Sock_Monkey on 8/9/2015 at 06:22
Hello. I used to visit TTLG a long time ago and pretty much liked the community here. I was hoping I could get some insight on the situation I'm in:
I'm 27, work a fulltime contract job (46,000$ / year before tax), and split rent, utilities, gas and grocery expenses with my boyfriend which amounts to 600$ / month on average. I pay for my own health and car insurance. When I was 22, my parents and I co-paid for my first car in 2011. It's a 2012 Hyundai Elantra Limited which cost maybe around 22,000$ and some, brand new and been driving it ever since.
I come from a middle class family and all this time I was pretty content living by the 2 mantras: work hard, save often. But recently I have been very overwhelmed and sort of nervous that my only source of income is my job.
Just to give you some context, my job pays well (I am an artist and work for a Fortune 500 company) but it is a contract job and has no job security, so I work 9 months out of the year. The company's business model is to my advantage in the sense that they are always having to produce a product every year, so there is enough work to do every year that gets me rehired. Because my job is unstable enough and because the company won't invest in their contractors (that is to say, they haven't been actively looking to keep contractors as full-time employees and isn't likely to anytime soon), I have decided to invest in myself by going back to school for a year and a half, and being a part-time student to hone and upgrade my skills. So that in due time, my skillset will be broad and diverse enough that I can break free of this company and move on to others.
If this isn't being ambitious enough, I am just now starting to see the sense in investing and really want to try it. I have set a small financial goal for myself: That in the next 6 to 8 years, I would like to buy a luxury crossover vehicle (like the Nissan Murano or the Range Rover Evoque, fully loaded) entirely out of my own money (my bf and I love taking roadtrips). So far, I only have 20,000$ of my own savings (which I would rather hold on to).
To be able to buy this future car of mine, should I just save up or invest money for the next 8 years? If investing is the way to go, I was thinking of using Betterment | Investing Made Better, and setting aside 350$ every month for the next 8 years to reach my target goal of 45,000$ (If I invest via Betterment, I will always have my money accessible to me without any penalties in the event of an emergency).
What do you guys think? Am I being too ambitious? Am I too old to start doing this? Since I am still new to this concept of investing, any opinion / feedback would be very much appreciated :" )
heywood on 8/9/2015 at 19:30
I think it's great to be able to buy a car outright. I had a loan on my first car, but my last two have been cash purchases, one used and one new but relatively cheap. Car loans are a bum deal, avoid them if you can.
It's great that you're saving, but if I were you, I would be saving primarily for a future real estate purchase not an expensive new car. Cars are short lived depreciating assets. Let someone else pay for the depreciation. If you can keep your current car going until 2020, that loaded 2016 Murano you covet today will be available for $20k in nice condition with 50k miles.
Pyrian on 8/9/2015 at 20:51
Quote Posted by heywood
Car loans are a bum deal, avoid them if you can.
Really? Car loans are routinely offered at little or no interest. My two car loans were at 0.9% and 0.0% respectively. I hate debt - but I'll take a no-interest loan even if I have the cash on hand.
Sock_Monkey on 9/9/2015 at 05:47
Quote Posted by icemann
I chose to invest in a little side business of buying and reselling old video games. Invested $1,000 and not a cent extra. 2 years later and I've turned that into $5.5k worth of stock via constant re-investment through profits into more and more stock.
Started off with a singular free store sticking with super nintendo games, then this year via profits started up a 2nd store dedicated to Sega Mega Drive games. Plan is to later on start up a NES store and a n64 one. Currently it brings in a trickle of cash (4-8 game sales weekly usually so not enough to live off by a long shot).
The trick is to pick something your passionate about, or you'll tire of it very quickly. For me I find it all to be a fun little side hobby.
Quote Posted by heywood
I think it's great to be able to buy a car outright. I had a loan on my first car, but my last two have been cash purchases, one used and one new but relatively cheap. Car loans are a bum deal, avoid them if you can.
It's great that you're saving, but if I were you, I would be saving primarily for a future real estate purchase not an expensive new car. Cars are short lived depreciating assets. Let someone else pay for the depreciation. If you can keep your current car going until 2020, that loaded 2016 Murano you covet today will be available for $20k in nice condition with 50k miles.
Thanks for the thoughts, guys! Heywood, I know what you mean. I have heard that a brand new car instantly deppreciates by 4000$ the second it's driven off the dealership's lot. I know because my first car was brand new. I wanted to go with a gently used preowned but in the state of Florida since there a lot of hurricanes, water damage instantly wrecks a car and owners try to pass it off when they sell it (the risk is usually there in private sales like the ones on Craigslist. Don't know if certified pre-owned cars that dealerships sell inspect for water damage - I have heard its difficult to detect water damage?).
But you're right. Going for a decent / gently used vehicle seems like the way to go. As I have grown older, I don't derive much pleasure for brand new things (kinda like textbooks for college. As long as it does the job..)
A real estate property would be a much better and wiser investment. But I doubt I will have the patience to take care of something so grand, especially since a future with kids still seems far away. But like Icemann, I will keep investing and have the money work for me as hard as possible.
Quote Posted by Pyrian
Really? Car loans are routinely offered at little or no interest. My two car loans were at 0.9% and 0.0% respectively. I hate debt - but I'll take a no-interest loan even if I have the cash on hand.
Is it common to pay outright for a car if one can afford it? I know paying monthly with an interest rate is definitely convenient (and popular) but does add up to be a bit more even if it's by marginally.
faetal on 9/9/2015 at 10:44
My parents have leased cars for ages now and claim that they'd never go back to owning.
There is an economics adage which goes "If it appreciates, buy it; if it depreciates, lease it", but I'm sure there are a billion exceptions to that, so not sure it works as anything other than something flash to say at a cocktail party to make yourself sound savvy.
Pyrian on 9/9/2015 at 12:16
Quote Posted by Sock_Monkey
Is it common to pay outright for a car if one can afford it? I know paying monthly with an interest rate is definitely convenient (and popular) but does add up to be a bit more even if it's by marginally.
It's not even marginally more if there's no interest rate (my current car loan). But even with a nice low interest rate, you've got to consider opportunity cost; at the 0.9% of my last car loan, I could invest the money and get a better return. However, you've also got to consider insurance; the lien of a car loan requires that you keep full insurance coverage, which costs considerably more than the legal minimum liability insurance. On the other hand, full coverage isn't useless - particularly if you hit a tree or something - so it's not entirely money lost, either.
Leasing... If you want a new car every three years, this seems to me like the way to go. The prices... Seem lower than they should be somehow? I'm not sure I understand what's going on, here. After all, I've never done it. I dislike car buying and even car switching in general, so I usually keep them until their current repair costs exceed their value.
catbarf on 9/9/2015 at 13:28
Regarding leasing, it can be cheaper or more expensive than buying, entirely dependent on what sort of deal you get. I got a great deal on buying my car and will have it paid off by the end of this year. My girlfriend got a good deal on leasing hers, so the total lease price + pre-negotiated buy at end of lease comes out to less than she would have paid to buy it outright.
A lot of people say that as a rule of thumb, lease if you'll want a new car in a few years, buy if you won't, but I think that's a little too black-and-white considering the amount of latitude dealerships have to adjust prices. If you can get a low lease with a cheap purchase price at the end, it can be substantially cheaper than buying, especially if you can't get a low-interest loan. Conversely, even if you figure you'll want a new car before long, if it's cheap enough to begin with then the gap between your purchase and sale prices might be smaller than the cost of a lease. You just need to run the numbers.
I'll echo what Heywood said, though, that a car is not an investment, it's a rapidly-depreciating commodity. If owning and taking care of a house isn't your thing, have you considered the idea of purchasing real estate, then hiring a landlord to manage it? Around here a fair number of folks do that as an investment, so the income from rent pays towards the mortgage and they build equity.
bjack on 11/9/2015 at 17:31
Sock_Monkey, invest... You will not regret it. If everything falls apart, we will all have much more to worry about than money issues. The market will continue to exist as long as Western Capitalism exists. I have been through 3 nasty crashes and always recovered, because I did not panic and sell with the chumps. I have bought up bargains right after a terrible crash and done extremely well. My one big regret is not buying Apple stock back in the day when they were almost out of business. I would be extremely rich if I had done so.
Look up "dollar cost averaging". Investing over time. Putting away $350 a month is a great way to build up $$$. Don't panic if your stocks tumble. They will pick back up. Invest in good quality stocks. Stay away from fly-by-night startups. Once you are well established and can afford to gamble, then you can try out the risky stocks.
Look at your life and determine what you are spending money on. Cut back on luxuries and non-necessities and use that money for investment. Is the latest smart phone really necessary for your life? Maybe it is if it is used for work. Do you really need cable and all those channels? Do you go out to lunch every day? Do you get bottle service? Do you shop a Macy's, or Ross? Even and extra $20 a month can make a big difference.
On the flip side, it is OK to splurge on yourself from time to time. Life is pretty boring if you do nothing but scrimp and save. The trick is the balance of spending for fun and investing for the future. You also have to determine when the "future" arrives. You are saving and investing for an event. Reward yourself from time to time. Just stay away from Land Rovers :joke:
Sock_Monkey on 14/9/2015 at 00:17
Quote Posted by Pyrian
Leasing... If you want a new car every three years, this seems to me like the way to go. The prices... Seem lower than they should be somehow? I'm not sure I understand what's going on, here. After all, I've never done it. I dislike car buying and even car switching in general, so I usually keep them until their current repair costs exceed their value.
Thanks Pyrian. I have known very few people to lease but like you, I too dislike car switching (I only like to indulge in change on my terms, not because the industry is advertising for me to), and I personally think it's more in line with my values to keep something for as long as I can until it's cheaper to replace it than repair it. For this reason, the ideal of buying a pre-owned car seems more and more appealing , if it is a luxury car. I would still be saving a good amount for it not being brand new (and car insurance on it would be cheaper too)
Quote Posted by catbarf
I'll echo what Heywood said, though, that a car is not an investment, it's a rapidly-depreciating commodity. If owning and taking care of a house isn't your thing, have you considered the idea of purchasing real estate, then hiring a landlord to manage it? Around here a fair number of folks do that as an investment, so the income from rent pays towards the mortgage and they build equity.
You're right , I do feel that money invested for years that is just then splurged on commodities that instantly depreciate sort of defeats the purpose of investing. I think it's much wiser to invest in ways that makes the money grow further, like you said on equity. Instead of buying land and houses, I have been thinking of wanting some profit from companies that build homes (especially those that build rental apartment buildings). Would I have to be a partner of such companies or just a shareholder? (I think partners make more than shareholders)
Please correct me if I am wrong here: I would like to purchase real estate (land / houses) but I have heard it is a very hands-on experience and I would have to be very familiar with the place / local culture to know my risks and chances of success? Currently, I live in Orlando which is where I have been working my contract job and have been doing so for the last 4 years. I would say that I'm still relatively new to the place. Also, career-wise, there aren't many job opportunities here that are in my line of work. The only thing keeping me here is the current studio / company that I contract for which I would eventually like to break and move to another company (most likely it will be a different state altogether). Orlando is said to be an upcoming hub though (besides for the already-existing Disney, NASA, Universal and Busch Gardens) and it has a fairly low cost of living so I think it would be wise to invest in some way, shape , or form in this city.
Quote Posted by bjack
Sock_Monkey, invest... You will not regret it. If everything falls apart, we will all have much more to worry about than money issues. The market will continue to exist as long as Western Capitalism exists. I have been through 3 nasty crashes and always recovered, because I did not panic and sell with the chumps. I have bought up bargains right after a terrible crash and done extremely well. My one big regret is not buying Apple stock back in the day when they were almost out of business. I would be extremely rich if I had done so.
Look up "dollar cost averaging". Investing over time. Putting away $350 a month is a great way to build up $$$. Don't panic if your stocks tumble. They will pick back up. Invest in good quality stocks. Stay away from fly-by-night startups. Once you are well established and can afford to gamble, then you can try out the risky stocks.
Look at your life and determine what you are spending money on. Cut back on luxuries and non-necessities and use that money for investment. Is the latest smart phone really necessary for your life? Maybe it is if it is used for work. Do you really need cable and all those channels? Do you go out to lunch every day? Do you get bottle service? Do you shop a Macy's, or Ross? Even and extra $20 a month can make a big difference.
On the flip side, it is OK to splurge on yourself from time to time. Life is pretty boring if you do nothing but scrimp and save. The trick is the balance of spending for fun and investing for the future. You also have to determine when the "future" arrives. You are saving and investing for an event. Reward yourself from time to time. Just stay away from Land Rovers :joke:
Thanks bjack! I found your comment very encouraging :" ) Funny that you mentioned luxury items because I'm currently wrestling myself over whether I absolutely have to upgrade to the newest iPhone (from a 4S). And yeah, the Range Rover Evoque is a luxury item too , urgh!! I can empathize and only imagine how flustered you must have felt for not investing in Apple sooner. I think I will use that to be mindful of (helping) small companies / opportunities that will not have us lose much if we were to invest in them but everything to gain if they were to become successful.
I also wanted to add that I feel like I have just awoken to how much of my life has been tailored to fit in just one basket (that is, putting money towards going to an expensive college in the hopes of landing a job , and then working that job in the hopes of getting a promotion / raise). But nothing has equipped me for what I could face if I had a change of heart in my profession or even worse - if the company stagnates and doesn't let their employees grow. Would it be wrong to say that I don't want the quality of my life to be dictated by how much I earn from my job? Especially since we are not always making more in sync with expenses in life (like ever-increasing rent rates, school tuition fees and so on). For a long time, I was actually fairly content in just earning from this contract job but I think the novelty has worn off and since my career here is coming towards a dead-end, I now want to try something different and learn about growing money. Just wondering
Also, given my age (27), my annual salary (around 45,000$ with a savings of $3,000 / month after rent and utilities), would it be wise to invest in more stocks or in more bonds? I have heard the younger you are, you can afford to be more aggressive and to invest in more stocks than bonds, and the older you get it's recommended to invest in more bonds than stocks (conservative).
Betterment.com goes by the Modern Portfolio Theory (MPT) and I was thinking of being a little aggressive by going 90% stocks, 10 % bonds. Is that too aggressive? I would be fine with 80% stocks and 20% bonds too, but I would like my money work as hard as it can for me.
Pyrian on 14/9/2015 at 03:49
Quote Posted by Sock_Monkey
...annual salary (around 45,000$ with a savings of $3,000 / month after rent and utilities...
How in the bloomin' heck are you clearing $36,000/year in savings off of $45,000 salary? :eek:
