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November 12, 2012


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Wow great work saving so much at 24! You have a bright future ahead of you and a fantastic start on a secure financial future. You certainly spend a lot going out, but you're young and in NYC, so it is understandable. But can you maybe trim it to $300? A $130 gym membership is awfully high, maybe you can reduce that to $60. Other than that everything looks good - but did you include everything? You mentioned vacations? That isn't in the budget you presented. What about transportation costs? Clothing and gifts?

My suggestion is to break out your savings into goals, you talk about a house, wedding, MBA - but your savings is lumped together. It makes sense to get a handle on the dollar amount you need to save and involve your gf in talks about wedding budget, housing budget, etc. It is also easier to track your progress if they are broken out. I have an online savings account with four different savings buckets for different goals. It has been very helpful and I think you should look into something similar.

If you can avoid it, I would not use your ROTH towards these future goals, so it falls on the both of you to start saving towards these concrete goals.

RL is quite young to have already learned how to become a smart and active investor as well as getting a job in a financial institution that will only increase his investings skills a great deal more.

I spent my whole working life working as an aerospace engineer, thoroughly enjoyed my work and obtained an MS in engineering at my company's expense. Back in my working era in the pre-internet days, which was 1956 to 1992, investing in the stockmarket was primarily done by opening an account at a brokerage and having your broker manage your account by calling you at work and telling you what he wanted to buy and sell for you. As a result I learned next to nothing about investment techniques but my broker did get me in a few great winners as well as a few big losers.

It wasn't until I retired at age 58 that I had the time to study investing. One of the books that I learned a lot from was "Technical Analysis of Stock Trends" by Edwards and Magee. I also started taking the Wall Street Journal and Investor's Business Daily and started to learn a lot from their articles. One day a WSJ advertisment caught my eye, it was from a company that had a mutual funds database, updated daily by modem, and it also came with some very attractive analytical methods, and the means to backtest them against one another. With my engineering, computer, and mathematical background this was just what I was looking for. I started my subscription in 1993 and have never looked back. It didn't hurt that the stockmarket was entering a great phase as the result of the start of the Internet which I believe is the greatest invention of my lifetime. The combination of the bubble and my newly found investment techniques enabled me to make more money in one year, 1999, than my gross salary as a senior engineer during my last 32 years of employment.

I recount my story as an example of how I made the bulk of my money not while I was working for a living but after I had retired. At the end of 2007, at the age of 73, I was starting to feel very comfortable financially and noticed that some of my market indicators were showing all the signs of very bad things to come so I made the decision to get completely out of mutual fund investments and go entirely into all income investments, munis in our taxable account, and CDs and taxable bonds in our IRAs. That's where I still am today.

At the age of 78 most of my life is behind me but I worry about what's ahead for young people with the Fiscal Cliff ahead and the rapidly growing effects of Global Warming that can have a profound effect upon people living very close to sea level. I am thankful that I live 85 ft. above sea level in California and that all of our utilities are underground.


You are off to a great financial start- paying off student loans and building up a $145K net worth at 24 is quite an accomplishment.

The summer of 2008 was a great time to start investing, congratulations for having the courage to invest against when everyone thought you were nuts. However, don’t underestimate how hard it is to beat the market just because you succeeded once. Sticking to a sane plan is prudent but taking unnecessary risks in the future could end up hurting your finances. For some perspective you should read A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing. After seeing all of the studies on how active management fares against the indices you may want to consider index investing.

Remember that because you are so young and have so much in your retirement accounts already you don’t need to take as much risk to meet your financial goals.

As for Rich Dad Poor Dad- I think it is like fools’ gold- it looks like it will make you rich but in the end it lacks real value. Read John T Reed’s analysis of Rich Dad, Poor Dad for a critical and well researched review.
His summary is that “Rich Dad, Poor Dad is one of the dumbest financial advice books I have ever read. It contains many factual errors and numerous extremely unlikely accounts of events that supposedly occurred.” He goes on to say that “Rich Dad, Poor Dad contains much wrong advice, much bad advice, some dangerous advice, and virtually no good advice.”

You would be far better off reading Apex’s articles on Real Estate investing- any one of them contains more real actionable information than all of Kiyosaki’s books. I really thought it was awesome that Apex started with: Why You Should NOT Invest in Real Estate. You will never see that content from someone that pushes real estate investment seminars.

-Rick Francis

RL is doing very well for his age.

Thank you so much for your feedback, everyone!

To respond/answer a few questions above:

JY – thank you so much for your suggestions on reducing some discretionary expenses. I will definitely further breakout my overall savings into goals. Currently, my buget is broken out more granularly:

Rent $950.00
Renters Insurance $15.00
Utilities $135.00
Cable/Internet $50.00
Groceries $200.00
Monthly Subway Metrocard $25.00 (luckily my company subsidizes the majority of this. An unlimited monthly metrocard costs $105/month, which my company picks up $100 of this and I only contribute the other $5 which is pre-tax)
Phone $75.00
Eating Out/Going Out $400.00 (split between going out to dinner and drinking with friends)
Clothes and Drycleaning $100.00 (I always shop out Marshalls or Target for discounted suites/work attire)
Gym $130.00 (company offers 40% discount. This gym is a premier gym in NYC which offers the opportunity to network with senior executives both in/outiside my company, and get an excellent workout ;)

Vacation $250.00
Gifts $150.00

$750, which is distributed to fund Roth IRA and liquid savings.

Old Limey and Rick - thank you very much as well, great recommendations on the reading material. I will be sure to pick them up.

Great finances thus far.

Have you had pay increases/promotions at your work? How does your salary compare to someone in the field? Check out if you haven't already and make sure you are getting paid for what you are worth.

How have your savings rate changed since moving out and into the big city? Has it gone down? I am trying to figure out why you are feeling "overwhelmed." Is that the right description? Perhaps you are thinking of doing a lavish wedding and expensive engagement ring? I'd recommend to budget everything and not pay more than you are comfortable or else you will indeed feel overwhelmed. There is no need for your to feel overwhelmed with what you are showing in this reader that is something you may need to work on.

Did you go to a top undergrad school? Why do you feel like you need to go to a top school for your MBA? As you say, you can get a better ROI by avoiding expensive schools. Maybe I'm wrong, but I hear time and time again that employers do not care where you graduated from. You can impress them with your interview skills, not to mention your 3 majors in under 4 years! Looks like you are trying to combine book and street smarts together!

Not sure why you talk of tying the knot with your girlfriend, but then you say you will wait another 3 to 5 years to get married? Don't want to get too personal but I can't help wondering if insecurity is a repeating theme here or if something else is delaying those plans.

Thanks so much for sharing your story man. I'm brand new to this blog and am looking forward to diving in to everything here.

I was impressed to see how low your living expenses are considering you live in NYC. Seems like cable and rent for example would be much more than you mentioned.

It's exciting to see guys your age getting started on the right foot. Keep up the good work and I hope and pray all the best for your future!

Thanks for the Benjamin Graham recommendation as well.

Active investing isn't that difficult if you have some good tools. First of all you need a comprehensive database of mutual funds - mine contains 11,224 funds. You also need quite a bit of time and that is hard to come by when you are young, raising a family, and busy working hard to advance your career and improve your skills and education.

You then need the database to be categorized into fund families of various types - mine has 86 categories.
You then need some ranking software that can perform operations on the particular category of funds you are interested in for the specified time period.

I like to rank by Risk Adjusted Return - in other words I want to find the funds with the best returns, the least volatility, and the lowest drawdowns in the period. I then examine the charts of the top six funds in the chosen category. If necessary I repeat the process over different time periods until it is obvious which 2 or 3 funds look the best of all. Obviously they are each in nice uptrends, since my technique is to "Buy High, Sell Higher", as recommended by William O'Neil, the editor of Investor's Business Daily. I then hold funds as long as they are doing well for me. As soon as they falter, and when I have decided to get out of them, I start looking for replacements.

My other two rules are:
1) Thoroughly understand the Power of Compounding Money.
2) Don't Lose Money, since a 50% loss requires a 100% gain just to get even. As you get wealthier and your portfolio gets larger it's even more important to put a tight constraint on losses.

I have a daily chart of my portfolio for the period 12/28/1992 to 11/09/2012.
For this period my APR=16.90%, My Total Gain= 2,122.93%, My worst drawdown was -15.9% on 10/25/2000.

For the NASDAQ 100 index and the same period.
The APR=10.44%, the Total Gain= 619.66%, the Worst Drawdown was -82.9% on 10/7/2000.
That gut wrenching drawdown shows what can happen if you Buy and Hold a high performing index.

@Old Limey

I'm curious whether you would recommend a subscription to a site like MorningStar which has extensive analysis, opinions, and rankings of each of the funds. For someone like me who is in his early 30s with a family, pouring over a database (while it sounds fun) is too time-consuming. I'm curious what other younger/busier people use to analyze the funds. It is possible to download past data from yahoo finance or Google and throw that into a database, but only if you have some programming knowledge. I actually did that type of work at a previous employer and it's amazing how much data is provided for free on the Internet if you know how to scrape it.

Hi RL,

I liked reading your profile. You are doing very well for your age. I am 15 years older than you, and you are ahead of where I was when I was 24.

Another book I'd recommend is called Unexpected Returns by Ed Easterling. There is some very good analysis on the valuation of the stock market and a great discussion on things that drive valuation and expectations of future valuation.

One of the shortcomings of most of the data that you can find that is free is that it hasn't been adjusted for all of the dividends and distributions that take place. The end of year capital gain distributions that many funds declare can be quite large and without them the data is pretty worthless. Likewise with income funds, most of them declare a dividend every month that gets added to your account by giving you more shares. If those extra shares aren't accounted for every month the data is also worthless. The free data may be useful for individual stocks but small investors shouldn't be owning stocks because they need to have a lot of diversity in their portfolio.

I don't think that the majority of younger/busier people are active investors. In my son's case, his largest asset, other than real estate, is his 401K and he has very limited choices in the funds that he can invest in. He has 26 funds available, 11 of which are Fidelity's Target funds, the rest are some index funds and a few very large funds that have been around for a long time. Currently I have him 100% in PIMCO's Total Return fund since it's the best of the 26 for risk adjusted return, it's YTD annual return is 10.84%. Its max drawdown this year is only -1.35% whereas for most of the others it's in the mid to high teens.

Everyone – thank you so much! I greatly appreciate your kind words and feedback.

Luis – just to answer your post above. Since I started at my company, I’ve been promoted in title every year with an average 12% raise since I started after graduating college. However I did a search on and see that I’m getting paid approximately 15-20% less than what other companies are paying for roles similar to mine. I plan on staying with my current company as they offer other benefits, very flexible hours, and see an accelerated path to a managerial role if I decide to stay. Also, they will offer tuition assistance if I decide to pursue an MBA, along with the flexibility of how I pursue it whether it be part time or full-time. Along with this, they offer a guaranteed pension plan, which I’ll be fully vested in 3 more years.

Both my girlfriend are I are able to stay on path regarding saving. I have to say that it is difficult because literally everything costs money here in the city. Going out with friends, late night taxi rides, and enjoying ourselves burns money. But with the plan we are sticking with – we are getting accustomed to living here and having balance between enjoying ourselves and saving for the future. We are continuing to work on this.

As far as schooling – I did not go to a top undergrad school and that is why I worked very hard while in school, with the goal of same day going to a top-tier business program. And with my current company –many top bschool alum work in my group. In speaking with them and where I want to someday be (this is only my opinion) – it is only worth going to a top business program because of the school brand recognition and networking, used especially in an economy like this. Basically the new high school diploma is a bachelors, and the new college is a masters. You need to be competitive as possible by going to the best school -- only top tier bschools (this only applies for an MBA).

We both want to have a nice nest egg saved up before we tie the knot. We are not really into having a lavish wedding but our dream is to have a home almost paid for while we are raising kids some day. My concern is this -- I see guys at work stressing about mortgages, kids, college expenses, etc. I want to position myself to be fully financially safe before raising a family which I feel begins when two people get married.

RL, I'm the same age as you! I can't believe you guys can live in a 1 bedroom apartment, though I guess NYC is pretty expensive. $145,000 net worth is pretty good for our age, congrats! And your expenses are so low!

Do you plan to stay in NYC after you get married? Do you plan to buy a house there? Or would you buy a house in NJ? I would consider moving to another city where you could have a shorter commute from a prospective house, when you're getting close to ready to buy a house. Then again, I do understand the desire to settle down in the same town you're from.

If you're saving $750/month, an engagement ring shouldn't take more than 1-2 months to save for. You don't need to spend three months' salary on a ring. Well, talk to your girlfriend on that, but I certainly wouldn't want one that expensive.

For a house, try to put 20% down out of cash savings, so 10% each. That way you avoid PMI and get almost the best rates (the best rates come with 25% down, but that's probably not worth waiting for and you can always refinance later).

RL, point taken on the "name brand" MBA programs, thanks for the insight.

I still want to emphasize the need for you to live out your life regardless of your current financial status.

What if in three years you are still tackling student loan debt? Will that keep delaying important life plans like marriage, kids, etc.?

We know that debt is inculcated in western society, and as a result we all have to learn how to manage (positive) debts like student loans and home mortgages with things like job security, emergency funds, life insurance, etc. I believe a married couple needs those challenges to strengthen the bonds that tie them together.

Beyond that safety net of income and insurance, we need to trust in a higher authority, a spirit to get us through uncertainties in life. That is what is happening now to those affected by hurricane Sandy. Money helps but faith is ultimately what they need most to overcome and rebuild, essentially, their lives.

Good Job on the Net worth for somebody your age. I do not to want to dampen the mood, but I added the expenses and savings amounts and it added up to about $2900, for somebody making close to 70K a year this monthly amount is low. Look into your numbers and see what you missed, your income should be higher compared to expenses. You have a surplus and you just have to find it. This will help you save for the other goals you have in mind.

Thanks RichUncle EL - You are correct - the yearly figure I included is my gross income, which I currently contribute 20% of that into my company's 401K plan (7% match). Also deducted is health, dental, vision, and life insurance and food expense related to work which comes out of my pay directly. Depending on lunch expenses in that month, my monthly take home is between $3,100 - $3,300.

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