Financial Future

[preach4bass]

Tyrus,

That makes sense.  But, I have one more question.  Flechero mentioned that the first step to Ramsey's plan is to set up a small emergency fund.  GeneinTX added that he has increased this fund due to the economy.  So, if you have an adaquate emergency fund built up (in a MM or similar fund), would you still invest in the CD over paying off the debt?

[tyrius.]

So, if you have an adaquate emergency fund built up (in a MM or similar fund), would you still invest in the CD over paying off the debt?

If I can earn the same return in a 100% safe investment then I am not going to pay that debt off early.  If I can't get something equal, then I will work to pay that debt off early.  I've got like 7 years to go on my student debt and I wish I could change it to 25 years.  The interest rate is so low that it doesn't matter.

This entire discussion really only applies to a few types of loans, primarily some student loans and mortgages.  Car loans (even the 0% ones) are almost always too high.  To get the 0% interest you're paying a higher price up front.  You have to see what the discount is for not taking the 0% and then figure out if it is worth taking the 0% or paying the bank rate of interest or holding off and paying cash.

This is all my opinion though and other's opinions vary.  I'm just trying to provide examples and explain why this is my opinion.

[RobbyZ5001]

So what are some smart investments for me if my interest is 4-6%.

[Muddy]

DEBT FREE: My current 2 year plan, I am done with credit, these cards charge interest that have put some of my friends in jail for charging the same interest on the streets, and that's the truth

[bilgerat]

I invested my 401k from a job I left years ago. The financial planner (who happened to be a family friend) spent hours explaining eveything to me. One thing I remember vividly about that meeting was him telling me that he considered a return of about 6% to 8% annually a decent return, and if I didn't agree that perhaps I should invest my money elsewhere.

His point was that there are a lot of people who will tell you they can get you much higher returns - 10, 12, 15, 20% if you invest with them. Beware. It's true that a sound investment can achieve those levels at times, but it's the exception rather than the rule.

I don't claim to be a financial authority on any level, but just look at the mess we're in now. How much of it was caused by the so called experts ?

Choose your investments wisely, choose your financial advisor carefully, and have reasonable financial goals. Live within your income. A big house and a brand new car are useless if you have to work like a slave to maintain them. Sam Walton, who started Wal Mart, drove an old Ford pickup even after he made his millons. He wasn't a slave to money, money was a slave to him.

You are smart to be thinking about this at your age, I only wish that I had started earlier. Good luck to you.

[tyrius.]

So what are some smart investments for me if my interest is 4-6%.

The first thing to do (and I think flechero would agree with me) is to build up an emergency fund in a risk free manner.  This means put it in a simple savings account or a cd or a money market (I think some of these are FDIC insured now).

[bmadd]

If I am not mistaken, wouldn't a problem arise with a cd if you needed the money before maturity? I'm not sure that would be the best choice for an emergency fund.

[cart7t]

Cart do you have any idea where I could possibly find something like that or what keywords I would use in a search on google?

Flechero thanks for the advice on Dave Ramsey. I never know who to trust so many of those guys have bad seminars and charge a bundle. Good to know this one is legit.

It was posted many years ago in the St Louis Post Dispatch newspaper.

The example was pretty stunning showing the year by year growth of the persons original $16k investment ($2,000 a year from age 18-26).

It didn't say where to invest only how the initial outlay would grow to $1,000,000 by age 65 merely earning a typical 10% yearly interest.

It also showed how the guy that started at 30 investing $2000 a year every year till 65 could never catch up. He was Close though. 10% may be a stretch but remember, the initial investment was only $16,000 over 8 years and then he stopped. Pick a good investment consultant, keep investing that $2k a year (tax deductable if it's a Roth IRA) and you could easily hit the same mark even with a lower return.

You could do the same thing with some simple math.  Take $2000, add a reasonable interest rate say 6%, That's $2120 at the end of year one.  Year 2, add $2k invest = $4120,  now figure year 2 interest total = $4366. Year 3 add $2k invest = $6366, interest add = $6747 and so on and so on.

[RobbyZ5001]

Thanks for elaborating cart. Is there anyway I can do it myself or will I need an advisor? I would like it if no hands would be in my pocket, but I am new to this. Also I have been looking into IRA's or Cd's and the highest rates I have seen are like 4.1-4.3. Where do you find a 6%+?

[tyrius.]

If I am not mistaken, wouldn't a problem arise with a cd if you needed the money before maturity? I'm not sure that would be the best choice for an emergency fund.

From what I know of cd's you can get your money any time you want.  You just forfeit the interest.

[bmadd]

tyrius you're probably right. I was almost positive that there was some sort of penalty for taking it out before maturity just wasn't for sure what exactly it was.

[RobbyZ5001]

I think it is that you lose 6 months intrest.

[Tin]

Forget all this hoop-la Robby. It has been a couple days, go donate some bodily fluid. O ya, found a kidney on the black market from some kid in Penn. That yours?

[RobbyZ5001]

Forget all this hoop-la Robby. It has been a couple days, go donate some bodily fluid. O ya, found a kidney on the black market from some kid in Penn. That yours?

It is very well possible. Do some tests on the wastes that the specific kidney cleaned out of the blood. PM me with them, and I will let you know.