How to invest extra money advice?

**disneysteve** · 08-13-2009, 09:09 AM

Welcome to the board, and congrats on being in such great shape at a young age. Good for you!

Tell us a little more about yourself. Any debt? Credit cards, student loans, car loan, etc.? What is your timeline for moving out of your parents' house? Do you anticipate renting or buying your own place and, if so, when? What are your monthly expenses currently?

**investingnoob** · 08-13-2009, 09:26 AM

Well I wanted to buy a house so I could get the $8k tax bonus, but fear i'd be living on bread and water, So I was hoping for advice there too.
I get along with my parents fine, live up stairs so its like my own place, but would like to move out no longer than 5 years.
I'm single too.
I have a $16k car loan with 3 years left to pay on it.
I only use credit cards for bigger purchases and pay it off at end of month.

main monthly expenses
$280/mo car insurance
$373/mo car payment
$200/mo rent
$90/mo phone bill

Then my gas and food, i really don't buy anything else, I'm big on saving.

**kork13** · 08-13-2009, 12:56 PM

welcome to the boards. It's good that you're "big on saving", that's going to help you alot throughout the future.

To start with, I would strongly consider paying off your car loan outright. What % rate is the loan? If it's anything above 2%, it's better for you financially to just be rid of it. The car payments could be funneled to savings, and you wouldn't continue paying interest on the loan. I realize that it might seem drastic to wipe out all but $5k of your savings, but it sounds like you have $2500/mo or more after taxes and your expenses, so you could quickly replenish your savings. If you aren't comfortable paying it all off, pay off half of it now, then make double-payments every month until the loan is paid in full (11-12 months).

Don't rush into buying a home if you're not ready to -- you'll only get yourself into alot of trouble. You're still young, with many years ahead of you to save up for and carefully select a home. Take advantage of that.

As for investing, I would start simple. Just get into a couple low-cost index mutual funds, invest some money in those every month, then continue learning. In time, you'll learn more about what are smart investments for your particular situation, and you can pursue those later. Laddering CD's are great for an emergency fund, but as investments, they're not at all growth-oriented, which is more what younger investors really should look for. Figure out your risk tolerances, decide what allocation you're comfortable with (100% stock, 80% stock/20% bond, or whatever), and work yourself into it. You'll learn best through experience, research, and asking questions.

**investingnoob** · 08-13-2009, 01:58 PM

Thanks, I just felt I need to get a house since its the cheapest to buy plus low interest, and 8k. Bonus! Its crazy not to buy.
I put 10k in an ally savings for higher interest.
I could put 5k on my car and keep 5k for EF.
Plus if I pay off my car i wont need full coverage, which will change my insurance dramatically.
I'm paying a whopping $280/mo for insurance, and i just hit someone so it will go up even more.
Sucks to be young male driver

Edit: 5% interest

**sammythesm** · 08-17-2009, 08:56 AM

I bought my first house when I was 24, in 2006. Buying a home so young has been a mixed bag for me, so be very careful...

1) taxes, utilities, and hidden costs of owning a home (read: money pit). These are HUGELY bigger than I ever thought they'd be.

2) you're stuck: make sure you like your job, are happy and secure, and won't want to move. especially in this economy, homes are hard to sell, and you might get stuck living somewhere you wish you didn't at such a young age. generally, young adults need mobility and a home is the ultimate ball and chain both physically and financially.

3) deducting the interest is great for reducing your tax liability (single guys get nailed on taxes, yo!)

4) it feels better to own something than to flush money down the rent toilet and pay someone else's mortgage.

5) although... if I'd have saved for 1-2 more years, I could have had a 10% down payment and paid my own closing costs. I financed 100% and the closing costs, and now 3 years later, am finally back to the original principle of the home.

So, my advice on the home thing: take advantage of the situation with your parents to save 15% of what a home costs in your area, and then take the plunge. By the time you have that saved, you will be older and more ready to throw down roots...

just my .02

**investingnoob** · 08-17-2009, 02:42 PM

Great advice thanks!
Yea I've decided not to buy a house.
At 21, im just way too young and not ready.
Instead I've decided to start paying off my car fast,
so then I'll have no debt and can start saving again, have no debt
and then buy a house when i'm ready.

**creditcardfree** · 08-17-2009, 03:22 PM

Originally posted by investingnoob View Post

Great advice thanks!
Yea I've decided not to buy a house.
At 21, im just way too young and not ready.
Instead I've decided to start paying off my car fast,
so then I'll have no debt and can start saving again, have no debt
and then buy a house when i'm ready.

Good plan. Best wishes on achieving those goals.

**amedvedovski** · 08-18-2009, 10:12 AM

Don't be afraid putting at least some of your money into stock market. You cab start buy buying index funds like S&P500, Int. index (e.g. EFA), small-caps (e.g. VB), Int; REIT index (e.g. RWX), etc. I listed some of the ETFs, but you can also can find corresponding mutaula funds. Don't go crazy though, so you are not burned out quickly.

I found the following articles that might help you:
I am in my 20's shall I start saving for retirement. See
Shall I invest into the stock market now?

**investingnoob** · 08-18-2009, 04:48 PM

Well I'm currently reading "the neatest little book about stocks" and "real money" to first learn about stocks. Then I'm going to start playing the stock market, I mean buying individual stocks through Etrade.
Not like vanguard where you just buy an stock index and thats it.

**cptacek** · 08-19-2009, 05:10 PM

You want to live with your parents until you are 26?

**amarowsky** · 08-23-2009, 11:45 AM

You ever think about buying a house and renting it out? I don't know where you live around but in certain areas that have been hit extra bad by the real estate market a house could be a lucrative investment.

Also for some investing advise and information I highly suggest reading some books/mags I love smart money magazine I got a subscription of it last year for something like $10-20.

https://subscribe.hearstmags.com/subscribe/smartmoney/25819?lid=g285915&BO=URLswitch

I have been looking around where I am living because I'm still at my mommy's house but I am thinking of buying a home to rent. My girlfriend just bought a home for $30,000 just about two miles from my house. I have been combing the real estate auctions and keeping an eye out for a good deal. All I have to do now is educate myself further on the elements, legality, process, insurance, and risks about renting, so I been looking for a helpful book.

Right now though if you are looking for some decent safe investments I would suggest bonds, even though stocks and mutual funds are at good prices they are still somewhat volatile. A lot of bonds are paying exceptionally good rates, I still keep plugging I-bonds (inflationary bonds)

Individual - I Savings Bonds Rates & Terms

This is the current rates, right now it's kind of lame because they are on a negative inflation, but inflation rate is readjusted in november, so if you buy just before you can get locked in at that additional .1% fixed rate which is pretty nice.

How to invest extra money advice?