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Author: Defgarden One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 49  
Subject: How do you invest? Date: 2/24/2008 9:10 PM
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Hi everyone,

I'd like to start off by introducing myself. I'm a fairly new fool, and have just started my investing adventure. 25, male, stable government job in California, single (though I've been pressured to get married, hah!).

I just recently setup a 457 deferred comp retirement account through my employer and plan to contribute 400 dollars a month towards it.

I also set up several brokerage accounts through Scottrade and Bank of America (my main bank). The BofA account will probably just be used for a money market account (probably 200 a month max), and my Scottrade I put 3000 so far (bought 2000 worth of shares in two different companies, and plan to buy one more tommorow).

I was just wondering how people plan their investments. I know I probably should invest more into my 457 (it's pre-tax similar to traditional IRA), but I was having a lot of fun buying stocks, even though I'm already down quite a bit.

I don't have a lot of high interest debt (owe 10k on a car and 10k on a student loan, but no CC debt whatsoever).

I'm simply looking for ideas and suggestions on how people set up their savings and investments.
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Author: Spaminetti One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28 of 49
Subject: Re: How do you invest? Date: 2/26/2008 4:58 AM
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Welcome Defgarden,

How do you invest<i/>

My methods have changed quite a bit as my time available to research stocks has vanished. Before college I just bought CDs. In college I bought individual stocks through various direct purchase plans. I still have the paper certificate from my first stock (and the second one which was mailed to me when it split), but other than that I sold them all and switched to buying funds. My income was low enough and my total investments at the time were small enough that the taxes were not too bad.

I have a Roth IRA and a TSP account (government retirement account similiar to a 401k). I have laddered CDs with ING Direct. I try to weight my CDs so appropriate sums come due when I expected to need money like planned vacations or buying a new car.

I have a mortgage and a car loan. I broke with my plan to buy the car with cash because I got a 0% interest rate. (I am still trying counting fingers and toes to figure out what I missed in the deal. I have a low trust level for good deals.)

I have been looking at my financial setup recently and want to change a couple things. While I max out my IRA, I'm not even close to maxing the TSP account (15k per year). I really ought to get some life insurance since the mortage is based on both my husband and me being paid.

My other investments are mostly index funds with Vanguard. I don't own any bond funds.

As for how I do it, the TSP money is automatically deducted from my pay. I max the roth for the year in the beginning of each year as soon as I figure out that I'm still going to be under the income limits. Every couple months, I take the extra money built up in my savings account and buy some more stocks.

Spaminetti

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Author: Spaminetti One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29 of 49
Subject: Re: How do you invest? Date: 2/26/2008 6:48 PM
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"<i/>"

LOL. I'll learn to preview my messages, huh?

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Author: Defgarden One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30 of 49
Subject: Re: How do you invest? Date: 2/27/2008 1:13 AM
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Thank you Spaminetti,

I like the idea of laddering CD's, the concept is fairly smart and simple.

I'm not exactly sure what sparked me to start my whole investing frenzy, but it's been really exciting simply learning. I've started to develop a "money conciousness." I have a few goals in mind that I really need to get the ball rolling on.

- Start an ING Direct Savings account (BofA pays jack)
- Right now just savings, as the rates on CD's they're offering are the same for 12 month terms
- Refinance my auto loan (I have very good credit, and I've been paying 9% why? Because I'm lazy and haven't refinanced)
- Leave my stocks alone for a while! (I was pretty giddy making my first purchases. Now I need to exercise some patience and leave them alone.)
- Cut my spending (I've already started doing this, and it's pretty amazing how much money I would simply throw away on junk)
- Decide how much I want to put towards retirement at this point (400 a month seems reasonable for now, but I can't do a thing with that money unless I quit, get fired, or retire, so I need some short term investments)


Some longer term goals

- Pay off my debt (shouldn't be too hard to do)
- Save for a house down payment
- I don't have kids, but I probably will down the line



Anyways, thanks again. I'm still confused as hell, but at least I have a much better idea of what I want to do.

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Author: Spaminetti One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31 of 49
Subject: Re: How do you invest? Date: 2/27/2008 6:42 PM
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Anyways, thanks again. I'm still confused as hell, but at least I have a much better idea of what I want to do.

Sounds like you actually have a pretty solid plan.

I started with a budget and invest what is not spent. But the "pay yourself first" method of picking an amount to invest and just living with whatever is left works better for a lot of people.

To pick where to keep savings/emergency fund money, I recommend checking out www.bankrate.com. I was fine with an internet only bank or credit union. In 2002 when I started ING had the best rates. Now, they are only above average. I am just too lazy to change. If I were setting up accounts today I'd pick the highest rates, especially for CDs.

Do you have any bits of money wisdom to share?

-Spaminetti

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Author: Defgarden One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32 of 49
Subject: Re: How do you invest? Date: 2/27/2008 7:39 PM
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Money wisdom? Not really.

At this point I'm simply trying to soak in knowledge. I've done a good job staying out of debt (though, admittedly, I did spend a lot of money on entertainment goods this past year).


I have most of my bills on auto pay, so I tend to keep quite a bit of money in my checking account because I'm very cautious about spending. I tend to have a sort of budget, but I'm trying to trim down a lot of my food costs. My job has me "in the field" a lot, so I tend to eat out almost everyday. Anyways, I digress.


What I've been doing the past year is simply setting aside 400 dollars each month into my savings automatically transferred from my checking. I mostly leave that money untouched, but I would often use it to pay off my CC debt in lump sums.

I've also tried to budget by staying away from using my debit card, and visiting the ATM on a biweekly basis instead.

I suppose what I want to do now is setup a gameplan. Do I setup an internet bank savings account/cd's? Do I put more money into scottrade and continually buy solid dividend paying company stock instead? How much? Just a few of the things I'm struggling with.

Oh, and a question. How are interest payments on CDs and Savings accounts taxed? Is it considered capital gains, or is it in a seperate category? I tried looking around google but wasn't able to find an answer yet.

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Author: Spaminetti One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33 of 49
Subject: Re: How do you invest? Date: 2/27/2008 8:25 PM
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Oh, and a question. How are interest payments on CDs and Savings accounts taxed? Is it considered capital gains, or is it in a seperate category? I tried looking around google but wasn't able to find an answer yet

Companies selling you CDs (or savings accounts) will send you a 1099-INT for taxes. It's not capital gains; it's just interest. So you get taxed at whatever rate the rest of your income is taxed. If you do multiple year CDs, you typically pay taxes on the interest all at the end when you actually get the money. Oh yeah, and they should be FDIC insured, so you don't lose your money (up to 250k) if the bank fails.

My suggested gameplan is:
(1) Spend less than you earn each month. (I tend to put it all in excel. I was a math major; I'm just like that.)
(2) Set up emergency fund in a high interest, accessible account. Mine's ~3xmonth pay. (some say 6x. It's based on security of your job.)
(3) Max yearly contributions to an IRA.
(4) Invest as much additional money as possible in taxable accounts.

Oh, a tax thing about stocks in general. You need to keep the statements when you buy them, because when you eventually sell you need to be able to prove cost basis.

Spaminetti

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Author: Defgarden One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34 of 49
Subject: Re: How do you invest? Date: 2/27/2008 11:54 PM
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Thank you spam,

I'm gonna work towards building a savings reserve and paying off my car first.

I already have a retirement account through my employer. It's pre-tax and I can contribute up to 15k per year tax deferred. I don't see myself even coming close to that in the foreseeable future. Is it worth it to setup another IRA? I may setup a Roth in a few years time, but I do need some investments I can actually use in the not so distant future (to buy a house mainly, well the down payment anyway).

Anyways, thanks again. You've been a great help.

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Author: Spaminetti One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 35 of 49
Subject: Re: How do you invest? Date: 2/28/2008 4:44 PM
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I already have a retirement account through my employer. It's pre-tax and I can contribute up to 15k per year tax deferred. I don't see myself even coming close to that in the foreseeable future. Is it worth it to setup another IRA? I may setup a Roth in a few years time, but I do need some investments I can actually use in the not so distant future (to buy a house mainly, well the down payment anyway).

Happy to help. Please continue to stop by and share insights as you have them.

I don't want to be bossy, because there are so many good ways to work with money. Please don't take my experience as the only way.

I have elected to follow the plan I mentionned in the last post. Your goals may vary.

For my specific 401k equivalent, an IRA is a better retirement savings option. I don't know about yours. If any contributions are matched, then contributing up the max matched amount before an IRA, is almost certainly best. The "almost" depends on the rate of returns likely from your 401k vice a possible IRA.

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