make it easy, regular, & consistent. Do you have direct deposit at work? Allocate a certain dollar amount or a percentage of your pay (figure out how much $ you're allowed to save per year, bec. there's a limit for each type of IRA; divide that by how your # of pay periods) & make that automatically deposit into your retirement savings. If not thru direct deposit, make an auto-payment from your checking account, most major banks & credit unions let you do this online. When it's automatic, you'll be able to do it without thinking about it. C) It's ok to start small. Remember, you're starting early, & that money will multiply over 3-4 decades. Baby steps. You can always increase the amount later when your take-home income increases. BUT remember to up the amount when you do get a raise or a better job! Max it out when you can. This is a slow & steady wins the race deal 🙂

  6. Liz Lemon: I have gotta make money and save it. And I have to do that thing that rich people do where they turn money into *more* money. Can you teach me how to do that?
    I absolutely can't pay anyone to do any of my money stuff for me. Considering my family history, I'm not sure if prioritizing retirement savings is the way to go right now–yes I will look into getting started with an IRA, but I would rather focus the bulk of my funds into a way I can save/earn interest/maybe make magic money with funds that I'll be able to access a little sooner. Halp?
    (Wow it's really bleak that I'm considering that I will almost certainly die before my IRA funds are of use, but oh well.)

    • You can buy a mutual fund (look for "no load" ones, that means no extra fees) that isn't in a retirement wrapper. You just will then pay taxes on what you earn. However, if you know you want the money before you are ready for retirement, then this is a good way to go. Just calculate the taxes in to your planning.

      The advantage of an IRA account is that you are taxed at a much lower rate. With a ROTH, you pay the taxes before you put the money in (your income tax) and you don't pay on what you earn.

      There are some ways to take out retirement money early, for specific reasons, without paying a huge tax burden. For example, I took out the maximum allowed for the down-payment on my first house. There was no additional tax in that case.

      You also can always take money out of your retirement account at any time, you just have to pay the appropriate taxes.

      • Much and many thanks!
        So theoreticals here… can you pull the amount you've contributed early with no tax burden? If you pull the funds early, do you pay taxes based on the tax bracket that (amount pulled – what you've contributed + income) puts you at?

        Buying a house was my first concern, so glad to hear that's an exception!

        • Look into a Roth ladder. It's all over the Mr. Money Mustache forums, and has to do with moving money from IRAs/401ks into a Roth, then you have to wait some amount of time, then you can withdraw without tax penalty regardless of your age (I think). A lot of people use it in early retirement.

        • the IRS website is pretty good for determining tax treatments. I recently had to take a lot of money out of my Roth while out for surgery and ineligible for STD. There are qualified early distributions, such as paying for COBRA or a down payment on a house, up to $10k. My distributions were not qualified, however; they were not taxable either. You need to have the money in for 5 years, and as long as you withdraw contributions, NOT earnings, you aren't penalized. So you definitely need to know your cost basis (I put in 9k 8 years ago, so I knew I could take out 4k and not be touching earnings) and if you're distributions are qualified or not. hope that helps!

    • You don't have to pay someone for financial advice! Many firms advise for free, they make money off of either front end loads (up front % of the money you invest, stay away from these) or off of the expense ratios of their funds.

      For example, my accounts are with Fidelity. I wanted someone to look over my financial situation to let me know if I'm on track for retirement and to give me suggestions on some funds I may be interested in. Totally free. I had a call with a local adviser (can be done in person too, but my schedule is a little rough right now). She took a look at everything and made some recommendations and it didn't cost me a dime. They don't charge anything to buy their ETFs (electronically traded funds) and their performance history is very good. You do not need a CFA to get some basic advice and put a little money away.

      If you do have health issues and don't have reasonable expectations to live into your 80s, don't do a retirement plan! Talk with an advisor, be honest about your needs and they will have a savings vehicle that works for you, even if you need access to the funds. You can buy investments that are unrelated to retirement. Those special accounts like Roth and Traditional IRAs are for retirement and may not be the best option or the only option for you, especially if you plan on accessing the money early.

  7. When I was in my 20s and just out of college I read "Get a Financial Life: Personal Finance In Your Twenties and Thirties" (an earlier eddition than that one). It was really good at helping me think through what to do, how to invest, and how to save.

    First, get rid of all consumer debt and make sure you can service your student loans if you have them.
    Then save up a "cash on hand" savings of about 6 months of expenses.
    Then put money toward retirement.

    I followed their rules in my 20s and 30s and now, at 41, I was pleased to see I'm right on track with this chart on how much someone should have saved toward retirement:

    My husband and I own a house (well, the bank owns most of it, but they let us live in it) and will have it paid off by the time I'm 59 (or sooner).

    I feel very "on track" for retirement. It doesn't stress me out. And I owe a lot of that to what I learned from the book above.

    I've been contributing toward my retirement since I was 22, but I haven't been able to contribute every year. I put in nothing during the four years I was getting my PhD. And very little during my masters degree. I'm still on track.

    The most important thing is probably to not let fear paralize you so much that you don't do anything!

    • I know all of the personal finance people argue about it, but while I totally agree that paying off debt and having an emergency fund are very important, if you have employer matching for retirement try to at least start saving enough to get that match while you are paying off debt/saving the basic e fund, since it's a guaranteed ROI above and beyond what your debt interest will be.

      • Yes – along this note: it only makes sense to pay off your debt as long as you won't need to borrow at a higher rate.

        For example, I managed to consolidate my student loans when rates were really low (which just means they basically all got bought up and put into one loan at the then current rate). If I had needed to borrow money at a higher rate, it probably would have been better to save or pay directly than to pay off the loans and re-borrow. The same could go regarding how much you pay each month but I think this is more obvious. (Better to pay less than pay more but put debt on a credit card for example.)

    • That chart is awesome! Good to know I'm right where I should be. Kind of depressing that it bottoms out at $50k, though…way to rub it in when you don't save enough for retirement AND don't make much money.

      • Exactly! The bottom of that chart would be about all I could expect to make in the fields I'm qualified for or am likley to become qualified for. I currently make much less.

    • Is there a chart like that for incomes well under that level? My income has always been low enough that saving for retirement has not been something I could do. (I've worked as college TA and in retail.) Even my husband's best paying job so far (postdoctoral scholar at a university), where he did contribute to a 401k though his employer, was slightly below the lowest level on this chart. So, where can we find a chart that will let us know how far behind we are at 31 and 32? (I'm certain we are behind, but there just isn't much we can do about it for the moment. We don't have student loans or credit card debt, so that's a plus, but we don't have much in the way of retirement savings other than a few years of that 401k mentioned above.)

    • Here's the thing that throws me… I owe so very, very much to student loans. And the federal loans are at a very high interest rate, 7%. So should I even be saving for retirement while I owe this massive amount of money? Is it silly to be paying off debt at 7% and investing at possibly <7%? If I shouldn't be saving for retirement until I get my loans paid off… I have almost 200k in loans. It's going to take at *least* 10 years to pay off, and might take 15-20 since I'm going to have to pay daycare when the baby comes. I'm 29 now so it certainly seems like a bad idea to delay retirement funding for decades, but it's also crazy to be saving for retirement when my monthly loan payment is almost 3 times my mortgage payment.

    • OMG is this chart PER PERSON? I have less than my per-person target saved as a married couple. This is terrifying. My student loans are killing me, my husband is still racking up his own SLs, and we can currently barely squeeze out $200 a month in savings by eating bulk legumes every day 🙁

  8. A lot of other Homies have given great advice on investment vehicles and the like, so I'll be brief:

    1. Start yesterday.

    2. It doesn't help the asker, but if you work for an employer who does any sort of retirement matching, sign up for that immediately and get the full match before you start investing anywhere else (unless the investment type is so horrendous that you'll get better returns than an immediate matching investment).

    3. Strongly consider rolling any raises into your retirement account immediately, or at least upping the contribution by half of the raise.

    4. Allocate any windfalls in the same way you do your paycheck, or stick them all into your retirement savings (yes, I know, it's more fun to have fun with them, but this is an easy way to boost your retirement savings if you contribute the same percentage of the windfall as you would a paycheck).

    5. Make it mindless and automatic.

    • I want to disrespectfully disagree with your #1. conceptually, you are correct. However, I think this type of statement makes people panic and feel it is too late, and so they do nothing. I'd change it to #1- do something today. Even if it is small. Take a first step and build on it.

      The rest of the stuff is good. Especially #5. My first IRA had an "automatic asset builder" that meant I got to waive transaction fees. Basically by setting up the auto payment of $50 every two weeks, I didn't think about the money going there, and I didn't have to pay for the transactions.

  9. Yes, mindless! That is the way to go for painless saving.

    I have a few saving vehicules. Two of them (RRSP and buying comany shares) get money even before my paycheck is deposited in my chequing account. Then there is another punction for my TSFA/emergency fund. And THEN I also set up my account so that every time I make a purchase with my debit card, 2 $ go directly to the TSFA.

    That is how I" trick" myself into saving. Plus, I always put the maximum allowed amount of my yearly bonus in the RRSP. Not as much fun, I know, unless you count the tax benefit once tax season rolls around 😉

  10. I'd like to recommend the book "Prince Charming isn't Coming" by Barbara Stanny. It's marketed towards women and addresses the particular mental blocks that women might have towards developing their own financial strategies. I found it particularly helpful for developing a more equal financial partnership with my husband.

  11. Teenager's Guide to Investment. Breaks it down super simple (it's for teens after all). But the basic thing I got out of it was that a Vanguard Total Market Index Fund is the easiest, no hassle way to invest with little risk for money you want to be able to access when needed. You will never beat the market curve, but you'll never fall under it either. It gets into more specifics for people who want to really learn the market and try to beat the odds, but I never bothered with all that. My college mutual fund is what we used as our home downpayment when we got married. We got the first time home buyers credit, opened a new mutual fund with it, and are now using that as our downpayment for our new house.

    http://www.bookworm.com/p/investment-guide-for-teens-672557?site=CA&utm_source=Google&utm_medium=cpc_bw&utm_term=FPS-109681&utm_campaign=GoogleAW&CAWELAID=1611672305&utm_content=pla_with_promotion&adtype=pla_with_promotion&cagpspn=pla_with_promotion

    • Vanguard Total Market Index Fund does have an initial minimum of $3000, if you really need to start small you can also try the Charles Schwab Index funds, where the minimum is $100 for IRAs. A really good resource into a diversified (and therefore low-risk) but also hands-off investing strategy is the Bogleheads website.

      http://www.bogleheads.org/wiki/Three-fund_portfolio

  12. My finance teacher told us to get a Roth IRA. I did a bit of research on it. When I opened an account with Ally, I went ahead and opened a Roth too. I don't have very much in it, so of course it hasn't grown much.

    • Seconded! Low fees and about as diversified as it's possible to get, with a really simple and easy interface.

  13. I love that we are talking about investing, savings, and retirement!

    I second, third, and fourth what folks said about a Roth IRA. I have one and am very happy with it. I will also recommend talking to and potentially hiring a financial advisor. I trust mine and she hasn't steered me wrong. It is worth the $100/year fee to have her look at investments and help me make smart choices. I am ok paying her since she knows WAY more about investing and finances than I do.

    Additionally, having an emergency fund is important. We have one and contribute to it monthly. Automatic deduction from your paycheck would be an easy way to go. I am crap at actually setting a written down on paper budget, but that works for lots of folks. A friend set her spending cap for all things (groceries, fun stuff, health care), then saved what ever was left over- paid off her debt that way.

    Most importantly, I would sit down with your husband and talk about your finances. Being on the same page makes all of this easier. What do you want to buy in the future? House? Go back to school? Save for retirement? Any and all of that is good. Being on the same page with our financial priorities has helped my marriage. Less arguing and more ' we got this'.

    I

  14. I rock a 401(K) from my day job. It used to be a lot sweeter than it is, they used to contribute 7.5% regardless of whether you put anything into it. Now they only match whatever you contribute up to that number. I contribute small amounts, about 1-3% of my paychecks, which translates to about 20-30 bucks a month. It isn't a lot. But I have been doing it for about 7 years now and with their matching and contributions prior, I have about 12,000 in my 401 K which is more than I have ever had anywhere at any time. I keep my statements and check in on it from time to time. I also look at how it is invested and make changes based on my age and when I want to retire. I am in my late 20's so I can still take more risks than most, but as I get older I will want to change that to something more stable . High risks mean you could lose a portion but you could also gain greatly. Where lower risks have smaller but more steady turn around. Neither are assured.

    IRA's and Roth IRA's are great options too. It's really a matter of finding out what works for you best.

    I also like to use a website called SmartyPig.com it's something that you would have to set up a small steady amount to be contributed at regular times in the month. But they are essentially online automatically drafted savings accounts that accrue REAL interest. Not fractions of a penny like banks other places, but actual cents. It's really easy to use. I set one up for Christmas presents every year, and for our DragonCon fund for hotel room and such, also for other trips we may have planned. You set a goal date of when you would like money to be raised by, and then you set the number you want to reach. The website will even help you figure out how much a month you need to contribute to meet that number in that time frame. You can set short or long term goals (Like retirement)

    If you are looking for something to invest in for the future of your little one, I highly suggest savings bonds. My estranged dad had been buying them for my sister and I for years, till we finally pleaded with him to stop. (What teenager wants a $50 savings bond for their birthday and Christmas every year? Answer: the smart one) Savings bonds are inexpensive, and take time to age (like good wine and cheese) but are fragrant and wonderful once they reach their prime, if you hold onto them longer than their term date, then they even start being worth more than what they are written for. It's a great way to sock money aside, for graduation, a car, college anything that you know you don't need for a long time, but would like to be able to do for someone. I was able to get about 2,000 from turning all of mine in, which I promptly blew. But holding onto them yourself and cashing them in when the time is right is an excellent idea too. And something doesn't auto draft from your account.

  15. Thanks for sharing! Finding a good investment plan can be hard and confusing. You need to have the right investment that will perfectly reflect your economic outlook and returns expectations as well. If you want to know more about wise investments and how to save a lot of money try checking out online investment management services like https://www.macroaxis.com/ to see how it can help you.

  16. So one thing I didn't see in the comments is a break down of financial terms. I know you can just google it, but it gets really overwhelming because you end up looking up words in the definitions of the terms you just looked up! I've worked for several investment management firms and I still get confused! Here are some basics that will hopefully help you feel empowered.

    Stock – a share in an individual company. That company does well, you earn money with them, does poorly, you loose money.
    Bonds- a loan to a company that is paid back with interest. You get a share of the interest along with your principle. Generally safer than stocks, but lower returns.

    Mutual fund – everyone tosses their money into a bucket and a team decides what stocks and bonds to buy and everyone gets their share depending on how the fund does. Management hopefully is able to do better than the general stock market.

    Index fund – type of mutual fund, but instead of being managed by a team of analysts, it is designed just to follow the general stock market. It doesn't cost as much to run an index fund because you don't have to pay all of those analysts and managers to make adjustments to the plan. There are arguments that the money that is saved in running it will more than make up for the average returns.

    Front End Load – $ taken out of your initial investment, often goes to commissions and fund managers. Stay away from these, someone is selling you something and that % up front will really impact what you can earn.

    Expense Ratio – the % of the fund's money that is used to run the fund. Includes paying managers, advertising and all administrative fees. This is an important number! You don't have to go with the lowest expense ratio, but it can make a big difference for you in the long run. Make sure it is at least below 1%

    ETF- Electronically Traded Fund – Most firms will offer these commission free. There is nothing wrong with these funds, just because it's electronically traded they have no overhead for getting you involved so they don't charge you anything. There are great ETFs, you should pick one of these.

    What you are looking for in a fund is a good morningstar rating, a high return, low expenses and reasonable risk tolerance. You can use this awesome fidelity tool for free to compare funds: https://www.fidelity.com/fund-screener/research.shtml

    IRA -Individual Retirement Account
    IRAs are used for tax purposes when saving for retirement. If you put money in without paying tax on it now, you pay tax when you take it out. The benefit to this is that you have that extra money up front that continues to grow while it is locked into your account. There are penalties for taking money out early. But you can open an individual or joint account and invest in mutual funds, stocks and bonds and not worry about taking money out early, you just use money you have already paid tax on! So if you are planning to save this money for decades, use a roth or traditional IRA, if you want access to the money earlier, use a non-retirement account.

    401K- Retirement account associated with an employer. You get to put in money without paying tax first and often the employer will match that to a certain level of your earnings. If your employer does a 6% match and you earn 25k a year, they are basically giving you 1500 on top of your earnings! That is why people say to always max out your 401k. You would be putting in $3000 which would then earn interest until you retire… if that is in 30 years, that $3000 will turn into $17,000 (magic!)

    I prefer not having an account manager. Larger firms like Fidelity will have employees that can advise you for free, both in office and over the phone. For almost all investors, this will be sufficient. They can explain to you the difference between account types, funds, costs and some basic strategies. They will help you open an account and invest in 1-3 well balanced funds. If/when you have more wealth to worry about you may choose to connect with a planner that can advise you on tax advantages and other savings vehicles.

    It really is great to start as early as possible, even if that means not being able to contribute regularly. Using your tax return for this instead of bills or splurging would be a great place to start. When I was younger I paid my bills with my regular 9-5 job and picked up babysitting and other odd jobs and used that money for investing. I did this even when I had student loans because you do want that account there, earning money, even if it is small.

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