Poor guy question

So i'm 24 and just got engaged last month. I would like to start investing/saving for the future. Right now I work full time for 16 an hour. Not to great but I live off it well enough. But i'm getting a 4 dollar raise starting the 1st of april.. hopefully my boss isn't playing an April fools joke haha. Anyways sense me and soon to be wife make it fine off what we make now I was thinking of taking 250 of the extra income for the month to save. I'm not a big fan of just putting money in the bank and letting it sit, but 250 a month isn't much so I'm not sure what do to with it. After google searching for a while I found this site and buying silver seems like it might be my best bet. I went and checked out some local silver shops and most around me have silver rounds for 1.50 over spot or the american mint stuff for 3.00 over spot.

Would this be the best thing to do rather then just put it in the bank? Or is there better options to do with only 250 a month?

 

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If your employer offers a 401k, with possible matching of your contributions, max out on that first. I put my 401k in stocks. Save the coins for a hobby that may or may not pay off someday.

 

We do have 401k but no matching of any kind. I've been doing 25 a paycheck so 50 a month for the last 2 years. So should I move it to 300 a month and call it good?

 

I'd contribute as much as I could to the 401k and maybe spend $50/mo on coins/PM's.

 

You should start reading about booms and busts. And how sure things have a habit of not working out for investors.

That being said, if you can put money long-term into stocks, overall they historically have done well.


Silver may tank or it may go up --- who knows. I sure don't. 5 years ago, no one was saying gold would basically double in price, especially since it had essentially tripled it's price in the previous 10 years. And 7 years ago, everyone was still buying into the real estate boom. No one was saying the factors in easy buying would burst. But both happened. Silver has had some really good high points, and many times lows. Go to http://silverprice.org/silver-price-history.html and scroll down to the bottom for the 34 year chart on silver prices. Take a good note of the two peaks and the close to 20 years in between those peaks where silver stayed at about 5$ an oz. I'm not saying silver is going back to 5$ an oz, but if it does, I will try to buy some...... so I can keep it for the next boom and sell the stuff.

So.... do what you want, but I would venture to say to keep these rules:

1) diversify your holdings (don't keep all your eggs in one basket)
2) learn about investments and trust yourself for your investments. More people, IMO, are scammed by or lose money to "professional" investors/money managers than those who lose out when they make their own decisions. In other words, don't trust your money decisions to others, even when they appear smart. It's not their money they are losing.
3) Don't buy coins or silver for "investment" purposes unless you just want to hoard. More likely, you will not make money on this. But it may give you peace of mind. Or buy because you love silver coins.
4) Buy a home and get some tax breaks. Put the money you "save" in tax breaks into a bank or buy savings bonds. Consider it not income, but the government allowing you to keep part of your taxes in your own bank account and earn interest on it. Perhaps in 30 years it will double, which is a low return, but its a better return than losing it to the government as a "tax".
5) Get a good estate lawyer who can help you set up a trust and help you keep your property safer than not using one and protect it from being attached if you have other losses in life. It's money worth the spending.
6) Save money. Use it to buy a car as a cash deal. You will actually "save" upwards of 10,000 or more dollars by not having to pay monthly interest as well as other benefits (you may be able to get a better deal for your old car "trade in cost") if the dealer thinks you will be financing.... if you play it right, you can make them think they will be financing, and then spring the cash on them after the deal is done. Many times dealers will offer a more favorable front door deal or a back door deal if they think they are going to make $$$ by financing. Believe me, if you save 10,000 over 6 years of not paying interest, etc, on a car you pay 10-15,000 for, for example, you will be almost "doubling" your money (long term) in a way.


Just some ideas.

 

Wow...excellent and well written... I agree wholeheartedly w/ Kasia. I make sure to max out my company's 403b, pay credit cards off immediately, have some "normal" investments, a house if possible, as well as some money in the old fashioned bank before I hit the PMs. And only then I do it as diversification, and because I love to stare at big stacks of silver coins....my precious. The money you "save" in interest or taxes (as described above) beats the pants off any returns on most investments. I'm not a survivalist, but it is comforting knowing that I have some alternate form of savings "just in case"

Of course...if silver hits $5 an ounce, you better believe I'm not making a 403b contribution that month and going to take some of my emergency fund out of the bank to buy buy buy.

 

OP, the biggest thing I can say is life will happen to you. Probably very quickly. You are engaged, I assume you will get married and probably have some kids. You know how much formula and diapers cost? Out of pocket delivery costs? Car breaks down?

While I applaud you wishing to work towards your future, something like PM is troublesome because you pay a premium to purchase it, even if the market does not go down by the time you sell you take a pretty good hit.

To me, the road to wealth is staying out of debt. After any credit card balance is paid off, I would put this money aside for an emergency/house down payment fund. I know returns suck now, but you always know you can get access to this money when you need it, and not have to lose some selling something to someone else. I have been there when silver was plunging, and trust me when that is happening you lose more than just the market price, since dealers sometimes pay even lower in such a situation.

Now, for your hobby, if you have $50 a month to spend on a hobby, then I don't care what you buy. If seeing piles of silver make you happy, then feel free.

Once you get more above water financially, own a home, money in 403b, and some money in a savings account for emergencies, then investing in PM is a WONDERFUL idea. I really do think everyone should have 10% of their wealth in it. I am just saying you are not there, and I foresee you really NEEDING this money you wish to build up very shortly. Because of that fact, the shorter term NEED of this money, I would not advise buying PM, stocks, or any other longer term investment with it.

Just my opinion.

 

Probably unpopular advice but...

If you have any debt, pay it off first. Any debt, with the possible exception of a mortgage. Cars, credit cards, whatever, get 'em outta there. You don't build wealth by financing depreciating assets. Live on less than you make. Save up six months worth of expenses. Then max out any possible 401K/Roth contributions.

Then worry about investing...

 

Agreed. Pay off your debt first.

DON'T worry about buying a house if you haven't done so already. While a good investment on its face, it is a huge commitment and there is nothing wrong with saving some money for a few years and then pulling the trigger on that.

Those two things out of the way, if I were you and just wanted to know how to invest $300 or so a month, I'd put $200 a month in your 401k and let $100 a month pile up in your savings. As Medora said, life happens and you'll be glad if you have a nice nest egg at some point. To be honest, I might reverse it and do a $100 401k and $200 savings split until you had rainy day money built up over a couple years.

401k does have nice benefits, but given there is no match and the fact that getting your money out of your 401k if you need it is difficult/expensive, you may as well not do it until you are more stable financially (nest egg). Once you have enough in your bank that you're telling yourself "I have plenty of money in the bank and I'm wasting it putting more in", that's when you bump up the 401k or buy some PM's.

 

step 1 - Pay off all consumer debt
step 2 - Build up a liquid savings account with 6 months of expenses. This is not money to play with, it's an emergency fund.
step 3 - put minimum 15% of your pre-tax income into a retirement savings vehicle (401k/IRA) invested broadly in the market. You are young, let compounding work for you.

 

I agree with what most people here are saying: Pay off debt first, build up an emergency fund, start saving some for near term expenses, and a little for retirement.

But, that doesn't get you any silver.

Since you're just starting out and do have more important things to invest in, start small. Buy a nice little mercury dime or silver quarter every month. You should be able to pick up average circulated to uncirculated mercury dimes in the the $2-4 price range, and silver quarters in similiar condition in the $5-8 range. If you have a good month and want to buy something bigger, go for a silver half, silver dollar, or perhaps even a 1 oz silver round or eagle.

But I'd say at this point 90-95% of your money should be going towards those things mentioned in my first sentence.

 

steps/http://www.daveramsey.com/new/baby-steps/
This is a great linkfor building wealth. It basically says
1. pay off debt,
2. 3-6 months ofexpenses in savings (very important!!!),
3. 15% of income inIRA/401K,
4. Pay off theHouse,
5. THEN invest!!!
great advise, ask any financial adviser orotherwise business savvy person

 

Yeah just don't ask anyone who bought a home in 2004-2007.

 

Not bad but I disagree with the last two. With mortgage rates so cheap, and even cheaper considering the tax deductibility, IDK if you should pay off a mortgage in lieu of investing. I know I can pay off my mortgage but don't. Investing only in IRA/401k is risky since you only can invest in a small percentage of possible assets.

 

Nowdays, I disagree with the order of steps 4 & 5 above.

With the current interest rates, and the fact that the interest on a home loan is tax deductible, it doesn't make too much sense to skip investing to pay off your mortgage faster. I say if you have the lowest interest rate possible on a 15 year mortgage, just pay the minimum payment and invest any extra money you have left over once steps 1-3 have been met.

Over the past 100 years or so, investments in small business stocks have averaged 11%. 15 year mortgage rates are currently around 2.75%. Why forego those kind of returns to pay off a tax deductible loan at such a low interest rate? As long as you are in a good financial position to do so, now is a great time to leverage the bank's money in your favor. :thumb:

But, all that being said, I'm a big fan of being debt free and I can't wait to pay off my own mortgage. I am following my own advice above and paying it off on schedule and no faster, but I will not be taking out a second mortgage or refinancing to get more money so I can further leverage the bank's money for investment purposes. If you get too greedy, you might end up upside down in your mortgage and then you don't have as many options if you run into an unexpected hardship.

 

This is exactly what I would recommend. Get creditcard/car loan debt free, build and emergency fund and contribute to your 401K at least 10% per pay period ..15-18% if you have that much extra income.

The thing about 401k's is that time is your friend. The money you can front load while you are young will have 40-50 years to grow. Until you can get educated on mutual fund investments, look at Index funds as a good place to start out. Then as you learn about small, mid, large cap and foreign funds you can diversify as your knowledge grows. Also look into starting a Roth IRA and try to max that out each year. Unlike your 401k where your interest/withdrawals are taxable, ROTH IRA withdrawals are tax free.

 

Oh yeah and another thing no one has brought up. Not to be cynical and not to cast aspersions on your beloved, but depending on your circumstances (where you're going to live and if she works, etc.) it is very possible that your expenses are going to be a lot lot more than when you are just supporting yourself. I'm sure some folks can back me up on that.

 

Unfortunately yes. I went from a single dude watching his checking account balance go up and up to a family of 3 with another on the way. That checking account is no longer going up each month...........

 

So, if your mortgage was paid off, you owned your home free and clear, you'd borrow against it to invest?

 

I'm not answering for Medoraman, but personally, it would depend on where I was in life.

I'll have my house paid off when I'm about 50. If that was a bit sooner, then maybe I would. But I might retire at around 50 and I don't want a mortgage then, even though my investment income should be able to support it.

But if I was 40 and didn't have a mortgage, and I had a good nest egg and a good job, then I might borrow up to 50% of the value of my house for the low interest rate and the tax savings. Especially if my nest egg was large enough to pay off the mortgage if the economy tanked even further. That's sort of where I'm at right now. I could cash in investments to pay off my mortgage if I wanted to, but I don't want to. If I didn't have enough money in my nest egg to pay off the mortgage, then I'd be a little more nervous about taking that risk.