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November 03, 2016



I like these tips. I like talking about and thinking through this type of stuff but sometimes its hard with friends when you arent all at the same financial point in your life. I reached the same point as you a few years ago (not sure what to do next with $$) and started reading. There are a lot of great blogs out there that helped me along my way:
The simple dollar - Trent Hamm sold his blog a few years ago but he still writes for it occasionally. I mainly read his posts but the others are decent as well. He does a great job breaking down complex concepts into simple ideas.
Mr Money Mustache - this is a great place to search for any topic you want to know. It can get deep on taxes, etc and other next level shit that isnt as important right now, but its really useful. more geared towards early retirement.

you may also want to read one of the boglehead books - that's where i started and it was really helpful to explain where i should put my money.

my short answer: if you are already maxed out on retirement accounts, open up a brokerage account with vanguard and put money into the total stock market index (VTSMX). the index fund is a way to buy tiny pieces of lots of stock, minimize your risk, yet still get returns on your investment. no one can predict the market and those that say they can are just lucky. even warren buffet recommends the index fund.


I am reasonably Good With Money (my parents did things like leave Money magazine around where I would omnivorously read it is a kid - Money, by the way, is a pretty good source of advice for the "what to do next" issue, and now I work at a financial services company). Some additions:

- You should try to build emergency fund even if you have debt, especially "good debt" like student loans. The reason is that if you have an emergency, like your car dies and you have no other way to get to work, you want to have some liquidity to handle it. Your emergency money should be somewhere super-stable and liquid - any bank account or money market account is fine.

- 401ks also come in Roth flavor. What this means is that your money goes in after-tax. You will pay more taxes, but it is a sneaky way to save more because you won't have to pay taxes when you withdraw the money - essentially you are prepaying your taxes. Deciding whether you want Roth or non-Roth depends on a lot of things. For example, if you are in a low-earning state (e.g. you're a grad student, or at the start of your career), paying taxes now is better since you'll likely be pulling out (i.e. earning) more in retirement. If you are at the peak of career, paying taxes later may be better. If you live in a high-tax state now and are planning to move to a low-tax state in retirement, paying taxes later is better. I have no idea what the "right" decision is, so I split mine down the middle.

- If you have more money left and want to save for retirement, maxing out your 401k is a good place to start - especially if yours has great options like Vanguard target date funds. Some company 401ks offer less-good options (i.e. funds with higher expenses).

- The big risk of 401ks is that you will want the money before you retire. Maybe you would want to buy a house or have a kid or take a year off and travel the world. For stuff like this, you'll want to figure out a time horizon. If you want to buy a house in 2 years, it's a good idea to accumulate that money somewhere safe, so that stock market dips (which may mean great buying opportunities) don't torpedo your down payment. If your kid is going to college in 15 years, probably better to invest in something more aggressive (there are also other tax-advantaged accounts called 529s for education - you can use this to save for more education for yourself too, if you want it). If you have no idea what you might want, maybe split the money between a total stock market index and a bond market index. Vanguard offers both as funds or as ETFs (ETFs = slightly more volatile, lower-cost versions).

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