My wife and I are both 24, and have both just started jobs that aren’t shitty. We both have 401k’s with employer matching to which we contribute.
We don’t know if we want to have kids, but in case we do, we’d like to start planning for things like college now.
What do we do? Mutual Funds? Ira’s? CD’s? What? Huh? Where?
What’s a decent, basic plan to get started for retirement and life’s other big things you need to invest and save for?
Even if your employer doesn’t match your 401k in any way throw as much as your comfortable with there. The tax advantages are real. And if your employer does match then it’s a great return.
Contact a broker and find one you’re comfortable with. Set up an automatic savings plan (say $100 or so pulled from your checking each month) and let that begin to build.
You’re young enough that you can really benefit from a moderate amount of savings every month. The compound interest will do you great.
I wouldn’t worry too much about college savings just yet. Once you have kids, investment vehicles like 529’s become available that make much better investment options. If you’re hard over on starting now, you can (verify this with someone not writing off the top of their head) set up a 529 for yourself or your spouse now, and change the benficiary or move moeny into a 529 for someone else later. Keep in mind once money is in a 529, it’s hard to use for other purposes than higher education without paying penalties.
Man, kids today. When I was 24 I was preparing for retirement by pressing tapes and screenprinting t-shirts for my rock band, which was then guaranteed to be the next Rolling Stones. 
Being 24 myself (but not having the luxury of working anywhere that matches my contributions to anything), I’ve learned that the best advice in the world is, whatever you’re putting your money towards, have it put there automatically before you touch your paycheck. 
You probably already do that, but it can’t hurt to repeat it.
IANAFA (financial advisor). I am drawing on what I just learned reading “Smart Women Finish Rich” (which I cannot recommend enough and it’s not just for women, either). These are the things I plan to do when I get a job that doesn’t suck:
Max out your 401k contributions, both of you. It may hurt for a while but by the time you’re 60, whatever you have to give up now to do it will seem petty compared to the mountain of extra cash you’ll have.
Open an IRA and max out the allowable contribution to that, too. If you absolutely can’t, then give as much as possible until you can save the full amount.
Find a financial advisor and open an account. Some will let you start with very little money and will let you put as little as 50 bucks a month into your account with them. Don’t bother with individual stocks. Unless you’re rich, stock dividends are never going to benefit you. Go for mutual funds.
Get everything possible deducted from your paycheck. You cannot spend money you don’t see. The book I mentioned talks about how Americans pay everyone but themselves first. This is why the average American has a pitiful amount in their savings account. You’ve got to pay yourself first (or, if you’re a tither, pay God and THEN pay yourself).
Exactly. Make sure it’s invisible to you. After a while you’ll get used to it.
One of the greatest bosses I ever had, upon hearing my mortgage complaints at 26 told me a great piece of wisdom:
“It will never be harder than it is right now. If you can survive now you’ll make it all the way.”
That applies to homes, savings, whatever.
Learn to live on less than what you make. Especially with two incomes, if you can live on one, you’ll be a long way towards having plenty of savings - as well as a safety net - plus you’ll have some idea of what children will be like should you decide to head that direction.
Don’t borrow. Particularly credit cards, but carefully consider borrowing money for anything that isn’t a house (or possibly further education).
Buy houses, then rent them out. Houses invariably rise in value, and the people renting them pay the mortgage for you. Of course, it’s not as simple as that. But, my mother bought a house around 10 years ago to rent out, and the land is now worth over double the amount she paid for it (AU$115k -> AU$270k).
Short-term, what everyone else said:
[ul]Pay yourself first[/ul]
[ul]Stay out of debt as much as possible[/ul]
[ul]Get out of any non-mortgage debt you’re in as quickly as you can[/ul]
[ul]Max out your 401K contribution[/ul]
I wish I’d been thinking about this when I was your age…
Long-term:
[ul]Get comfortable with financial and investment concepts. Borrow personal finance books from your library and see what kind of book you’re comfortable with. Look at on-line reviews, browse bookstores. There are chatty books (Suze Orman - The 9 steps to financial freedom), big general overview books (Jane Bryant Quinn - Making the Most of Your Money), more specialized books (Andrew Tobias - The Only Investment Book You’ll Ever Need). I’ve also seen books specifically targeted at your age group. Many books have worksheets, questionnaires, etc. I’m sure there’s software out there to walk you through this type of exercise, but I’m not familiar with any of it. If you look through enough of this stuff, it’s not hard to tell the gimmicky books from the solid ones.
Once you find a book or two that you’re comfortable with, buy the latest edition, work through it, and periodically go back to make sure you’ve implemented the principles that are important to you. Once you’ve got a good feel for the basics, you’ll be able to tell what type of financial adviser (if any) you need. [/ul]
[ul]Make sure that BOTH of you are as comfortable as you can be with this information so that you’re both actively making your financial decisions.[/ul]
As a financial advisor, I feel I have stick my neck out here. It is wonderful that you are starting to plan for your future, it is unfortunate that saving at your age is rare. There are a couple pieces of advice I would give, keeping in mind of course that I am not specifically covering your situation.
Start with your employer’s plan. Before you open IRAs or other types of investment accounts you should contribute to your employer’s plan at a level that ensures you get the employer match. Never turn down free money.
Ensure you have an adequate emergency fund. Time and again I see people with great intentions who end up cashing out their retirement when they leave their employer. You can’t save for retirement while ignoring the possiblity of the car exploding, dog needing surgery, or flash flood destroying all your posessions. For this purpose a money market fund or CD at your bank is the best choice.
Commit to increasing your savings as your pay increases. It is far more important to increase your contributions incrementally than it is to start with a huge sum of money. Save what you are comfortable with, and increase as you go. If your employer gives the option of contributing a percent of your pay (most do), take that rather than a flat dollar amount.
Finally, I am of the opinion that you do not need a financial advisor at this point in your lives. Financial advisors tend to work with people who need help managing existing assets. The problem in your situation is that you will lose a portion of any investment to fees which compensate the advisor. Most advisors will do one of two things:
Direct you to a firm like Vanguard or Fidelity as your assets and account balances are lower than the minimum they handle or …
Open the account, but not provide much in the way of ongoing service.
This is not a slam against my profession. It is just that most firms are not geared to give advice to people just starting out. They are paid a percentage of the assets they manage, and it is easier and more profitable for them to work with people with existing balances. You may get lucky and find someone who works with people starting out on an ongoing basis, but it may be difficult.
If you want to branch into investment outside of your employer’s plan, I would look at a company like Vanguard at www.vanguard.com. They have excellent investments and charge very minimal fees. If you peruse their website they also give excellent basic advice and ways for you to determine the right level of risk for your situation.
Remember that the most important thing you will do as a beginning investor is learn. If you make mistakes now, they are not critical. If you enter your forties and fifties clueless about personal finance you will pay the price in spades. Get comfortable with risk and the different types of investments and start to understand what works for you. Good Luck!
I would like to recommend the book 8 steps to seven figures. In it he recommends that you invest regularly, even if it is only 25 dollars a month. To do this you can use sites like www.sharebuilder.com that allow you to invest in stocks a little at a time (there are others like this, but sharebuilder is the one I know.)
He offers good sound advise and the book is easy to read.
One word.
Plastics.
Start eating cat food now, so that by the time you’re ready to retire you won’t mind the taste.
Aside from the realistic advice of building up a 401(k) and saving what you can, you’ve already done one of the things I’ve seen that seems to help the most when just starting out – found a partner. Expenses are double in many areas, but at the incomes one gets when just beginning, housing takes up so much of your income. The ability to share one residence really aids in being able to save money.
Then again, splitting up cleans you out, so my advice is to find someone you can stick with for a good long time and who can hold down a job consistently and find a new one quickly if anything happens.
(Take this post with a grain of salt, it’s just written by a bitter, perpetually single 20-something looking at life.)
Avoid buying expensive vehicles.
While homes are a great investment and typically rise in value, I’ve never seen a vehicle that didn’t lose value over time.
If you can convince yourself to spend $15-$20K for transporatation rather than $27-$35K, that’s a lot of extra cash to put into savings, IRA, etc.
Avoid debt and watch for “free” borrowed money opportunities. 0% financing offers til 2008 are real as long as you avoid the pitfalls they would like you to make (late payments, not paying off in alotted time). If you have decent credit you probably get barraged with 0% for a year credit card offers. If you have credit card debt use these to transfer the debt often (Warning: do not use these to accumulate more debt). I have about $10,000 in outstanding credit card debt that is being paid off slowly but I haven’t paid any interest on it for over 5 years.