Guidance for a 24 Year Old

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I'd like to have some guidance from the FW community regarding my current situation and how I should approach the short-term. Some background:

I've been an active reader of FW since my teen years, and as I've transitioned from a high school student scrubbing through the Free Stuff section (because I didn't have any money of my own back then), to looking for hot deals as a college student, and now taking in the threads in Finance--I feel like I'm really growing up with the FWF. But sometimes, reading the Finance threads are a bit depressing, especially the Compensation threads when I see so many people around my age making much more money (I also understand there is a bias effect going on as FWF members tend to be more educated and finance savvy). So here's my situation:

Savings:

Liquid:
- $4,500 in BOA Checking (for day to day spend), stashing about $300/mo from paycheck
- $6,000 in Ally Checking, stashing about $200/mo from paycheck
-$30,000 in Discover Online (earning about 1%), stashing about $1,500/mo in this account from paycheck


- Currently have about $37K stashed in a 401K (no employer matching)
- About $14K in investments

Annual Income: About $55K

My question is this: Is there a place where I can stash my $30K and earn about 5-7% interest (preferably a relatively safe investment instrument)? While my expenses are low (still living at home), I feel like my savings is not growing fast enough.

Thanks!

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5-7% no way. 1-3% is reward checking now and that's if you are lucky. anything 5-7% will require some risk.

throw a big party for your parent(s)

invite all their friends, buy one major ticket item as a gift, give them hugs and announce how much you love them and all they did for you

stop being so intellectual for a moment and appreciate what is really important

coupons2828 said:    But sometimes, reading the Finance threads are a bit depressing, especially the Compensation threads when I see so many people around my age making much more money (I also understand there is a bias effect going on as FWF members tend to be more finance savvy).
You are 24, have a net worth of ~90k (I am assuming no debt since you didnt mention any) and make 55k a year. You are far ahead of the average 24-year old. Indeed your net worth might put you in the top 10% or even 5% in that age group. Keep up the good habits and think of ways to increase your income.

Take the online compensation posted here (or any online forum for that matter) with a fist of salt. Selection bias apart, not everything you read online is true.

If you're looking for more than 1-2% you're going to have to do it in stock/bond market, and there's going to be risk. 40k is a pretty excessive amount to hold liquid IMO unless you plan to buy a house soon.

Time to make a decision, do you want to try to make some $ by purchasing property and renting it, by investing in stock market, or by investing in some type of business venture?

Sounds like you're about at the age/net worth where its time to choose which path to take.


PS: I guarantee you are in the top 5% of 24 year olds as far as net worth is concerned. Definitely thank your parents for letting you live with them and putting you in a good position to succeed.

jd2010 said:   If you're looking for more than 1-2% you're going to have to do it in stock/bond market, and there's going to be risk. 40k is a pretty excessive amount to hold liquid IMO unless you plan to buy a house soon.

Time to make a decision, do you want to try to make some $ by purchasing property and renting it or by investing in stock market.

Sounds like you're about at the age/net worth where its about time to choose which path to take.


I've thought about purchasing property and renting it out for passive income, but I live in Southern California, and it's tough to find a place that I can afford putting 20% down. On a side note, I'm an avid reader of the MMM blog and it would be awesome to reach 700K by the time I'm 35, be able to invest it and have annual returns of approx 49k (assuming 7% returns), and work part time.

move to chicago. 700k you will be able to get 80k passive income easy in the buy and rent out market. but enjoy life a bit and travel. coupons2828 said:   jd2010 said:   If you're looking for more than 1-2% you're going to have to do it in stock/bond market, and there's going to be risk. 40k is a pretty excessive amount to hold liquid IMO unless you plan to buy a house soon.

Time to make a decision, do you want to try to make some $ by purchasing property and renting it or by investing in stock market.

Sounds like you're about at the age/net worth where its about time to choose which path to take.


I've thought about purchasing property and renting it out for passive income, but I live in Southern California, and it's tough to find a place that I can afford putting 20% down. On a side note, I'm an avid reader of the MMM blog and it would be awesome to reach 700K by the time I'm 35, be able to invest it and have annual returns of approx 49k (assuming 7% returns), and work part time.

You have saving down pat, now the next step is to focus on generating more income, learn a skill, build a business, get rich.

deleted

lend money to morons @ 96% interest

quickclickloans

after expenses, you easily earn 7% on your money

You owe your parents most of that money for food, utilities, and rent. Stop being a leech.

1. Your concern is that you're not earning as much as you think you should be, and don't have the savings you think you should have. You're using vague thoughts to compare to. I suggest you think out a financial plan - where you want to be by age 30, age 40, etc. I assume that your goal is to have a certain amount by retirement age?

2. You're cutting your expenses to the bone, and you've saved almost twice your annual salary, which is phenomenal for a 24 year old. I doubt that you could increase your saving rate, and I doubt you can do much better on rates of return. That just leaves salary - what degree do you have, what field do you work in, and what is your compensation relative to others in your area with similar degrees/work experience? Upping your salary will be the key to getting significant savings.

3. Don't worry about the comparison with others here. A lot of them have their salaries artificially high by living in high cost of living areas. And they tend to work in highly compensated fields.

Edited to add: Your post states that you want to do better short term. Why would a 24 year old be concerned about short term? Are there significant short term expenses you envision?

don't fixate so much on how much you make compared to others, i'm sure you can find someone who makes 2-3x what you make with 2 cars they cant afford and 3 maxed credit cards and zero savings, it's not just about how much you make, but how much you keep, and you seem to have that down,

You're doing a great job socking away $1,500 a month. The fact of avoiding rent is great from a budget perspective since housing is usually the biggest monthly expense.

You just need to develop a plan for what you want with achievable goals.

Looks like you are saving an additional $2000 (plus?) each month. Any additional savings you can scrape from an extra percentage point or two of your existing savings are going to be pretty trivial compared to that.

No real advice, just don't do anything foolish and put that money at risk!

Be careful about buying an investment property. If your parents realize how loaded you are they might start questioning why they are still paying your bills

Errrr, step one would be stop living at home rent-free.

coupons2828 said:   I'd like to have some guidance from the FW community regarding my current situation and how I should approach the short-term. Some background:

I've been an active reader of FW since my teen years, and as I've transitioned from a high school student scrubbing through the Free Stuff section (because I didn't have any money of my own back then), to looking for hot deals as a college student, and now taking in the threads in Finance--I feel like I'm really growing up with the FWF. But sometimes, reading the Finance threads are a bit depressing, especially the Compensation threads when I see so many people around my age making much more money (I also understand there is a bias effect going on as FWF members tend to be more educated and finance savvy). So here's my situation:

Savings:

Liquid:
- $4,500 in BOA Checking (for day to day spend), stashing about $300/mo from paycheck
- $6,000 in Ally Checking, stashing about $200/mo from paycheck
-$30,000 in Discover Online (earning about 1%), stashing about $1,500/mo in this account from paycheck


- Currently have about $37K stashed in a 401K (no employer matching)
- About $14K in investments

Annual Income: About $55K

My question is this: Is there a place where I can stash my $30K and earn about 5-7% interest (preferably a relatively safe investment instrument)? While my expenses are low (still living at home), I feel like my savings is not growing fast enough.

Thanks!


24 and making 55k? Seriously? You're fine, either that or you're secretly fishing for compliments. There are very few 24 year olds making that kind of money even discounting your additional assets and rent free living.

Are you still living at home? Quick paycheck calculator says you'd net about $3300/month, and you claim to be in the black to the tune of $2000 per month... and you live in SoCal, notorious for high rent and home prices. If you are, I bet you'd feel a lot better about life if you got a place of your own (rent or own).

Here's what I would do.

1. Assuming you get paid by-weekly, multiple your net pay by 13. Open a rewards checking account. Move this money in the checking account.
2. Take $5k from your liquid savings and Open a Roth IRA with Vanguard. Buy Vanguard index funds (24% bonds, and split the rest 66% domestic index funds, 34% international index funds). Each year take an additional $5k from your liquid savings and invest it in your IRA
3. Any funds that you're currently contributing to your savings, divert it to your 401k.

at 24 years old and making 55K a year I think its definitely time to leave the nest...

OP, you're doing fine. Don't worry about things and odn't worry about all the haters saying you HAVE to move out.

Honestly, I don't understand the rash of people ragging on you for that. If your parents dont' mind (or indeed may actually LIKE seeing you at home), then why move out based on teh opinions of some random people on the internet? I feel like sometimes people are just jealous that they have to pay rent/mortgage and other people don't. I don't get it, but whatever.

$100k at 24 is actually quite impressive. Well done; What you need to do now is concentrate more on increasing the size of your paychecks through work.Keep up the savings rates. woohoo!

nwill002 said:   at 24 years old and making 55K a year I think its definitely time to leave the nest...

I kind of ask, why? I left the nest before that because of where my job was located, but unless he really wants to or wants to start looking for a future wife than financially he should stay right where he is, focus on building up his income even more. Since he most likely wont be getting a girlfriend he should be devoting much of his after work time to either:
A) More ways to produce income(another job, E-bay selling, side projects, etc.)
B) Adding more learning/certificates/classes/etc. that will make him more employable.

And if you're doing those things on a lot of your extra time what's the point of living in your own apartment that you wont even be able to enjoy.

Of course I do believe that the OP should start paying his parents at least a couple hundred dollars to cover utilities, food, some rent, etc. because right now he's adding to his parents costs, but other than that until you want or need to move out I wouldn't.

I realize that this answer is weird, but usually the only rationale(outside of him getting a gf and the enjoyment of no longer living with parents) given as to a person shouldn't continue to live with parents is a general social stigma. Well, 5 years ago there was a social stigma to earning a decent living and not owning your own home. The point is what is the better financial and personal move for the OP and there is at least a pretty decent argument that it's perfectly fine to keep living at home and accumulating more and more cash.

Help pay your way at home a little bit to keep the goodwill, but f the haters op, i wish i could still live at home.... 1700/mo for a studio is dumb.

Turn getting wealthy to a process and system. Slow and steady, maintain the course, jump on CC offers, hot deals things you can use to get ahead. After a couple of decades you will have higher net worth and wealth profile than people that are making twice what you have been.

Stop putting so much money away each month and start to enjoy your twenties a little. Vegas, H&B, Crown Vic. Come on! Party while you still can!

jd2010 said:   Help pay your way at home a little bit to keep the goodwill, but f the haters op, i wish i could still live at home.... 1700/mo for a studio is dumb.Good advice here, OP. If your parents are silly enuf (or so attached) that they still let you live at home, you'd be a fool to change that. Unless you occasionally wanna get laid, that is....

dshibb said:   nwill002 said:   at 24 years old and making 55K a year I think its definitely time to leave the nest...

I kind of ask, why? I left the nest before that because of where my job was located, but unless he really wants to or wants to start looking for a future wife than financially he should stay right where he is, focus on building up his income even more. Since he most likely wont be getting a girlfriend he should be devoting much of his after work time to either:
A) More ways to produce income(another job, E-bay selling, side projects, etc.)
B) Adding more learning/certificates/classes/etc. that will make him more employable.

And if you're doing those things on a lot of your extra time what's the point of living in your own apartment that you wont even be able to enjoy.

Of course I do believe that the OP should start paying his parents at least a couple hundred dollars to cover utilities, food, some rent, etc. because right now he's adding to his parents costs, but other than that until you want or need to move out I wouldn't.

I realize that this answer is weird, but usually the only rationale(outside of him getting a gf and the enjoyment of no longer living with parents) given as to a person shouldn't continue to live with parents is a general social stigma. Well, 5 years ago there was a social stigma to earning a decent living and not own your own home. The point is what is the better financial and personal move for the OP and there is at least a pretty decent argument that it's perfectly fine to keep living at home and accumulating more and more cash.

The reason I wouldnt do that is not because of some misguided perception of "living in my parents basement" but because I believe living on your own is an invaluable experience in life, especially as a male who will likely be at the head of his own household down the line. At 55K you can easily get a place of your own and still have money to put away. Yes it wont be as much as staying with your folks but you have to draw the line somewhere.
And I'm not speaking hypothetically... Im of a similar age and income and my mom has always extended the opportunity to move back in with her.

^^^Always time for that. If you're not planning to get married until around 30 you will still have a few years where you're getting the experience of living on your own.

I lived with my parents when I was 23/24 for maybe 4 or so months but I couldn't bring a girl back to my parents place...so I moved out.

OP, As you see from the replies above, FWF is a really awful place for financial advice. Move over to bogleheads.org and read their forum to get started on a solid footing.
In the past 3 years investing in the S & P 500 alone would have gotten you a 13% average return per year(Exceptional and probably never going to happen again). If that were in a Roth you would never have had to pay taxes on that 39% increase.

You feel like other people are very much ahead because of people who have taken a major RISK in their lives, ie Zuckerberg. In order to truly be exceptional, you have to take a risk, and 24 is the perfect age.

Go into sales and give it everything you've got (pharma, insurance, etc. Potential income 200k+)
Or start your own company (owning rental properties is a popular option)
Or do something else that relies on your work ethic, spirit, and frugality, but pays off bigtime in the end.

If you make 55k forever, you'll retire at 67, and your $90,000 from today will not be enough money to buy a Pepsi.
The whole living at home thing is a distraction of a discussion. Your savings rate is excellent, and if you increased your income you could achieve some very rare success.
Good luck!

coupons2828 said:   
I've thought about purchasing property and renting it out for passive income


I'm not sure that I'd call an investment property "passive income" the same way that say, dividend paying stocks are. Rental properties can consume a lot of time, effort and money on your part. Sure there's more potential upside but also lots of risk.

fattysaver said:   OP, As you see from the replies above, FWF is a really awful place for financial advice. Move over to bogleheads.org and read their forum to get started on a solid footing.
In the past 3 years investing in the S & P 500 alone would have gotten you a 13% average return per year(Exceptional and probably never going to happen again). If that were in a Roth you would never have had to pay taxes on that 39% increase.


There is not a doubt in my mind that Fatwallet is a superior place for financial advise than Bogleheads. First of all, a place that basically only answers one question 'what do I do with my money' over and over and over again and with a copy and paste answer is relatively useless in all other matters.

At this stage the OPs best option is available is to do everything in his power to increase his income and how he invests his money is secondary to that at the moment. Had he gone to bogleheads he would have only received the standard copy and pasted investment advice and that's about it.

I find it hard to believe that people who don't like repeating the same $hit over and over again(like preachers) could really spend that much time on there(I have a handle there) and it's should just be labeled, "Passive Investing for Dummies" because that is really all they ever talk about and the title 'dummies' is pretty befitting of the forum overall.

Al3xK said:   I lived with my parents when I was 23/24 for maybe 4 or so months but I couldn't bring a girl back to my parents place...so I moved out.

I lived with my parents for about the same amount of time. I had no shame, brought girls over all the time.
then I moved out because things got awkward.

FatWalletLurker said:   You feel like other people are very much ahead because of people who have taken a major RISK in their lives, ie Zuckerberg. In order to truly be exceptional, you have to take a risk, and 24 is the perfect age.

Go into sales and give it everything you've got (pharma, insurance, etc. Potential income 200k+)
Or start your own company (owning rental properties is a popular option)
Or do something else that relies on your work ethic, spirit, and frugality, but pays off bigtime in the end.

If you make 55k forever, you'll retire at 67, and your $90,000 from today will not be enough money to buy a Pepsi.
The whole living at home thing is a distraction of a discussion. Your savings rate is excellent, and if you increased your income you could achieve some very rare success.
Good luck!


I agree that Op living at home is not really relevant to the discussion. Whether Op continues to live with parents will likely have a lot to do with the situation that we know nothing about. (Overnight guests? Is Op expected to contribute anything? Etc? ) Op don't hesitate to continue living with your parents if you enjoy doing so. Show them your appreciation with your time (I've inferred that your parents are financially secure, if this is incorrect show them some monetary appreciation)

As others have suggested you can start your own business or put your money in the stock market. - You know what risks you're comfortable with.

dshibb said:   fattysaver said:   OP, As you see from the replies above, FWF is a really awful place for financial advice. Move over to bogleheads.org and read their forum to get started on a solid footing.
In the past 3 years investing in the S & P 500 alone would have gotten you a 13% average return per year(Exceptional and probably never going to happen again). If that were in a Roth you would never have had to pay taxes on that 39% increase.


There is not a doubt in my mind that Fatwallet is a superior place for financial advise than Bogleheads. First of all, a place that basically only answers one question 'what do I do with my money' over and over and over again and with a copy and paste answer is relatively useless in all other matters.

At this stage the OPs best option is available is to do everything in his power to increase his income and how he invests his money is secondary to that at the moment. Had he gone to bogleheads he would have only received the standard copy and pasted investment advice and that's about it.

I find it hard to believe that people who don't like repeating the same $hit over and over again(like preachers) could really spend that much time on there(I have a handle there) and it's should just be labeled, "Passive Investing for Dummies" because that is really all they ever talk about and the title 'dummies' is pretty befitting of the forum overall.
For someone like the OP who does not currently have much knowledge of investing, Bogleheads would definitely be a great place to start. I would also recommend checking out the wikis there and read the book "The Boglehead's Guide to Investing".

dealmaster00 said:   dshibb said:   fattysaver said:   OP, As you see from the replies above, FWF is a really awful place for financial advice. Move over to bogleheads.org and read their forum to get started on a solid footing.
In the past 3 years investing in the S & P 500 alone would have gotten you a 13% average return per year(Exceptional and probably never going to happen again). If that were in a Roth you would never have had to pay taxes on that 39% increase.


There is not a doubt in my mind that Fatwallet is a superior place for financial advise than Bogleheads. First of all, a place that basically only answers one question 'what do I do with my money' over and over and over again and with a copy and paste answer is relatively useless in all other matters.

At this stage the OPs best option is available is to do everything in his power to increase his income and how he invests his money is secondary to that at the moment. Had he gone to bogleheads he would have only received the standard copy and pasted investment advice and that's about it.

I find it hard to believe that people who don't like repeating the same $hit over and over again(like preachers) could really spend that much time on there(I have a handle there) and it's should just be labeled, "Passive Investing for Dummies" because that is really all they ever talk about and the title 'dummies' is pretty befitting of the forum overall.
For someone like the OP who does not currently have much knowledge of investing, Bogleheads would definitely be a great place to start. I would also recommend checking out the wikis there and read the book "The Boglehead's Guide to Investing".


1) You do realize that there are a lot of bogleheads here, right? If you want the standard Boglehead response it isn't really hard to have it come out of someone on this site
2) The post I was responding to called fatwallet an 'awful place for financial advice' and proceeded to call Bogleheads better....Bull$hit! Besides the fact that many(not all, but many) of the members there act like they are members of a cult, and besides the fact that you really have to strive hard to find anybody there that understands anything basic outside of passive investment(like how to read a balance sheet, how options work, how a futures contract works, etc.), they wouldn't have rendered any advice on anything outside of "invest in vanguard index funds"(gee I just summed the collective several hundred thousand hours of time wasted by its members).

uutxs said:   coupons2828 said:    But sometimes, reading the Finance threads are a bit depressing, especially the Compensation threads when I see so many people around my age making much more money (I also understand there is a bias effect going on as FWF members tend to be more finance savvy).
You are 24, have a net worth of ~90k (I am assuming no debt since you didnt mention any) and make 55k a year. You are far ahead of the average 24-year old. Indeed your net worth might put you in the top 10% or even 5% in that age group. Keep up the good habits and think of ways to increase your income.

Take the online compensation posted here (or any online forum for that matter) with a fist of salt. Selection bias apart, not everything you read online is true.


OP is ahead of the median 54 year old too. I read recently that median net worth in the US had dropped to $77K after being around $100K for quite a while. They say it's because home equity is down.

I'd definitely take the online compensation here with a fist of salt and note that it's also biased towards cost of living and particular jobs. As in this thread, there are plenty of people saying, "that's really good if you're in your early 20s and making $XX,000" too.

The best money to risk right now is in your 401k. You won't need it for 40 years, so something more aggressive held for the long-term wouldn't be so bad as long as you have the stomach to know that it could drop 30% in a given year (but will be fine in the long-term) and don't trade too much on short-term news.

Do you have any tax-advantaged savings besides 401k, e.g. traditional or Roth IRA?

On the staying at home thing, if you can handle living with your parents (no way for me), and they're willing to put you up (they would have loved to when I was 24, but probably would have suggested that I be more independent if I still lived there at 25), it's not horrible to save money that way for a few years, but it doesn't work for everyone. At some point though, it is a life experience to not live with your parents, and as some people said, significant others or wanting to have a significant other may force the choice. That said, I know plenty of baby boomer types who basically moved out of their parents' house and in with their spouse (male and female), and I even know a few who lived at either their parents' house or their spouses parents' house after they got married (and in some cases after they had kids too!). It's only in current times that we have such a stigma.

700k by 35 ? Am sure you will find a girl in the bar, and she will spend all your savings, so don't worry Many people in FW make more than 55k, but they don't save as much as you coz they have to pay for their home/apartment, and they have to spend on their girl friends and if married, wife & kids.. money is just like a pail of water, you end up drinking or let someone drink it.. and if you don't invest properly, it will evaporate away with inflation...

Skipping 49 Messages...
Invest in yourself - get certs (i hope you working on PMP). I agree that MBA is waste of money, until you get to middle management - then it might be worth it. There is no better return than getting a better paying job - and at 55K in CA you have a long way to go.

My personal advice - try to get into big consulting companies - that way you will get exposure to big companies and that experience will pay huge dividends in your future job placement.



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