For you retirees, how should I handle my money?

[Jonathan F/2]

Ok I was thinking about this today, and realized you guys would be a good source of financial information. I noticed a lot of forum members are older and seem financially secure, being able to purchase expensive camera, lenses, go on trips and other goodies while enjoying the company of your many offspring. Anyways, what is your secret to financial security and what kind of tips would you give a young person who wants to be secure in old age? Due to the nature of my work, I usually get sporadic wads of cash, but I end up spending it on guy toys like my car, computers, cameras, lenses, eating out, lap dances, etc.

Anyways, do you guys/or gals have any investment tips so I don't grow old broke? Thanks for any feedback!

 

[greyflash]

Pick a standard of living that you can maintain through the lean times and the great times. Don't spend above this level when you get the wads of cash. Save 10% of your earnings and put this into safe investments (15%) or Treasury bills(85%). I define safe investments right now as being gold and oil related stocks . Don't go into debt for purchases but rather borrow from yourself (savings) for big ticket items like cars and then pay yourself back, including interest. Scrap the lap dances as there is little payback. Find a nice young lady that has the same financial goals as stated above and settle down.

Now none of this you probably wanted to hear but you asked.

 

[Jonathan F/2]

Thanks Gordon, that's what I wanted to know. I was kidding about the lap dances!

Long term though, do you think oil stocks will hold up? And not to be a lefty tree hugger, but are you talking about investing in companies like Haliburton? Are there other safe investments you would recommend? How about currency investments? Any validity in that market?

By the way, I've never bought a new car in my life, most my cars have been theft recovered vehicles that I paid straight cash on. My friends keep telling me I'll never build my credit if I don't invest in big ticket items, but I hate car payments!

I guess my major concern is long term investing of my money. Thanks for the tips!

 

[Retief]

Jonathan, best advice I can give you is to send me $500 each month, or each week, whichever comes first. I absolutely guarantee that you will get a much better return than Social Security, honest, no doubt about it. Then again, my favorite bumper sticker was on a great huge motor home I saw, which said 'We are spending our children's inheritance" :lol: .

OK, the serious side, Gordon makes good points. Don't go overboard on "micromanaging" investments. I would add that straight real estate is not a bad thing to have a bit of as well. Lap dances are OK, just ration them, like twice a year. A guy has to live a little fun for crying out loud :lol: .

You are picking the right time to start thinking about this, and frankly, there is no "wrong" time but the earlier you do it the better chance you have of making it an easy habit to live with. One good trick is to set up a monthly automatic bill to yourself for the savings bits if you can structure that well.

 

[Jonathan F/2]

Thanks Bill, I just want to be relaxing like you guys when I get older. Unfortunately, my parents have gone through health issues which has seriously affected their finances. Going through my car accident early on has just shown me how important it is to plan!

 

[Gale]

Work hard now. Play later younger :>)

 

[Rich Gibson]

Since the old farts are in a playful mood I'll join in. As a young Naval Aviator we had a few sayings:

"Live fast, die young, leave a good looking corpse."

"Better die than look bad."

Okay, now for the serious stuff. Another old saying which is 100% on. "Pay yourself first." Someone, better in math than me explained that if person A took something like $10,000 and put it in a relatively conservative investment at age 20 and nothing else again and B did that at 30 and kept adding regular savings to it for the rest of their lives B would never catch up to A.

Start putting 10% off the top in a middle of the road mutual fund each year (biweekly or monthly, so you won't be tempted to blow it.) You'll be shocked eventually when you're in your fifties to see how much it has grown. The secret is compounding; for example, 5% interest per year seems small but if you keep adding to it that also gets the 5% as well as the interest gained. Many folks here seem well off. I had friend whose parents were a shoe cutter for and his wife a secretary for a catalog sales company. They did not earn a lot, as you can imagine, but they saved a small amount regularly. After almost 50 years of marriage they had amassed almost $1 million. Steady saving, compounding and youth (in other words over a long period of time) are the keys to success. Not a naive search for the killer job.

Good luck...start now!

Rich

 

[greyflash]

Long term though, do you think oil stocks will hold up? And not to be a lefty tree hugger, but are you talking about investing in companies like Haliburton? Are there other safe investments you would recommend? How about currency investments? Any validity in that market?

The world is running out of oil and that is becoming ever more apparent with the emergence of China as a major player in the oil consumption market. Oil exploration stocks are smoking right now and will be for some time to come. Never looked at Haliburton who is a much more than an oil company. I don't like to recommend stocks to anyone but will say that Diamond Offshore Drilling (DO) just continues to rise and my increase is 115% over a short period of time.

Well rated mutual funds are another good investment as long as you can leave your money there over the long haul.

Currency investments are risky at best IMO.

Good luck, and it is great that you are thinking along these lines at your early age. Rich also made some good points.

 

[Retief]

Thanks Bill, I just want to be relaxing like you guys when I get older. Unfortunately, my parents have gone through health issues which has seriously affected their finances. Going through my car accident early on has just shown me how important it is to plan!

Jonathn, I am only "middle-old", so I'm not off relaxing just yet :lol: , but I am hoping that will happen in the Twenty-Teens, and hopefully I will be around to enjoy it :lol: .

The planning is very important, but the execution of that plan even more so. "Pay yourself first" is the best advice I've seen here, and one I wish I had been more consistent with myself.

You are on the right track, asking and considering now, good luck.

 

[Uncle Frank]

I'd recommend a great book... "The Millionaire Next Door". It'll explains how wealth is acquired and retained over the long term, and how to avoid some of the traps that most fall into. It's a good read, and imho contains so many valuable lessons that I bought copies for both of my kids and quite a few of my friends.

http://www.amazon.com/exec/obidos/tg/detail/-/0671015206/qid=1114008531/sr=8-1/ref=sr_8_xs_ap_i1_xgl14/104-8351310-4957562?v=glance&s=books&n=507846

As far as investing is concerned, the first thing you need to do is open an account at a broker, like Fidelity, and start funding a Roth IRA. You can invest the money that's in it, and the withdrawals you make after retirement will be non-taxable! It's an amazing vehicle and a wonderful opportunity for someone in your age bracket.

With regards to investment allocations, I'd be cautious about concentrating in any narrow sector, such as oil or gold, which go through unpredictable cycles of popularity and disfavor. You're in a wonderful position with an investment window that spans decades. The best way to take advantage of that is to buy a fixed amount of something with long term growth potential on a monthly basis, and "dollar cost average" into a long term position. Imho, there's nothing better suited to that strategy than an S&P500 Index Fund. These funds have low management costs, and consist of weighted shares of the USA's 500 largest publically traded companies. That makes it a well diversified investment, and historically, it offers better returns than any other investment you could make.

Jmho.

 

[TOLady]

Since I'm in the biz, and have invested in the industry for years, I'd say start with real estate. Stop paying a landlord and start paying yourself. Buy something small and manageable. Interest rates are historically very low, and not only will it provide you with a place to hang your hat, it will also increase in equity over time. I bought my first house when I was 19 and have built up an enormous amount of equity in real estate which will also be my retirement fund - and it is NOT taxable!!!
As far as your credit history, get a credit card that pays dividends (I get a nice big fat credit in December every year from mine). Put everything you purchase on it, and pay it off each month. You're using their money for twenty days, it doesn't cost you a dime, you get money back and you will build a good crediting rating. DO NOT use it as a source of funds, but rather as a money-managing system.
Some sage advice: 1. buy good - buy once; 2. if you don't have the money to buy it today, wait until you do have the money as your life won't end if you don't own that item.
Hope some of this helps, Cheers, Sandi

 

[F15Todd]

Someone, better in math than me explained that if person A took something like $10,000 and put it in a relatively conservative investment at age 20 and nothing else again and B did that at 30 and kept adding regular savings to it for the rest of their lives B would never catch up to A.

Yes the Rule of 72. It's a simple way to see how money grows over time.
Tips:
1. Start early and save regularly
2. Pay yourself first. Try to put 10-15% of your net pay in some type of investment. But do this first, before you buy that 300mm f/2.8VR next month. :lol:
3. I would say since your asking about retirement, I would say open a Mutual Fund. Get a nice Roth IRA and put money in it. You will not start to up it out until after you hit 59 1/2.

Since you are younger I would starting at least two different funds. One a high risk fund, some kind of growth mutual fund. And open a second fund that is a bit safer.

A mutual fund pools the money of many investors to invest in a variety of stocks, bonds or other securities. While fund returns are not guaranteed, mutual funds offer many advantages, especially for the inexperienced investor.

 

[Uncle Frank]

Sandi, you're much too young and good looking to answer a question addressed to "retirees" .

Same to you, Todd, except for the good looking part 8).

Btw, both of you gave Jonathon good advice, despite your callow youth :lol:.

 

[PhotoDawg]

Jonathan,

Cash is King...Debt is Dumb. I am 31 years old and have already planned my retirement. Open yourself a Roth IRA, invest 10-15% across the board. In other words, diversify you savings & investments by investing in various different options. A Roth IRA is hands down better than a Traditional IRA. I am sure a good investment advisor could help you pick out the best way to diversify your Roth. If you have a 401K, only invest what the company matches, and try to find the best ROR (rate of return) your 401K offers. Hope this helps. Getting a written will and TERM life insurance should be in your plan as well. Don't put your nest egg in one basket. Hope this helps.

 

[greyflash]

With regards to investment allocations, I'd be cautious about concentrating in any narrow sector, such as oil or gold, which go through unpredictable cycles of popularity and disfavor.

Some may have misread what I recommended as far as investments go. First I said to invest 85% in Treasury Bills, the safest investment there is currently because of the troubled times we are in. I then recommended gold and oil as a safe haven for right now and then only at the level of 15%. Currently there is really little safety in stocks and bonds and those brokers that think there is are deluding themselves (this is not to say that there are not some good strong companies around whose stocks will do well in almost any environment). Real estate which at one time was an excellent investment is now high risk as it is riding a bubble that is about to pop as tech stocks did a couple of years ago. The US trade deficit is so high as to be scary and the value of the dollar continues to drop against world currencies (especially the Euro). Interest rates are rising and will continue to do so and the feds have run out of solutions and I haven't even talked about the generation of new money (M6) without anything to back it up. The in ground oil reserves are at 50%, meaning that half of the worlds oil is gone and the rate of use for the remaining 50% is rising at an alarming rate. China is very near to making an agreement with Canada for the largest oil reserve in the world and their usage is skyrocketing. Now as to gold, China has just recently made gold available to their citizenry as has India and the demand is driving the price of gold ever higher. I bought gold stocks at $245 to $260 an ounce and it is now $430 and should easily move to $500+ in the not too distant future. It doesn't have much to do with falling in or out of favor it has to do with rising interest rates, devalued dollar, and world demand. The world bank has kept it in check to an extent by releasing some of their gold horde but this will only work so long.

Well I have probably said enough but did want to clarify my position, especially on the investment of 85% into T bills.

 

[Uncle Frank]

Some may have misread what I recommended as far as investments go.

No, Gordon, I did understand your position, which is a very sound one for folks our age who want to protect their capital. I was trying to address Jonathon's situation, which is far different. He doesn't have a stash to protect yet, and he has an enviable 50 year investment window. I think dollar averaging into a diversified instrument, such as Spyders, makes more sense for someone of his generation, as it offers greater possibilities for appreciation than the conservative t-bill/gold approach. The only scenario in which that would fail is the collapse of the US economy, but I don't think that's much of a risk, particularly as the other developed nations wouldn't allow it, as it would mean the collapse of the world economy. And I'm still very optimistic about prospects for the USA's economy over the long term, despite the horrible performance of the last 5 years.

Jmho.

 

[TOLady]

Awwww shucks Frank, you're making me blush!!! I gotta tell ya, after my birthday celebration yesterday, and all the incredible wines consumed, I'm feeling a LOT older today (where DID I put that bottle of Tylenol????). It's funny how it doesn't seem all that long ago that I was thinking "when I get old, and start thinking about retirement".... now I'm there!!!! I'm starting to think about WHERE I want to retire, and it certainly isn't in a cold climate, that's for sure!! Probably become a snow bird and hit the I75 every November, stop in for a cuppa java with Jarrell and keep hauling that kayak on down south! *LOL* These bones aren't meant for five months of cold, wet, cold, wet.... Well, back to nursing my head *LOL*

 

[Jonathan F/2]

Thanks for the advice guys! A lot to digest, but I'm definitely going to look at everything you guys have put on the table.

 

[PhotoDawg]

The market is driven by two conflicting emotions......FEAR & GREED. I like to stay in between. Good luck in your decision Jonathan!!

 

[Joe Marques]

Jonathan,

Just a word about "investing". Most strategies here are really "savings" - even those involving higher volatility instruments like stocks. Why is this all really "savings"? Simple - savings results in a "rate of return" of X%. Doesn't matter if it's an ultra-safe T-bill or a an aggressive assortment of stocks. ANY savings strategy will result in a lifetime average ROI of X% annualized (the difference in return based solely on investment volatility - higher volatility=higher average return for the most part).

There's nothing wrong with this approach as long as you accept the fact that you won't achieve true wealth without a fairly large initial investment OR disciplined annual investments. Remember one key aspect of stock "investing" - the INVESTMENT performance doest not equal INVESTOR performance (meaning a mutual fund with a 5 year annualized return of 17% is rarely achieved by INVESTORS of that fund who are traditionally too fickle to stay invested long enough to capture its peak performance). Emotion is the greatest risk when investing.

So what is investing in my experience? Investing in small businesses and cash generating real estate (multi-dwelling or retail units). The biz angle is sweat equity to build the biz and either sell it or expand it (classic entrepreneurial strategy). The real estate angle is playing leverage to your greatest advantage given the stability of property investments (you earn both income and capital appreciate on the asset). Operating in this "investment" space is a realistic approach to greater wealth accumulation with modest investable assets since the leverage and risk combine to produce exponentially superior returns to "savings".

BTW, since I'm a former lawyer and stock broker I have NO faith in CEO's of US businesses (or the government for that matter - SS will be bankrupt by the time we're old enough to collect). I'd rather entrust my financial future to ME - via small biz investing and income generating real estate.

Just offering a different take on "investing".

Regards,

Joe