Personal Finance: Credit/Debit Card, Checking/Savings Account, Index Fund
Right now, I'm 20 and I have about $20k to my name. It's all sitting in a checking account with no fees. I pay for things with a debit card.
I want to start a credit card to build my credit history. I also recently opened a low-fee brokerage account and wanted to put most of my cash into an index fund.
How should I structure this? I was thinking of funding the brokerage account with 19k and splitting that between maybe three indexes.
I'd keep 1k in my checking account, set up an auto-pay for the credit card bills out of there, and pay off each bill completely and on time each month. Am I able to set up a bill auto-pay from a savings account so that I can open some small amount of interest? Or does it make sense to keep a checking account? Both?
And if I need more cash for my credit card bills, I'll have to liquidate shares of the index funds.
Does that make sense? Any advice?
Thanks a lot.
I'd keep more in cash. You're young and have plenty of time to invest over time. 20% in cash ensures you'll always have some money on hand for emergencies and sudden bills regardless of short-term index drops.
Not sure its the right time to start buying into the broad equity market at all time highs...
I'd keep on buying in the US for a long time in equity. If you are worried about the US, look at the rest of the world and you will understand. The US has the privilege of holding everybody else by the balls to get out of trouble. As long as they will keep the printing press in action you will see some nice inflation, and equity is a great hedge vs. inflation, your cash will just keep on losing its value by the day.
If you are young and in college, why don't you take a more active approach to investing? Stick in an index fund for now (if cash is not an issue, just use the cash to build your credit history as you said). And start building a mock portfolio for the next 3-6months, plenty of them to chose from online; do not invest right away, unless by active approach you are going to stick most of your cash in US blue chips and not rotate for 6mths+. Stick 4K into a Roth, or whatever the max allowance is, and play there, you can take 10K out for your first buy tax free, so you don't have to wait for retirement.
+1 (What I've personally done)
I keep about 6m worth of cost of living in cash, rest in a brokerage account with ~75% etfs on major index and ~25% bonds (PIMCO's flagship fund; that guy's good enough not to get crushed when IR rise again... hopefully). No single name as I'm just trying not to miss out on the markets over the long term, no beat them.
In your case, keep in mind you need a big chunk to stay liquid (without too much risk of a loss on your capital) because you will have major expenses coming in the next few years: maybe a car, maybe buy a house/apt or nicely furnish your new place, maybe a wedding, maybe tuitions, maybe just a less frugal way of living, etc. At 20, you know for sure some of those will come, you just don't know when.
Managing Personal Finances (Originally Posted: 04/24/2013)
Soon many of us will be leaving the hallowed halls of our target schools for a Bulge Bracket or some other financial institution. Although technically paid about as much as a burger-flipper by the hour, first-year monkeys will still take in $125K - $150K, and even with rent and blowing as much as possible on shoes and booze, we'll still be left with a lot more money than most of us saw in our college days.
What do you do with all of it? Seriously. I'm joining an investment bank because talking about "stock-picking" and mutual funds puts me to sleep more quickly than than a ride home at 6am after finishing v793 of that pitchbook.
How much cash do you let sit in your checking account? Savings? How much do you throw in your Scottrade/Etrade account, and what do you do with the rest you don't have time to spend on clothes and hoes?
Any advice is much appreciated.
booz and hookers. and on the serious note 50% on checking account, 25% on ETRADE and 25% to max out your retirement contibutions plan.
Personal Finance Excel Template (Originally Posted: 05/09/2013)
Been thinking about getting really on top of my personal finances and although I've created my own spreadsheet that I think it pretty decent, I was wondering if anyone else had already done this and had a template they could share. I've found a couple decent ones on the internet too, but seeing as WSO is filled with excel whizzes, I figured someone here probably had created something better
Thanks everyone,
SP
Also interested in this. Agreed that the Excel whizzes here most likely have a sicker template.
I have a contact list template as well that I could share.
mint. com is the best because it auto-populates all of your expenses/loan info/bank accounts
For data, I'd recommend using the website Mint. It'll categorize your income/expenses by account for you and the output function is .xls format.
I used to have a few spreadsheets built out to calc cash flow, liquidity, etc.. but it required manual updates from me.
I use mint exclusively now. There are a few things that irk me about it though. i.e. one of my favorite restaurans continues to show up as "dry cleaners" and I have to re-categorize it every time. Kind of pain. The budget setting process is a little weak, but everything else it great.
Thanks for the responses. I've been hearing about mint for a long time now, and I think I even created an account a couple of years ago (but haven't checked it since), but I'll give it a second shot. Didn't know I could export the data to excel.
I'm gonna toy around with it for a bit, but anyone have any useful tips for using it, or is it pretty simple with no hidden functions?
Is Mint.com available in Europe at this point? Any tips besides this app?
Help me with my personal DCF (personal finance goals for the next 10 years) (Originally Posted: 05/19/2014)
I was bored recently so I decided to project my expected net worth going forward for the next ten years and would appreciate any input you have. I will be starting FT in a front-office investing position at a BB this summer (GS/MS/JPM) in a satellite office. My excel "model" is attached to this message.
Here are a few assumptions that I made in the model over the next 10 years: -I plan on becoming a complete cheapskate in order to keep expenses extremely low and maximize the amount of earnings available to go into my investment accounts (gotta give that compounded growth rate some love). This also means that I will not really improve my own living conditions even as I get promoted -I will not buy a house and will instead continue renting a 1BR apartment -I will not get married -I live in a state (and will continue to stay there) with no state or local tax and a really low cost of living, while earning a New York investment banking-like salary and bonus -I will get promoted to associate after 3 years as an analyst and then to VP after 3 years as an associate -I will not transition to any other buy-side role -All other assumptions are explained in the notes inside my model
I would definitely appreciate your input--I know I am missing certain things but can't think of it.
OT: Model is pretty clean.
Kudos, OP. Thanks for the laugh too.
if this is a joke, I fell for it...
model is clean
kudos for wanting to plan this far in advance
put some money towards an emergency fund (http://www.wallstreetoasis.com/forums/the-last-what-should-i-do-with-my…)
I personally think inflation assumption is too low, while CPI prints at around 2 nowadays, your real cost of living will increase more than this (to be super conservative, I'd model 4%)
no idea how you can spend only $500 on groceries & dining in any city a month
no clue if your raise expectations are reasonable, you're anticipating a 21% raise on salary and a 33% increase in bonus after your first year? I'm not in IB, but that sounds a bit lofty.
please PM me the city you live in where you can find a 1br for 1k a month and still make NYC income. if the rent isn't section 8, I may consider moving ;)
I realize you were bored, but I think you're getting way too detailed. if you're OCD, you will get super stressed out if you don't abide by this budget every month. if I were you, I would focus on the savings portion of it, not the rest. and focus savings on the portion you can control, like percentage. if you don't get your expected bonus/raise every year, you will not hit your net worth goals. focus on the controllable. if your goal is to spend 20% of what you make, great! that's easier to stick to than what you're talking about. once your income goes up, if you keep your spending down, maybe you can just bump the percentage up (say something like once I hit 100k, I want to save 30% of what I make, at 200k, 40%, and so on). I'm a big believer in enjoying your resources (even though I don't get paid when people do that), but I didn't see a budget for vacation or fun. take a trip every once in a while, if you make a ton of money over time and save diligently, the difference in experiences and overall happiness you get from taking annual trips to the difference in your estate at death will be a rounding error.
Are you not going to buy a new car at any point in the next ten years? I think you are grossly underestimating extra expenses. Think: Christmas presents for family, travel, medical expenses if you get sick, ext. as stated above 2% inflation is not even close to what you should be putting in the model, I would do 3-4% as stated above. Also some things you have to think about, you may not pay any tax on investments if you hold long term
@"ManyHenny" Thanks! In no way did I think I was funny but I am glad that you got a laugh out of it :)
@"thebrofessor" I'll definitely keep in mind the emergency fund and factor in 4% inflation. As for groceries, I plan to maximize my usage of Seamless every day. I plan on using the extra money to buy other meals (for lunch and weekends) so most of the money I spend in this category will go towards home essentials and not groceries. Also as a college student I regularly spent $150/every 2 week on groceries in a large metropolitan city, so for me $500 doesn't seem a stretch considering I will be at home even less now
As far as the salary expectations go, the analysts #'s were definitely confirmed to me by the others. The pay for associates and VPs was taken off of estimates on this site and others (post-recession, of course)
And I'll definitely make sure to follow the advice to not sweat the nickels and dimes! I set aside $12k a year under other, which I hope will be enough to fulfill hangouts/vacations/gifts/etc...but will definitely be willing to go over if it brings me the utility :)
@"ct banker" that's a good point for the car and inflation, will definitely add that in. My current car is actually only 2 years old but I will add in that expenditure near the tail end of the projection period.
For gifts and other expenses...I set aside an additional $12k/year so hopefully that is enough to cover anything I did not think of. I am not really clear how employer medical insurance works, so I may add that into the model to cover any uninsured claims
recommend personal finance books please? (Originally Posted: 12/04/2008)
I am graduating in May and want to read up on books that relate to personal finance and retirement planning.
Any requests?
A Random Walk Down Wall Street
I second Malkiel's random walk. Very interesting reading, and takes into account taxation + fees when describing investment schemes. Make your own religion about index funds, though...
Any great book about personal finance and retirement planning ? (Originally Posted: 07/10/2011)
Anyone knows about a great book to give guidance and structure for retirement and personal finance ? Just starting to wonder how much I should save / invest / keep for my future...Have already been focusing on that but quite keen to hear new ideas from other sources...thanks
Please don't mention "4h work week" or similar stuff because it's straight BS, that book is just a summary of the most basic general ideas, so vague...can't believe so many people buy this crap
the wealthy barber
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