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20somethings Financial Thread

Started by Jsmith, September 18, 2018, 07:59:09 AM

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Jsmith

Hey FS community!

As a 20somethings myself, I've seen a lot of questions come up from younger readers so far about starting off in the independent world and thought it might be a good idea to have a continuous thread of questions and answers for everyone to read through and refer to once this forum picks up even more and we have a lot of new first-time readers. So I figured this could be a place to ask a lot of starter questions and maybe some of the more experienced FS community could enlighten us with personal experiences they have already gone through. I know a lot of readers are going through the same things about where to save, how much to save, student loans, credit cards, saving for a house, etc... and I thought it'd be great to have a place to all talk about that together.

I would love to hear everyone's thoughts on this and maybe even start off with some questions you've always had.

Hayden

Jsmith-

I think this is a great idea. I think starting a thread for the younger part of the community would be awesome. I am always looking for strong advise from the financial savvy. Maybe this is something Sam can facilitate to add to the forum. Right now, my big question is should I be building credit even though I hate debt and do not want consumer debt under any circumstance. I am worried though about property buying in the future with no credit. What are your thoughts, Jsmith?
Very Respectfully,
Hayden

Jsmith

Quote from: Hayden on September 18, 2018, 08:45:18 AM
Jsmith-

I think this is a great idea. I think starting a thread for the younger part of the community would be awesome. I am always looking for strong advise from the financial savvy. Maybe this is something Sam can facilitate to add to the forum. Right now, my big question is should I be building credit even though I hate debt and do not want consumer debt under any circumstance. I am worried though about property buying in the future with no credit. What are your thoughts, Jsmith?

Clearly you are a very financially diligent person by being concerned about your wealth hand visiting this site, so I personally believe having at least one credit card is a no brainer. As long as you track your expenses, and pay off you balance in full every month, credit cards can offer so many great perks (including building credit which will help you get better loans in the future). You can use this cash back as a statement credit, which is what I do every month, but you can also have this money deposited into a bank account or have a check sent to you.

Ever since I got my credit card about 10 months ago, I honestly have barely used my debit card or cash anymore. I just track all of my purchases and treat my credit card like a debit card with only buying what I need. I got started with a Discover IT card, which has rotating 5% cash back every quarter (like gas or restaurants for example), 1% cash back on all other purchases, and then a cash back match at your 1 year anniversary date (they give you a match of everything you have earned in the first year).

So far for me, with a referral bonus from a friend plus all my cash back on purchases, I have accumulated ~$230 of cash back throughout the year, which will get matched at my 1 year anniversary in November. That's almost $500 of free money for a card with no annual fee during the first year, and I have always treated it exactly as my debit card.

So from my personal experiences I really see no reason to not have at least one credit card. My plan is to open up a second credit card after my one year anniversary with Discover that focuses on travel rewards to help pay for any future trips I plan to take some day.

Young And The Invested

The way I view it, you always want to get invited to the dance even if you don't end up attending.  In other words, you might not want consumer debt now and want to avoid it at all costs, but you may someday need it.  You may like to take out a mortgage to finance a home purchase, finance a used car, or any number of other financings.  In order to get the best possible loan terms, you will need to have a sound credit history.  And to develop that, you need to have a diverse credit history inclusive of revolving consumer debt like a credit card.

That being said, you need to have the financial discipline to pay off the credit card each month (if you use it) and not carry a balance month-to-month.  If you can accomplish this and also receive some generous cash-back or loyalty rewards points, you can build your credit history, have access to liquidity, and end up earning money off your credit card use.  Win, win, win.  Discipline is key.
https://youngandtheinvested.com/

Hayden

Jsmith,

Thank you for the input. What about Discover has drawn you in? I am always interested as to why people pick specific financial institutions to do their business. I am thinking about going with the Costco Visa due to their great rewards program. Let me know what you think.
Very Respectfully,
Hayden

Jsmith

No problem Hayden!

To be honest, I joined Discover while still in college because it is what my parents had used and I could get the $50 referral bonus plus all of the cash back match at the end of the year (which is almost another $230 at this point like I mentioned earlier).

My opinion would be to research the perks of credit cards and pick one that best suits your lifestyle. For example, I would like to travel a lot throughout my lifetime, so I'm going to pick a credit card that gives loyalty points towards traveling at competitive rates. If the Costco rewards program is one that you would get a lot of utility out of, then by all means go for that one. Just be sure to check annual fees on credit cards to make sure you won't be spending a ton of money in order to get those loyalty rewards points.

Apodai34

Ah! It's good that somebody has started this financial thread. I am thinking a lot about personal financial planning now days as now I have a settled job and my parents want me to secure my future. Would like to know more ways of how it can be done.

hyperobjeckt

Good idea for a thread! I'm still a 20something, barely...

Been thinking about house buying a lot lately. Wife and I are starting to settle into a HCOL area and starting to think that we might actually be here long enough to make buying a house worth it. I've started holding some cash in a savings account to save up for a down payment, but it sucks having all that money on the sidelines instead of making money in investments.

Young And The Invested

I've been saving for a down payment on a house for the better part of the last 3 years.  My wife and I continue to save and anticipate buying one in the coming two years.  Ideally, we'd use Sam's advice from his post published today on ARM loans and consider using one of those loans to finance the purchase.  Given the timing of our intended purchase, I would think interest rates will have peaked and become more biased to the downside by that point.  It takes the risk of an upward rate reset off the table.
https://youngandtheinvested.com/