Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[hometeam]

I recently landed a (low) 6 figure job.

My first order of business is to get my high interest debt paid down.

THEN WHAT DO I DO?

[lewdog]

Originally Posted by hometeam

I recently landed a (low) 6 figure job.

My first order of business is to get my high interest debt paid down.

THEN WHAT DO I DO?

Start learning to live below your means.

Use that to start building an emergency fund (3-6 months living expenses).

Pay off debt completely.

Build equity and buy a house if you don't already have one.

Start building savings/investments for retirement and/or the future as you can through all of this. Even $100 per month is better than nothing.

[DaFace]

Originally Posted by hometeam

I recently landed a (low) 6 figure job.

My first order of business is to get my high interest debt paid down.

THEN WHAT DO I DO?

...

Originally Posted by DaFace

I'm certainly not a financial guru (hell, I'm only 34 myself). Others have given some pretty solid takes more generally, but if I go with the assumption that "spend less, save more" is a given, here's how I generally prioritize things:

1. Pay off credit cards.
2. Build up an emergency fund of six months worth of expenses. (There's a lot of debate about the exact amount here, so up it if you're conservative, lower it if you're risky and/or have a really stable job that you're not worried about disappearing.)
3. Put in as much as is necessary to get a company match in your 401k or IRA plans (if applicable).
4. Pay off anything else that has an interest rate above 5% or so. (This is debatable since you may make more than that in the stock market, but I'm fairly conservative and think you take the guaranteed "return" while you can.)
5. Start your own IRA (I think Roths make the most sense if you're young, but Trads are fine as long as you know the differences and benefits of each.) Max out your annual contributions if you can.
6. Pay off any thing you have left that's below 5% interest rate (except your mortgage assuming your rate is good).
7. Max out your contributions to your company 401k or IRA account (if applicable).
8. Pay off your mortgage.
9. Start a standard brokerage account and start investing for income (or possibly look into other types of investments).

There is very little in financial planning that is a "right" or "wrong" way of doing things, so others may shift their priorities in the above a bit. Nothing wrong with that.

Finally, in terms of investments, if you know NOTHING, you can always start with a target date fund. The fees are a little high, but they're managed and will generally keep you pointed in the right direction. A step above that is where I'm at: I'm lazy and go with a three-fund lazy portfolio for the most part. Be wary of "full-service" places - they're great for advice, but they're taking fees out of EVERYTHING, which can add up ENORMOUSLY over time. If you really start to have a feel for what you're doing, you can invest in individual stocks obviously, but 90% of people will just get themselves in trouble doing that IMO.

[hometeam]

I have been making 40-60 grand a year for about 12 years. I have no savings, no retirement (I started to build one at one point but cashed it in in an emergency)

About 20k in high interest debt, 30k in low interest debt, and owe about 78k on my house thats worth 85. (edit: recalculated, 22k in high interest, 17k in low interest with 12 of that at 0%)

Unfortunately at this new company I'm not vested for 6 years, but I will max. My 6 percent for the 3 they give.

I dunno really anything about any kind of IRA, no idea what a brokerage account is. I have kind of been living paycheck to paycheck and doing racecar shit :/

I am going to start researching investments as well, but I wont start investing until i get my 10k CC debt paid off, hopefully feb/march. My house is at 5.25 right now which is higher than I can get, but I wanted to finish the transition to the new job before I went in for a streamline refi at somewhere around 3.25.

[hometeam]

I have A+ credit as well. Have been thinking about looking into some debt transfer options and turning some of that high interest debt into low interest debt, but dont know if thats worth any fees etc.

[SAUTO]

Originally Posted by hometeam

I recently landed a (low) 6 figure job.

My first order of business is to get my high interest debt paid down.

THEN WHAT DO I DO?

[hometeam]

Originally Posted by JASONSAUTO

Dont think im not dreamin!

Gonna be cool and get my shit handled first.

[DaFace]

Originally Posted by hometeam

I have been making 40-60 grand a year for about 12 years. I have no savings, no retirement (I started to build one at one point but cashed it in in an emergency)

About 20k in high interest debt, 30k in low interest debt, and owe about 78k on my house thats worth 85. (edit: recalculated, 22k in high interest, 17k in low interest with 12 of that at 0%)

Unfortunately at this new company I'm not vested for 6 years, but I will max. My 6 percent for the 3 they give.

I dunno really anything about any kind of IRA, no idea what a brokerage account is. I have kind of been living paycheck to paycheck and doing racecar shit :/

I am going to start researching investments as well, but I wont start investing until i get my 10k CC debt paid off, hopefully feb/march. My house is at 5.25 right now which is higher than I can get, but I wanted to finish the transition to the new job before I went in for a streamline refi at somewhere around 3.25.

It might help to simplify your choices to help you think through it. There are generally three things you can focus on:

1. Emergency fund
2. Debt reduction (2.5 refinancing, consolidation, etc.)
3. Investments (3.5 401ks, IRAs, brokerage accounts)

There's very little point in getting into #3 beyond doing enough for your company match until you've got #1 and #2 taken care of.

I'd probably split your first priority between building up a little emergency fund of a few grand and paying down the high-interest stuff. Once you get enough in an emergency fund that you can handle most normal emergencies (breaking an arm, car breaks down, etc.), focus exclusively on the high-interest debt until it's gone. (Obviously if you can find ways to get the interest rates down, great, but that's just a matter of doing the research and the math to see if it's worth it.) After that, build up your emergency fund to where it really should be.

THEN you can start thinking about how to prioritize the low-interest loans vs. investments.

[DaFace]

Oh, and you should definitely look into a refi once you're stable enough in the new gig (assuming you plan to stay in the house for at least a few years).

[DaneMcCloud]

have been making 40-60 grand a year for about 12 years. I have no savings, no retirement (I started to build one at one point but cashed it in in an emergency)

About 20k in high interest debt, 30k in low interest debt, and owe about 78k on my house thats worth 85. (edit: recalculated, 22k in high interest, 17k in low interest with 12 of that at 0%)

Unfortunately at this new company I'm not vested for 6 years, but I will max. My 6 percent for the 3 they give.

I dunno really anything about any kind of IRA, no idea what a brokerage account is. I have kind of been living paycheck to paycheck and doing racecar shit :/

I am going to start researching investments as well, but I wont start investing until i get my 10k CC debt paid off, hopefully feb/march. My house is at 5.25 right now which is higher than I can get, but I wanted to finish the transition to the new job before I went in for a streamline refi at somewhere around 3.25.

I have A+ credit as well. Have been thinking about looking into some debt transfer options and turning some of that high interest debt into low interest debt, but dont know if thats worth any fees etc.

Okay. Trying to stay calm after reading this. Hometeam apparently has me on ignore, which is all good.

That said, I just don't understand the numbers. If I read them correctly, he's $50,000 in debt with $7k equity in his home.

How in the world could he have "A+" credit?

This is what led to the crash of 2008.

[DaFace]

Originally Posted by DaneMcCloud

Okay. Trying to stay calm after reading this. Hometeam apparently has me on ignore, which is all good.

That said, I just don't understand the numbers. If I read them correctly, he's $50,000 in debt with $7k equity in his home.

How in the world could he have "A+" credit?

This is what led to the crash of 2008.

It's possible. Probably not the recommended situation of course. If you have a lot of credit and pay on time, though, you can have a pretty good credit score.

[DaneMcCloud]

Originally Posted by DaFace

It's possible. Probably not the recommended situation of course. If you have a lot of credit and pay on time, though, you can have a pretty good credit score.

I can understand "pretty good" but from my understanding, A+ is 800 and over.

Again, I'm not trying to denigrate, just understand.

It seems like I don't understand the rules.

Mosbonian could explain this back in the old days but he rarely posts these days.

[Rain Man]

Originally Posted by DaneMcCloud

I can understand "pretty good" but from my understanding, A+ is 800 and over.

Again, I'm not trying to denigrate, just understand.

It seems like I don't understand the rules.

Mosbonian could explain this back in the old days but he rarely posts these days.

My understanding is that a credit rating isn't about your net worth or your ability to pay so much as it is your actual history of paying. A person with debt who pays on it unerringly is perceived as a very positive risk, even better than a person without debt who doesn't have a record of unerring payment.

[DaneMcCloud]

Originally Posted by Rain Man

My understanding is that a credit rating isn't about your net worth or your ability to pay so much as it is your actual history of paying. A person with debt who pays on it unerringly is perceived as a very positive risk, even better than a person without debt who doesn't have a record of unerring payment.

I find that to incredibly financially irresponsible and scary.

[DaFace]

Originally Posted by DaneMcCloud

I find that to incredibly financially irresponsible and scary.

I suppose that's true in a way, but credit scores are meant to help banks know how much risk they'll be taking that you won't pay them back. It has nothing to do with whether it's a financially-responsible decision for you to hold additional credit.