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Old 06-03-2007, 02:43 AM #1
Mps2216
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Here it goes...

Well I'm sure this sort of thread appears fairly often, but I lack the search function and am interested enough to seek some information from the people here in the investment subforum.

Well, I'll begin. I'm sixteen years old and a rising senior. I'm interested in my future but not necessarily overly concerned. I'm not going to state that I am brilliant or extremely savvy in concerns to the financial/business industry/community, but I'm confident in my intellect and my ability to complete what needs to get done. That said, I'm at a point where I'm putting my life in perspective. Creating a stable financial future is part of this. I realize that makes me sound like a complete overcaring nerd, but I do what I gotta do. Thus I have concluded that it is best that I begin to invest (disregard rhyme), even if insignificantly. Essentially I want to familiarize myself with the concepts of finance and investing. I have a substantial saving account (Don't scoff, it's somewhat sizable) and a summer job. Now I do have a pretty nifty predisposition here. My dad is a CPA and my brother is a stock broker, who will be instrumental in this development. But nevertheless, I was hoping if I could receive some insight from people around my age, or who have gone through similar processes. What has been noteworthy in your financial ventures? Things that you regret? Tips or imperative things that should be done at this stage?

I'm the more philosophy and science/engineering oriented guy, so if possible keep the financial jargon at bay, or at least clarify. Thanks for any/all help. You don't know how much it's appreciated.
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Old 06-03-2007, 10:20 AM #2
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First off, I'd like to congratulate you for being light years ahead of the game compared to most people. The majority of our country doesn't begin to have thoughts like this until they're near their 30's. Starting early is the absolute best way to create a huge nest egg later on.

I'm a financial advisor at a bank. Without inflating my own ego, I like to think I might know just a little bit about this stuff.

I always start out by recommending you create a budget. Use paper and pencil, a check register, your own excel spreadsheet or a fancy software one that can be purchased at any computer store. Keeping track of your finances is the easiest way to find out where you can save more, spend more, etc.

You need to create a priority list of what gets paid out of whatever income you have. I like to use the phrase "pay yourself first." This means your own savings and investing comes before any credit card bill, car note, "play money," etc. I'm not saying to not pay your bills in order to invest, I simply mean that you should budget your money to go to YOU before the other guy.

If you're starting this early I recommend you set up a savings plan based on percentages. That way, no matter how your pay increases as you get older you will rarely have to readjust your plans. I like to recommend saving 20% of your income. If you find you can do more, by all means, DO IT! I am currently stashing away about 45% of my income towards my long term goals, and about 25% to spending cash and the rest to bills that I have. 20% is a good number to start with, though. It will also be sufficient to provide you with a good retirement fund as long as you're disciplined throughout your lifetime.

The basic breakdown of account that I set up for clients is as follows (and in this order of importance):

Emergency Account: This should be 3-6 months (longer if possible) of expenses in a savings account that is 100% liquid and easy to get it. If an emergency occurs, this is where you turn to solve it. You should be able to live 6 months without income from this one account alone. I have mine set up at about 15 months right now, I'd like to get it to a full 24 month supply but that will take time. This is the hardest account to be disciplined with, as it is usually a large sum of money and is easy to get to. By its nature, though, it has to be easy to get to when you need it.

Short term savings: Maybe you're saving for a car, a trip with friends, a four wheeler, whatever. This is money that you plan to use within a 12 month period and are constantly adding/withdrawing funds from. The size of this account depends on how much you spend and what you plan to buy next.

Retirement Account: This should be invested into some type of tax efficient account like a 401(k) or an IRA. You can find out how both of those accounts work at any financial website, but basically they all offer some way to either avoid paying taxes right now, or avoid paying them later. Either way, these accounts will grow more quickly because of that. This is money you plan to stash away until retirement and should be at least 20% of your income.

Long Term Savings: While it is similar to your retirement account, these funds are a bit different. This would be money you plan to use to buy the next house, put your kids through college, build wealth, take a vacation, etc. These accounts are usually held in a portfolio containing stocks, mutual funds and/or real estate. Mutual funds are by far the most common way to do this. These monies should be set away for 5 years or more. As this fund isn't set aside for retirement it can be set up in a number of ways in order to reach your goals.

Spending Cash: Money you plan to spend on food, movies, dates, weekend trips with friends, shopping, etc. This money should be kept in a checking account and will vary depending on how much you allow yourself to spend. These are spent for items that are not a regularly occurring expense for you. Gas for your car, for example, is an expense and should not come from this account. It is something that you can predict fairly easily and is something you should budget for.

Bills: You'll notice this one is last. It's not last because it is least important, but last because it should be put into your budget AFTER you feed those other accounts. With this method, in theory, you are much less likely to get into a bad financial situation with debt or too small of a retirement fund. This is where your car loan, gasoline, house payment, insurance, etc will come from.

I know that sounds like a lot to do, especially at age 16. That is why I like to use percentages. No matter what your income is, as long as you donate a certain percentage and not set dollar amount to each of these you will always be able to stay on track. This type of plan means you budget for your own future before budgeting what size house or car you can buy. If you at least get some of these going now you will be amazed at how quickly they add up.

It is easily possible to have tens of millions of dollars in your retirement account alone if you start early. Make contributions to those tax efficient accounts and compound interest (what you earn on your investment) should take care of the rest for you.

You sound extremely intelligent for your age, I'm confident you can figure out what percentage of your income goes to each account. If you wanted me to help with the actual figures you can email me for more help. My email is tfineis@gmail.com

I know this was long, but I feel that it is good information to get you started, as well as anyone else who happens to read this thread.. It is by far not a be-all-end-all plan to financial stability, but it is an extremely good start. Don't be afraid to open multiple checking and savings accounts at your bank. You can essentially have as many of these accounts as you want and it makes splitting up your money a lot easier than dumping it all into one account.

To recap:

- Budget your money
- Pay yourself first
- Keep each of these accounts separate from the others
- Become disciplined early and maintain that throughout life
- Starting early is a HUGE STEP and I applaud you for that.

Any more questions, please ask. Good luck!
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Old 06-03-2007, 10:36 AM #3
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I'll keep this short an sweet since I am leaving for a day of paintball soon, I will add more later.

First off, nice job on wanting a stable financial future at your age. And I thought I was the only one... Also, this type of post is not as common as you might think. Mostly, posts are from 12 year olds asking how to make money and buy new paintball gear.

Anyway, you stated that both your father and brother have financial jobs, they should, in my opinion, be your go to guys when you have questions. Advice on the internet can be great, but in many cases it is worth what you pay for it.

As far as noteworthy things... Having a broker that seems like a good guy, and who actually has my interests before his own. Many brokers will suggest you buy something that will help pay their salary. This can be solved by going with a discount online broker, but then you have no one to talk to or get advice from. I found that when I started a few years ago, I needed all of the advice I could get. Now that I am older and use the internet a lot more, I am considering moving to a cheaper online broker.

One thing I regret was not doing my own research, I trusted my broker with it all. While he has been good, there are some things I would not have done, had I know all of the facts.

I will add more later when I get back from paintball.
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Old 06-03-2007, 11:18 AM #4
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Quote:
Originally Posted by SoMich_Tom View Post
First off, I'd like to congratulate you for being light years ahead of the game compared to most people. The majority of our country doesn't begin to have thoughts like this until they're near their 30's. Starting early is the absolute best way to create a huge nest egg later on.

[...]

To recap:

- Budget your money
- Pay yourself first
- Keep each of these accounts separate from the others
- Become disciplined early and maintain that throughout life
- Starting early is a HUGE STEP and I applaud you for that.

Any more questions, please ask. Good luck!
Excellent! Wow, now that's informative. Hmmm... Well I'll certainly be heading down to the bank fairly soon. But great, I'll start some internet research on some of these topics as soon as possible. The only immediate problem I'm detecting however, is that with this number of accounts, I'm spreading my funds rather thin. Is that preferred than just beefing up just a few of them at this point? I suppose one does have to start small.

Thank you as well pb3190, I look forward to the rest of your post.
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Old 06-03-2007, 11:54 AM #5
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i personally sugest putting the bulk of your money in a stable account that will give you a small yield. This way you don't have to worry about losing everything in the stock market or similar things, but you can still have your money work for you. I personally have most of my savings in a mmo(money market organization) which is a mutual fund. A mutual fund, if you do not know, is when a large group of people pool there money together and use it to deversify the aim of their investments. Therefore, if Company A fails, you still have money in Companies B, C and D.
The mutual fund I have invested in is a rather agressive one averaging about 15%. You can chose from many different funds, some being agressive and others not.

FYI, I'm 15 and going to be a Junior next year.
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Old 06-03-2007, 06:03 PM #6
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Quote:
Originally Posted by Mps2216 View Post
The only immediate problem I'm detecting however, is that with this number of accounts, I'm spreading my funds rather thin. Is that preferred than just beefing up just a few of them at this point? I suppose one does have to start small.
I listed them in what I believe to be the order of importance. I would set up a plan to obtain each one after the other. (IE, your emergency cash should be first priority, then the next, etc)

As long as your bank doesn't have minimum balance requirements for each account (most these days don't, so I'm sure you can find a bank in your area that will work for you), open these accounts up and just get them going.
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Old 06-04-2007, 12:50 PM #7
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Originally Posted by SoMich_Tom View Post
I listed them in what I believe to be the order of importance. I would set up a plan to obtain each one after the other. (IE, your emergency cash should be first priority, then the next, etc)

As long as your bank doesn't have minimum balance requirements for each account (most these days don't, so I'm sure you can find a bank in your area that will work for you), open these accounts up and just get them going.
Noted. Alright, well I´ve begun to budget/determine how much money I've got at this point. Things looks alright.

To Pballer, I actually already have one account with the firm that my brother works for, and it in fact does have some mutual funds in it. A percentage of my college funds are in mutual funds as well. At this point, I will use that account and my savings account as my intial starting points, and then continue from there.

Thanks guys.
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Old 06-13-2007, 08:17 PM #8
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MPS- What's the status of your accounts? Did you ever get anything else going? Keep us updated!
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Old 06-13-2007, 10:48 PM #9
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First off, I'd like to congratulate you for being light years ahead of the game compared to most people. The majority of our country doesn't begin to have thoughts like this until they're near their 30's. Starting early is the absolute best way to create a huge nest egg later on.

I'm a financial advisor at a bank. Without inflating my own ego, I like to think I might know just a little bit about this stuff.

I always start out by recommending you create a budget. Use paper and pencil, a check register, your own excel spreadsheet or a fancy software one that can be purchased at any computer store. Keeping track of your finances is the easiest way to find out where you can save more, spend more, etc.

You need to create a priority list of what gets paid out of whatever income you have. I like to use the phrase "pay yourself first." This means your own savings and investing comes before any credit card bill, car note, "play money," etc. I'm not saying to not pay your bills in order to invest, I simply mean that you should budget your money to go to YOU before the other guy.

If you're starting this early I recommend you set up a savings plan based on percentages. That way, no matter how your pay increases as you get older you will rarely have to readjust your plans. I like to recommend saving 20% of your income. If you find you can do more, by all means, DO IT! I am currently stashing away about 45% of my income towards my long term goals, and about 25% to spending cash and the rest to bills that I have. 20% is a good number to start with, though. It will also be sufficient to provide you with a good retirement fund as long as you're disciplined throughout your lifetime.

The basic breakdown of account that I set up for clients is as follows (and in this order of importance):

Emergency Account: This should be 3-6 months (longer if possible) of expenses in a savings account that is 100% liquid and easy to get it. If an emergency occurs, this is where you turn to solve it. You should be able to live 6 months without income from this one account alone. I have mine set up at about 15 months right now, I'd like to get it to a full 24 month supply but that will take time. This is the hardest account to be disciplined with, as it is usually a large sum of money and is easy to get to. By its nature, though, it has to be easy to get to when you need it.

Short term savings: Maybe you're saving for a car, a trip with friends, a four wheeler, whatever. This is money that you plan to use within a 12 month period and are constantly adding/withdrawing funds from. The size of this account depends on how much you spend and what you plan to buy next.

Retirement Account: This should be invested into some type of tax efficient account like a 401(k) or an IRA. You can find out how both of those accounts work at any financial website, but basically they all offer some way to either avoid paying taxes right now, or avoid paying them later. Either way, these accounts will grow more quickly because of that. This is money you plan to stash away until retirement and should be at least 20% of your income.

Long Term Savings: While it is similar to your retirement account, these funds are a bit different. This would be money you plan to use to buy the next house, put your kids through college, build wealth, take a vacation, etc. These accounts are usually held in a portfolio containing stocks, mutual funds and/or real estate. Mutual funds are by far the most common way to do this. These monies should be set away for 5 years or more. As this fund isn't set aside for retirement it can be set up in a number of ways in order to reach your goals.

Spending Cash: Money you plan to spend on food, movies, dates, weekend trips with friends, shopping, etc. This money should be kept in a checking account and will vary depending on how much you allow yourself to spend. These are spent for items that are not a regularly occurring expense for you. Gas for your car, for example, is an expense and should not come from this account. It is something that you can predict fairly easily and is something you should budget for.

Bills: You'll notice this one is last. It's not last because it is least important, but last because it should be put into your budget AFTER you feed those other accounts. With this method, in theory, you are much less likely to get into a bad financial situation with debt or too small of a retirement fund. This is where your car loan, gasoline, house payment, insurance, etc will come from.

I know that sounds like a lot to do, especially at age 16. That is why I like to use percentages. No matter what your income is, as long as you donate a certain percentage and not set dollar amount to each of these you will always be able to stay on track. This type of plan means you budget for your own future before budgeting what size house or car you can buy. If you at least get some of these going now you will be amazed at how quickly they add up.

It is easily possible to have tens of millions of dollars in your retirement account alone if you start early. Make contributions to those tax efficient accounts and compound interest (what you earn on your investment) should take care of the rest for you.

You sound extremely intelligent for your age, I'm confident you can figure out what percentage of your income goes to each account. If you wanted me to help with the actual figures you can email me for more help. My email is tfineis@gmail.com

I know this was long, but I feel that it is good information to get you started, as well as anyone else who happens to read this thread.. It is by far not a be-all-end-all plan to financial stability, but it is an extremely good start. Don't be afraid to open multiple checking and savings accounts at your bank. You can essentially have as many of these accounts as you want and it makes splitting up your money a lot easier than dumping it all into one account.

To recap:

- Budget your money
- Pay yourself first
- Keep each of these accounts separate from the others
- Become disciplined early and maintain that throughout life
- Starting early is a HUGE STEP and I applaud you for that.

Any more questions, please ask. Good luck!
I'm 17 and it makes me glad to know that I'm going in the right direction. I've been doing this type of stuff for about a year and a half now. This makes it 100% clearer though. Thanks for the input
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Old 06-13-2007, 11:14 PM #10
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I have something I do now for a retirement fund.... I belive its along the lines of saving about $2,000 dollars when your around the age of 16. Put $2000 a year until your, I think it was at the age of 25.... It will build into around 1 millinoin dollars by the age of 65 thanks to time..... And interest...

I know you might not understand it, someone here has probably already said it, but still.
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Old 06-14-2007, 08:00 PM #11
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I have something I do now for a retirement fund.... I belive its along the lines of saving about $2,000 dollars when your around the age of 16. Put $2000 a year until your, I think it was at the age of 25.... It will build into around 1 millinoin dollars by the age of 65 thanks to time..... And interest...

I know you might not understand it, someone here has probably already said it, but still.
There are way too many variables to put it into cold hard figures like that, but yes, compound interest and time can make small investments grow to be extremely large down the road.
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Old 06-14-2007, 11:35 PM #12
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Edit: I almost hijacked the thread, sorry.
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Old 06-15-2007, 12:38 AM #13
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MPS- What's the status of your accounts? Did you ever get anything else going? Keep us updated!
Ah! Sorry! Of course. Well, thus far I have two accounts: a savings account with a local bank, as well as an account with my brother's brokerage firm. The largest percentage of my initial amount of money is to be invested to create a stock portfolio with my brother. However, I placed the rest, along with 90% of my current income, into the savings account. Luckily my parents have offered to pay for my normal expenses, with the notion that I will invest my income wisely. I'm really trying to build up this initial account early, as to be able to create some of the other accounts you suggested fairly soon. So far I'd say things are going pretty well! Your help was invaluable Tom, as well as the others who contributed. I hope things continue well, and I'll try to keep things up to date!
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Old 06-15-2007, 09:22 PM #14
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Sounds good. Having a plan is a huge part of success.

Keep us updated.
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Old 07-14-2007, 01:31 AM #15
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I have 1300 bucks in the bank saved after buying a car. I am 16 years old and I would really love to keep saving for when I get an apartment after I graduate. Is this a good choice or does it really not matter at this age?
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Old 07-14-2007, 12:47 PM #16
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I'm confused as to what you're asking.

Yes, it is always a good idea to save. Can you ever imagine having too much money? I can't.

I would think that is common sense.
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Old 07-15-2007, 02:20 AM #17
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I'm asking if I should have fun at this age and spend it on cool stuff or save it for the future?
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Old 07-15-2007, 09:44 AM #18
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Spend it on gas, fast food and clothes? I wouldn't.

Pick up a hobby and buy some equipment for that? Sure, within reason. Set a plan to spend a certain portion of your money and stick to it. You will be surprised at how much you can save but still have fun.

I live off of 40% of my income. That goes towards bills, gasoline, etc. 20% is play money, 25% is strictly retirement savings and the other 15% is short term/emergency savings. Figure out a breakdown like that and stick to it, that is the best way to save for what you want and still have some pennies in the bank afterwards.
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Old 07-16-2007, 01:28 AM #19
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Alright that sounds good, thank you.
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