Congrats Class of 2021

[Lord McBuckethead]

Save up 5k prior to doing anything else.

[Lord McBuckethead]

Before you worry about starting a retirement investment plan though, you need to build up an emergency cash reserve of several months of expenses. You don't want relatively minor problems to turn into catastrophes which cause you to go into debt.

If you have enough in your personal investment accounts, it will continue to grow and is accessible if something crazy happens.

[Lord McBuckethead]

Than you can work for in a lifetime.

Remember these things

Shit, that is gold Jerry!

[BrunswickDawg]

If you have enough in your personal investment accounts, it will continue to grow and is accessible if something crazy happens.

The problem is that it isn't available when something usual happens. If I could do the last 25 years over again, I would have banked $10k in a regular savings account. The adage when I came out of school was "always have 2 months salary in the bank." Well fresh out of school in the mid-90s, my salary was only $2,500 a month. That wasn't nearly enough to have when my transmission blew, or the refrigerator died, or the compressor on the AC went out one August, and I didn't have enough monthly cash flow just to absorb the hit. Those smaller emergencies led to credit cards, and that credit card debt let to a tighter monthly cash flow - which made it harder to save and harder to handle the next thing - let alone when something real bad happened like a hurricane hit and shut my wife's business down for a month. 401ks are great long term, but life's realities require you to be more liquid than they allow you to be. Bank $10-15k before you start investing. That liquidity will save your ass a lot of interest in your lifetime.

[msudawg1200]

My son graduates with honors tomorrow with a degree in Computer Engineering.

Congrats dude. I bet you're super proud!

That I am. As stated by Brunswick, he's a lot smarter than his dad. He's already got a job lined up. Also, a 2nd generation Dawg. Appreciate it.

[Coach34]

C34 rule for my children:

No marriage before age 25. Your level of maturity is much better than at 21-22. If they love you at 22 and want you in their life forever- they will still be there at 25

[Offshore Dawg]

C34 rule for my children:

No marriage before age 25. Your level of maturity is much better than at 21-22. If they love you at 22 and want you in their life forever- they will still be there at 25

This also.

[BeardoMSU]

C34 rule for my children:

No marriage before age 25. Your level of maturity is much better than at 21-22. If they love you at 22 and want you in their life forever- they will still be there at 25

Not a bad philosophy.

Also, (and I'm sure some will have issues with this) I think if most couples lived together prior to marriage, the divorce rate in this country would plummet. I know soooo many people who rush into marriage just so they can live together (and bang, lol) without the ire and judgement of their families, and get divorced a year or so later....because they don't really know that person. Once you've lived with someone for an extended period of time (especially early in a relationship), there are no more secrets.

[the_real_MSU_is_us]

That's pretty good advice. I wish somebody had explained to me that 15% was barely adequate when I started off.

If you get 6% real returns (which I view as on the optimistic going forward), and save 15% year in, year out, you'll be financially independent in 38.6 years. Obviously that assumes you will the same amount of money in real terms your entire career which won't be the case, but that means to do any better, you actually have to start saving more than 15% as your salary grows if you want to maintain the same lifestyle in retirement as you do while working. And that assumes that you save every year, and don't have setbacks, which is not going to be the case for most people.

Of course you should have social security on top of that, but I'd never want to be in a position where I felt compelled by my financial position to argue that younger and on average poorer people should have to pay more taxes to support my lifestyle.

I assume that "38.6 years" is the time it takes to where the interest alone allows you to retire. If you set up an annuity obviously you can retire before that time

By the time you retire, your house is paid off and kids are out of college, so that's significantly less $$$ needed to live than when you were say 40.

Lastly I agree in about SS, BUT there's no way in hell the Gov't will ever say "Hey largest group of voters in the country, I know we promised you SS your whole life, and you paid into it, but F you you're going to starve to death". They'd never do it because of the old people vote, they'd never do it because our kids (who'd suddenly be responsible for keeping mom and dads' electricity on) would riot, and they'd never do it because there's NOTHING the Gov't loves more than to have us dependent on them. They'd print $$$ or raise SS taxes before they gave us nothing. So yeah, there will definitely be something we can count on in addition to our own savings

[Rex54]

Not a bad philosophy.

Also, (and I'm sure some will have issues with this) I think if most couples lived together prior to marriage, the divorce rate in this country would plummet. I know soooo many people who rush into marriage just so they can live together (and bang, lol) without the ire and judgement of their families, and get divorced a year or so later....because they don't really know that person. Once you've lived with someone for an extended period of time (especially early in a relationship), there are no more secrets.

US divorce rates are at 50 year lows.

[Lord McBuckethead]

Dude, a personal investment account can get you your money in less than a day.

[Lord McBuckethead]

Not sure who you are trying/going to convince on SS. Need to step back from the ledge. This entire overplayed conversation on SS is pointless.

My entire family relies on SS to live their life. Without it, they would starve. I am grateful they get it. I am grateful the boomers are going to get it, because they are useless.

So no shit, govt is never going to stop SS. Cause they cannot. It has nothing to do with having people under their control. As it was the day it was passed, SS is an absolute necessity to keep our country moving forward and keeping that anchor off of the workers backs so they can do what they need to do, ve productive.

[BeardoMSU]

US divorce rates are at 50 year lows.

Are you citing the IFS article? You obviously quoted it (https://ifstudies.org/blog/the-us-di...-a-50-year-low). This article doesn't really provide anything but a chart not of their making and a bunch of conjecture of what this means to families going forward, and they obviously fail to mention that people are waiting until they're older to get married (when they do, which is obviously a wise decision). And that fewer people are actually getting married, despite still remaining in solid relationships. Women being active members in the workforce is a major factor in this phenomenon, obviously, to your chagrin, I'm sure.

[Maverick91]

Another bit of advice, once you get a job.....max out your 401k and then start an investment account and set yourself up on automatic deposits.

Take your financial plans as serious as your drive to advance in your career.

Another thing, do not rush out to buy a house and spend above your means on getting married and such. Stay within your means.

Also, you do not know everything. Ask tons of questions.

rep given!

[Offshore Dawg]

One good rule to follow if you can is to have a six month supply of cash to operate with if you become unemployed. However in the real world half of this country could not come up with $1,000 in ready cash.

[Johnson85]

Not a bad philosophy.

Also, (and I'm sure some will have issues with this) I think if most couples lived together prior to marriage, the divorce rate in this country would plummet. I know soooo many people who rush into marriage just so they can live together (and bang, lol) without the ire and judgement of their families, and get divorced a year or so later....because they don't really know that person. Once you've lived with someone for an extended period of time (especially early in a relationship), there are no more secrets.

This may have changed in the last ten years, but living together prior to marriage used to be one of the stronger predictors of divorce. Study authors didn't have an explanation but guessed that maybe people that held to the norm that you shouldn't live together before marriage were more likely to hold to the norm that you shouldn't divorce. There was also supposedly some research showing that outside of traditional "at fault" causes of divorce like abuse or infidelity, the main difference between people that got divorced and and people that didn't is that the people that didn't get divorced just didn't get divorced. Had the same ups and downs, but some couples were committed and some weren't, and supposedly the ones that stayed committed ended up happier. Always good to be skeptical of research like that that supports a hot button position, but doesn't seem implausible and taken together, it would explain why cohabitating before marriage would be a decent predictor of divorce even if it doesn't cause it.

ETA: Apparently some people do/did think that had changed, but others think the premarital cohabitation decreases risk of divorce in the first year but increases risk of divorce in the long term.
https://ifstudies.org/blog/premarita...es%20of%20data.

[Johnson85]

One good rule to follow if you can is to have a six month supply of cash to operate with if you become unemployed. However in the real world half of this country could not come up with $1,000 in ready cash.

I'm thinking this is not true. There was a fake statistic that is recirculated almost every year that equates choosing to pay with a method other than savings means they don't have any savings. Not that savings aren't generally abysmal, but it's not true that half this country can't cover a $1k expense.

[Johnson85]

The problem is that it isn't available when something usual happens. If I could do the last 25 years over again, I would have banked $10k in a regular savings account. The adage when I came out of school was "always have 2 months salary in the bank." Well fresh out of school in the mid-90s, my salary was only $2,500 a month. That wasn't nearly enough to have when my transmission blew, or the refrigerator died, or the compressor on the AC went out one August, and I didn't have enough monthly cash flow just to absorb the hit. Those smaller emergencies led to credit cards, and that credit card debt let to a tighter monthly cash flow - which made it harder to save and harder to handle the next thing - let alone when something real bad happened like a hurricane hit and shut my wife's business down for a month. 401ks are great long term, but life's realities require you to be more liquid than they allow you to be. Bank $10-15k before you start investing. That liquidity will save your ass a lot of interest in your lifetime.

If you fund a Roth IRA for 2 years you have more than a $10k emergency fund that is accessible without penalty. And the good thing is that it makes you think before you touch it. Lots of people would probably dip into their emergency fund to buy a nicer car when they are replacing it. HOpefully lots fewer would take contributions out of a roth to upgrade their car.

We don't carry any emergency funds. Not to say we don't ever have cash, but I don't have a problem running our cash down to almost nothing. At basically anytime, of the month, we will have a credit card that we can put an expenditure on and not have to pay for 50 days. We have a personal line of credit we can access if we have something that we can't figure out how to cash flow in 50 days. We have Roth IRAs if we need something beyond the LOC. We have 401ks from previous jobs that we can roll over and then do a roth conversion and access if we need something past that. Any emergency that exceeded our LOC (or made it unavailable) and wiped out our Roth contributions would almost certainly involve a loss of a job, so we'd then have at least one current 401k that we can access in short order by rolling to an IRA and doing roth conversions.

Certainly the math is different depending on what kind of income you make. But in general, if you are young and in a good career, I wouldn't slow down investing just to keep $10k in a cash account.

[Johnson85]

I assume that "38.6 years" is the time it takes to where the interest alone allows you to retire. If you set up an annuity obviously you can retire before that time

That's 38.6 years using the 4% rule, but that also assumes a virtually non-existent income tax burden in retirement, which may or may not be the case depending on what state you live in and how much you have.

By the time you retire, your house is paid off and kids are out of college, so that's significantly less $$$ needed to live than when you were say 40.

The house part is correct and a good point. If you are paying off a house, then that's additional investment beyond your 15% and does make the math look better. For other expenses, including kids, I just take the (possibly overly) conservative approach that I don't want my consumption to go down when I retire, and that I'll have some expenses that go down (kid costs, business expenses) and others that will go up (healthcare, services like lawn and home maintenance grocery deliveries, etc depending on how healthy we stay, and travel, although I guess that's increased consumption) and it will roughly balance out.

Lastly I agree in about SS, BUT there's no way in hell the Gov't will ever say "Hey largest group of voters in the country, I know we promised you SS your whole life, and you paid into it, but F you you're going to starve to death". They'd never do it because of the old people vote, they'd never do it because our kids (who'd suddenly be responsible for keeping mom and dads' electricity on) would riot, and they'd never do it because there's NOTHING the Gov't loves more than to have us dependent on them. They'd print $$$ or raise SS taxes before they gave us nothing. So yeah, there will definitely be something we can count on in addition to our own savings

I'm not worried about Social Security going away, but if we ever do something sensible and say "we're going to make sure seniors don't end up below the poverty line, but we're going to stop taxing young poor workers to give money to relatively rich retirees", I don't want to be tempted to say "17 those young people; I was screwed by people older than me and now I want to immorally screw over people younger than me". Even if they don't cut my social security at all, that will almost certainly mean my kids are getting screwed even harder than we did, so I will want that social security money available to give to them to help soften the blow.

[Cooterpoot]

To the class of 2021:

Get out of your parent's house and start a career. Stop sucking up the communist/socialist bullshit because you want shit handed to you. Go make a difference.
But until you're 25, just smoke weed and bang as much as possible. You only live once! Don't fall into the lie that your entire life is about money.