<p>Not necessarily, I consider it a bonus to be able to go to the University hospital at our flagship if I want to (I happen to live in that city and it is an option in some of the plans available here). If I were sick with some weirdo thing that isn’t seen very often I would like the option. But I also like to be able to go to the hospital nearest my house, easy for more routine stuff. If you Google “hospital quality rankings” you can find some resources for different hospitals. There is a lot of debate about these rankings, but I think looking at a few of them can give you an idea.</p>
<p>Often you have a choice of clinics to use within a given plan, but sometimes you have to pick a “primary care” clinic where you start with most of your problems. Then they refer you to specialists. Emergencies fall outside this most of the time, you don’t need to your primary care clinic if you have a medical emergency and have to get to an ER.</p>
<p>Regarding investing your 401K, some recent studies have shown to just pick a couple of market index funds if you have the option within your 401K and stick with them. Fees are lower and performance is as good or better than ‘managed funds’. Even if your dad has done something else, he might not know this. Agree that company stock isn’t such a great option. It puts a lot of your eggs in one basket. I certainly own a lot of other types of investments (have complete control of almost all my retirement funds, so have had to…), stocks, etc. My advice to my kids has been mostly use index funds. And I am moving more of my portfolio that way as well.</p>
<p>Our S has stuck with index funds. Last year he got 16% net return, which was much better than us. The money he doesn’t have in his Rith IRA or 401k he uses to purchase inventory, which he resells on amazon and makes 25-50% profit. He’s much better with $$$ than we are and enjoys it.</p>
<p>We have branched out to have some funds in real estate index fund for our retirement funds. It has done fairly well.</p>
<p>I’ve done some more further budgeting since I’ve looked up the insurance, found a place to live, and examined what I spend a little further. To leave the numbers somewhat ambiguous, I’m stating them in percents of estimated post-tax income (I’m estimating 35% tax to include all taxes, withholdings, all that).</p>
<p>Food+Alcohol: 14.5% (Might sound high but I like to eat well)
Retirement Savings: 13.8%
Rent+Utilities+Internet: 7.5%
Transportation (insurance, gas taking into account length of commute, $100/month set aside for maintenance): 6.5%
Miscellaneous (cellphone, toiletries, clothing, health insurance, etc): 6%
Entertainment/Gambling: 5.1%
Savings for big purchases (vacations, firearms, art, etc): 3.6%</p>
<p>In total that’s about 57% of my estimated post-tax income. Now, I didn’t account for things like a SO coming into the picture, but I think I accounted for everything else.</p>
<p>With the other 43%, I’m thinking of just putting it in stocks, with maybe 2/3 in index funds (I still have to figure out exactly how to do this without buying tiny amounts of stock in hundreds of different companies) and 1/3 in what I think is going to take off (kind of a gamble) stocks. How does that sound? Do my numbers look sensible for the spending breakdown and does my investment strategy for the rest sound reasonable?</p>
<p>I’m not understanding the first part of this. Index funds buy the stocks for you. That’s the whole point…that you don’t have to assemble your own 500 stock portfolio to mirror the S&P 500. You can buy index fund “shares” in any small amount you like. If you get a large enough investment amount, you can even get a reduced management fee, down to the level of under 1/10 of one percent. Fidelity and Vanguard (and others) have a variety of index funds, but the ones that mimic the S&P 500 are the starting point.</p>
<p>As far as the “gambling stocks”, its all a matter of how you look at it. I don’t care for using the idea of gambling regarding stocks. They are ownership interests in productive enterprises that earn income (some with more risk than others, but different from gambling, which has a negative expected value). If I had it to do over again, I’d take more of a Warren Buffet approach, which was to buy stocks that had strong franchises, and weren’t subject to quick changes in the demand for their products. They don’t always shoot up, but they are steady, and their risk profile is lower than the “innovator” type stocks.</p>
<p>I do see that you have health insurance, but that’s just the premium. You also need money set aside to pay your share of any medical bills. There may come a time when you need or want medical care that’s not covered by insurance at all.</p>
<p>You also need a general emergency fund. Car breaks down, for some reason you need to relocate your housing, etc.</p>
<p>You should also be saving for your next vehicle. Eventually the one you have now will need to be replaced, and you’ll want to be able to pay cash for its replacement.</p>
<p>Without knowing actual numbers, it’s hard to say if some of your percentages make sense. 7.5% for rent/utilities/internet seems quite low. It looks like either you’re making a boatload of money, or you live in someone’s basement (or both). Do you share rent etc with a roommate? Be prepared for something to happen and all of a sudden you’re living alone, and your costs rise.</p>
<p>The advice I give my own kids is to live a few months “as if”. Put aside the money you expect you’ll be investing, but keep it readily available for a few months until you get the wrinkles smoothed out with living and spending. Once things settle in a bit, then invest the money you’ve put aside (and add to it monthly). When just starting out, expenses are higher. There are often deposits needed for utilities and rent. You may have to buy some furniture and household goods. Perhaps a bit of decorating, depending on your situation. If you’re starting with bare cupboards and an empty fridge, your first trips to the grocery store will be out of proportion to your ongoing expenses. You may find that you’ve budgeted too much or too little in certain categories.</p>
<p>I <em>love</em> that the OP is trying to figure this out at this stage of life!! </p>
<p>I recommend 2 books: Eric Tyson’s Personal Finance for Dummies, and The Millionaire Next Door. You can read Investing for Dummies if you want to dig a little deeper into the investment side of things. The Vanguard web site is a treasure trove of free information. </p>
<p>I’m planning to gift both of these to my D as a college graduation gift.</p>
<p>Okay, let me get this straight, so I buy a financial product from Fidelity or Vanguard that mimics S&P 500 rather than buying the individual stocks that make up S&P 500, and there’s basically a .1% fee that they take for creating the product? If so that makes sense, that’s what I mean then. </p>
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<p>No I haven’t gone to a financial planner, a few people said that they didn’t recommend it as you really don’t know if who you’re getting is any good. Though I guess I should have read a book that I haven’t yet read. I’ll get on that, this is just more preliminary. Specifically about the rent+utilities, that’s based on a place I’ve found (they are sending papers over) for the rent and based on their estimate of utilities. The rent alone is 6.6% of estimated post-tax income. As for the living situation, it is a 3 bedroom apartment where I’m paying 1/3 of the rent for 1 bedroom. And rent in the area is relatively low (lower than Ann Arbor at least, not entirely sure how that compares nationally). I guess in the future rent will be a bigger portion of my income if I live alone. But of any of the things I listed, this number is probably the one I am most confident about.</p>
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<p>That’s fair. How much seems like a reasonable amount? </p>
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<p>Sure, I’ll do that. It’ll give me a better idea about my spending for when I move there. </p>
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<p>There’s been a few book recommendations but I’ll see what looks good and make sure I read something. Thanks for the recommendations.</p>
Please start listening to Dave Ramsey podcasts. If you feel comfortable with what you hear him say, go to his website and click to find an “Endorsed Local Provider”. I had great success with that, and really love my financial planner.</p>
<p>If you don’t like that idea, do you have any friends with wealthy parents? They might have a financial planner to recommend. (I found my very first financial planner - who was good - by asking my dentist!)</p>
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For healthcare… well, that depends on what plan you have, but I think all the plans under the ACA have a maximum out of pocket expense. So you need your monthly premium <em>plus</em> that amount. But it’s something to keep in mind, and just know you might someday need to use your savings/investments for care you want that’s just not covered (maybe you want care at a hospital that’s not in your plan, for instance). Oh, and that reminds me, you should plan for dental and eye care expenses too.</p>
<p>Is your new apartment furnished? If not, you’ll need to buy what you’ll need to buy. Start looking at Craigslist now to get an idea of what things cost (buy and store now if that makes financial sense). Are you graduating in January? Many storage facilities charge only $1 for the first month…you can gather what you need and then rent a truck to move it all at once if that scenario works for you.</p>
<p>Go to see a financial planner. Even a bad one would be better than this. </p>
<p>There is no way you are going to have decimal level of precision in your budget. And lets suppose this budget is plausible, which I doubt, do you have any specific plans on how to monitor it? You get what you measure. </p>
<p>In stocks you any money that you plan on “playing with” or “gambling” is lost money Write it off. So 1/3 is too much. Is not enough for you to be right about about macro movements (eg people love buying Apple products) but you essentially have to out guess professionals who have decades of experience, more information than you, and have more time than you to monitor things all day. If someone sells you a stock for $100 that means they think they have a better investment than that stock. You dont just have to be right about people liking Apple products, since that is already priced into the stock, but people have to like them a lot more than professionals are anticipating. </p>
<p>Individual stocks are a supper high bar. You would be much better with a tech index but even that is risky.</p>
<p>“I just figured $460 contributed monthly for only 20 years…in 40 years, at 10% rate of return, it will be worth 2.339 Million. TAX FREE.”</p>
<p>Busdriver, where are you earning 10%? No offense but i would caution anyone against taking advice from someone who is projecting 10% returns, especially over a long time horizon.</p>