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Savings

Connemara

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I'd like to get some ideas on socking away the dough. How do you structure your savings? From what I've read/been told, 20% of your net income is the magic number. It's best to first ensure that you have a 6-month supply of net income. And put it in a plain old savings account or something else that's liquid. From there, you should split it up between investments (index funds maybe?) and retirement.

I don't know how many people actually follow a formula...so if you don't, what are some general guidelines you follow?
 

Valor

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Save as much as you can.

Cash under pillow -> Checking -> Savings -> Retirement -> Investment Vehicles

Generally people recommend 6 months living (including rent) that you keep liquid (more liquid than savings)
 

Lowndes

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I set it up to be automatic so I don't notice the money and I know whatever is in my bank account I can spend.

I just started working six months ago and this is what I have done so far. I put away about 10% of my gross into a 401(k) to max it out and get the maximum tax benefit there. And then I send about 10% of gross to my Vanguard Account as I really like their index funds. Not as diversified as I would like to be in different index funds currently because of the minimums for each but as my savings increase I'll diversify more.

Also, for me personally it doesn't work well for me to have my savings just sitting in my savings account right there with my checking. It is just to easy for me to transfer that money back into my checking account.

I'll be interested to hear what older investors have done as I am pretty new to this and have no idea if my policy is good or bad. Figure at least I am trying to invest so that is better than nothing.
 

otc

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Yo brah---read the book I suggested

http://www.amazon.com/Will-Teach-You.../dp/0761147489 (or just crawl around his blog..a lot of good advice there before he decided to dedicate all of his time to entrepreneurship)

I don't know that I follow a specific formula...but most of it is automatic and recurring.
I get paid every 2 weeks and the money dumps into a citi checking account that functions as my inbox (they seem to have good transferring and online bill pay options). Pre-tax things like 401k have already been taken out at this point.

a few days later, some transfers kick in. A portion automatically goes to the brokerage that houses my Roth and a larger portion goes to a high interest ING account (because they let you have sub accounts without actually splitting the real account). Citi automatically cuts a check every month for rent and student loans all pay directly from the checking too. The amount left in the account after transfers is enough to cover my normal credit card bill (large things like a planned furniture purchase or an emergency repair get a transfer back from the ING account).

I don't really split my ING into many sub accounts (for instance...I did not see the point in starting a "wedding" account at this point) but the functionality is there to save and budget for separate things. I actually keep my emergency fund in a different high yield account that provided an ATM card so I can get to it immediately.

The nice little bit about automatic transfers and sub accounts is that it is psychologically easier to increase a transfer that is already happening than to start something new. If you are only saving $5 a month for something and it suddenly becomes more important to you or your income increases, it is a lot easier mentally to ramp it up than to start fresh (and that little pile of $5s gives you momentum)
 

aphextwin07

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open a 401K as quickly as possible if you haven't already, and try to max out your contribution if you can swing it.
 

StephenHero

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I had about $35,000 when I graduated and put some in money market accounts, some in bonds, and left the rest in normal savings. That has worked out well. Then I let my dad start buying low risk mutual funds and stocks with some of that money when the stock market bottomed out. I now aim to put aside 25% of earnings and I'm looking into other longer term options as well. Saving money can be really fun if you see returns on it.
 

Lord-Barrington

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First order of business should be to set up an emergency fund. Usually 7K-10K (around 4-5 months of living expenses) for a single person living within their means is OK.
 

cretaceous_cretin

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Originally Posted by StephenHero
I had about $35,000 when I graduated and put some in money market accounts, some in bonds, and left the rest in normal savings. That has worked out well. Then I let my dad start buying low risk mutual funds and stocks with some of that money when the stock market bottomed out. I now aim to put aside 25% of earnings and I'm looking into other longer term options as well. Saving money can be really fun if you see returns on it.
Be careful with bonds and bond funds. The price of a bond changes inversely with the prevailing interest rates. If long term interest rates start to go up due to inflation kicking in, which a good possibility due to all the dollars our government is printing, it could really hammer the bonds/bond funds you are invested in. A discussion on interest rate vs. bond price can be found here: http://stocks.about.com/od/understan...dint111004.htm
 

Mr Herbert

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i have a mortgage so dont really save any money but i guess i put away about 20% of my income above them minimum into my mortgage repayments

i just set up an automatic transfer.. every time ive got a pay rise i up the transferred amount automatically so i dont get used to it.

i actually run very low on cash. i use my credit card for all big unexpected bills and pay it off the following month.
 

ginlimetonic

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Originally Posted by Connemara
I'd like to get some ideas on socking away the dough. How do you structure your savings? From what I've read/been told, 20% of your net income is the magic number. It's best to first ensure that you have a 6-month supply of net income. And put it in a plain old savings account or something else that's liquid. From there, you should split it up between investments (index funds maybe?) and retirement.

I don't know how many people actually follow a formula...so if you don't, what are some general guidelines you follow?


well, a general rule of thumb asset allocation should be:
(100- your_age)% in stocks
(your_age)% in bonds/fixed income/cash
 

Mesta

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If you'd have around 30k$ on your checking account and have no idea what to do with it, what would be a risky move that could pay off? (moderate to high risk).
That's roughly what I'll have this year to save and I dont have any saving account or anything else, it's just rotting on my checking account :p
 

otc

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Originally Posted by Mesta
If you'd have around 30k$ on your checking account and have no idea what to do with it, what would be a risky move that could pay off? (moderate to high risk).
That's roughly what I'll have this year to save and I dont have any saving account or anything else, it's just rotting on my checking account :p


At least put it in a high yield savings account like ING or HSBC Direct. They aren't paying much now...but rates could go up and at least it is something.

Moderate risk move that could pay off would be to put half of it in a S&P500 index and the other half in a REIT fund...
 

Joffrey

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I am pretty happy with what I have in my 401k.
 

cladnin

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Read some books. It's the best advice anyone can give you. You'll learn *something* from each.
 

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