Investing 102

[silvermonte]

Im new to the forum, I spend all my time over at pro-touring and just recently found this place.I have a question for you guys and sorry if its been asked im only on page 25 of this thread at the moment and the great thing about this is because of this thread im ready to get back into investing. 10 years ago when I was 20 and single and in the military living in europe having the time of my life with no bills and no worries I thought I could become rich being a day trader and I blew 1000's and 1000's trying to do that. I lost it all in the long run and havent even looked at stocks since then. Now Im 30 married with a house and a stable job and its time to start investing and this thread is great.

Here is my question, I make alot less then most on this site and pro-touring, but its all relative really. I have all my bills paid off and I have 6 months of pay saved up for emergency. Only things I pay are house payment, health insurance and car insurance. I pay 10% of my paycheck to my works 401k and they add 5% on top of that.I feel that this should be enough for what i need for retirement but i would like some wiggle room. What should be my next step for investing, they rule seems to be to max out your 401k, but for me that wouldnt be possible giving the cap for that. Should I be aiming to pay the house off early my rough numbers say i could pay it off about 10 years sooner making me about 50 years old, or should i be putting money into a roth IRA, or should i be doing what greg suggest and do the dividend stocks.My thought would be the stocks as the compounding interest should pay off in spades 30 years from now giving me a very plush retirement.

[WSSix]

What is the interest rate on your home loan?

If you and your wife make less than $150k combined, you can put your money into a Roth IRA. I would do that. With Vanguard, you can pick your stocks or chose a mutual fund. That's who I have and I've done both with my account in case I choose my stocks poorly.

Regardless of what your interest rate is on the home, a simple way to help pay it off quicker is to take one month's payment and divide it into 12. Add that amount to each month's payment which will mean you'll make 13 payments in a year. I can't remember the number of years you'll pay off the loan quicker doing this but it's significant. I personally will do this even if I get a great interest rate. I simply hate having debt.

Oh, and welcome to the forum.

[GregWeld]

Originally Posted by WSSix

Regardless of what your interest rate is on the home, a simple way to help pay it off quicker is to take one month's payment and divide it into 12. Add that amount to each month's payment which will mean you'll make 13 payments in a year. I can't remember the number of years you'll pay off the loan quicker doing this but it's significant. I personally will do this even if I get a great interest rate. I simply hate having debt.

Oh, and welcome to the forum.

I have two very low rate mortgages... and I round them both up every month... for the very same reasons you state. I just don't like mortgages. But I also know that at the rates I'm paying (I borrow cash on cash)... it's just flat ass stupid to do what I'm doing.

As you all know I'm in a different "place" investment wise... and don't have any reason whatsoever to "save" any money... but I still just can't stand "owing".

[silvermonte]

Thank you for the reply greg, i do have a fixed rate on my house, its fairly low at 4% and i do round up on the payments. I couldnt stand to owe money anymore and i decided it was time to do something about it. The 401k i have is a government TSP account, its not great but i watch it alot,in the 5 years ive had it is has averaged 11% in returns but its a fund account and that makes me a bit worried as i have no control over what they put in it, there isnt much to pick from with the different plans and it being something tied to the government I always fear it will just go poof one day and be gone.

I figured having a house payment is unavoidable and I will prolly have it paid off in my mid to late 40s. I have give or take about $200 a month to put into a roth IRA so I wont get it capped either at this moment but at least this money was cash I was throwing away in interest for all the stuff I owed money on.

Its a shame I didnt read something like this 10 years ago, everything you have sad not to do was stuff I have done and I didnt know any better at the time. Alot of stuff I have read for investment advice I think is wrote by people making well over 100+k a year and I live in the midwest. I think average wage in Iowa is 35-40k a year so I dont know anyone that makes 100+k a year so its kinda a guessing game as to how a person should divy up their money to be well protected when investment caps cant be meet.

[GregWeld]

Originally Posted by silvermonte

Thank you for the reply greg, i do have a fixed rate on my house, its fairly low at 4% and i do round up on the payments. I couldnt stand to owe money anymore and i decided it was time to do something about it. The 401k i have is a government TSP account, its not great but i watch it alot,in the 5 years ive had it is has averaged 11% in returns but its a fund account and that makes me a bit worried as i have no control over what they put in it, there isnt much to pick from with the different plans and it being something tied to the government I always fear it will just go poof one day and be gone.

I figured having a house payment is unavoidable and I will prolly have it paid off in my mid to late 40s. I have give or take about $200 a month to put into a roth IRA so I wont get it capped either at this moment but at least this money was cash I was throwing away in interest for all the stuff I owed money on.

Its a shame I didnt read something like this 10 years ago, everything you have sad not to do was stuff I have done and I didnt know any better at the time. Alot of stuff I have read for investment advice I think is wrote by people making well over 100+k a year and I live in the midwest. I think average wage in Iowa is 35-40k a year so I dont know anyone that makes 100+k a year so its kinda a guessing game as to how a person should divy up their money to be well protected when investment caps cant be meet.

Wanna make yourself sick??

$2,000 a YEAR saved from 21 til you're 31 -- never add another dime to it - will net you a MILLION dollars at retirement (given about a 7% compounded average return)


Don't start saving until you're 31 -- put $2,000 a year away til you're 65 and you end up with about $600,000


HUGE difference in retirement income right there!!


Want to really be shocked?? You should have started saving at 19.....
Check out this investing page for KIDS!!


http://kids.daveramsey.com/index.cfm...ContentId=4509

[silvermonte]

Yeah im already 30, i woke up one day and said enough of this crap its time to get serious, went and got a part time job and paid everything off, ill prolly work the part time for another year or two till the wife starts popping out kids just to get caught up from all the fun i had in my early 20s, and it was from reading things about how much money you can save by starting in your 20s instead of your 30s that got the ball rolling for me. Like I said its a shame I didnt read something like this when I was younger, I wouldnt of blown all that cash trying to be a high roller.

[WSSix]

Make your house payment and no more. Put the $200 and any extra into a Roth IRA. That's what you can do and have a good impact on your retirement. The other thing is to keep your spending levels low even when your income increases. Basically, live below your means.

[GregWeld]

#1 -- Welcome to Lat G --- the BEST PT site...

#2 -- Glad you found this thread!


Sounds to me like you have your act together pretty good! So kudos to you.


I'm not a finanacial planner -- nor (I don't think) is anyone on here a professional investment advisor... this is just a good "Starter" thread that give people some stuff to discuss and think about.

Here's what I'd think about if I was in your shoes.

Max a ROTH IRA if you can....

If you have a FIXED RATE mortgage... and you'll be a reasonable age when it's paid off (some time before or at retirement) I wouldn't rush to pay it off. You're fixed rate mortgage will be mighty cheap 10 years from now... and if we're all lucky -- returns should far outstrip the interest rate on your loan. That's the "theory" anyway.

Now for that 401K at work.... It's not nearly as important how much you're putting in (and the match) as it is WHAT IT'S IN! Pay attention to that! You'll read here about Mutual Funds --- and you really need to have your money going into good ones -- because there's a 100 that SUCK and a very few that will get the job done for ya. So look into that.

Six months of savings is plenty in cash for rainy day fund.... so now it's time to start INVESTING... and keep reading this thread and you'll catch on real quick!!