Intro: Starting to Focus on the Future

[budgetnoob]

Hello everyone,

I am new here and am hoping to be a long-time member to the point where I can eventually contribute. This will be a little long winded, but I wanted to get it out in one place and start to organize everything.

I have been on a few forums for completely different interests, and imagine this to be a sort of "build thread" and learning process for myself. I have talked to a financial adviser in the past, but for some reason have not found this to be as effective as I would like. I function well on the forums and hope for this to be a gateway for me to get interested in finances and budgeting as right now I find them uninteresting and tedious. Hoping to change that!

Part of my problem is that I have very few set long term goals. I know I should be thinking about things like a house and retirement, but I don't really have any set goals for those so it's hard to visualize saving for them.

Here is my basic scenario: I'm turning 27 in the fall and have had a salary job bringing in about 2400 a month after taxes and everything for nearly two years now. I despise debt, and because of this have paid off all of my student loans and don't even own a credit card (I know that I probably should for credit score reasons?). I have a relatively healthy savings (could live easily for six months without pay, including emergency funds), but nothing beyond that. I have no long term investing other than maxing out what my company will match in a 401K. My two biggest fixed expenses are rent and gym. After food, the rest of my money goes towards recreational things and a basic savings account. I like working on vehicles, electronics, etc, so am constantly buying tools and unnecessary parts (more than just maintenance items). I eat out at lunch probably twice a week, and the girl and I either make a nice dinner or go out around once or twice a week. I've had a few unexpected flights that I've paid for this year, and those aren't exactly cheap.

Looking at finances is intimidating. There are so many places to look and things to do that I don't know where to start. Investing is a weird concept for me. Paying cash for cars and eating out less make sense, but the world of saving and compound interest is daunting because people can make careers out of it and still not even know everything. I understand compound interest, and know I should be doing something with my money now because it'll make a big difference for when I'm 40 or 50.

I guess I have a few vague goals. I am having fun in my job right now, but a few classmates and I have started talking about starting our own company. It won't be for a few years at the earliest, but I get this feeling that I may want to prepare for that. I like seeing where life takes me, and don't know what I want to do yet. I don't plan on living where I'm at forever, hence the renting for now. Sometime within the next year I will be getting a ring for the lady. I am considering getting a masters degree, and think I can do much of this online in addition to work. This won't start until next fall, though.

I don't budget anything right now. I check online periodically to see where I'm at and to make sure I'm not getting charged for anything weird, but if you were to ask me how much I pay a week for food right now, I'd have no idea. I just know that I'm bringing in more than is going out.

Ok, I hope I haven't disclosed too much or too little! I'll continue visiting and reading up on this forum. I really like the advice and members so far for other threads, and think that if I take it one step at a time. I hope to sit down and write out my full budget this weekend so I have a better idea of what's currently going on. It may be useful to get a computer program for this, so I'll look into that.

One last thing... I've read a couple of other introductory threads and as soon as people suggest looking at roth IRA's and target date mutual funds and my mind just checks out. My political views on taxes make this more difficult I believe. I don't think they should be complicated to the point where you have to trick your way through investments just to avoid taxes or take advantage of FED interest regulations or anything like that. I know this is idealistic and hope to put more energy into my personal situation as protesting with my finances is a overall a very unwise decision!

Thanks for reading my sporadic ramblings! This isn't a particular question, but more of a goal for myself to become more frugal and adult with my finances, and to start focusing my energy rather than just saying "I'll get to it eventually".

-noob

[bjl584]

Welcome.

It sounds like you have the frugal part pretty well down. I'd suggest reading up on the investing side of the equation. There are tons of books that you can pick up on the subject. There are a few recent threads discussing good investing books. Check those out first.

[coffee]

Anti debt and putting in a 401k at age 27. You are halfway there. Impressive. Just make sure you diversify in the 401k and not just put into 1 or 2 different funds. 4 at a minimum. I would suggest buying a 100 dollar series I bond every month (yeah, the interest is low, but better than a bank acct or CD)to start building up an emergency fund and put your tax returns into a savings acct (as an emergency fund until you reach 6 months living expenses). You are 27: enjoy your life, just be smart about it. (And another thing, from someone who was in great shape until my mid 30s: Do not ever stop the gym, once you hit mid 40s, it gets much harder to get back into shape).

Just remember this one tip: Beware of status symbols (High end cars, name brand clothes, starbucks coffees every day), these will break you in the long run.

[breathemusic]

Sounds to me like the first thing you need to do is figure out where you're spending your money. If you use a debit card for the bulk of your spending, then it shouldn't be that hard since your bank statements will have all your expenses listed and you can just start adding eveything up and get an approximation of what you're spending each month.

If you tend to carry around cash and spend that, then you should try to keep a little spreadsheet or maybe find a phone app to start logging your expenses. In a few months, you'll have a pretty good picture of what's going on. That will allow you to really see if you're happy with what your spending now, or maybe you'll look and say "oh wow, I didn't realize I was spending so much on X, I'm going to make an effort to cut back on that."

If you're happy with the amount of saving that you're doing now, and you want to invest but not put a ton of thought into it, do a little reading up on a Roth IRA, and you can easily put money into a target retirement fund. Basically you can just deposit it, and then ignore it until you retire. The whole point of those funds is that they're set up for people who don't want to spend tons of time or effort managing all of their investments and shuffling money around.

It also sounds like you need to sit down and just take a moment to think about your long term goals. Do you want to buy a house in the near future? Do you wanna get married in the near future? Have kids ever? Buy a new car soon? If you think there are going to be any major expenses coming up, just start setting aside some money for those things now.

Those are at least some of the beginning steps that you can take!

[TBH]

I hear you about not wanting to think about this stuff too much.

It sounds like you do have a few big goals coming up in the next few years and it would be worth setting aside some money for them.

1. Buy a ring for your girl
--why not shop a bit and see how much you need for the ring you want? then you know how much to set aside.
2. Get a masters degree online while working
--sounds great. can you start saving for that now?
3. Start a company with some other people
--you probably want to have a larger-than-average emergency fund before you do this, like maybe a year's worth of living expenses saved up before you quit your job. Or try to start the company while continuing to work at your other job. Still, if this is a goal of yours, you might want to step up your savings in this area.

Another thing--
You said you're contributing enough to get the full 401k match from your employer. That's great. But what percentage of your income are you contributing? Ignoring the employer match, you want to contribute at least 10 % of your income to your retirement plan. Some people say 15% is better, but you're starting relatively young and you have other savings goals so I'd say 10% is a good place to start now.

So. Lots of reasons to save more money. No interest in tracking every penny you spend. It's understandable, but a little self-discipline might be needed here. This board is fun and friendly, and you'll get a lot of help here.

Good luck.

[snafu]

If you and classmates want to start up a business you'll need funds in place to participate. Is that project worth the effort of creating an investment plan to finance your share of the enterprise?

You might like to design your own budget via Excel spreadsheet or use Mint for free on-line. Quicken links to your bank and is remarkably easy to use. You've done a terrific job of paying off student loans, and avoiding consumer debt. I wishI had the skill sets and interest in working on my car and repairing electronic. What are you holding in your 401K? How much are you paying in fees [whatever term they use?] I thought you laid out your goal quite clearly. You want to hold yourself accountable financially and use your money in a wise, adult manner.

[kv968]

Looking at finances is intimidating. There are so many places to look and things to do that I don't know where to start. Investing is a weird concept for me. Paying cash for cars and eating out less make sense, but the world of saving and compound interest is daunting because people can make careers out of it and still not even know everything. I understand compound interest, and know I should be doing something with my money now because it'll make a big difference for when I'm 40 or 50.

Welcome.

Let me just say finances, and especially the investing aspect of it, can be quite intimidating but it doesn't really have to be. To me the most basic, and fundamental part, of finances is living below your means and being in the right mindset. It seems like you're doing fine as far as that goes with your "despising debt", having an emergency fund in place and basically just spending less than you make will go a long way in one's financial picture. Now you just have to come around to the investing part so you can make that money you are saving work for you. I'd suggest reading a few books that have been posted in other threads about beginning in investing so you at least get a basic understanding of it.

One last thing... I've read a couple of other introductory threads and as soon as people suggest looking at roth IRA's and target date mutual funds and my mind just checks out. My political views on taxes make this more difficult I believe. I don't think they should be complicated to the point where you have to trick your way through investments just to avoid taxes or take advantage of FED interest regulations or anything like that. I know this is idealistic and hope to put more energy into my personal situation as protesting with my finances is a overall a very unwise decision!.

I'm not sure what your political views on taxes are (I assume they're along the lines of that they shouldn't be this complicated, and I agree) but I'll be another one of those people who suggest that you open a Roth IRA and start putting some money in it once you come up with a more precise, current budget. I wouldn't say its a way to "trick your way through investments just to avoid taxes" but instead just using what's available to you so you don't have to overpay them.

Starting a Roth is very simple. All you would have to do is find a reputable fund family (Vanguard, T Rowe Price, etc...), open one up online and fund it. And yes, I'll suggest just putting it in a target date fund when you do just to make it simple and hope that you don't "check out"

In the meantime read up a bit on investing and just learn the basics of it and you'll be further ahead than most people out there on it. As I said, investing can be very complicated if you want it to be, and some of the threads on here do dive pretty deep into it, but just a simple understanding of it will go a very long way.

[budgetnoob]

Wow! Leave the internet for a couple of days and get such a great welcome!

There are a few recent threads discussing good investing books. Check those out first.

Thanks for the tip. I found one of the threads that I believe that you were referencing and have a list of 10 to start with. It seems that there are two or three that are highly recommended.

Anti debt and putting in a 401k at age 27.

Can't take most of credit for this one. I got lucky and had parents with the same mindset.

Sounds to me like the first thing you need to do is figure out where you're spending your money.

Along with the books, this will be my first step. It seems that I would be able to answer other questions better, and others have recommended it.

You said you're contributing enough to get the full 401k match from your employer. That's great. But what percentage of your income are you contributing? Ignoring the employer match, you want to contribute at least 10 % of your income to your retirement plan. Some people say 15% is better, but you're starting relatively young and you have other savings goals so I'd say 10% is a good place to start now.

I will look into this. I think it's around 7% but honestly I don't know. I just remember getting as much "free money" as I could.

If you and classmates want to start up a business you'll need funds in place to participate. Is that project worth the effort of creating an investment plan to finance your share of the enterprise?.

I'm not sure I could answer that a "yes" at this point. It was something we (three of us total) were very energetic for a few years ago, but I'm not sure where everyone stands today. To be honest, I only listed it because I was trying to think of big ticket items I would need to save for.

I'm not sure what your political views on taxes are (I assume they're along the lines of that they shouldn't be this complicated, and I agree) but I'll be another one of those people who suggest that you open a Roth IRA and start putting some money in it once you come up with a more precise, current budget. I wouldn't say its a way to "trick your way through investments just to avoid taxes" but instead just using what's available to you so you don't have to overpay them.

Starting a Roth is very simple. All you would have to do is find a reputable fund family (Vanguard, T Rowe Price, etc...), open one up online and fund it. And yes, I'll suggest just putting it in a target date fund when you do just to make it simple and hope that you don't "check out"

In the meantime read up a bit on investing and just learn the basics of it and you'll be further ahead than most people out there on it. As I said, investing can be very complicated if you want it to be, and some of the threads on here do dive pretty deep into it, but just a simple understanding of it will go a very long way.

You pretty much nailed it on disliking the complications of taxes, and I think after I budget I will make more sense of starting up a Roth.


Thanks for the welcomes! This is already much less daunting, and I have a couple of things I can start with and go from there.

[YLTL_Dan]

On the right track...

I was in a very similar place as you a few years ago - I'm 31 now. I didn't know what I wanted to do with my life, but I knew I hated debt and didn't want to work in the corporate world forever. In the year previous, I paid off $50k in debt while doing some minor investing. Fast forward to today, my wife and I are currently traveling the world for 9 months.

It all started for me when I was tired of debt and feeling like I was only working to pay on it. I debated quitting to volunteer, going back to school, or starting my own business but I didn't know what I wanted to do. Luckily, as I was going through this, I had been investing in my 401k since I started my corporate job at age 22 so at this point I had a decent amount in retirement (maybe 40k).

Then I read "Poor Charlie's Alamanc" - my favorite book of all time. It got me interested in reading non-fiction and the back of the book recommends 10-15 books for further reading on science, history, psychology, and a few other topics. I must've read over 100 books over the years since then and started to "find my way" in life.

All of this is to say that I think you're headed in the right direction. You don't need to have all of the answers now, but if you keep doing the right things with money (saving/investing), then when the time comes, you'll be able to take your life in the direction you want. Keep your 401k going and learn about the funds offered. Open a Roth IRA and start with some basic funds (I love Vanguard index funds). As you start to do these things and keep reading, you'll get more comfortable with investing and it'll be great timing too as your investments start to grow bigger - which, admittedly, takes a long time! Good luck

[budgetnoob]

Holy smokes that is a big book (Poor Charlie's Almanack)!

I've already started with some of the advice on here. Mint.com has so far been extremely easy to use. I particularly like how you can add categories such as "auto insurance" and it removes that amount out of the budget each month.

I have just applied for a credit card (I will used it like I use my debit card), but hopefully it will help build my credit a bit and I'll get a little cash back while I'm at it. Hopefully that will work into Mint.com as well

Started on a couple of the books and hopefully will get into the 401K stuff this week. Our HR is out for a month so it may be a little longer before this is easy to figure out.