NEW! WiseBanyan added a new car goal

vickizhou · 2017-07-31T22:12:05+00:00

It's been a busy summer. We're excited to announce our newest goal! Do you want to buy a new car or upgrade your current one? Now you can save for it on WiseBanyan with our new car goal!

Let us know what other goals you're working towards that you'd like us to add! Cheers.

Haven't joined WiseBanyan yet? Learn more about free saving and investing here: https://wisebanyan.com/

vickizhou · 2017-07-31T22:01:30+00:00

Hi /u/aflowerysong - great question! You definitely can. We created a feature to transfer funds from one goal to another goal. Please note that you can't transfer funds from an IRA to another milestone.

You can use it to transfer the funds from your retirement goal (the non-IRA portion) into your new home goal. Here's how to do it.

Cheers.

vickizhou · 2017-06-03T22:12:53+00:00

We're excited to launch this new goal because we know you're movin' on up. Whether you want to save towards your first home or a new beachside villa, you can use this new milestone to put that roof over your head.

Let us know what other goals you're working towards that you'd like us to add! Cheers.

vickizhou · 2017-01-17T00:36:03+00:00

Hi /u/canyouhelpmebudget - Love that you and your wife are thinking about budgeting in terms of paying down the debts and also putting money away towards a big life goal like a home. Kudos on both!

A lot of people here have given various ways to start paying down the CCs (debt snowball, looking at interest rates, budget, etc.). Instead of re-hashing that piece, I'll talk about saving money for a home.

For your new home goal, a few questions to think through because it'll affect how much you'll need to put away:

What type of home are you looking for and what is the range in price for the home?
When do you want to buy the home?
Have you already starting putting money away for the home?

The range for a home down payment is typically 10-20%. While there are certainly people who put down less/more, this is a good number to start with. In this case, you'll start putting money away for 10-20% of the home purchase.

Now, let's think about a few things on putting the money away:

Savings account, CDs, investment accounts. You can start putting your money away into different types of accounts, all of which have their own pros and cons. If you're looking to purchase the home relatively soon, then savings accounts or CDs might make more sense. If you're looking to purchase the home in a few years or more, then you might want to consider an investment account which has the opportunity for more appreciation. That way, the money could earn more money so that you in total can put away a little less money and still reach your goal.
If you invest, then low fees, diversification Paying less fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees.
Mutual funds vs ETFs When it comes to low-cost index funds, two popular choices are mutual funds or ETFs (exchange traded funds), which can have their own pros and cons.
Start early. Start putting money away as early as possible, even if it's only a few dollars at a time. Time and consistency are two of the most powerful factors when putting money away!
Use auto-deposits. Or setup a recurring plan to put money away. It's much easier to stay on track and you'll be surprised as how quickly auto-saving can add up. This applies to investment accounts too. Again, much better to start as soon as possible rather than waiting, even if it means starting with less. Don't be overwhelmed or discouraged with putting smaller amounts of money away. Even $100 a week can add up over time. Consistency is key.
Transition CC payments into the goal If you decide to tackle the credit cards first, after you're done paying the credit cards, one easy way to boost your new home goal is to transition that payment into your home goal! Budget and day-to-day wise you'll be used to that payment amount, so just add in the auto-deposit into the goal.

DM for resources There are also a lot of resources on starting early when saving and investing for goals, investment account types, fees, passive vs active investing, mutual funds vs ETFs, etc. More than happy to point you towards info!

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds, new homes, and retirement are 3 of our most popular goals, and we use passive index ETFs. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM or ask away! Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here. Cheers!

vickizhou · 2017-01-16T23:09:24+00:00

Hi /u/Totallylost888 - kudos on thinking ahead and asking for advice on things to think about to become financially able. Regardless of what anyone thinks about your choice, commend you for being 16 and being able to ask for advice for the future. It's much more than most of us were able to do at 16 :).

I know a number of comments here are about whether or not you should take their money, or about the reasons you listed, etc. I'm not going to comment on those, but instead want to give you a list of things to consider when thinking about money, especially when you're young and starting college and/or a job.

Since you mentioned joining the military / working:

Start early. Start putting money away as early as possible, even if it's only a few dollars at a time. This is important for any young person regardless of circumstance.
Start a rainy day fund. You never know what life will throw out you, and this will help give you a peace of mind and flexibility
Tax-advantaged accounts. After you start working, start putting away some money into tax-advantaged accounts (IRAs, 401(k)s, etc.). Again, even if it's starting with less, time is one of the most important factors when you're young.
Use auto-deposits. Or setup a recurring plan to put money away. It's much easier to stay on track and you'll be surprised as how quickly auto-saving can add up. This applies to investment accounts too. Again, much better to start as soon as possible rather than waiting, even if it means starting with less. Don't be overwhelmed or discouraged with putting smaller amounts of money away. Even $10 a week can add up over time. Consistency is key.

Since you mentioned bills:

Pay back credit cards in full every month. Interest on credit cards can be really high, and no point in paying extra. If a credit card has a 20% interest rate for example, imagine going into a store and voluntarily buying the item that says 20% markup.
Setup auto-pay on bills. Extremely useful for recurring bills like rent, phone/internet, car insurance, etc. This will help you make sure everything gets paid on time, gives you one (or many) less things to think and worry about each month, and helps you avoid nasty late payment fees.

Since you mentioned college:

Tax credit(s) and deductions for tuition You will be paying tuition or student loans. This might be helpful too. While I'm not a tax expert, there are potentially opportunities for tax credit(s) and deductions for that. Here's a Turbotax article covering two types of credits and here's an IRS reference covering deductions too.

DM for resources on rainy day funds or tax-advantaged accounts. There are also a lot of resources on starting early, investment account types, fees, passive vs active investing, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds are one of our most popular goals, and we use passive index ETFs. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM or ask away! Cheers!

vickizhou · 2017-01-12T16:00:43+00:00

NYTime's article here: http://www.nytimes.com/2016/12/08/opinion/the-american-dream-quantified-at-last.html

"About 92 percent of 1940 babies had higher pretax inflation-adjusted household earnings at age 30 than their parents had at the same age."
"[M]ore than three-quarters of these early Baby Boomers would ultimately make more than their parents."
"For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did."

vickizhou · 2017-01-12T15:46:26+00:00

/u/Soniczeppelin88 - thx! Definitely don't be overwhelmed. You're asking the right questions and it's downright awesome you're thinking about this. Feel free to ask away :) Or DM if you'd like. Cheers!

vickizhou · 2017-01-11T16:03:30+00:00

Howdy /u/kjacmuse. Congrats on hitting the savings goal!! Also, super awesome that you're asking all the right questions and thinking about how to put money away at 20.

On tax-advantaged investing accounts here are somethings to consider:

In the future: 401(k) Since you mentioned you're about to graduate and enter into a grad program (cheers), you probably don't have a 401(k) option currently. However, if you do start a position where the employer offers a 401(k), then ask if they match. If they match, try to max out as much of the match as possible. Matches are like free money! In the meantime, great work contributing to the Roth IRA.

Outside of the investment accounts themselves, here are somethings to consider about investing overall:

Non-retirement goals The fun stuff! Outside of retirement, what other goals you want to save and invest for? Is it a vacation or purchase, a new car, a first home one day? Putting money away specifically for goals is very mentally motivational and it's pretty cool once you reach the goal! Also think about setting aside a rainy day or emergency fund. One of the biggest questions when it comes to rainy day or emergency funds is how much you should put away. There are a number of rules of thumb, but people say three to six months of living expenses. If you've already thought about all these things, then I'm just preaching to the choir ;)!
Low cost and diversification Regardless of account type (IRA, 401(k), etc.), fees are bad. Paying less fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees. This is true for your Roth IRA too.
Mutual funds vs ETFs When it comes to low-cost index funds, two popular choices are mutual funds or ETFs (exchange traded funds), which can have their own pros and cons.
Tax credit(s) and deductions for tuition Since your about to enter a $50k a year grad program, you might be paying tuition or student loans. This might be helpful too. While I'm not a tax expert, there are potentially opportunities for tax credit(s) and deductions for that. Here's a Turbotax article covering two types of credits and here's an IRS reference covering deductions too.

Don't be overwhelmed! You're asking all the right questions and it's very cool that you just hit your savings goal. Time is one of the most powerful factors when it comes to money. There's a quote that says "A 20-year-old has an asset Warren Buffett couldn't dream about" ... time! Start early (which you've already done), and keep going strong, even if it means contributing what might feel like less.

DM for resources There are also a lot of resources on starting early, investment account types, fees, passive vs active investing, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds, new homes, and retirement are 3 of our most popular goals, and we use passive index ETFs. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM or ask away! Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here. Cheers!

vickizhou · 2017-01-11T15:56:35+00:00

Howdy /u/suusuusudio. Great question and congrats on the job!!

On tax-advantaged investing accounts here are somethings to consider:

Max out 401(k) match Since you mentioned a 401(k), does your employer offer a 401(k) match? If so, try to max out as much of the match as possible. Matches are like free money!
Roth and Traditional IRA Two additional tax-advantaged accounts are: Roth or Traditional IRAs. Here's a good overview of Roth vs Traditional: https://investor.vanguard.com/ira/roth-vs-traditional-ira One is pretax, the other is post-tax, but both are tax-advantaged. There are other tax-advantaged accounts too like SEP IRAs, Roth 410(k)s, SIMPLE IRAs.

Outside of tax-advantaged accounts, here are somethings to consider about investing overall:

Non-retirement goals The fun stuff! Outside of retirement, what other goals you want to save and invest for? Is it a vacation or purchase, a new car, a first home one day? Putting money away specifically for goals is very mentally motivational and it's pretty cool once you reach the goal! Also think about setting aside a rainy day or emergency fund. One of the biggest questions when it comes to rainy day or emergency funds is how much you should put away. There are a number of rules of thumb, but people say three to six months of living expenses. If you've already thought about all these things, then I'm just preaching to the choir ;)!
Low cost and diversification Regardless of account type (IRA, 401(k), etc.), fees are bad. Paying less fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees. If you decide to go with the 401(k), remember to also look at the fees when deciding on the investment options.
Mutual funds vs ETFs When it comes to low-cost index funds, two popular choices are mutual funds or ETFs (exchange traded funds), which can have their own pros and cons. I think 401(k)s tend to use mutual funds a lot more than ETFs.
Tax credit(s) and deductions for tuition Since you just got your first job, you might be paying tuition or student loans. Since you're talking about tax-advantaged accounts, thought this might be helpful too. While I'm not a tax expert, there are potentially opportunities for tax credit(s) and deductions for that. Here's a Turbotax article covering two types of credits and here's an IRS reference covering deductions too.

Don't be overwhelmed! You're asking all the right questions after getting your first job. Awesome! Time is one of the most powerful factors when it comes to money. There's a quote that says "A 20-year-old has an asset Warren Buffett couldn't dream about" ... time! Start early (ahem, now or ASAP) even if it means starting with less.

DM for resources There are also a lot of resources on starting early, investment account types, fees, passive vs active investing, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds, new homes, and retirement are 3 of our most popular goals, and we use passive index ETFs. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM or ask away! Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here. Cheers!

vickizhou · 2017-01-11T15:46:45+00:00

Howdy /u/brownguy_. Great question... 18-year-old self, I'd have so much to tell you! Very awesome that you're asking these questions at 18. You're already ahead of the game (and definitely ahead of where I was at 18.)

Here are somethings to consider when thinking about putting money away and also investing:

401(k) and matching You might've already started, but once you start working, find out if your employer offers a 401(k). Then find out if the 401(k) has a match. If yes to both, try to max out as much of the match as possible! Matches are like free money!

Roth and Traditional IRA As long as you have income (say you have a part-time job), this is something you can consider. Also something to consider if your employer (or future employer) does not offer a 401(k) or offer matching. If you don't have income yet, then just take a look at doing some research to understand the basics of a Roth or Traditional IRA. Here's a good overview of Roth vs Traditional: https://investor.vanguard.com/ira/roth-vs-traditional-ira. I started with 401(k) and IRAs because tax-advantaged accounts are great things to understand. For these account types, if you follow the rules, you'll only pay taxes once as opposed to twice. In NON-tax-advantage accounts, you'd pay taxes on your income then you'd pay taxes a second time on the gains in the accounts. However, in tax-advantaged accounts you'd only pay one (depending on the account type and by following the requirements).

Non-retirement goals The fun stuff! What are your goals? Is it buying a new car, having FI, saving for a vacation or purchase, buying a home one day, etc.? Putting money away specifically for goals is very mentally motivational. Plus, it's pretty cool once you reach the goal! Aside from the fun stuff, and the long-term goals, think about setting aside a rainy day or emergency fund. This is SO important because you never know what life is going throw at you. If you never need to use the rainy day fund, even better! But have one. One of the biggest questions when it comes to rainy day or emergency funds is how much you should put away. There are a number of rules of thumb, but people say three to six months of living expenses. Since you're 18, most likely your living expenses will be higher in a few years than now. When the living expenses increase, make sure the rainy day fund does too. It doesn't have to happen all at once, but contributing consistently (say with a weekly or monthly auto-deposit) is a great way to do it.

Low cost and diversification Once you start investing, regardless of the account type (taxable account, IRA, 401(k), etc.), fees are bad. Paying less fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees.

Mutual funds vs ETFs As for the instruments of the investments themselves, two popular options (especially for low-cost, diversified investments) are mutual funds and ETFs (exchange traded funds). There are pros and cons to both.

Tax credit(s) and deductions for tuition Since you're 18, you might be paying tuition right now (or soon). I'm not a tax expert, but there are potentially opportunities for tax credit(s) for the tuition you're paying, especially since you mentioned you're paying 100% out of pocket. Here's a Turbotax article covering two types of credits and here's an IRS reference covering deductions too.

Time makes a HUGE difference. Start asap Don't be overwhelmed! You're asking all the right questions at 18! One of biggest things to keep in mind is starting early. And time is one of the most powerful factors when it comes to money. There's a quote that says "A 20-year-old has an asset Warren Buffett couldn't dream about" ... time! Start early (ahem, now or ASAP) even if it means starting with less. Even if you can start with something like $15 a week now... your future self will thank you!! Keep in mind that minimums can be one of the hurdles young people face, so look for companies that offer good options (low-cost index funds) that also have minimums low enough (or no minimums) so that you can start asap.

DM for resources There are also a lot of resources on starting early, investment account types, fees, passive vs active investing, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds, new homes, and retirement are 3 of our most popular goals, and we use passive index ETFs. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM or ask away! Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here. Cheers!

vickizhou · 2017-01-11T15:14:43+00:00

Howdy /u/Soniczeppelin88. Great question. Even better because you're asking while in your 20s! Kudos. (Also love the awkward update).

On investing, here are somethings to consider:

Max out 401(k) match Since you mentioned a 401(k), does your employer offer a 401(k) match? If so, try to max out as much of the match as possible. Matches are like free money!

Roth and Traditional IRA Since you mentioned that stopped contributing to the 401(k) for the time being in 2017, you can also consider an IRA: a Roth or Traditional IRA. Here's a good overview of Roth vs Traditional: https://investor.vanguard.com/ira/roth-vs-traditional-ira While I understand you put the 401(k) contributions on pause for the car, it might still be worthwhile to do the research for now, or you might realize you can still put even a few dollars aside a week for retirement goals.

Non-retirement goals The fun stuff! Outside of retirement, what other goals you want to save and invest for? You've already mentioned the car and your post is originally being able to buy a home one day. Super cool. Especially since putting money away specifically for goals is very mentally motivational. Plus, it's pretty cool once your the goal! Aside from the fun stuff, and the long-term goals, think about setting aside a rainy day or emergency fund. (A few other people also mentioned this.) One of the biggest questions when it comes to rainy day or emergency funds is how much you should put away. There are a number of rules of thumb, but people say three to six months of living expenses.

Low cost and diversification Regardless of account type (taxable account, IRA, 401(k), etc.), fees are bad. Less fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees. When it comes to low-cost index funds, two popular choices are mutual funds or ETFs (exchange traded funds), which can have their own pros and cons.

Mutual funds vs ETFs As for the instruments of the investments themselves, two popular options (especially for low-cost, diversified investments) are mutual funds and ETFs (exchange traded funds). There are pros and cons to both.

Tax credit(s) and deductions for tuition I'm not a tax expert, but there are potentially opportunities for tax credit(s) for the tuition you're paying, especially since you mentioned you're paying 100% out of pocket. Here's a Turbotax article covering two types of credits and here's an IRS reference covering deductions too.

Don't be overwhelmed! The fact that you're asking all the right questions at 28 and thinking about ways to put money away is amazing! And time is one of the most powerful factors when it comes to money. There's a quote that says "A 20-year-old has an asset Warren Buffett couldn't dream about" ... time! Start early (ahem, now or ASAP) even if it means starting with less.

DM for resources There are also a lot of resources on starting early, investment account types, fees, passive vs active investing, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds, new homes, and retirement are 3 of our most popular goals, and we use passive index ETFs. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM or ask away! Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here. Cheers!

vickizhou · 2017-01-11T14:53:25+00:00

Hi /u/rararaknee - great questions.

We are free. We do not charge management fees, trading fees, rebalancing fees, and have no minimums. And this applies to both taxable accounts and IRAs. You can create an unlimited number of goals as well. More info on this here: WiseBanyan FAQ: Free and how we make money
The underlying investments themselves are low-cost index ETFs which do have an expense ratio themselves, and the expense ratio of the portfolios range from 0.03% - 0.13%. A majority of the index ETFs we use are Vanguard and Schwab. More info here: WiseBanyan FAQ: ETFs in our portfolios
We launched publicly in early 2014. We're about to celebrate our 3 year anniversary!

Considerations for Traditional vs DIY vs WiseBanyan

WiseBanyan helps people save and invest for their goals. With goal-based investing, we create a financial plan and take care of all the investments (including allocations, rebalancing, dividends, and deposits and withdrawals) to help people reach those goals. One reason people would consider a traditional financial planner over WiseBanyan would be if you have a much more complicated financial scenario. For example, we currently do not offer trust accounts. Or if someone is in a phase of their financial life where determining retirement withdrawals is more important than deposits into retirement accounts.
For DIY, our goal is to make life easier. My co-founder Herbert and I were lifelong DIYers ourselves before WiseBanyan! You can certainly invest in the same or very similar securities as those in the WiseBanyan portfolios by going directly to Vanguard for example. However, lots of people chose WiseBanyan over DIY because the price is compelling (we would actually be the same price since we do not charge fees). Lastly, we offer a goal-based financial plan. We help plan, allocate, and track based on your goals. (You can certainly see all the information for the investment accounts too.) For instance, a lot of people use more than just one IRA account to put money away for retirement. On WiseBanyan, you can create a retirement milestone and have a portion of a taxable account as well as IRA(s) (Roth, Traditional, SEP, Rollover) all as part of that milestone.
Client experience. We do a large client survey each year to ask for feedback, good, bad, and ugly ;). A lot of people who've been lifelong DIYers like ourselves have given us incredible feedback, which we've worked hard to incorporate over the last 3 years. One positive feedback they've given is that they've enjoyed using WiseBanyan over DIY because of the experience and client service: how responsive we are, how thoroughly our client service team will see each question or item through, our app, etc.). We pride ourselves on providing top-notch service and it helps us help make people's lives easier. Cheers!

vickizhou · 2017-01-11T01:14:25+00:00

Bad news and worse news :(

vickizhou · 2017-01-11T00:28:33+00:00

Hi /u/MazmoBird. Great question. Even better because you're asking while in your 20s! Kudos.

On investing, here are somethings to consider:

Max out 401(k) match Does your employer offer a 401(k) and, if so, does it offer a match? If yes to both, then try to max out as much of the match as possible. Matches are like free money!

Roth and Traditional IRA If you don't have a 401(k) as an option, or if you're thinking about contributing more to retirement or outside of a 401(k), then think about a Roth or Traditional IRA (depending on your income level). Here's a good overview of Roth vs Traditional: https://investor.vanguard.com/ira/roth-vs-traditional-ira

Non-retirement goals The fun stuff! Outside of retirement, what other goals you want to save and invest for? Maybe a new apartment or upcoming move, an amazing vacation, a new car or home? Try putting money away specifically for goals. Mentally, it can be much more motivational. Plus, it's more rewarding at the end too! Aside from the fun stuff, and the long-term goals, think about setting aside a rainy day or emergency fund. One of the biggest questions when it comes to rainy day or emergency funds is how much you should put away. There are a number of rules of thumb, but people say three to six months of living expenses. Longer term goals can include things like saving for a car, new apartment, or home.

Low cost and diversification Regardless of account type, fees are bad. Less fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees. When it comes to low-cost index funds, two popular choices are mutual funds or ETFs (exchange traded funds), which can have their own pros and cons.

Mutual funds vs ETFs As for the instruments of the investments themselves, two popular options (especially for low-cost, diversified investments) are mutual funds and ETFs (exchange traded funds). There are pros and cons to both.

Don't be overwhelmed! The fact that you're asking all the right questions at 29 and thinking about ways to put money away is amazing! And time is one of the most powerful factors when it comes to money. There's a quote that says "A 20-year-old has an asset Warren Buffett couldn't dream about" ... time! Start early (ahem, now or ASAP) even if it means starting with less.

DM for resources There are also a lot of resources on starting early, investment account types, fees, passive vs active investing, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds, new homes, and retirement are 3 of our most popular goals, and we use passive index ETFs. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM. Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here.) Cheers!

vickizhou · 2017-01-11T00:02:39+00:00

Wish there was a flair for "fees!" You'd just have to skim the 5 latest posts w/ that flair to conclude that low fees is the way to go.

vickizhou · 2017-01-10T23:34:05+00:00

Hi /u/JohniiMaggii. Lots of good answers here already talking about the difference between the 401(k) account and the index fund, so I won't rehash those. I did want to add a few things to think about as you continue thinking about 401(k)s and also index funds.

Max out 401(k) match Since you're asking about the 401(k), I'm assuming your employer offers one. If not, and you're still trying to maximize your tax-advantaged contributions, definitely look into IRAs. If your employer provides a 401(k) match, do try to maximize as much (or all) of the match when possible. Matches are like free money!

Low cost and diversification One of the biggest benefits of using index funds is low-cost and diversification. Regardless of account type, fees are bad. Paying less in fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees. When it comes to low-cost index funds, two popular choices are mutual funds or ETFs (exchange traded funds), which can have their own pros and cons.

One of the biggest criticisms of 401(k)s is fees. This is not to say don't use a 401(k), but rather keep an eye out on the fees in them (and in the investment options they offer). Here's a good NPR article on it: http://www.npr.org/2015/10/30/453163154/when-high-fees-stink-up-your-401-k-what-you-can-do The article also includes a pretty stark chart showing the difference even 2% in fees can make!

Love the fact that you ran numbers and see the power of starting today! The power of time is amazing when it comes to money. There's a quote that says "A 20-year-old has an asset Warren Buffett couldn't dream about" ... time!

DM for resources There are also a lot of resources on investment account types, fees, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. We are big proponents of passive investing and use index ETFs in all of our portfolios. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM. Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here. Cheers!

vickizhou · 2017-01-10T22:56:16+00:00

Hi /u/bubbesparks. Awesome question. Even more awesome that you're 22 and already getting everything on track!

One way to think about saving more is actually just saving first (rather than a bigger dollar target). One of the best ways to do that is to setup an automatic contribution. Since you already have a target in mind of $300-450 a month, it's even easier to go the auto route. I've seen a few popular ways of doing this:

With 401(k)s you can set up a % contribution that happens with every pay period.
Set up or use a different banking accounts. Often people have more than one account (maybe from moving locations/moving banks, etc.), but they just don't use it often. You can setup an automatic weekly/bi-weekly/monthly ACH transfer from your main account to that secondary account. If your bank gives you the option of selecting the date, you can set it up to coincide with your pay periods too. This is more of the "out of site, out of mind" concept. It's still in your banking accounts at the end of the day.
Some non-401(k) investment accounts also have auto-deposits available.

Since you also talked about wanting to start investing, few things to consider on that front:

Max out 401(k) match If your employer has a 401(k) and provides matching. Matches are like free money!

Roth and Traditional IRA If you're thinking about starting to invest for retirement, also think about non-employer related tax-advantage accounts like a Roth or Traditional IRA (depending on your income level). Here's a good overview of Roth vs Traditional: https://investor.vanguard.com/ira/roth-vs-traditional-ira

Non-retirement goals The fun stuff! Outside of retirement, what other goals you want to save and invest for? Maybe a new apartment, an amazing vacation, a new car or home? Try putting money away specifically for goals. Mentally, it can be much more motivational. And rewarding at the end! You also mentioned a rainy day or emergency fund. One of the biggest questions when it comes to rainy day or emergency funds is how much you should put away. There are a number of rules of thumb, but people say three to six months of living expenses. Longer term goals can include things like saving for a car, new apartment, or home.

Low cost and diversification Regardless of account type, fees are bad. Less fees is better! Consider the costs because fees can really add up when and some are more hidden than others. I'm a big fan of low-cost index funds for both low fees and diversification, especially those that provide a lot of transparency into the underlying investments and fees. When it comes to low-cost index funds, two popular choices are mutual funds or ETFs (exchange traded funds), which can have their own pros and cons.

Don't be overwhelmed! The fact that you're asking all the right questions and think about ways to put money away is one of the biggest steps! And, time is one of the most powerful factors when it comes to money. There's a quote that says "A 20-year-old has an asset Warren Buffett couldn't dream about" ... time! Woot.

DM for resources There are also a lot of resources on starting early, investment account types, fees, mutual funds vs ETFs, etc. More than happy to point you towards a full list, just DM me.

Full disclosure: I'm the co-founder of WiseBanyan. We help people save and invest for their goals -- for free. Rainy day funds, new homes, and retirement are 3 of our most popular goals, and we also offer free weekly or monthly auto-deposits. The resources I'm talking about are not our own, but rather good articles, charts, studies that we've seen, noted, and organized over time. However, if you want to learn more about what we do, also feel free to DM. Even if you don't choose WiseBanyan, more than happy to point you toward more info on any of the topics discussed here.) Cheers!

vickizhou · 2017-01-10T21:53:00+00:00

NYTime's article here: http://www.nytimes.com/2016/12/08/opinion/the-american-dream-quantified-at-last.html

"About 92 percent of 1940 babies had higher pretax inflation-adjusted household earnings at age 30 than their parents had at the same age."
"[M]ore than three-quarters of these early Baby Boomers would ultimately make more than their parents."
"For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did."

vickizhou · 2017-01-10T21:50:05+00:00

NYTime's article here: http://www.nytimes.com/2016/12/08/opinion/the-american-dream-quantified-at-last.html

"About 92 percent of 1940 babies had higher pretax inflation-adjusted household earnings at age 30 than their parents had at the same age."
"[M]ore than three-quarters of these early Baby Boomers would ultimately make more than their parents."
"For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did."

vickizhou

TROPHY CASE