How many of you guys use a financial advisor. I see a lot of comments saying it's dumb to have X amount in checking/savings. I see some say blow it all in the market and only keep a months worth on hand, etc... Overall consensus is to put money elsewhere besides a bank. If I already MAX out tmy 401k contributions each year, and MAX out a Roth IRA, And have a little in my e-trade account (20K) and keep a little more than average in the bank, where to invest this money.


I like to buy things, like I want to buy a new car soon, I usually put down 1/2 of the car, so I'm thinking the new escalade (90k). If I had all my money in the market, I wouldn't have the 40k or so I would put down on this car. Also say I want to re-do my kitchen (30-50k), I would imagine it would be tough if I weren't so liquid. So how would I manage that?

So what's a good amount of liquidity vs investments? is there a %?  Should I go to a place like Charles Schwab?

Just bought my first house/mortgage(last week) so I am cleaned out.  I was pawning shit to ARFCOM'ers, selling other shit, running up credit cards contemplating selling blood.    

Today I signed for a personal loan to cover the high interest cards.  Zeroing one, dropping the balance from 14% to 3% as well as transferring balances on another 12% card to an interest free card.  

Now to pound out double and triple payments on the personal loan then move to the interest free card balances.  After that either flip the house or do triple payments and pay it off in 5 to 7 years.

If my calculations are correct, in 8 years I'll have $87 in the bank and no debt.  I was debt free up till Jan this year.

I'm a special case as I'm starting at 49 whereas most everyone else started in their 20's.  Most of my friends are retiring and I'm just starting.  Wish me luck  

no, you should go to Amazon and spend $17.

http://www.amazon.com/About-Asset-Allocation-Second-Edition/dp/0071700781

i wish, oh how i wish, that more ARFCOM'ers would learn about the concept of asset allocation -- it is the single most important factor in balancing risk vs return vs a myriad of other factors (age, etc).

most of the folks in this thread asking, "what do i do if ...X... ?" would benefit from reading Ferri's text linked to above.
it is not a math book.  it shows how to plan HOW and WHAT to do with your money based on YOUR situation.

several people in this thread have asked "i have $100K, what should i do with it?".

there are many factors which would drive certain asset allocation behaviors...

-- age.
-- years to retirement.
-- current retirement assets (taxable and non-taxable) situation.
-- short term debt.
-- long term debt.
-- major upcoming expenses (college tuition, etc).
-- risk tolerance.
-- etc.

someone who is 23 with no spouse and a new job will have one approach to investing $100K.
another who is 33, married, with a baby on the way will have another approach to investing $100K.
another who is 53, married, with one freshman in high school and another freshman in college, will have an entirely different approach investing $100K.
another who is 63, widowed, retired, and selling a house will have an entirely different approach investing $100K.

if you get nothing out of this thread other than picking up Ferri's "All About Asset Allocation", you will be ahead of 99.9% of other long term investors. proper asset allocation is the single most determinant factor in long term portfolio performance. simply put, asset allocation is a $10 term for figuring out how not underweight nor overweight aspects of your overall portfolio.

easy example: you have heard the term "house rich, cash poor". this describes a condition where a person has a very nearly paid off house, but little free cash flow, and insignificant retirement assets. from an asset allocation perspective, one would say that this individual is overly concentrated in real estate. yes, it's their home, and a paid off mortgage is nice, but it came at the expense of everything else including making long term retirement investments. the result of this situation is that the individual will most likely have to sell the house in order to live comfortably in retirement (or reverse mortgage, basically the same thing). this doesn't sound so bad, unless it happens to you during a prolonged real estate downturn, and in an area that is losing jobs. then, your "retirement asset" is now worth less, perhaps a lot less. in this specific case, paying down the mortgage INCREASED the risk to having sufficient retirement assets. but this is an avoidable situation.

ar-jedi

i'm uncertain how someone else making money takes money away from you.
it's not zero-sum -- you can make money along with everyone else, it's allowed you know.

ar-jedi

read this ENTIRE thread:
https://www.ar15.com/forums/t_1_5/1737565_Got_a_Roth_IRA.html&page=1

an IRA (traditional or Roth) is not an "investment", per se.  it is a tax-advantaged container.  the thread above covers this.  

start here:
https://www.ar15.com/forums/t_1_5/1737565_Got_a_Roth_IRA.html&page=1#i53017017
and then here
https://www.ar15.com/forums/t_1_5/1737565_Got_a_Roth_IRA.html&page=1#i53017099
but i again encourage you to read that entire thread.

ar-jedi

switch to decaf perhaps?  

money rates, and therefore inflation rates and borrowing rates, are cyclical and highly correlated.

remember 1980, the days of 15% mortgages? well you could get a 1 yr CD for 12% as well !!!

notice the differential -- about 3%.

today, you have 4% mortgages and a 1 yr CD will yield 1%.

notice the differential -- about 3%.

i fully realize that the folks living on fixed income are adversely impacted by the current economic situation. making 1% annually on your retirement portfolio is not very good in the long term. hence, the need for higher yields on retirement assets has driven all kinds of folks into the equities markets in search of higher returns. this is turn has pushed up the stock market.

that said, the economic situation which is found at the opposite condition is many, many times worse. today, there is no possible way that wages would keep up with the inflation associated with 15% mortgages and 1 yr CD yielding 12%. i don't want that, no one wants that.

regression to the mean will likely result in a transient return towards "more historically normal", meaning 6.5% mortgages and 3.5% 1 yr CD yields.

again, notice the differential -- about 3%.

this will only remain quasi-static if the inflation rate can also be maintained at about 3%. otherwise, there can be another tipping point and it's never a certainty which way it will go -- and politics has a lot to do with it.

you can't control this, and it's difficult to plan for. but proper asset allocation can mitigate a lot of unwanted effects to your retirement portfolio.

anyway, if you haven't refinanced in this credit market already, do so now. immediately, in fact.
if you are purchasing ANYTHING (car, tractor, equipment, etc) you should weigh the potential benefits of NOT paying for it outright, and using someone else's money for the duration.

ar-jedi

On your recommendation, I bought the book. Hopefully I actually read it.  My situation isn't typical of your average American. But I do make a comfortable living, and spend within my means. I just have no idea where to start with my excess. I usually spend it on foolish things. But I do make double payments on my mortage, paid off my student loans and cars, I'm 31 years of age.

Not really sure how to answer this one... We have about 5-6k in our checking account most of the time... which covers all of our expenses easily.  We have a savings account that is our emergency fund, that is about 3x that... That money never gets touched unless, you know.. it's an emergency.  Then we each have our "fun money" accounts, which probably have 4-600 bucks in them.

Don't really feel right saying 20k, as that emergency fund... I don't really consider that money we should spend unless absolutely necessary.  So I'll say 5-6k.

buy with confidence.
example:
https://www.ar15.com/forums/t_1_5/1737565_Got_a_Roth_IRA.html&page=5#i53412536

another example:
https://www.ar15.com/forums/t_10_17/670528__ARCHIVED_THREAD____A_Honest_question.html&page=2#i11464503

ar-jedi

It is a good book that is easy to read and understand. Just set aside some time every day and read one chapter until you are done with it. It is a short book that requires a very small time investment for a potentially huge return in wealth.

As for " I just have no idea where to start with my excess. I usually spend it on foolish things."  you start buy stop buying foolish things and start saving it. Building wealth starts with not wasting your income. From there you read the book. After that you will have a better idea of how to plan to put your income to work for you.

I don't think you understand, I buy foolish things WHILE saving.... I keep 6 figures in my checking/savings account, so when I want something I don't need, like another rifle or some electronic device i didn't know I needed but do not know how I went this long without it. I buy it.

Checking and savings is under $1000.  I keep most of my money in stocks.

Damn. That would make me skittish.  Lose track of time, and a credit card payment or rent check would bounce.

Holy Moses, I would blow that by Tuesday

this, it stinks

I keep my $ at home in a safe. Only keep enough in the digital money in the bank for bills, nothing more.  You spend less if you keep it in cash.

I'm in the middle of a move so it's a wee bit lower than normal but I am usually also right at the top of the curve there with $7-8k. Although I am kind of lying. It's never actually in the bank.

I think my situation offers a more concrete example for FALARAK. I think debt is a dangerous tool and if misused or you are unlucky it will cut you off at the knees financially. You also need a lot of self discipline to benefit from debt - and most people don't.

In 2003 I purchased my home - this was at about the peak of the market but it was modest (1 bdrm condo) because I made about $11 an hour and had set up a monthly budget. It was impossible for me to buy this home WITHOUT debt - and if I hadn't established a credit history by using a credit card (and keeping it paid off) it would have been hard to qualify for the mortgage. At the time I purchased the home the monthly payments and HOA fees were cheaper than renting - and even when real estate in my area crashed in 2007-2012 the mortgage and HOA was at least comparable to monthly rents if not slightly better.

In the past couple of years real estate in my area did a complete 180 - prices and rents have shot up quite a bit. Some of my coworkers now pay over 2x what I have to pay for mortgage and HOA each month to rent apartments. Owning my home has kept my monthly housing expense curve flat - and generally lower than the expense curve for renting too. Since the market turned around I refinanced with a lower rate and shorter term in order to pay off the property even faster - also I lowered my mortgage payment by $20 a month.

Right now I'm reaping some of the rewards of debt - I make more money now than I did when I purchased my home but my monthly outlay for housing hasn't increased significantly. My mortgage now saves me hundreds of dollars a month in expenses (compared to renting). That frees up a lot of money from my income to save, invest, or spend as I see fit.

Note that my mortgage is my only long term debt. I've never financed a vehicle and I keep the credit cards paid off each month. I detest the obligations that debt forces on you and I regard it as a necessary evil - if you don't need it then don't deal with the devil to get it.

median or  mean

but, over time you end up with less if you keep it all in cash.

ar-jedi

Are you serious?

I think you're serious, but it can be hard to tell.

Hope he has a good insurance policy. It would suck to see a life's savings burn up in a house fire.

Lots of retirees can't retire on their 401k

Because of current interest rates, or because they didn't save enough?

If a person entered the job market at age 25, making $20,000 a year.....
Assume they invested 15% of their income
Assume they earned only 5% over the long haul.
Assume they got ZERO employer match.
Assume their salary grew at 3% over their 40 year career, from 20k ending at 65k (totally reasonable given promotion, improvement, and inflation)

They'd have over $600,000 in their 401K.

Assume they are in totally safe investments at retirement and are returning 2% annually.  That's $12,000.  Assume social security pays them another $12,000 a year.  So they must draw off an additional $40,000 of principal per year.  They could continue this for 15 years assuming NOTHING improved in that time.... that gets them to age 80.

These are conservative numbers.....

Lots?  Try most.

The average American nearing retirement has approximately $12,000 in retirement savings.

The average overall is about $3,000.


LOL

Yeah okay.  Why not just assume that they can fly, too?



http://www.zerohedge.com/news/2013-02-14/average-american-contributed-2733-their-401k-2012

$9,000? I'll raise the BS flag on that one.

That's all good and swell, but who's counting the hillbilly retirement funds?

The average savings is skewed by those who saved nothing, and makes my whole point.  If you cannot retire on your 401k/personal savings as a primary retirement income vehicle, you didn't save or invest appropriately.

I literally have $12 in my checking and savings accounts.  Didn't think that that was so awful.

Thanks for making me feel bad, GD.

I bumped up my 401K last week to 30 percent of my income to make the 18k max by the end of the year

really?

let's ask a company with a bazillion (actually, more than 24 million) 401k and IRA accounts:

https://www.fidelity.com/about-fidelity/employer-services/quarterly-retirement-snapshot-q1-2015


ps
also see
http://time.com/money/3838816/fidelity-401k-savings-high/



ar-jedi

the comments from that 2013 link are AWESOME!  

ar-jedi

Curious...  



Once the laughter dies down over all the lost upside from the past several years, what would you tell that fellow today who is sitting on a large but under-performing nest egg?



Buy back in at record highs?  



Wait for a dip (how big of one?)?



Or ?
 

first, spend $17.

http://www.ar15.com/forums/t_1_5/1739597_The_average_amount_of_money_in_an_American_s_bank_account_is__9_023.html&page=9#i54026109

ar-jedi

The average 401k. Yes.

Now, how many Americans have 401ks?  Average in all those at near zero balances.

the linked article and my quoted snippet above includes information about IRA balances.
the "I" in IRA stands for "individual".  
anyone can open an IRA, contribute, and select appropriate investment vehicles inside the IRA.
it's not rocket surgery.



read
https://www.ar15.com/forums/t_1_5/1737565_Got_a_Roth_IRA.html&page=1#i53017017
and
https://www.ar15.com/forums/t_1_5/1737565_Got_a_Roth_IRA.html&page=1#i53017099

moreover, the link above includes information about other types of retirement accounts:


ar-jedi

uh huh

And IRA's require initiative.  People with IRAs probably also have 401ks.

i'm curious.

do you have a 401k?
do you have an IRA, either Roth or Traditional?
do you have another type of DC plan (e.g. TSP, 403b, etc)?

ar-jedi

I rolled all my orphaned 401(k)s into an IRA in my regular brokerage account. It was easier to manage this way plus it gets my account balance over a threshold which saves me yearly fees. The goal was to only have to manage/rebalance a single 401(k) since I had a bunch of different ones floating around. I could have instead rolled everything into a single 401(k) but I wanted an IRA and there was the annoying fee thing.

I have like 50 bucks in there right now.

Good advice. I will give my example. I have paid off roughly 90k in student loans over the last 7 years, mostly over the last 5. I've also paid cash for 50k in cars. Don't get me wrong, it is nice not having payments hanging over my head, but I would be far ahead of where I am now had I been willing to risk the market beating my loan rates.