<p>I live in Brooklyn Heights and have lots of friends in other parts of Brownstone Brooklyn. This is no cheaper than Manhattan, folks! These are beautiful neighborhoods that are in high demand. And, the housing crunch that is hitting the rest of the country so hard is coming here late, so prices have not dropped yet. They probably will, and there is a lot of new building currently in the works. I would definitely not buy anything right now. Wait a while and see where this all goes. Rentals in NYC are also expensive, but maybe safer at this time with a good income. I don’t know much about investing, so no advice there. They are young. They can take their time and explore their options for a while. No need to rush into anything just yet. My $.02.</p>
<p>I think real estate is pretty safe in NYC, but I’d save what he has for a couple more bonuses so that he can buy something nice. I agree a 3% loan is not worth paying off. I’d park some of the money in a money market account, the rest in equities (me probably just an index fund), Roth IRA if he can, and if he wants a nice vacation - sure, but not more than a few thousands worth. Getting in the habit of being charitable is a great idea.</p>
<p>Roth IRA limit is only $4K, so what to do with the rest of the money is the question. I would park this money in somewhere that won’t loose value. Cash is king for short term, but not sure if dollar is the place anymore. Suggestion to buy ETF for Euro and Swiss franc.
Inflation is also on the rise, see the news today, which means not paying off debt and let it inflation eats away the debt slowly. Not sure if this is the right year for Real Estate, perhaps it’s best to wait a few years. The key thing is to make sure this person does not fritter this bonus away easily. So if I were this person, I wouldn’t put the money where this person does not have easy access. And if this person has to spend money on vacation, limit it to just 10% of the amount. Lots of self-discipline here.</p>
<p>[U.S</a>. Nov. PPI up 3.2% – largest growth since 1973 - MarketWatch](<a href=“http://www.marketwatch.com/news/story/us-nov-ppi-up-32/story.aspx?guid={4FF90E7C-62EF-490B-9B62-5730F9B5BFA0}]U.S”>U.S. Nov. PPI up 3.2% -- largest growth since 1973 - MarketWatch)</p>
<p>One of his coworkers recently bought somewhere on the upper east side. I think that’s where he got the idea to buy. However, that person is recently married. Changes things a lot.</p>
<p>I do agree he’s at least another year away from thinking of buying, thanks aj725 and others, I’m thinking along your lines. Needs another bonus and another year. He’ll look into the Roth IRA if he hasn’t already. </p>
<p>BunsenB you’re in the ballpark…actual salary is over 100K but in a ‘bonus’ industry that’s just part of the total compensation picture as you know—certainly far from ‘rich’ esp in NYC. He knows this but since bonus comes in a chunk, it’s like forced savings which is great. The trick imo is to always treat it as such…try not to rely on it for living expenses and don’t always assume next year will be bigger and better (or even there at all!).</p>
<p>Yes paying3t I think there’s a Manhattan mentality esp among the young crowd. Brooklyn’s been rediscovered but commute over to Exchange Place Jersey City would be a nightmare. My nephew lives in Hoboken and likes that…sadly S will have nothing to do with it. I think it’s partly the gf (whom I love:))</p>
<p>Second or third the motion of NOT paying off a low interest student loan. However if there is ANY credit card debt, those should be paid off, in full, immediately.</p>
<p>At minimum, he should have 6 months worth of living expenses in (relatively) liquid cash. I suggest staggering CDs (6 months, 9 months, 12 months - 1/3 to each), each time one matures, reinvest it for the next round, and preferably in a credit union, where the interest rate should be a wee bit higher. </p>
<p>Another percentage (to be determined by tax law) should be invested in an IRA, either Roth or traditional. Since this bonus will already be taxed, a Roth is better.</p>
<p>Another percentage (to be determined by S) would ideally be invested in himself. Possibly a vacation, furniture, even wardrobe. </p>
<p>Another percentage (also to be determined by S) would be nice to donate to a charity of his choice (tax deduction). </p>
<p>Now, if this were me, the percentages would look like this:</p>
<p>50% - staggered CDs (none invested for more than 12 months at a time)
20% - IRA funding (Roth or traditional - again since this is already taxed, Roth is a good choice)
15% - me - wardrobe update, would love a new bedroom set
10% - LATimes camp fund (where they match 50 cents on the dollar and a hundred percent of donations go to children, NOT paperwork and other expenses)
5% - checking account
Total 100%</p>
<p>My H gets this every year as well. We have NO debt, our retirement is more than generously funded, 5 cars (kids got used ones), and two houses. We always socked it away…but, we always took out a very small percentage for “play money” - one year it was a trip, one year it was furniture and so on. He’s been w/ the same company for more than 20 years and we always just tried to live within our means, not up to our means. Savings, the market, the 401K, etc - I would also reiterate not paying off a low interest loan - you can put that money in a cd or money market fund and get better returns.</p>
<p>It’s nice to have options!</p>
<p>The Roth IRA limit is $4000, but he can put it in for both 2007 and 2008 if he does so before April 15.</p>
<p>The charitable contribution might not work. Since he doesn’t own a home, chances are he’s not itemizing. Unless his state tax withholding is larger than his standard deduction.</p>
<p>Do the 529 gambit. I know that the stars were aligned for DS’s college fund for CMU. He started CMU at a COA, list price of $34K in 2002. Today in 2007, its $46K+. </p>
<p>In 20 years, the annual COA would be close to $125,000/yr at 5% compounded increases, if we are starting at today’s COA of $46K. This means that person should be contributing close to $850/mn at 8% compounding, taxfree, for 20 years. OR a one time contribution of $101K, compounding 8% for 20 years.
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<p>I calculate that we have close to 30 years before DS finds a GF, has a baby, and off to college, which brings the one time contribution close to $20K.</p>
<p>If he doesn’t have one already, I’d start a rainy day fund. If the economy does turn sour, i-banking is one industry that has no qualms about laying off whole departments. It would be nice to have $$ handy to live on while trying to find a new job.</p>
<p>Is 529 appropriate for a single guy? I think it’s a little bit early. What If I need the money before I have any kid? What if I don’t have any kids and don’t want to adopt?What if my future kids don’t want to go to college? Too many what ifs is the problem with 529 especially at this stage of one’s life.</p>
<p>That’s true, but you can spend 529s on further education for yourself, a spouse or a relative. That said, I think it’s too early unless you’ve got more education in mind.</p>
<p>It depends on the field. But I know in my field, most companies would pay for it. I never had to pay a dime. I can do MBA, JD, MS, Phd with other people’s money with the exception of MD degree.</p>
<p>BTW – while the OP’s son probably shouldn’t jump into buying an apartment right now, I don’t think it’s accurate that an apartment in Manhattan will cost 800k-1 million. Of course there are apartments in that range and higher in the city. But I know plenty of people who have gotten nice, doormen buildings for 600k. Of course, these weren’t brand new or huge, but certainly nice and very liveable by manhattan standards – great starter apartments, as long as you stay out of whatever area is deemed the hottest neighborhood in the city.</p>
<p>He should be a little more forward thinking. Where will he and his gf want to raise a family? A community with great schools, wonderful neighborhoods, a vibrant downtown and an easy train commute to Hoboken and/or New York City! Buy my house please!! :D</p>