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 Post subject: New to Personal Finance - need some tips
PostPosted: Tue Mar 12, 2013 1:11 pm 

Joined: Tue Mar 12, 2013 12:44 pm
Posts: 22
Hello,

I'm young starting out - 27, and I make about 60K.
I just started earning money, I would say this year, I've been out of school two years, but spent the first year taking care of things I didn't have (e.g., used car etc.), and the second year paying for my divorce/alimony. So this year, will really be my first year of true earnings.

I was able to start a 10K emergency fund over the past two years, but I haven't started saving for retirement. Rent is really high where I live, and I've minimized my payments the best way I possibly can (I rent a room for 900$ a month -not an apartment; I don't have anyone I can live with for less, and I can't afford to buy a condo/home yet).

Anyway, so ideally I will not like to live like this forever. I really wanted to live by myself this year, but I'm willing to continue to have a roommate it if it would allow me to have enough for a downpayment on a home someday. This year, I will also like to start saving for retirement. So my question is: assuming I've got my budget down to a science - which I do (no gym memberships, no frills etc.) and I have about 800 extra each month after rent/bills/food/tax how much of that should go to a retirement account, and how much of that should go towards saving for a downpayment on a home?

I don't want to lock it all away in retirement, because I need some money upfront if I want to get a good mortgage in the next 3 years (assuming I'm doing it by myself and not with a significant other).

All advice would be appreciated.


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Tue Mar 12, 2013 7:53 pm 

Joined: Sat Feb 23, 2013 12:09 am
Posts: 40
I'm about your age and I put $450 into retirement and $450 into a house fund each month.


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Tue Mar 12, 2013 9:12 pm 

Joined: Sun Mar 10, 2013 12:10 pm
Posts: 125
Newb - Welcome and congratulations on starting to earn "real" money. Also, what a fantastic thing that you care about your financial future enough at age 27 to be at a place like this!

I humbly suggest that at this point on your journey, you value saving for retirement over saving for a house downpayment. That is, beginning to save at least 10% of your salary for retirement is far, far more important than saving for a house. You will not make $60k forever. So, as your income grows you will find more and more room to save for a house in addition to properly saving for retirement. This is the art of "delayed gratification" my friend, and it's key to how the average person becomes wealthy. Frankly, I sucked at delayed gratification when I was your age. But then again, I wasn't the type of guy who visited GRS either!

The problem I have with saving-for a house at the expense of properly saving for retirement is that life gets only more expensive after buying a home. Combine that with the possibility of remarrying and maybe having more kids down the road, and you can see how those good intentions about ratcheting up retirement savings might never fully materialize. So, I urge you to begin fully funding your retirement savings ASAP. Set it up on auto-pilot (e.g. automatic payroll deduction) and you'll eventually forget the money exists.


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Wed Mar 13, 2013 6:43 am 

Joined: Tue Mar 12, 2013 12:44 pm
Posts: 22
Thank you both for your advice. I do think I need to work on the delayed gratification more...it's just hard when I want to live someplace that I own.

I'll take the suggestion and create the automatic deduction.

Thanks for the advice!


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Sat Mar 16, 2013 7:45 pm 

Joined: Sun Feb 10, 2013 2:14 pm
Posts: 7
Welcome!

I would start with a Roth IRA or see if your company offers a Roth 401K. It would benefit you to ensure you are getting your company match.

Congrats on having 10K in your rainy day fund. That seems like a lot based on what your expenses are. Now time to focus on your Roth.

Remember, Set it and Forget it!


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Sun Mar 17, 2013 12:00 pm 

Joined: Tue Aug 21, 2012 1:33 pm
Posts: 21
I'm going to give you some bad and questionable advice. I know with my 401K they told us that there was an exception to early withdrawals when used to purchase a first home. I can't seem to find a citation for that though. If you are saving in a 401K or IRA I'd call and ask if that is an option (without additional penalties).

If it is, I'd put it all in the retirement account. Then you have options. If you later think that buying is important and timely and you can't save enough for a down payment you can withdraw. On a 401K, a loan would be an additional option if your emploment is stable enough and you see a deal that can't wait. If you later make more and are able to save for a down payment, you didn't miss these years of retirement saving.

But, practically no one here, if you come back in a year or two, will advise you to withdraw or borrow from retirement. So, this might just be a way to lie to yourself. Save for retirement and a house in your head, while actually only saving for retirement in the bank.


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Fri Mar 29, 2013 3:23 pm 

Joined: Tue Mar 12, 2013 12:44 pm
Posts: 22
Thank you. I work for the government now and I'm still learning about our benefits. But they do have a 457 plan - in addition to the city retirement plan. With the 457 I believe I can put in as much money as I want, and pull it out when I want (regardless of what the purchase is for). I asked for a packet in the mail so I'm waiting to receive it, but I'm going to join that plan, and start saving money there as well. There is no match to my knowledge, but at least it will be a way to start saving for retirement.

Hopefully, I be able to accomplish both by the time I'm 30.


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Fri Mar 29, 2013 4:47 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1627
Location: Seattle, WA
newb wrote:
But they do have a 457 plan - in addition to the city retirement plan. With the 457 I believe I can put in as much money as I want, and pull it out when I want (regardless of what the purchase is for).


I could be wrong but I think you have to separate from the employer before you can start withdrawing from a 457.


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Fri Mar 29, 2013 10:08 pm 

Joined: Tue Mar 05, 2013 6:57 am
Posts: 5
Roth IRA or Roth 401K from the job.


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 Post subject: Re: New to Personal Finance - need some tips
PostPosted: Thu Apr 11, 2013 10:19 pm 

Joined: Fri Apr 05, 2013 2:30 am
Posts: 154
Well, as you’re 27 years old right now, it is an ideal time to save for the golden years of your life – your retirement. You have mentioned that at present you have $800 extra every month. I will suggest you to put $500 toward your retirement saving and $300 toward the down payment for a new home.

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