Investing questions

Hekotat

Hekotat

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Basically I'm looking for a good place to start learning about this or other means of improving my financial situation. I'm sick and tired of being broke and would like to learn how to increase my financial gain over time.

I'm a pretty smart guy but I've never looked into this kind of stuff. There is information out there that I'm unsure where to start or what to do.

I was thinking of pulling a loan out of my 401k, keeping half of it and using the other half to try and invest with. Use the portion I kept to make the payments until I make back the money from investing (Or whatever) and then pay the 401k loan off and use what I made in excess to keep investing. I understand that investing is a risk and I could not make my money back at all. I'm also not sure if this is a good idea.

Looking for some feedback and direction.
 
Hekotat

Hekotat

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I found the investing thread after posting this, mods can you add it as a reply to that thread and delete this? My bag.
 
Eomer

Eomer

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The first thing to realize about investing is that increasing your rate of return by a percentage or two is going to have far, far less of an impact on your financial situation and be far more difficult to achieve than increasing your savings rate by reducing your spending. The reality is that over the long term you will be hard pressed to exceed the long run rates of return for stocks (around 5% total return, after inflation) or bonds (2% total return, after inflation). Add around 2.5% to each of those figures for the "nominal" returns before inflation.

Unless you think you're a budding Warren Buffett.

tldr: saving more money is more important than min/maxing investment returns
 
K

Kedwyn

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Borrowing money against the 401k is a bad idea. Using that money to invest is a very poor tactic as you are paying interest, granted to yourself but giving up the gains that 401k would make to do so hoping that you might make more than what the 401k would make regardless. Most likely that isn't going to be the case.

If your plan has a shitty fund selection then put the amount in that gives you the match and no more. Open a Roth or Traditional depending on your tax bracket now, put the balance of your savings in there. You can also look into rolling the money from the 401k into another similar investment account with better options. You don't have to wait until you quit your job and you can still contribute to the 401k. This may not be an option it depends on the custodian.

Regardless just get started, doesn't matter how much you start with, you just have to start. $20 a month is fine, just put something, anything in there. Once you start it is easier to bump that up than it is to wait to some arbitrary number that is higher that you might never reach. Put something, anything, in there and slowly bump it up.

If you have high interest debt, you need to get that paid off. Hopefully your credit is good. If it is, get yourself a balance transfer card and transfer that high interest debt at 0%. Repeat every 12 to 18 months and your effective interest rate goes down to 4% or less (balance transfer fee if there is one).

If your credit is mediocre to bad then take a long hard look at your debts and ability to pay them off. You can consider bankruptcy as an option which would get you back in shape inside of 6 years instead of sitting in purgatory for 15 or 20 trying to pay off high interest debt you realistically have no chance of doing.

Stop buying shit you don't need. Get rid of Prime on amazon. Cut up your cards and don't use them or at least don't carry them with you. Prime on amazon is a great way to spend money on shit you don't really need. Wait until you get the $35 worth of shit and buy it a few times a month but prime is just too easy to spend money on stuff you don't really need.

Switch to an MVNO like Cricket or GoogleFI. Stop buying expensive handsets.

Cars and toys are a huge expense for people. Stop buying overpriced cars. Get yourself a KIA or a Hyundai and ride that bitch into the ground for 200k miles and then look to get another one. No reason to be spending 30k+ on vehicles unless it makes your pecker feel a little bigger. I always laughed that my employees had nicer cars than me. They never could grasp exactly how much money that translates to over time. It is massive.

Downsize your big bills like your mortgage or rent. Move to a smaller house. Don't rape your equity.


You didn't give many specifics but that should help a little. Good luck.
 
Hekotat

Hekotat

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Kedwyn_sl said:
Borrowing money against the 401k is a bad idea. Using that money to invest is a very poor tactic as you are paying interest, granted to yourself but giving up the gains that 401k would make to do so hoping that you might make more than what the 401k would make regardless. Most likely that isn't going to be the case.

If your plan has a shitty fund selection then put the amount in that gives you the match and no more. Open a Roth or Traditional depending on your tax bracket now, put the balance of your savings in there. You can also look into rolling the money from the 401k into another similar investment account with better options. You don't have to wait until you quit your job and you can still contribute to the 401k. This may not be an option it depends on the custodian.

Regardless just get started, doesn't matter how much you start with, you just have to start. $20 a month is fine, just put something, anything in there. Once you start it is easier to bump that up than it is to wait to some arbitrary number that is higher that you might never reach. Put something, anything, in there and slowly bump it up.

If you have high interest debt, you need to get that paid off. Hopefully your credit is good. If it is, get yourself a balance transfer card and transfer that high interest debt at 0%. Repeat every 12 to 18 months and your effective interest rate goes down to 4% or less (balance transfer fee if there is one).

If your credit is mediocre to bad then take a long hard look at your debts and ability to pay them off. You can consider bankruptcy as an option which would get you back in shape inside of 6 years instead of sitting in purgatory for 15 or 20 trying to pay off high interest debt you realistically have no chance of doing.

Stop buying shit you don't need. Get rid of Prime on amazon. Cut up your cards and don't use them or at least don't carry them with you. Prime on amazon is a great way to spend money on shit you don't really need. Wait until you get the $35 worth of shit and buy it a few times a month but prime is just too easy to spend money on stuff you don't really need.

Switch to an MVNO like Cricket or GoogleFI. Stop buying expensive handsets.

Cars and toys are a huge expense for people. Stop buying overpriced cars. Get yourself a KIA or a Hyundai and ride that bitch into the ground for 200k miles and then look to get another one. No reason to be spending 30k+ on vehicles unless it makes your pecker feel a little bigger. I always laughed that my employees had nicer cars than me. They never could grasp exactly how much money that translates to over time. It is massive.

Downsize your big bills like your mortgage or rent. Move to a smaller house. Don't rape your equity.


You didn't give many specifics but that should help a little. Good luck.
Click to expand...

Thanks for the tips guys. I did some research and decided against it and had forgot I posted this tread.

Kedwyn, I basically already do everything you have said above. I rarely buy anything anymore unless it's necessary, I did unload my 2012 VW due to the incoming shitstorm due to their emissions bullshit. Not something I really wanted to do but I also thought it would be better to get something cheaper to work on. I'll just keep chugging along and see if things get better.

I think my best course of action for the time being would be transferring my only credit card to another low interest one, however, my credit is mediocre so that makes me a bit nervous on the credit hit.
 
Gravel

Gravel

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People get way too spun up about credit ratings. Unless you plan on taking out a large loan in the next few years, you shouldn't worry too much about it.

For your priorities, I'd say you should first do your 401k up to the employer match (this is a guaranteed 100% rate of return, by far the best return on your money most people will ever see), then start paying down your debts (not including a mortgage or any <3% interest rate debt).

Once they're paid off, I'd max out ($5500/year) an IRA (traditional if you're in the >25% tax bracket, roth if you're in the <15%). I'd recommend Vanguard personally, because fees are probably the number one enemy of any portfolio.

If you can manage that, consider working on maxing out your 401k. The 401k gets tricky if you have terrible funds (high expense ratios), but it's still likely worthwhile.

If you can manage all of that, I'd then consider either investing in taxable accounts or looking into real estate and pulling in rental income. You could skip ahead to this step before maxing out the 401k if your options there are shit.
 
Hekotat

Hekotat

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I checked my credit score yesterday only because I had not looked at it in a long while. I'm up 30 points since this time last year. It really sucks how bad a layoff can fuck you and your credit over. I don't really care what it is as long as it's not bad, I rarely ask for loans and I'm pretty set with only one CC and a car loan.

Unfortunately, I have returned to my previous company as a temp and don't have employee match yet. But I always max it out when I have the option, I just wish I would have started a 401k 10 years earlier.

I feel like I have much less debt than most people my age and I definitely make more money than most of my friends but I do not see how they afford these 30k dollar cars when I can barely afford a 20k dollar variant. But, I also like having a buffer in my checking account in case shit happens.

I've decided to go ahead and list my monthly bills just so you guys can give me some feedback. I think that only two things are really fucking me, one being my CC that I had to dip into when I wasn't making shit the last 6-7 months (Due to high APR) and my loss of dental insurance (Which is a fucking scame btw, I had no idea it worked liked that) which caused me to take on another 1500 in debt for my Invisalign.


Rent $1,000
Cell Phone $100.00
Internet $70.00
Insurance (car and renters) $119.00
Electric $100.00 (give or take 30 bucks depending on weather)
CC $50.00 - $100.00
Auto Loan $350.00
Dental debt $50.00


I've looked into getting a cheaper place, however, only apartments I can find cheaper are in the ghetto or don't have garages and I'd like to lease an actual house but I don't have enough in savings to put down first/last month's rent and a deposit.
 
Deathwing

Deathwing

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Hekotat_sl said:
I've decided to go ahead and list my monthly bills just so you guys can give me some feedback. I think that only two things are really fucking me, one being my CC that I had to dip into when I wasn't making shit the last 6-7 months (Due to high APR) and my loss of dental insurance (Which is a fucking scame btw, I had no idea it worked liked that) which caused me to take on another 1500 in debt for my Invisalign.


Rent $1,000
Cell Phone $100.00
Internet $70.00
Insurance (car and renters) $119.00
Electric $100.00 (give or take 30 bucks depending on weather)
CC $50.00 - $100.00
Auto Loan $350.00
Dental debt $50.00
Click to expand...
Food? Gas? Car repairs? Heating(is that on electric?)? Student loans? Clothing?

I prefer to create a budget reactively than proactively. Look at ALL your purchases over last year or two. Your bank might allow for this and there are certain websites that make categorizing stuff easy, if you feel like trusting them. I use mint.com.

It's not that important to categorize accurately but more that you get a better picture where your money is going over a large amount of time. Purchases that are not monthly but still regular in nature still need to be counted. For example, I included the lawn mower in my budget because even though I won't be buying a lawn mower every year, home maintenance is a regular cost. However, I didn't include the down payment I put on the house.

After you do that, you can drill down in to categories to see where your money is going and what could be cut.
 
Cad

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Hekotat_sl said:
I checked my credit score yesterday only because I had not looked at it in a long while. I'm up 30 points since this time last year. It really sucks how bad a layoff can fuck you and your credit over. I don't really care what it is as long as it's not bad, I rarely ask for loans and I'm pretty set with only one CC and a car loan.

Unfortunately, I have returned to my previous company as a temp and don't have employee match yet. But I always max it out when I have the option, I just wish I would have started a 401k 10 years earlier.

I feel like I have much less debt than most people my age and I definitely make more money than most of my friends but I do not see how they afford these 30k dollar cars when I can barely afford a 20k dollar variant. But, I also like having a buffer in my checking account in case shit happens.

I've decided to go ahead and list my monthly bills just so you guys can give me some feedback. I think that only two things are really fucking me, one being my CC that I had to dip into when I wasn't making shit the last 6-7 months (Due to high APR) and my loss of dental insurance (Which is a fucking scame btw, I had no idea it worked liked that) which caused me to take on another 1500 in debt for my Invisalign.


Rent $1,000
Cell Phone $100.00
Internet $70.00
Insurance (car and renters) $119.00
Electric $100.00 (give or take 30 bucks depending on weather)
CC $50.00 - $100.00
Auto Loan $350.00
Dental debt $50.00


I've looked into getting a cheaper place, however, only apartments I can find cheaper are in the ghetto or don't have garages and I'd like to lease an actual house but I don't have enough in savings to put down first/last month's rent and a deposit.
Click to expand...
It's impossible to know if your budget is reasonable or what you should cut without knowing your bring home each month and how reliable that bring home is.
 
Gravel

Gravel

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Hekotat_sl said:
I feel like I have much less debt than most people my age and I definitely make more money than most of my friends but I do not see how they afford these 30k dollar cars when I can barely afford a 20k dollar variant. But, I also like having a buffer in my checking account in case shit happens.
Click to expand...
They can't. They can "afford the monthly payment" but the reality is that most people are living paycheck to paycheck. A layoff means bankruptcy for most people.

This isn't because they're not making enough money, or inflation is eroding their buying power. It's just that people buy too much shit they don't need. It's not uncommon for someone to have a 5 year car loan and trade it in 2-3 years into it for a brand new loan. People would rather eat out 10 times a week and claim they're broke than put away $100 a month into their retirement accounts. Get a refund back on your taxes this year? It's probably time to buy a new phone and tablet because you need to treat yourself!
 
Eomer

Eomer

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Deathwing_sl said:
Food? Gas? Car repairs? Heating(is that on electric?)? Student loans? Clothing?

I prefer to create a budget reactively than proactively. Look at ALL your purchases over last year or two. Your bank might allow for this and there are certain websites that make categorizing stuff easy, if you feel like trusting them. I use mint.com.
Click to expand...
I use Quicken, and yeah, if you aren't tracking spending like groceries, gas, eating out, liquor etc then the budget isn't worth a shit. A $3 coffee per work day is nearly $800/year, for example. I think the average person who doesn't track their spending would be shocked that their discretionary spending on stuff like eating out (whether cheap fast food or decent dining), drinks, clothes, and entertainment can easily be 15-30% of their take home pay.

Quicken has taught me that I spend too much money on booze and dining. Way too much. But it's all so delicious!
 
Cad

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Eomer_sl said:
I use Quicken, and yeah, if you aren't tracking spending like groceries, gas, eating out, liquor etc then the budget isn't worth a shit. A $3 coffee per work day is nearly $800/year, for example. I think the average person who doesn't track their spending would be shocked that their discretionary spending on stuff like eating out (whether cheap fast food or decent dining), drinks, clothes, and entertainment can easily be 15-30% of their take home pay.

Quicken has taught me that I spend too much money on booze and dining. Way too much. But it's all so delicious!
Click to expand...
What I do is put all my spending on my credit card, and then add up my credit card bills for the last 12 months, divide by 12, and put that in the budget as "all spending". That way I know I'm not leaving anything out and I'll scour my bank accounts for other debits I pay (like property taxes and income taxes, for example) that aren't on CC. People leave out way too much shit when they add up "the budget" because they're not including all of their discretionary spending.

Breaking out the credit card bills and line item adding them up is a great step, and then taking your grocery store receipts and doing the same to see where you're spending money on food is a great thing. I eat out like twice a month and the firm usually pays, fuck that noise. I'm not a picky eater and I don't need to be served, eating out sucks.
 
P

Picasso3

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Mint could definitely do better regarding the categorization of spending and prompting uncategorized spending input and storing the input for assignment later. But i find its a great way to assimilate credit cards (gotta hit those 5% categories on each). Just knowing what I spent on them is not a huge help anymore. I may have 900 in car insurance hit one month, and then it looks retarded, but I actually did well that month, wasteful spending wise.

This guy has 1800 a month in obligations with the only possible equity on a car that he's financed for 5 years (so no equity). Unless he's making 50k+ (doesn't sound likely) he's not going to get even slowly ahead until his car is paid off then he'll still be creeping.

Depending on what's important to you:
1. give up going out, eating out, shopping, consumption
2. pile in with roommate(s)
3. just have $ taken out of your paycheck every month and go into a savings account you don't count as existing and see what happens
any of which can be coupled with
4. buy a $3000 car, also allowing option to cut collision/comp insurance assuming you can save up enough money to get yourself out of a fuckus

and do this until such a time that you have sufficient cash to either buy a house or afford a cash flow generating opportunity (assume 5 years min).

or
5. do none of this shit, and continue on the grind and assume it'll work out in the end (i'm always surprised at the number of complete retarded fuckups that are 60 years old and doing fine, i really think this is a viable option)


3. is fine with me because i'm not very disciplined and i'm not fucked on cashflow. You very well may be and will find yourself a whole lot happier if you make some macro adjustments for a while.

Since this post has probably been made similarly in this thread 10 times, you do need to realize there is no easy or unheard answer to this.
Remember: If you put away a little each month, you'll be surprised at how little you have at the end of the year.
 
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Picasso_sl said:
This guy has 1800 a month in obligations with the only possible equity on a car that he's financed for 5 years (so no equity). Unless he's making 50k+ (doesn't sound likely) he's not going to get even slowly ahead until his car is paid off then he'll still be creeping.
Click to expand...
My retarded brother makes like 40-45k a year and buys new cars and sells them 3-4 years later. It's honestly mind-boggling.
 
P

Picasso3

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My retarded (older) brother makes 40-45k a year, spends 60, and then hits my parents up for 10k to keep the charge party going. Irks the shit out of me because my dad is very frugal, has done plenty for us, and needs to retire. When I think about that singular aspect I really want to slap the shit out of him, but some people just seem absolutely mentally handicapped when it comes to money.
 
Cad

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Picasso_sl said:
My retarded (older) brother makes 40-45k a year, spends 60, and then hits my parents up for 10k to keep the charge party going. Irks the shit out of me because my dad is very frugal, has done plenty for us, and needs to retire. When I think about that singular aspect I really want to slap the shit out of him, but some people just seem absolutely mentally handicapped when it comes to money.
Click to expand...
My brother hit me and my mom up to help us pay for his $25k debt last year. He had just bought a new truck. Told him to fuck off.
 
Gravel

Gravel

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I guess I was reading too literally, because for a second there I thought it was strange that you both had mentally retarded brothers. I'm sitting here like, "What are the odds?"
 
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