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Thread: What should I do with my money? What would YOU do with my money?

  1. #1
    sugary
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    Dizzy What should I do with my money? What would YOU do with my money?

    I'm 23 and I need some financial advice.* To be frank, I have accumulated:

    +$3500 sitting in Fidelity ROTH IRA Account (but I don't know how to invest)
    +$3500 sitting in Ally Savings Account
    +$600 in Bank of America Checking Account
    +$200 in Bank of America Savings Account
    +$100 in cash, in my wallet

    And that's all the money to my name. I'm thinking of clearing out the money in Ally Savings Account and putting it somewhere better...

    How do I choose a good savings account? What kind of things should I look out for?
    Should I purchase some CDs? How, and where? Mint.com reports that SallieMae has high interest rates (Savings Account at 1.40% APY and 60-month CDs at 3.00% APY), but it seems that most of you think SallieMae is the devil.

    Should I get rid of my Bank of America accounts altogether, in exchange for a better bank? I just think it's easy to find their ATMs, and convenient when I want to talk to a representative in person, wherever I happen to be in the country.




    -S.


    *I'm still a newbie when it comes to financial matters, haven't read any good books besides "Automatic Millionaire." Got any suggestions? Thanks so much!

    ** ALSO: Should I buy property? Gold? What is up with the economy, stock market? Or the year 2012? I'm nervous!
    Last edited by sugary; 05-23-2010 at 08:07 PM.

  2. #2
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    Default Re: What should I do with my money? What would YOU do with my money?

    Stop worrying about all of these things. Stressing yourself about all this shit just makes you feel bad. You don't want to feel bad do you? Imagine how crappy you'll feel when you have a shitload of money! You are already ahead of half the people in the whole world! Relax.

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    Default Re: What should I do with my money? What would YOU do with my money?

    For me, $8k in the bank is more like "emergency fund" money to smooth over a few months of slow/no work, car repairs or relocation, than anything I would put into risky investments. Have the American banks stopped going broke every few months?
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: What should I do with my money? What would YOU do with my money?

    I would definately put at least 5,000 away. You never know what cold happen. Where your working could have a horrible summer coming up. You definately need to have money to breath smoothly with.

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    Default Re: What should I do with my money? What would YOU do with my money?

    Since you're young and interest rates are low, I recommend moving your Roth IRA into a no-load stock fund and continue contributing to it as much as you can, up to the max. I think the current max is $5,000. As you get closer to retirement, or interest rates increase significantly, you should move to more conservative investments, like money market funds. Here's a page on T. Rowe Price's web site that recommends your allocation based on age:

    http://individual.troweprice.com/pub...09%09%09%09%09

    One book I recommend reading is, "The Millionaire Next Door".

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    Banned Melonie's Avatar
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    Default Re: What should I do with my money? What would YOU do with my money?

    I'm hoping that this doesn't turn into a controversy ... but here goes.

    I agree with Eagle2 that you should put the money that you have already contributed to your ROTH IRA to work. However, rather than stock funds right now I would recommend ETF's such as GLD or USO or SDS. Remember that stocks can lose money inside or outside and IRA. However, unlike Eagle2 I would recommend that you stop contributing additional money to your ROTH IRA until we all find out what sort of rule changes the government may have in store. It's very possible that with certain rule changes every dollar you contribute to an IRA now may COST you 50 cents worth of gov't retirement benefits later.

    I would shift all of my 'new' savings towards the purchase of additional short term CD's at a financial institution that does not charge a penalty for early withdrawl ( like Ally Bank or a credit union ). The strategy behind this is to create an 'emergency fund' that can cover 6 months worth of ordinary living expenses ... which probably means at least a total of at least $12,000 worth. Interest earnings are of secondary importance versus 'immediate availability of funds' and FDIC / NCUA insurance.

    This will keep your next $8,000 worth of surplus earnings 'busy'

    ~
    Last edited by Melonie; 05-24-2010 at 10:22 AM.

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    Default Re: What should I do with my money? What would YOU do with my money?

    What proposed rule changes are you referring to?

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    Banned Melonie's Avatar
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    Default Re: What should I do with my money? What would YOU do with my money?

    ^^^ 'means' testing for future benefit eligibility ... as already suggested by some in Washington DC.

    (snip)Don't Means Test Social Security
    By John Rother
    Posted January 29, 2010

    John Rother is executive vice president for policy and strategy for AARP, which lobbies for people 50 and older.

    Imposing a means test could destroy the most successful social program in our country's history.

    Social Security does need moderate changes to restore its long-term fiscal health. The sooner we make those changes, the more modest they can be. But Social Security does not need a change that would alter its fundamental character, create incentives against saving for retirement, and undermine its popular support. A means test would do just that.

    Social Security's enduring popularity reflects the insurance nature of the program: Recipients have an earned right to their retirement benefits. Everyone who pays into the program is entitled to benefits. If you work long enough in covered employment, you qualify, no matter where you stand on the income ladder. Almost everyone with a job has a personal stake in keeping the program strong. And let's not forget the matter of fairness. Everyone who contributes through the payroll tax—including the affluent—deserves a fair return on his or her contributions. This expectation is not an exaggerated sense of entitlement. It's reasonable.

    The notion that the benefits are an earned right separates Social Security from means-tested income-support programs. Social Security can help everyone. Means testing is a feature of taxpayer-funded welfare programs designed to help the poor. A means test would inevitably erode the universal and contributory nature of Social Security and some of the popular support that has sustained it for nearly 75 years."(snip)

    (snip)"Imposing new limits for the well-off could backfire in various ways. A means test could adversely affect retirement planning and lower the personal savings rate if people concluded the program would penalize them for having higher retirement incomes or larger nest eggs. It would discourage older persons from continuing to work beyond eligibility age, depriving them—and the economy—of additional money. It would create incentives for people to take lump-sum distributions from pension plans, strategies that could prove shortsighted and harmful."(snip)

    from


    The problem with any gov't sanctioned retirement savings / investment account is that you subject your money to potential penalties the minute you make your 'contribution' ... but the gov't is free to change the rules controlling those penalties or to enact new penalties at any time between now and the point where you reach legal retirement age 30-40 years from now. Obviously a ROTH IRA is less subject to such rule changes than a Conventional / SEP IRA because the ROTH 'contribution' money has already been taxed in the year it is contributed, but there are already some early withdrawl penalties and the gov't could very well enact new future penalties.

    And of probably even greater import is the looming necessity of the gov't somehow reducing Social Security obligations against the US budget in future years. The easiest way to do this is for the gov't to enact a 'means test' on retirees based on their ability to pay for their own retirement costs versus their 'need' for Social Security Checks. This is the only 'real world' method of preserving Social Security Check benefit levels for people who have not saved any money of their own toward retirement ( and avoiding the 'dog food' argument ). Money benefiting from tax deferred / tax exempt gov't sanctioned retirement plans is the obvious first target for such a 'means test'. It's certainly not beyond the realm of possibility for the gov't to decide that money being available from an IRA should justify a reduction in Social Security Checks for the person owning that IRA ... perhaps on a 50 cents per dollar basis, or perhaps above a certain total dollar threshold, or perhaps on some other sort of sliding scale that would follow today's popular principles of maintaining benefit levels for 'poor' Americans while sticking it to 'middle class' and 'rich' Americans.

    Put as bluntly as possible, contributing money to an IRA involves the assumption of risk ... but risk that is both unknown for future years and risk that is not spelled out in any IRA prospectus that I have ever seen. IMHO the degree of potential risk exceeds the increased 'value' of the gov't providing tax deferrals or tax exemptions for IRA's. Thus IMHO the only case where an IRA represents an acceptable level of risk is an employee 401k 'employer match' situation ... where the employer is contributing 'free money' whose value far exceeds potential future downside risks. But in a scenario where every dollar contributed to an IRA comes from the pocket of the contributor, the risks need to be compared to other savings / investment options that do not have gov't strings attached.

    ~
    Last edited by Melonie; 05-24-2010 at 10:06 AM.

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    Default Re: What should I do with my money? What would YOU do with my money?

    Listen to MELONIE who echoes Roubini. Until all the current messes shake out and are resolved, CASH is King. Do NOT invest in stocks for right now.
    Last edited by Eric Stoner; 05-25-2010 at 12:46 PM.

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    Default Re: What should I do with my money? What would YOU do with my money?

    Eagle 2 gives good advice. I would add, pay off all your debts. Then build up six months of income as a reserve fund for emergencies. Other than home loans and working capital for a profitable business, don't borrow money.

    HTH
    Z

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    Default Re: What should I do with my money? What would YOU do with my money?

    All of this talk of cashing out Roth IRA's is freaking me out. I have a good-sized amount in mine... I thought they were rock solid???

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    Banned Melonie's Avatar
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    Default Re: What should I do with my money? What would YOU do with my money?

    ^^^ well, by current rules, Roth IRA's ARE pretty solid. The fact that all of the contributed money has already been subjected to income taxes limits the gov'ts future ability to try and tax it a second time. However, the compounded interest / dividend earnings ARE exempted from taxes ... which gives the gov't 'leverage' in regard to present and future taxes / penalties / loss of other gov't benefits which could occur as a result of you having 'collected gov't subsidies' via your Roth IRA under future gov't rules.

    Some worst case possibilities that have already been 'kicked around' in Washington DC ...

    - when you reach official retirement age, you don't get one dollar of Social Security money until you have withdrawn and spent every dollar in your Roth IRA account first.

    - the gov't decides that Wall St. / personal investment decisions cannot be trusted, and forcibly converts all of the money / investments in your Roth IRA account into US gov't bonds paying zip point nothing interest.


    This 'tangent' regarding the 'real world' risk factors involved when contributing money to gov't sanctioned retirement accounts is, however, drifting off topic. I only brought it up because the original poster was channeling ~50% of her available 'cash' into a Roth IRA account , and apparently doing so without regard ( or recognition ) of the risks involved.

    ~
    Last edited by Melonie; 05-24-2010 at 06:59 PM.

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    Default Re: What should I do with my money? What would YOU do with my money?

    IRAs are good for long term planning etc, but right now she needs to accumulate an emergency fund-some cash, some short term CDs. I'd expect that stripping jobs are comprised of mostly contractors and thus there would be no matching for employee IRA contributions. But if that were not the case IRA's (with matching) are good. But remember that IRAs are only legal accounts; one can put the money in those accounts in any qualified investment vehicle.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: What should I do with my money? What would YOU do with my money?

    I would spend it all on lap dances.

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    Default Re: What should I do with my money? What would YOU do with my money?

    Quote Originally Posted by Eric Stoner View Post
    Listen to MELONIE who echoes Roubin. Until all the current messes shake out and are resolved, CASH is King. Do NOT invest in stocks for right now.
    The messes were much worse year and the stock market had one of its best years ever.

    I agree that for money you will need in the short term, like an emergency fund, it's better to keep it in a bank account or money market fund. For the long term, like 40 years from now, stocks are probably one of the best investments. The world's population is growing and businesses are always coming out with new products and inventions. Around the world, in places like China and Brazil, hundreds of millions of people who had been living in poverty are joining the middle class and becoming part of the global economy. The demand for modern products will continue to rise over the long term.

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    Default Re: What should I do with my money? What would YOU do with my money?

    Quote Originally Posted by Melonie View Post
    ^^^ 'means' testing for future benefit eligibility ... as already suggested by some in Washington DC.

    ~
    Even if some type of means testing does get passed some time in the future, which do you think would be better? Not saving money for retirement because of possible means testing, so that you're living Social Security payment to Social Security payment, barely getting by, or retiring wealthy in a luxury home and a nice car, and losing some of your Social Security payments because of means testing?

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    Default Re: What should I do with my money? What would YOU do with my money?

    ^^^ you are implying that the only route toward providing for retirement financial needs is via a gov't sanctioned IRA account ! There are many alternatives, and many don't involve risks of having the gov't 'change the rules after the game has started'.


    Around the world, in places like China and Brazil, hundreds of millions of people who had been living in poverty are joining the middle class and becoming part of the global economy.
    which is why many smart investors have moved their money out of the USA and into offshore investments !!!


    or retiring wealthy in a luxury home and a nice car, and losing some of your Social Security payments because of means testing?
    Actually I prefer the home, the car, AND the Social Security checks ... which probably means that the home has to be located in a different country !!!

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    Default Re: What should I do with my money? What would YOU do with my money?

    Quote Originally Posted by eagle2 View Post
    The messes were much worse year and the stock market had one of its best years ever.

    I agree that for money you will need in the short term, like an emergency fund, it's better to keep it in a bank account or money market fund. For the long term, like 40 years from now, stocks are probably one of the best investments. The world's population is growing and businesses are always coming out with new products and inventions. Around the world, in places like China and Brazil, hundreds of millions of people who had been living in poverty are joining the middle class and becoming part of the global economy. The demand for modern products will continue to rise over the long term.
    Yes. You are right. For the long term BUT I strongly advise investing in stocks right now. And maybe not for another year or two. And I'd invest in China, Brazil, India and maybe even Japan before buying U.S. Stocks. Japan ? Yes, if like me you look for fundamentally sound investments that are out of favor and overdue for a turnaround. I'm on the sidelines but I would consider a solid Japan investment fund in the near future. Maybe the near future.

    One, I'd wait until AFTER the November elections.
    Two, I'd wait until the Federal tax policies on savings and investment are clarified.
    A LOT of things are being talked about and discussed. Some will directly affect investors. Others will directly the corporations whose stocks and bonds one might be looking to buy. NONE of the policies being batted around by Obama and the Dems bode well for either.

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    Default Re: What should I do with my money? What would YOU do with my money?

    ^^^ indeed ! Many US businesses are about to be saddled with significantly higher health care costs, unemployment insurance costs, energy costs, higher taxes etc. which could indeed affect their bottom line. Same is true re the potential for the gov'ts incessant money printing causing a plummeting US dollar exchange rate once the US dollar = safe haven Greek / Spanish / Portuguese worries in world economies subsides ... a plummeting US dollar exchange rate will mean much higher prices for oil / gasoline / metals / plastics / chemicals / imported components and sub-assemblies that will eat into the bottom line of every US business and industry.

    Add to that both higher individual tax rates on earned income that are already slated to go into effect on January 1st, a high probability of higher long term capital gains tax rates next year etc. From the standpoint of investors, this will serve to make owning US stocks less desirable ... and probably prompt heavy demand for tax exempt municipal bonds ( depending on the US federal gov'ts bailout position re bankrupt states like California ).

    I'll probably be willing to risk a few 'bets' shorting 'blue' stocks just prior to the November election i.e. companies like GE the depend on US gov't green energy / national health care policy to mandate purchase of their products, and US gov't zero interest rate policy creating profits for their 'banking' operations. But that is precisely what it would be ... a 'bet' as opposed to an investment.

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    Default Re: What should I do with my money? What would YOU do with my money?

    Quote Originally Posted by dlabtot View Post
    I would spend it all on lap dances.
    Ummm and what state are you in???

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    Default Re: What should I do with my money? What would YOU do with my money?

    Quote Originally Posted by sugary View Post
    I'm 23 and I need some financial advice.* To be frank, I have accumulated:

    +$3500 sitting in Fidelity ROTH IRA Account (but I don't know how to invest)
    +$3500 sitting in Ally Savings Account
    +$600 in Bank of America Checking Account
    +$200 in Bank of America Savings Account
    +$100 in cash, in my wallet

    And that's all the money to my name. I'm thinking of clearing out the money in Ally Savings Account and putting it somewhere better...

    How do I choose a good savings account? What kind of things should I look out for?
    Should I purchase some CDs? How, and where? Mint.com reports that SallieMae has high interest rates (Savings Account at 1.40% APY and 60-month CDs at 3.00% APY), but it seems that most of you think SallieMae is the devil.

    Should I get rid of my Bank of America accounts altogether, in exchange for a better bank? I just think it's easy to find their ATMs, and convenient when I want to talk to a representative in person, wherever I happen to be in the country.




    -S.


    *I'm still a newbie when it comes to financial matters, haven't read any good books besides "Automatic Millionaire." Got any suggestions? Thanks so much!

    ** ALSO: Should I buy property? Gold? What is up with the economy, stock market? Or the year 2012? I'm nervous!

    Leave it all as is. Try to build the savings account up until has at least 3, or better, 6 months worth of your monthly expenses. Then park that sucker in that savings account or a long term CD and don't touch it unless you have an emergency. Emergencies include loss of job, major car repair, major health issue, that sort of thing. DO NOT LEND ANYONE THAT MONEY.

    Once you have 6 months worth of savings, you can start to think about other things.

    Congrats, you're ahead of most people your age who probably owe money and have no way to pay it back.

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