Fresh Outta College Newbie

Quote from Brian1 : Do not buy any (as in not a single penny) of your own employer's stock - it's too risky. Your current path of picking up your employer's match in your 401(k) then maxing out a Roth with Vanguard is a very good path.

What is your reasoning for this?

I understand the idea of if things go south (stock goes down) and you get laid off it can be a double whammy but many ESPP's are very good. They can offer discounts, look backs, and dividends. I have made a lot of money from my company stock. The stock could drop more than 50% and I would still be UP; taking into account my dividends, discount, and look back. You can't really say don't invest in employee stock without knowing all the details of the deal.

Some of my returns from ESPP bought a new car.

Quote from Brian1 : Do not buy any (as in not a single penny) of your own employer's stock - it's too risky. Your current path of picking up your employer's match in your 401(k) then maxing out a Roth with Vanguard is a very good path.

I don't believe my ESPP will be that risky. Stock prices are already very low and then I get a 10% discount on lower of the prices taken at opening and close of the quarter. Very good deal. The stock is at about 30% of the value it was in 2008 before the crash, but lot's of companie are like this. I work at a very large company in the energy business so I think it's a good thing. I will still be able to continue to fully fund my IRA and bump up my 401k % in July, when I get a decent raise.

Quote from Raylon : I don't believe my ESPP will be that risky. Stock prices are already very low and then I get a 10% discount on lower of the prices taken at opening and close of the quarter. Very good deal. The stock is at about 30% of the value it was in 2008 before the crash, but lot's of companie are like this. I work at a very large company in the energy business so I think it's a good thing. I will still be able to continue to fully fund my IRA and bump up my 401k % in July, when I get a decent raise.

Depending on your company rules for buying and selling, if there are no restrictions to sell, it is near zero risk to invest max in ESPP at the discount and sell the stocks the instant you get them. In your case it would be like a free 10% bonus, minus the fees associated with selling stocks. Do the math and look into it.

Quote from Raylon : Thanks for the advice guys. I did have an old credit card I had when I was 16 that I cancelled. It was a vanilla Visa from my old bank that had a $500 limit that would never move. I decided to cancel it about a year ago not knowing much about anything related to credit scores. Did this hurt a lot? I my next oldest card I opened when i was 18, I'm guessing those 2 years would have helped.

Credit Karma has a credit simulation tool that will show you how your credit score may be affected if you open an account/close an account/pay a credit card bill late/etc. It doesn't really help you now that the account's dead and gone, but could be useful in the future. If you're not on credit karma, I'd check it out - I've found that it's a great way to understand where your credit's at and monitor changes as you're trying to build it up.

(oops, double post)

I would recomend creating a liquid savings plan that will allow you to put 20% down on a house when you want to buy. This will allow you to avoid very costly mortgage insurance which can be north of $120 per month. Contridictory to a previous posters comment I would take out a 30 year loan, reason beign that the interest rate difference is not that great right now and there is no penalty for early payment. Even if you can afford a 15 year payoff now that doesn't mean you will always be able to afford a 15 year payoff, if you lose your job or incur some other kind of expense it would be nice to be able to have a smaller comitted payment. If you really want to and can afford to pay it off in fifteen years simply adjust your payment accordingly. I know this will cost you a little more over the long run but remember there is value to a real option (the option to pay less every month) and if doing so allows you to avoid other loans in the future there is value to that as well. With rates as low as they are and the fact that mortgage interest is tax deductable I would strongly advise a thirty year loan right now, the cash will one day be worth far more than the savings on the loan, it wasn't that long ago you could purchase a 1 year CD for 5%.

It might be worth figuring out how much housing cost in your area. Start looing at some homes/condos in your area. That way you will knonw what you want and what it will cost. YOu can work towards a goal of 20% of XXX amount of your future home. Keeping your funds liquid in a short term savings may be a good option if you want to get your home first. Funds in a ROTH may be locked up for some time.

Quote from coal0101 : What is your reasoning for this? I understand the idea of if things go south (stock goes down) and you get laid off it can be a double whammy but many ESPP's are very good. They can offer discounts, look backs, and dividends. I have made a lot of money from my company stock. The stock could drop more than 50% and I would still be UP; taking into account my dividends, discount, and look back. You can't really say don't invest in employee stock without knowing all the details of the deal. Some of my returns from ESPP bought a new car.

Quote from Raylon : I don't believe my ESPP will be that risky. Stock prices are already very low and then I get a 10% discount on lower of the prices taken at opening and close of the quarter. Very good deal. The stock is at about 30% of the value it was in 2008 before the crash, but lot's of companie are like this. I work at a very large company in the energy business so I think it's a good thing. I will still be able to continue to fully fund my IRA and bump up my 401k % in July, when I get a decent raise.

Companies have life cycles just like people. GM used to be seen as invincible. Kodak used to be a blue chip stock. KMart used to be the largest retailer in the United States. All have gone bankrupt. Sears used to be the largest retailer in America. It's been on it's last breath for years.

It's too risky to hope to build a healthy retirement involving the same place you get your paycheck from. It's putting too many eggs - huge eggs at that - in the same basket. If the company goes bad, you can lose your investment and your paycheck. It also involves the opportunity cost of not having invested in better options.

I think it's bad for employers to promote buying company stock. It's too risky and it can end in a tragedy that didn't have to happen. Not to mention, executives will pump up the stocks by promoting buying company stock to their employees. Then what do they do? Most of them sell their stock, not buy or even hold it.

The following are two great articles by SmartMoney magazine that talk about how all too often we buy company stock because we're familiar with the company and we feel more knowledgeable about the company and stock. They also talk about how we buy company stock with too short of vision in mind, how we often take a rear-view mirror approach, how we typically like to buy when the market or stock price is rising and how all of this is too risky. In short, they talk about how buying company stock is risky and, financially, is a bad idea.

Is it Time to Reconsider Company Stock? [smartmoney.com]
The Dumbest Investment Move [smartmoney.com]

You are young.

7k, black 22, vegas Let it ride.

If you want to save some money, please look at the travel forum for advice in vegas. cheers

Quote from Brian1 : Companies have life cycles just like people. GM used to be seen as invincible. Kodak used to be a blue chip stock. KMart used to be the largest retailer in the United States. All have gone bankrupt. Sears used to be the largest retailer in America. It's been on it's last breath for years. It's too risky to hope to build a healthy retirement involving the same place you get your paycheck from. It's putting too many eggs - huge eggs at that - in the same basket. If the company goes bad, you can lose your investment and your paycheck. It also involves the opportunity cost of not having invested in better options. I think it's bad for employers to promote buying company stock. It's too risky and it can end in a tragedy that didn't have to happen. Not to mention, executives will pump up the stocks by promoting buying company stock to their employees. Then what do they do? Most of them sell their stock, not buy or even hold it. The following are two great articles by SmartMoney magazine that talk about how all too often we buy company stock because we're familiar with the company and we feel more knowledgeable about the company and stock. They also talk about how we buy company stock with too short of vision in mind, how we often take a rear-view mirror approach, how we typically like to buy when the market or stock price is rising and how all of this is too risky. In short, they talk about how buying company stock is risky and, financially, is a bad idea. Is it Time to Reconsider Company Stock? [smartmoney.com] The Dumbest Investment Move [smartmoney.com]

The one article is referring to buying company stock in your 401K...that is not the same as an ESPP. The other article warns against having a lot invested in company stock and to spread your investments out...I thought that was obvious. It also goes on to say that if the program offers a discount and no holding period it is a very good deal. Investing all of your retirement in your work place is a bad idea, did we really need an article to tell us that? The OP is looking at placing 3% in a program with a discount and a look back. If it also offers a low or no holding period it is "almost" guaranteed money.

I have owned stock in 2 different companies I have worked for and both have made me money even the stocks I purchased pre 2007. They are not part of my retirement account.

OP, I think you did the right thing and if they have a short or no holding period that can be even better. It is also nice if your company pays a dividend.

Quote from coal0101 : OP, I think you did the right thing and if they have a short or no holding period that can be even better. It is also nice if your company pays a dividend.

They definitely pay dividends. I need to find out about holding period but I am about 90% confident you can sell as soon as you get them. For those interested the company is Exelon.

Quote from jaqnabox : You are young. 7k, black 22, vegas Let it ride. If you want to save some money, please look at the travel forum for advice in vegas. cheers

Haha thanks for the advice. I will consider it wisely

Quote from Raylon : Haha thanks for the advice. I will consider it wisely

7k - black 22 (payout about 217k)
let it ride...
217k - black 22 (payout about 6.7 mil!!)

boom! RETIREMENT!

Who says you cant retire at 23?

If not, you can work another year to save 7k and try again.

7k saved per year x 30 years of work. Savings would be about 210k. "Let that ride" work another 30 years....

haha

FYI companies can be tricky with their 401k match and won't tell you that you have to put the minimum percentage *each paycheck* for their match. So don't frontload your contributions, because you have to contribute throughout the year to get the full match.

Quote from jaqnabox : 7k - black 22 (payout about 217k) let it ride... 217k - black 22 (payout about 6.7 mil!!) boom! RETIREMENT! Who says you cant retire at 23? If not, you can work another year to save 7k and try again. 7k saved per year x 30 years of work. Savings would be about 210k. "Let that ride" work another 30 years.... haha

did you watch that episode of south park, too?