Investment/Money Questions

I am a 23 year old, married, veterinary school student. My wife is a high school teacher ( she has only been working one year) and I will not really be able to save much money for another three years when I finish school. My question is what are some good resources(books, websites, shows) which I can expect to learn how to save and invest money safe and effectively for our future. If I can't start now I want to know how to when I can start. Thanks in advance guys.

My first suggestion would be to find a planner that is willing to help you usless you just want to do it yourself. Your wife has an awesome plan though the state(my wife is a teacher as well.) I encourage her to take full advantage of that. You need to sit down with her and decide how much you are willing to invest per month. Do you want to do it pretax or after tax?

Don't listen to, watch, etc Clark Howard.

Red

Listen to Dave Ramsey and go thru his Financial Peace University course....you will be set....

I'm going to suggest something a little different. You say that you can't afford to put any real money away yet, so I would tell you to hold off on meeting with a planner until you are ready. A lot can change between now and the time you need to start investing. Financial planners come in two flavors - those that make a living pushing investment vehicles that make them money and those that you pay by the hour. The latter would be a waste of your money until such time as you really do intend to make real investments and the former would twist your arm until you relented and bought something from him (you can tell I'm not a big fan of the shark type of fp). In the meantime, see if your wifes school district offers a 403(b) plan. That is a 401(k) for government employees. I wouldn't advise most 403(b) plans for major investing (they are too conservative for my tastes) but they can give you a good start until you are ready for something serious.

Doyle said:

I'm going to suggest something a little different. You say that you can't afford to put any real money away yet, so I would tell you to hold off on meeting with a planner until you are ready. A lot can change between now and the time you need to start investing. Financial planners come in two flavors - those that make a living pushing investment vehicles that make them money and those that you pay by the hour. The latter would be a waste of your money until such time as you really do intend to make real investments and the former would twist your arm until you relented and bought something from him (you can tell I'm not a big fan of the shark type of fp). In the meantime, see if your wifes school district offers a 403(b) plan. That is a 401(k) for government employees. I wouldn't advise most 403(b) plans for major investing (they are too conservative for my tastes) but they can give you a good start until you are ready for something serious.

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This statement is completely false and leads people to believe that all advisors are liars, cheats, and thieves. Maybe this has been your experience. Many planners do work like this for free(me being one). I do it because I can and I enjoy helping people when I can. Many mutual funds have minimums of $250. You can also by mutual funds with a fund of funds relationship that is more diversified than just a typical fund would be.

Red

Ol' Red said:

Do you want to do it pretax or after tax?

Don't listen to, watch, etc Clark Howard.

Red

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I don't really understand the benifits/advantages of either of these options, that is why I am wanting to get educated on the subject. My wife is currently putting 5% in a 407b (I think) but I am working a couple jobs right now(summer time) and she also is a waitress so we make enough to be happy right now, but can't afford to put away much more than that. Anyway, thanks for the quick advice I will definately follow up on it.

AIM Energy Fund

Talk to Ol' red, he can help you!

Do y'all really think it is important for me to see a financial planner this early in the game? I basically have nothing to work with.

Have your wife put as much as possible into her 401k.
Start a roth IRA for both of yall
Mutual funds are great as well.
Dont forget to check on them at least once a year to see how they are working.

Fireaway said:

I don't really understand the benifits/advantages of either of these options, that is why I am wanting to get educated on the subject. My wife is currently putting 5% in a 407b (I think) but I am working a couple jobs right now(summer time) and she also is a waitress so we make enough to be happy right now, but can't afford to put away much more than that. Anyway, thanks for the quick advice I will definately follow up on it.

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I was referring to a Roth IRA vs a Traditional. A Roth is funded with after tax dollars and all withdrawals are tax free. A traditional on the other hand is funded with pretax dollars and is tax deferred. Taxes are paid on the withdrawals. You can also get a tax deduction on the traditional based on your income. As far as using a planner, it's never to early to start a relationship. Trust is the name of the game in this business.

A 407b is another type of retirement account similar to a 401k and 403b. Don't let this confuse you. She needs to max it out though if she can.

Red

Red, I applaud you for doing right by your customers. I certainly did not wish to imply that all financial planners are bad. My problem with them is that there are a LARGE number of individuals that call themselves financial planners which are in reality just salesmen. In my mind there is (or should be) a distinct difference. Unfortunately, you can't tell the difference between the two just by looking at an yellow page ad or a business card.

FIrst of all no amount of money is to small to save. You would be surprised what you can save by just cutting out a little frivolity. Drink water instead of a soft drink, make a baloney sandwich rather that a burger at a cafeteria or McDonalds.

Start an IRA in a growth mutual fund and have regular debits from you checking account. You would be surprised how little money you need to get started.

Do reseach on investing, learn and understand the different type of investment products. Then see a professional or two. You will be more comfortable talking to Professional Planners if you have an understanding of what they are telling you.

Don't go it alone, you will have your hands full building your business.

Fireaway, I applaud you for thinking about your future at your age. I feel like the economy is going to worsen (not trying to start a political discussion, that's for the political forum). I'm concerned that the current generation doesn't know anything other than instant gratification and doing without is something that's foreign to them. (Sorry for getting off topic.)

If you can at all swing it, load up your Roth IRA before you make too much money.

teethdoc said:

If you can at all swing it, load up your Roth IRA before you make too much money.

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2010 the income limits of Roths go away. This also applies to conversions. I lean more towards Roths than traditionals. I also try to get as many clients that will to convert.

Red

Fireaway said:

Do y'all really think it is important for me to see a financial planner this early in the game? I basically have nothing to work with.

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No, it is not important for you to see a financial planner at this point. You actually may never need to if you are willing to take some time and do some research on your own. BUT, I would suggest that, at some point, yes you will want to get some kind of an advisor. You'll be busy with your vet business and probably won't have the time.

My advice...find someone you KNOW you can trust. Take time to really vet (no pun intended) all the guys who will want to run your money.

I do agree with Red. The statement that all planners are out there to rip you off is completely wrong. Yeh, they have a bad rep. But it's just like any profession. You've got to do some work to find the right guy.

Doyle misled you a bit on the types of advisors. There are "commission" advisors and there are "fee-only" advisors. Fee only advisors have gotten more press recently because you know up front how much it is going to cost you for them to run your portfolio. You don't pay "per trade" for a fee only guy. Are commission advisors necessarily bad? Nope...just make sure you find a good one you can trust over the long haul. There are advantages to both kinds.

Right now? You definitely do not need a financial advisor. The state pays folks to help your wife make decisions and, Red is right, their plans are awesome (my wife was also a teacher until we had a baby). For you, if you don't have much money to put away, my advice would be to open a Roth IRA and just start putting whatever you can in there. The earlier the better even if it's just $50 a month or something.

There are plenty of no or low cost IRA's out there that you can get into and there are tons of low cost mutual funds that you can get into as investments within the IRA. That would be the best thing for you right now IMO.

Later, when you have more time, your tax situation is more complicated and you have lots more money to invest....THEN go find a trusted advisor that you can lean on.

One other comment I have is that there is absolutely nothing wrong with listening to Clark Howard or Dave Ramsey. Just listen to them with a critical ear. They both have some great ideas and suggestions. But nothing they say is absolute truth for everyone. Clark would probably tell you to invest in index funds....but IMO that is stupid for a guy who is 23 years old. You are young enough to take some risk and you should.

disclaimer: I am not a personal investment advisor of any kind. But I do work in the investment industry as a portfolio manager working with large institutional clients. So I feel like I am able to give somewhat unbiased advice (and that's what it is....just advice) on this subject.

Ol' Red said:

2010 the income limits of Roths go away. This also applies to conversions. I lean more towards Roths than traditionals. I also try to get as many clients that will to convert.

Red

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We also have a new administration coming in, and some of them would like to change that.

I want to emphasize how much I agree with the above post. The investment market today is incredibly complex, and there are no cookie cutter answers.

You can learn about all the different investment mechanisms on-line and from a library, but the time you will spend, and the lack of conclusiveness will probably lead you to the conclusion that you might be better off paying a professional. Locating a professional may be as simple as asking for help at your local bank.

As a veterinary student you don't have much down time, but you might check out some of the courses at Continuing Ed. Taking some of the courses there would be a much more focused use of your time than surfing the net.

If your wife is a teacher, they have salesman coming around all the time trying to sell them on plans. So if you do nothing else, take advantage of them to listen to their pitch to educate yourself. Actually some of the plans are pretty good.

One simple investment plan of which I'm a big fan is the dividend reinvestment plan (DRIP). This is a no-brain way of developing a nice nest egg. You can start one with one share, and if you choose a company that pays a good dividend, the compounding effect will really work to your advantage long term. Many companies allow you to purchase shares directly from the company (no brokerage fee) and additional shares purchased through the plan usually don't have fees. Just the savings in the fees can make a significant difference in the long term compounding.

teethdoc said:

We also have a new administration coming in, and some of them would like to change that.

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You're right. I don't think they will though. At most they might do away with the cap. gains tax and take it back to regular income brackets or do something with the estate tax in 2011. Remember, they are weathly regardless of what they say. They don't want to pay those taxes.

Stay away from the Vanguards, Fidelities, etc.....anyone company that promotes no fee IRAs. You get exactly what you pay for. There have been several threads on here about how they operate. Vanguard for instance will change your benenficiaries at will regardless of what you indicate on your forms. T Rowe does something similar as well.

http://members.forbes.com/forbes/2007/0903/068.html

Red

One other thing that you MIGHT want to look into for use within an IRA would be Target Date Funds. T Rowe runs the biggest ones. But there are lots of them out there. Essentially you just let a mutual fund manager run your assets and they adjust the "risk" for you based on your years to retirement. They're not for everybody. But you might do some research on them. I won't try to go into all the details here.