patrick.net

39 views and no comments. Maybe you guys don't talk about this kind of stuff here. I usually hang out in real estate. Have been thinking and thinking about this and thought I would try posting here.

Most people (including me) are probably not familiar with TSPs but they sound like the govt. equivalent of a 401(k), very limited selection of funds. At least they have a S&P 500 index fund which is what I'd pick out of their choices. I was very happy to be able to roll my 401(k) over into an IRA when I got laid off from my former employer, it didn't even offer any index funds.

Other than the TSP angle your situation is very much like mine (I left grad school flat broke at age 35) but I'm a bit older. 14 years out of grad school and I'm about 3/4 in Berkshire Hathaway, most of the remainder in a few selected stocks picked up at relatively low points in their respective recent natural disaster / global economic crisis, and about 18 months' living expenses in cash as a combination of disaster fund and liquidity for any other crazily mispriced stocks of otherwise fundamentally sound companies. I would not tie up the cash in something less liquid and more risky in order to squeeze out some tiny yield.

I recommend following the Yahoo message board for serious Berkshire investors (http://finance.groups.yahoo.com/group/chucks_angels/messages - this is NOT the main BRK stock board, which is infested by Buffett-hating morons). It's been very educational for me over the years. Lots of discussion about Buffett's investing principles, valuations, moats, other good stuff applicable to much more than Berkshire itself. Reading the letter to the shareholders in the Berkshire annual reports for the last few decades is also a great educational tool - there's more concise common sense about investing there than almost anything else you can imagine.

I just happen to look at this Investing area for the first time today because of your post. While I was hoping for more comments here, I guess I can add my own instead.

Personnally I would direct funds in the order Roth IRA, Student Loan, then TSP.

If you are single and you think your salary will increase at a nice clip, then you may soon hit the income limit and then you won't be able to add anymore. If you are filling jointly, then perhaps there is enough head room.

I, like many others here I think, would suggest removing debt as quick as you can. Certainly you have a very low rate which is nice. If you think your investment selections can beat that, then go a head an invest. While I haven't been doing so bad with my individual stock selections, I can't say as much for my limited 401k offerings.

I maxed out my 401k contributions when I first starting working, but I was single with no debt. These days I put in just enough to get the full employer match. Did I mention I don't like my 401k investment options? I am just trying to get the 'free' money without loosing too much of it in the process.

You don't need any help looks like. I would buy stock mutual funds with any extra money. Vanguard and T.Rowe Price have ones with low fees.
Look at "tax managed" Vanguard funds, they will not send you 1099div each year to add to your tax burden.
The only thing you need to do is avoid blowing too much money on a chick who latches onto you.
Like that Ry Cooder song, "The very thing that makes you rich, made me poor".
Or Rod Stewart's "but whatever you do don't lose your head.. for a woman that'll spend your bread."
If your debt is as a rate lower than 2%, it doesn't matter what you do with it, personally I'd invest more while I could at your age.
If you need to remove that debt entirely for some reason like seeking a large loan, sell something and pay it off when the time comes, if ever.

You need to ask yourself what is your life and financial goals first. If you don't have a goal, then you can't devise a plan.

With that in mind, I know exactly how much to set aside each month (and invest in myself to make more money) to reach my financial goals. The excess is all for fun and investing in the kids. The fastest way to burn out is just focus on saving and not enjoy the years along the way.

theLandlord says

You need to ask yourself what is your life ... goals first. If you don't have a goal, then you can't devise a plan.

Sounds like one goal is to boast about our personal finances.

My financial situation is eerily similar to yours, grad school and all. Let me offer my suggestions from what I've learned.

Save up to the matching contribution in the TSP. Then fund the Roth as much as you can. If you max out the Roth, go back to the TSP and fund it as much as you can up to the max.

As far as what you should invest in, with the Roth choose income generating investments (bonds, REIT's, etc.). This way you will have tax free income at retirement and it won't affect your SS. With the TSP I prefer my own mix of C, S, and I funds, but if the lifecycle funds are your preference it's just as good.

Looks like you're doing a great job of saving. Don't over do it though. I would echo theLandlord's sentiment.

bg says

TSP ~ 150K in Lifecycle fund for 2030

You suggested you were 41. Do you plan to retire at 60? Or were you looking for something slightly more conservative than a Lifecycle fund for 2035? What are your other investment choices besides the Lifecycle fund?

You haven't stated what your goals are. It is hard to give you much advice without knowing what your goals are and what you'd like to do. Do you want aggressive growth? Do you want medium growth with lower downside? Do you want cash preservation? Do you need to save money for anything besides retirement? People are happy to give advice if you give the right information.

bg says

I haven't been putting a lot into my Roth lately. So, I can do that. I think of 30K or so of the cash as my cash reserve, but could do something besides letting it sit.

One thing I'd mention is that you don't have to decide on IRA contributions for 2011 until April 15. Just make sure you tell your broker that the money you contribute is for 2011 if you contribute it in 2012.

Buy physical Gold and Silver, generic stuff, no fancy coins. Buy from a local coin shop dealer that you feel comfortable with, and who charges a small mark up.

I doubt you will listen, but that is your best and safest savings.

Open a business, best money you can ever make.

Your job for someone won't last forever. You are in your prime now, once you get older it's usually downhill from there. You'll need to save up about 6 million if you plan to retire with your current lifestyle, that kind of money isn't made with a day job.

When you say no credit card I'm assuming you mean no credit card debt...right? If you really don't have a credit card I'd be a bit surprised.

I'd say maybe some gold/silver but don't go crazy.

Maybe see if you can buy a vending machine in a busy area..as long as there is decent security it should be ok (maybe a college/university/condo development etc)

Are you planning for marriage/kids? That's a whole other concept right there.

It's always a good idea to have a plan b, c or even d in case something happens. Are there any rental properties near you that could be cheap?

Roth, savings, TSP.

Roth #1 - its a hedge against taxes in retirement. Max it out
Savings - Since I'll assume you want to buy a home some day get more aggressive with your savings. It sounds like you have a good amount int he TPS already - don't neglect it, but if a house is your aim, well even at $118k there's not quite enough money for everything and "save for house vs. save for retirement" is one of those difficult personal questions that must at some point be addressed. (I can relate - I'm in a similar boat)

Student loans at 1.65% - string them out as much as possible. No hurry on that one.

LarryPatrickMaloney says

Buy physical Gold and Silver, generic stuff, no fancy coins. Buy from a local coin shop dealer that you feel comfortable with, and who charges a small mark up.

I doubt you will listen, but that is your best and safest savings.

+1

Best advice on this thread.

At minimum, go at least 10-20% of portfolio in physical.

I think theoakman is heavily invested in metals as well (i think 100%) and has some good advice as well.

Josh,

I think I understand what your point is, in that case what I am going to say may be reading too much into it, but..

Larry said the metals would be best and safest savings. Savings, like a stash or a hoard, for future spending/trading. Not an an investment.

And investment, like a business, ought to have income. Even better, income that can grow. A hoard of gold or a hoard of other metals won't do that. Mining stocks, maybe. But not the actual metals.

So like Larry said, the metals can be a different form of saving/stashing/hoarding money. Nothing wrong with that. But if you're counting on it as an "investment" it's not, it's a speculation. Like Bubble Housing.

Doctor Professor,

Words are important, and that's why it is important to use and understand them accurately, because not doing so can lead to misunderstanding.

I don't think he really meant "investment".

I think he meant, stashing/hoarding money.

In that sense, the premiums he pays at the coin shop are akin to the exchange "fees" he'd pay if he were swapping his dollar hoard for a Euro or yuan or yen or CAD hoard or a hoard of some other currency.

FortWayne says

Open a business, best money you can ever make.

Your job for someone won't last forever. You are in your prime now, once you get older it's usually downhill from there. You'll need to save up about 6 million if you plan to retire with your current lifestyle, that kind of money isn't made with a day job.

Not everyone has the drive and energy to start a business, nor the appetite for risk.

Where do you get the $6M figure? Are you being facetious? That's a burn rate of $300k/year even if he retires at 60 and dies at 80. That's quite a lifestyle!

New renter says

Not everyone has the drive and energy

That's the problem, isn't it? We need someone else, like an employer for example, to solve our problems for us.

Pay off that student loan. It is twice what the bank would pay you ... F=ck em.
Join one of those organizations that make small loans to people. Become a lender. make your money work for itself. Can't do that with teenagers ! Buy a mobile home park (low maintenance), or industrial condos and take advantage of that triple net stuff.

Sit back and stew in your jacuzzi and enjoy yourself !!! The last I heard, Gold cost $1100 per ounce to produce. Give sumpin to a charity.

I charge 10 %

B.A.C.A.H. says

That's the problem, isn't it? We need someone else, like an employer for example, to solve our problems for us.

But imagine a world where everyone was a company of one. It wouldn't work. Any society more complex than a hunter/gatherer needs multiple people to work on the same jobs and the most efficient way to do that is with one boss and workers.

And yes just as a rancher must take care of his/her herd an employer must take care of his/her employees, at least until they are slaughtered for profit - er, I mean let go to look good to investors.

Nomograph says

LarryPatrickMaloney says

Buy from a local coin shop dealer

Shopping at the local coin shop as your investment plan is pretty much the worst advice you could ever receive.

Agree, this is terrible advice. I guess this is what you do after you fake-adverse possess your own house.

EastCoastBubbleBoy says

Student loans at 1.65% - string them out as much as possible. No hurry on that one.

This is very good advice. 1.65% probably doesn't even beat inflation in most years.

oddhack says

Most people (including me) are probably not familiar with TSPs but they sound like the govt. equivalent of a 401(k), very limited selection of funds.

Yes! Govt 401K

KevinD says

If you are single and you think your salary will increase at a nice clip, then you may soon hit the income limit and then you won't be able to add anymore.

It does go up a bit in the next 3 years. This is very helpful. Thank you. Also your thoughts about the order. My hope is to fully fund both TSP and Roth, but I will start with the Roth.

clambo says

Look at "tax managed" Vanguard funds, they will not send you 1099div each year to add to your tax burden.

I will do that. Thank you for the specific suggestion.
clambo says

The only thing you need to do is avoid blowing too much money on a chick who latches onto you.

I love this comment. Turns out I am a chick!

theLandlord says

You need to ask yourself what is your life and financial goals first. If you don't have a goal, then you can't devise a plan.

10 years ago, I would have said my goal was to save enough money to own my own time. Now, with interest rates so low, that seems unlikely. I used to think that if I saved a million dollars, I could retire and live on the interest. I am happy with living small if I can live with my freedom. THat is looking like a no-go. Recently my goal has been to have 8 months in emergency cash. Have that. Now what is a good question. 5 years ago I puzzled over buying a home. That seems unwise just yet in Bay Area.

E-man says

Debt is a tool. Don't fear it if it can be used wisely.

It isn't that I am exactly afraid of it, but I don't see what it would get me right now.
EastCoastBubbleBoy says

if a house is your aim, well even at $118k there's not quite enough money for everything and "save for house vs. save for retirement" is one of those difficult personal questions that must at some point be addressed. (I can relate - I'm in a similar boat)

It was more of a question before I started reading this site. I think Bay Area has more to drop. I could justify saving a good bit in cash while workiing on reserves. Now, I don't see a home puchase in next 3 years.New renter says

Not everyone has the drive and energy to start a business, nor the appetite for risk.

I have a couple of business possibilities, but not throwing myself into that just yet. If I set my mind on something, I will do it. Not always a good trait, but might serve me well in small business.

TMAC54 says

Join one of those organizations that make small loans to people. Become a lender. make your money work for itself.

I read some about that. Interesting if it is safe.

About the gold comments, I had read somewhere that investing in metals was a bit of a safety strategy against some terrible ecconomic collapse. It seems they might be over priced at the moment. What do you guys think about that?

Thanks everyone for comments. I was out of town right after I posted this for a funeral. I really appreciate the suggestions and input.

clark howard says the first 5K of any investment money should be dumped in a roth ira.

then rid yourself of those student loans. TMAC54 is absolutely right.

lots of people like gold, but i'm dubious. sure, it's had a nice run (and has created a modern-era gold rush), but it'd have to hit the 2K/ounce mark to make real history. and if it does, then i have a lot to answer for. IMO, i think gold's value will stagnate for some time, and then slowly decrease.

New renter says

FortWayne says

Open a business, best money you can ever make.

Your job for someone won't last forever. You are in your prime now, once you get older it's usually downhill from there. You'll need to save up about 6 million if you plan to retire with your current lifestyle, that kind of money isn't made with a day job.

Not everyone has the drive and energy to start a business, nor the appetite for risk.

Where do you get the $6M figure? Are you being facetious? That's a burn rate of $300k/year even if he retires at 60 and dies at 80. That's quite a lifestyle!

Not facetious, there is a financial retirement calculator I was looking at that our portfolio manager provided us with. Consider that you'll retire in 30 years from now to 40. Certain amount of inflation that will be there. That's the kind of cash you'll need saved up to keep the current lifestyle.

If you were 70 today and expected to live another 15 to 20 years you'd need at least 2 million to get by. And that's just today. 30 to 40 years from now with inflation that's going to be bigger obviously. So don't mean to scare you there, who knows what the future will bring.