I'm 23, How Should I Be Investing?

The Ramsey Show Highlights
16 Mar 202104:57

Summary

TLDRIn this conversation, Nick, a 22-year-old living with his parents in New York City, seeks advice on saving for retirement. He is interested in starting a Roth IRA but has concerns about his financial situation. Dave, the host, advises Nick to first build an emergency fund, focus on finishing his work-study program, and increase his income. He stresses the importance of delaying retirement investments until Nick's financial foundation is solid, suggesting that Nick should eventually invest 15% of his income into good mutual funds through a Roth IRA once he's financially ready.

Takeaways

  • 😀 Nick is 22 years old and thinking about saving for retirement, but his current financial situation requires some adjustments before investing.
  • 😀 Nick’s company doesn’t offer a 401k, so he’s considering a Roth IRA or traditional IRA for retirement savings.
  • 😀 Dave emphasizes the importance of starting early, but advises that Nick should first build a solid financial foundation before investing.
  • 😀 Nick has $3,000 in savings and $43,000 invested in single stocks, which Dave considers too risky for his current situation.
  • 😀 Dave advises Nick to reduce his exposure to single stocks, limiting them to no more than 10% of his net worth (around $2,000).
  • 😀 Nick is still living with his parents, which is fine for now, but he should eventually plan to move out when his finances allow.
  • 😀 Dave suggests that Nick should focus on finishing his work-study program and increasing his income over the next 1-2 years before diving into retirement savings.
  • 😀 Once Nick’s income increases, Dave recommends fully funding an emergency fund with 3-6 months' worth of expenses before starting retirement savings.
  • 😀 Dave advises Nick to start contributing 15% of his income to a Roth IRA, focusing on growth stock mutual funds when he’s ready.
  • 😀 The priority right now is securing stable finances—getting a stable income, a fully funded emergency fund, and moving out—before starting to invest long-term.

Q & A

  • What is Nick's current financial situation?

    -Nick is 22 years old, living with his parents, and working in a work-study program that pays around $15,000-$16,000 a year. He has $3,000 in personal savings and invested $43,000 from a settlement he received when he was hit by a truck at age 18. Most of his investment is in individual stocks.

  • Why does Dave advise against investing in single stocks?

    -Dave advises against investing in single stocks due to the high risk they carry. He suggests that, while Nick has a knack for it, he should limit investments in single stocks to no more than 10% of his net worth to reduce risk.

  • What is Dave's stance on retirement savings for Nick at this stage?

    -Dave believes that Nick is too early in his financial journey to start contributing to a retirement account like a Roth IRA. He recommends Nick focus on other priorities first, such as building an emergency fund, paying off any debts, and increasing his income.

  • What should Nick prioritize instead of contributing to a Roth IRA right now?

    -Nick should prioritize saving enough to cover three to six months of living expenses in an emergency fund, securing a stable income after completing his work-study program, and planning for his move out of his parents' house.

  • What are the next steps Nick should take after building an emergency fund?

    -Once Nick has built his emergency fund and has a more stable income, Dave advises him to focus on moving out, continuing his education or career development, and then starting to invest in a Roth IRA, contributing 15% of his income to good mutual funds.

  • How much of his income should Nick aim to invest when he starts?

    -Nick should aim to invest 15% of his income once he has moved out, completed his studies, and secured a stable career.

  • Why does Dave emphasize getting out of his parents' house?

    -Dave stresses the importance of moving out because it signifies financial independence and maturity. He believes Nick should avoid living with his parents indefinitely, especially after reaching a certain age, and should take steps to move into his own place once he is financially able.

  • Why is Nick's $3,000 savings likely sufficient as an emergency fund for now?

    -Nick's $3,000 savings are likely sufficient as an emergency fund because he still lives with his parents and has fewer expenses. Dave suggests that, at this stage, the $3,000 probably covers his immediate financial needs.

  • What type of investments does Dave recommend for Nick when he starts saving for retirement?

    -When Nick begins saving for retirement, Dave recommends investing in good growth stock mutual funds within a Roth IRA, as they offer a safer and more diversified option compared to individual stocks.

  • What role does Nick's current income play in his financial planning?

    -Nick's current income of $15,000-$16,000 a year is not enough for him to move out of his parents' house in New York City. Dave advises Nick to focus on increasing his income and securing a stable career first before taking on additional financial responsibilities like retirement saving.

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Etiquetas Relacionadas
Retirement PlanningFinancial AdviceEmergency FundInvesting TipsRoth IRAStocks vs Mutual FundsPersonal FinanceYoung InvestorsFinancial StabilityCareer Development
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