I want to start investing but I know very little (and honestly, I have very little).

Submitted by NannerPanda t3_10pn55q in personalfinance

I'm sure this gets asked a lot, so my apologies in advance. I'm in California. So... everything is expensive. I don't want to leave this state either.

I'm 24, turning 25 this year. I work per-diem at a hospital and my 2022 income was around $31k (after taxes). I know it's really low, I'm trying to do a UX Design program and turn up my income a lot. Hopefully that pans out.

Unfortunately I live with my mom, so I don't pay rent. I have student debt ($26k) that I'm hoping gets cancelled but I know it's extremely unlikely. But I haven't had to make any payments because of the COVID-19 Forbearance.

My goals are to simply move out and be financially independent and have enough money to be able to do whatever I'd like to do. Nothing really expensive like extensive traveling but just more like.. being able to thoroughly get invested in hobbies. I don't mind splitting rent with a partner, but I do want to be able to cover my own rent in case me and said partner does not end up working out.

So why am I considering investing right now even though I have.. practically nothing?

Well I just was able to get over $13k in my High Yield Savings Account. I look at the money and I'm wondering when should I start allocating my earnings elsewhere? I've been pretty good with my money I would say. I saved around $7.5k last year and I made plenty of large purchases that year too.

I figure that with money that I usually put into my savings account, a portion of that (maybe 20-30% of it) could go into investments. The reason the portion is so small is because I assume I'll want accessible money when I eventually move out of my mom's (ugh).

I don't have a 401k or a retirement fund. Not through my job, as it is per-diem and per-diem workers don't get benefits, just a 14% higher hourly wage. I'm debating whether or not to get one. The reason why this is even a question is because.. well.. I don't really see myself living until 50s or 60s. I grew up in harsh circumstances and it messed with my mental health. I'm surprised I'm even alive right now. I just.. don't see myself that far into the future.

I scoured across Reddit to find some guidance in investing and:

What I am considering of doing is to go on Fidelity and open a Roth IRA? Usually after I get a paycheck, I pay off all my credit cards, then I throw the rest into Savings while leaving enough for bills in my Checking. I was thinking that 20-30% of what I typically throw into Savings could be thrown into the Roth IRA instead.

But honestly? I don't really know much. I don't have much. I am just looking for some guidance here on:
- If I should even consider investing right now
- If what I am considering is feasible
- If there's anything else I should know

Thanks in advance!

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Werewolfdad t1_j6leann wrote

https://www.reddit.com/r/personalfinance/wiki/commontopics

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NannerPanda OP t1_j6lfnos wrote

Ah yes this is a great resource except:

  1. I don't have an employer matching fund. I might have one in the future, but not right now. As my position does not offer this.
  2. My only debt is my student loan (4.65% interest rate). Which in the United States may or may not be cancelled and there is also some debate in the air about if you'll get a refund if you make payments and then it gets cancelled. I don't want to lose my money to that nonsense.

Which puts me at a loss of what to do.. I mean Roth IRA sounds like that's where I should start but even then I'm still at a loss of what to do.

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Werewolfdad t1_j6lfpz7 wrote

> but even then I'm still at a loss of what to do.

Why?

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NannerPanda OP t1_j6lg7tc wrote

Frankly I just don't know much about... investing in general and if it's even worth it despite having so little.

I know there's a max yearly contribution of $6k. I know the earnings won't be taxed. I know with some lurking on Reddit I can find what index funds to put the money in the IRA to.

I can barely grasp the idea of what an index fund is. I don't know if what I am considering doing is feasible (a small portion of what I usually put into savings into the IRA). And even if I manage to open IRA, I don't really know what to do. Do I constantly have to buy index funds? Can I just throw money into it regularly and forget about it? I genuinely don't know anything other than "I can open a Roth IRA with Fidelity and it's an investment... thing."

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Werewolfdad t1_j6lgfby wrote

> I can barely grasp the idea of what an index fund is

A bunch of stocks. Often, all the stocks.

(effectively anyway. If you buy VTSAX or FZROX or VTI, you own a basket of all the US stocks)

> I don't know if what I am considering doing is feasible

Saving some is better than saving none.

>And even if I manage to open IRA, I don't really know what to do.

buy index funds and wait 40 years

>. Do I constantly have to buy index funds?

Only when you contribute new money

>Can I just throw money into it regularly and forget about it?

Yes

https://www.reddit.com/r/personalfinance/wiki/index#wiki_investing

https://www.reddit.com/r/personalfinance/wiki/index#wiki_retirement_accounts

Should explain it

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NannerPanda OP t1_j6lh489 wrote

Should I even be looking into an IRA if I don't have a retirement fund? Granted, I don't particularly care about being alive that long. If I'm old and my senses start going, just pull the plug :P

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Werewolfdad t1_j6lh786 wrote

> Should I even be looking into an IRA if I don't have a retirement fund?

An IRA is a retirement fund

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NannerPanda OP t1_j6lhtnq wrote

See this is why I'm so lost. I appreciate your patience very much ;_; thank you

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czarnar t1_j6llt7v wrote

You're not lost, you're here! You made it. Step 1, complete!

The next step, step 2, is a bigger step. Education. We are all learning, because all of our lives and situations are all different and always changing. The terms you are seeing here and in the link above, look them up and start to learn how the different elements map to your situation. A big thing you'll hear is making a budget and outlining your goals. Both will help you here too.

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NannerPanda OP t1_j6loje1 wrote

I appreciate this thank you. I've been diving into the wiki that was linked earlier. Mainly looking at Roth IRA and I-Bonds and thinking about how much money I have. I already keep track of my expenses on a spreadsheet so I know if I'm wasting money, if I have enough room to spend money, etc. Not exactly budgeting but it's something.

Thinking about...
- Savings for expenses under a year (emergency fund, or if something comes up)
- I-bonds for expenses past a year (down payments on a new living situation, battery for my car, potential trips, etc.)
- IRA for retirement

Man, money things are so complicated. ;_;

EDIT: Thinking of brokerage accounts with low cost index funds too but the tax stuff scares me. I don't want to invest and then suddenly have to pay a whole bunch of taxes ;_;

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czarnar t1_j6mt0k2 wrote

If I were in your shoes, I would start with a more detailed budget then and I would absolutely include the student debt into the budget. Even though you aren't paying it atm pretend you are and really get to the bottom of how much money you have in excess each month.

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ruoaayn t1_j6lp39y wrote

Start by contributing toward a Roth IRA. There’s a limit on how much you can contribute per year. You can still contribute for 2022 until April, then start contributing for 2023.

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NannerPanda OP t1_j6lp9x6 wrote

Thanks for this! I appreciate the direction! I am very slowly learning all this money stuff.

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ruoaayn t1_j6lsrx7 wrote

You’re welcome. The earlier you start your retirement savings the better because of compound earnings. I wish I started at your age

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