"SHOW ME THE MONEY" VIEWS on HOW to make MONEY GR

[Bretsky]

A youthful and bright poster inquired in Tank's Blog Thread about strategies to best make money work after college. Rather than use up the Blog Thread for this, with as many intelligent posters in different professions that we have in here, I thought it might be a good idea to start up a thread on this. So I'm going to Copy and Paste a few posts from the Blog Thread in here and hopefully get some views in here. Maybe we can help each other accumulate wealth.


HERE IS THE ORIGINAL POST I'LL USE FOR THE BEGINNING BASIS FOR THE THREAD; I'LL ALSO COPY A COUPLE POSTS IN HERE AS WELL

"""So, you guys are all good with money it seems.

What is the best way to make money in terms of investment? buying property? flipping houses in addition to your job? stock market? ira? mutual funds?

How can I pay the least taxes upon graduation? Say you make 50,000 out of college, what is a good percentage of that to save immediately? """

[Bretsky]

FROM FOSCO


Depends on a few things - expected retirement age and your risk aversion. I'll assume you'll be 22 when you finish up and expect to work until your 60 (if you make $50K coming out of school, you probably won't want to work 'til 65). So you've got about 40 years of work to save for retirement. Use this to determine your expected net earnings and then pull out your finance book to reverse estimate the growth over time.

Regarding where to invest - depends on the amount of time you have available. Buying property will be the largest investment of your life and you'll need some cash and earnings potential to pull it off. Buying/selling (flipping) houses can be a strategy but has time and risk associated.

We had a guy from Charles Schwab come talk to our company @ a conference a month ago - he just kept preaching diversification. Max out whatever the company matches to your 401k and put away the max in a Roth IRA (pre-tax baby). If your comfortable investing, you can pick your own stocks but there are tons of great mutual funds (no load, no spiff for the firm) that you can set your diversification (large cap, mid cap, growth, international, etc.). Here's a pretty standard way to keep your investments health for the long term:

Conservative
You seek current income and stability, and are less concerned about growth.
Fixed-income investments: 50%. Cash: 30%. Stocks: 20%.


Moderately Conservative
You seek current income and stability with modest potential for increased investment value.
Fixed-income investments: 50%. Cash: 10%. Stocks: 40%.


Moderate
You’re a long-term investor seeking steady growth potential without the need for current income.
Stocks: 60%. Bond funds: 35%. Cash: 5%.


Moderately Aggressive
You’re a long-term investor seeking good growth potential.
Stocks: 80%. Bond funds: 15%. Cash: 5%.
This portfolio could be volatile.

Aggressive
You’re a long-term investor seeking high growth potential.
Stocks: 95%. Cash: 5%.
This portfolio may have substantial year-to-year value fluctuation.

Regarding 'how much to save' - as much as you can. A dollar today is worth more than a dollar tomorrow. Lock in your student loans if you just graduated (by 7/1) as interest rates are risking. And pay off any credit card debt before you begin investing. Cheers-

[Bretsky]

BRETSKY'S THOUGHTS COPIED AND PASTED

WHAT A GREAT QUESTION from somebody getting ready to get out of college.

Most individuals your age are pissing money away rather than thinking how to save it. And it's not that I'm a geezer at 37, but I think it's great that you are thinking about this as early as you are.

First off, I'll preface my views by saying that I work for a large bank and do nothing but Home Loans. As my 5 year old daughter says when she introduces me to her pre-school friends, "My dad helps people buy houses". And with all the programs our bank has, and the fact that I'm fair with people I'd say I'm one of the best at what I do.

So I'd have more inside information regarding real estate investing as opposed to the stock market....but I have personal experience and interest in both.

That being said, I started investing money in mutual funds at age 22 and in the stock market at age 25 (and I saw the best and worst since I'm VERY risk averse and look mostly at tech stocks). I've also been in a 401K from the day a company allowed me to be in one.

I'll offer some general thoughts and a step by step process as general views and anybody can comment as they see fit.

Coming out of college, I'd pound the table for you doing two things, and they go hand in hand. These two things IMO serves as your foundation for the "future". Once that foundation is set, then you branch off in riskier things such as Real Estate, Stocks, Flippings...etc...as you see fit.

401K
ROTH IRA

1. Get in a 401K plan ASAP and contribute at least what a company will match money to. For instance, a past company I worked for would put up to 5% into my 401K account if I contributed 10% of earnings. So I contributed 10% so for every$100 I earned $15 was put into my 401K account. My current bank contributes up to 3% of earnings if I put 6% in. So I contribute 6%. So for every $100 I make, I put $6 in my 401K account, but since that $6 is not taxed since it's put in a 401K I'd estimate I only lose $4 off that $100 on my actual paycheck if I dindn't have a 401K. And I set aside $6 and the company give me $3 for $9 in future savings plus the interest it will appreciate over the years.

2. Personally, my second biggest mistake in investing was not starting up a ROTH IRA when I was 22. I bought a Hot Red Ford Probe and had it paid off within 12 months. I spent a lot of money on booze and fun. But I was not setting aside enough money cause I was just living the good life.

Even if you only can afford to contribute $1000 a year, get that ROTH IRA started early. This is different from a Traditional IRA or 401K in that you put money in the ROTH after it's been taxes. BUT, and a very important BUT for youngyans, the accrued interest that money makes over time in that ROTH IRA is NOT taxed when you take it out at Retirement. So if you invest 100G over the next 40 Years and the value of that ROTH IRA is 250G and you wait til retirement age to cash it in, you get the 250G. That's a powerful investment.

Retailguy, or any, if I'm slightly off on anything in here, please correct me. But I think most will agree that to set up your future base you invest in your 401K if the company contributes and a ROTH IRA for to set your foundation for your future.

The second part of your question deserves another post so I'll give that a wing as well

[Bretsky]

"""Partial wrote:

How can I pay the least taxes upon graduation? Say you make 50,000 out of college, what is a good percentage of that to save immediately? ""

The answer to this question is short and simple IMO. Be sure you have good credit, and buy a house.

Many years ago people had to have a lot of money down to buy houses. Rules have loosened if you have good credit. Honestly rules have changed for everyone, but I hate seeing young buyers with challenged credit get rakes over the coals by high risk brokers with outrageous interest rates and fees.

If you don't have good credit then spend a year renting and build your credit score up to where you do have good credit and can get approved with a reputable bank that will treat you fairly.

If you are not self employed or a business owner, home ownership is one of the most effective ways to keep the money you pay into Uncle Sam low while watching the equity of something you own go up.

[Bretsky]

Once you are comfortable with your foundation, then it's time to "consider" more risk averse investments so you can retire both "early" and "comfortably". I look at the 401K and ROTH IRA and ways to help you retire comfortably.

Mutual Funds, Stocks, Flipping Property....if effective all nice ways to try to get richer sooner rather than later.

Stocks- Honestly this depends on your comfort level and understanding with the types of stocks you invest in. But do a lot of due diligence and UNDERSTAND what the market is if you are going to do this yourself via the net.

Starting in the mid to late 90's I began heavily investing in technology. Owned stocks such as Cisco, AOL, Yahoo, Applied Materials, Broadcom, DELL etc............keep in mind I wasn't nearly early enough on any of these to be one of the rich guys you read about as these were all well developled companies when I bought them with the exception of a few.

I had a slightly below average understanding of the stocks I owned, and an average understanding of the stock market..........but I thought this was flippin easy because when I started investing we were in the Internet Craze.
Problem was I believed I was going to get rich off these and didn't understand when to sell.

I invested about 20G and watched that multiply by over 4x and bragged to my wife that my goal was to make 25% a year on the annual investments. Even had an early age targeted for retirement and arrogantly showed my wife that the balance on our stocks was more than our mortgage balance. And it worked for a couple years. And then it all crashed. And over and over and over I told myself "it can't go lower". And it did....much lower.

In the end, I only made a very small profit on that investment because truth be told, I didn't know nearly enough about what I was doing to handle online long term investing.

Mutual funds, to me are clearly safer; stocks..which are still my personal interest....can great reward or greatly disappoint. But be sure you know what you are doing if you are doing it on your own.

[Bretsky]

HOUSE FLIPPING

I'm right in the middle on that one. When I started doing home loans the home market was much stronger and I witnessed several success stories. Now that the home market is softer lately it seems I have witnessed several failures.

These TV shows...Carlton Sheets...etc...all make it sound SO easy on the infomercials. But truth be told, it's not nearly as easy as it sounds to find that home and then secure financing when the goal is to flip a house.

I'd preface by saying IF you are a handyman and find a possible deal and can fix it up yourself and sell is yourself...it can be very profitable. But most don't have those skills.

I've honestly been keeping my eye out for homes to flip or buy and rent out as well. Eventually I will give one a shot, but I'm really proceeding conservatively given the soft real estate market and growing number of realtors who are getting into flipping.

I may end up trying to first buy a duplex and rent it out. If you can find a property, do some minor fixings, and have two rentors paying a bit more than your mortgage on a property that will appreciate, it makes sense. But the numbers HAVE to make sense.

I'd proceed with a lot of caution on this idea.

[HarveyWallbangers]

This is riveting. More! More! More!

[Bretsky]

This is riveting. More! More! More!

What are your views Harv ? I know a lot in here know a hell of a lot more than me about most of this stuff. I've always thought smart people learn from other peoples mistakes. Well, I'm normally the dumb f'cker who always has to learn from my own mistake.

[HarveyWallbangers]

What are your views Harv ? I know a lot in here know a hell of a lot more than me about most of this stuff. I've always thought smart people learn from other peoples mistakes. Well, I'm normally the dumb f'cker who always has to learn from my own mistake.

I don't know crap about all of this stuff, so I find this helpful. My wife wears the financial pants in the house. I learned one thing in my late 20s. Investing in anything just about beats not investing at all. We have some 401Ks, some IRAs, and I also have some Mutual Life funds.

[Bretsky]

What are your views Harv ? I know a lot in here know a hell of a lot more than me about most of this stuff. I've always thought smart people learn from other peoples mistakes. Well, I'm normally the dumb f'cker who always has to learn from my own mistake.

I don't know crap about all of this stuff, so I find this helpful. My wife wears the financial pants in the house. I learned one thing in my late 20s. Investing in anything just about beats not investing at all. We have some 401Ks, some IRAs, and I also have some Mutual Life funds.

Sounds like you guys are doing all the right things Harv. I've always felt, that after clearing any high interest CC debt out, best things to do are first set your future up with the 401K's and IRA's and Equity in Home.

Then some will choose to dabble in higher risk things. I'm a dabbler so I hope I can get some ideas in here.

I'm the guy that will watch an Infomercial and wonder..........hey.......I can do that if the next Joe can.

B

[Partial]

I appreciate it Bretsky, lets get some more opinions too! The more the merrier!!

[MadtownPacker]

Great thread Bretsky, I too find all this info very interesting. Here in CA houses are not selling and the prices are starting to drop but they where so overpriced that they are still unreasonable. i got sonme deal set up at work where they match $2 for every $1 of mine I put away. What the hell is that called?

[Bretsky]

Great thread Bretsky, I too find all this info very interesting. Here in CA houses are not selling and the prices are starting to drop but they where so overpriced that they are still unreasonable. i got sonme deal set up at work where they match $2 for every $1 of mine I put away. What the hell is that called?

I would think that is your 401K retirement plan. But normally companies match $1 for every $2 you put in up to a certain % of your earnings, which is still outstanding. If your company is matching more than that they are probably very fiscally healthy and it's even better. Then they take that money and invest it in mutual funds and normally you have some say in how to diversify the investments.

That should get your foundation set up well so if we make it to retirement we can comfortably retire. Who the hell wants to work in their 60's anyway ?

Real estate sounds insane there. Certain markets, like CA that have appreciated at such a high % for so long, are drastically slowing down.

If only I did loans in California.

In Wisconsin if I close $1,000,000 of loans per month where I live that's pretty decent and I make a decent living.

In California that's 1-2 loans a month.

In Jefferson County, where I reside, the average loan closing is around 130,000.

Cheers,
Bretsky

[Bretsky]

I appreciate it Bretsky, lets get some more opinions too! The more the merrier!!

I look forward to more comments from some of the CPA/accounting guys.

B

[Patler]

Where do I start? At one time or another I have benn involved in and with so many different investments. I'll breakup my remarks in "topics" in different replies.

Sideline businesses

I looked for weekend and night things that would be highly lucrative for the hours spent.

My first venutres into business were sidelines to make money above and beyond what I earned in hourly wages while in college. The first was salvaging recyclable materials out of buildings that were being torn down. This works well in small towns where owners will let you in free to pull out what ever you can. I was given a window of 3 or 4 days, usually, to take out whatever I could. Hacksaws, chainsaws and sledge hammers were my tools! Brutally hard work, but paid well for the hours spent. You need a buyer, but I hauled tons and tons of cast iron radiators, copper plumbing, etc to salvage yards.

Now there is a great market for recycled wood floors, woodwork,etc. But KNOW YOUR BUYER before you start. I never stored the stuff, just hauled it from the site to the guy who bought it from me.

My point in telling this story is that there are a lot of sort of odd ball things you can do in your spare time that can be quite lucrative. If the investment of money is small, and what is needed mostly is your time, TAKE A CHANCE! What is there to lose?

[Partial]

So here's a scenario,

if you have a 401k in one company, that move to another, what happens then? Do you still get to keep your old 401k?

[MJZiggy]

You could, but it's probably easier to roll the old 401K into the new company plan.

Shamrock, there is such a market for reclaimed and salvage materials right now--I bet you made a killing doing that.

I am no financial genius, but I can tell you that I've read a couple books on the topic and they recommend that you do the 401K stuff and while you're doing it, start making substantial payments to your credit card debt and once the credit cards are paid off, take the money that you were paying to them and add it to your car payment and once your car payment is paid off, add the money that you were paying on the car payment to the money you were paying on the credit cards and put the whole amount to your mortgage. Supposedly you eventually run out of things to pay off and then you have your whole income to yourself minus taxes.

[MadtownPacker]

I would think that is your 401K retirement plan. But normally companies match $1 for every $2 you put in up to a certain % of your earnings, which is still outstanding. If your company is matching more than that they are probably very fiscally healthy and it's even better. Then they take that money and invest it in mutual funds and normally you have some say in how to diversify the investments.

That must be it then, I signed up cuz they said it cant lose $. I do think I had to agree to a % but they do everything as far as selection of investments. Wish I was a smart con like you.

[MadtownPacker]

On the subject of credit cards, I read somewhere about signing up for those 0% APR for a year type of deals and then when the year is almost up transferring all your balance to another offer for 0% interest. Does anyone do this?

[Patler]

Flipping Houses

I did this as a young man, without realizing that I was doing it. It wasn't called "flipping" back then! The first few houses we lived in were "fixer uppers". I had time and some skills, so I looked for real good deals on sort of run down houses in good neighborhoods. The first was bought from a couple we knew in their 80s. Owned it about 15 months and sold it for twice what I paid for it. After duducting the costs of materials, I made around 25%. Of course, what the final price was back in those days wouldn't even buy a new car today!

I found it easiest to do a "flip" in the house I lived in. I was always there and could work even a half-hour if I had the time. If you have to "go to" your flip, you need blocks of hours to accomplish anything. My costs were less, because I lived in the investment property while renovating. Only one mortgage.

The key to this is KNOW YOUR REAL ESTATE MARKET. Don't renovate a house to be the most expensive one in the neighborhood, it will be hard to sell. You are better off taking on the neighborhood eye-sore and making it into a slightly better than average one for the neighborhood. Shop lumberyard closeouts, opened boxes, etc. for your materials. You can save an amazing amount of money this way. Renovate to conservative styles, that won't offend any buyer. Remember, its not your tastes that count, its making the property look nice to as many potential buyers as possible.