Millennial Money Management LLC
Founder, Chief Investment Officer
At the age of 18, I opened my first offshore brokerage account and began trading penny stocks from my freshman dorm room. From that moment my passion for trading and following the financial markets developed into a lifestyle. Now I build professional portfolios of the highest quality with zero conflicts of interest. I built my firm, Millennial Money Management LLC, to be completely independent of Wall Street. In doing so I am able to offer every client the most professional investing experience -- one that utilizes the entire investment marketplace, rather than just a handful of commissioned mutual funds. In addition, I am able to choose from the industry's most cutting-edge technology allowing me to reduce fees, increase performance, and set client expectations in a way that has never been done before.
Outside of managing money, I am an avid golfer, hunter, and outdoorsman. In 2016 I had the great pleasure of hiking the entire Pacific Crest Trail with my brother Scott as we traversed the entire west coast mountain ranges from Canada to Mexico.
BS/BA, International Business/German, Washington & Jefferson College
At my firm, which I started for Millennials (I am also 25 years old), this is a very popular question as you can imagine. The balance between saving for the future and capturing all those years of compound interest, versus paying down those pesky student loans is a judgment call. And, while deciding, we have to make assumptions about future returns, and also decisions about your personal/familial goals. A couple basics to start, saving for retirement will be beneficial, well... in retirement. Paying down those student loans, however, will benefit you more in the short-term. Do you want to sacrifice some flexibility now for more a more comfortable retirement? That's a personal question.
Next, consider your loan rates vs. possible investment returns.
Your loan rate is fixed, naturally and your 401(k) return is variable.
In a simple calculation, it would make more sense to put more money towards the 401(k) if it returns a higher rate than your the interest on the loan, but in reality, the calculation is much more complicated. You must factor in taxes that you will eventually pay on you 401(k) assuming it isn't a Roth 401(k), and also the tax break you get on paying interest on your student loan. Even though the stock market returns roughly 10% on average and your student loans interest is only maybe 6%, the answer isn't so cut and dry. At the end of the day, a 10% return on your 401(k) is very far from a guarantee. Especially with current market dynamics.
All in all, I like to vote for more certainty and more flexibility. If you pay down the debts, you know you are eliminating that 6% (or whatever it may be) compounding debt. Then when the loans are paid off you will have flexibility with your money to make decisions accordingly, liking upping you 401(k) contribution later on. Make sure you are always maximizing your employers match of course.
It most certainly is not too early to start an investment portfolio for your one-year-old child, as a matter of fact, it is highly recommendable.
That being said, from your question, I highly recommend speaking and hiring an investment advisor to provide advice and manage your investments. No advisor would recommend just "one" stock or "one" bond. Don't be embarrassed by this, however, as it is a typical question asked by clients. What investments to select will determine what accounts you plan to open and for what purpose they will serve, ie. college saving, retirement, etc.
That leads to the next logical point, which is to determine what you want the account to accomplish. If it is to save for college expenses, then 529 college savings plans are tax advantage accounts that would be a great place to start saving for your one-year-old. You can open one yourself through your states online website, but again, consult an advisor because you may be able to open one through another state's plan that has better options or fees. Note: you will not have an option to select a stock or bond, rather there will be a list of funds(basket of 100s of stocks/bonds) from which you can choose. (A solid portfolio will most likely consist of both stock and bond funds, leaning heavier on the stock side.) When it comes time for college your child can then enjoy tax-free distributions to pay for qualified expenses. Along the way, you will receive a tax deduction for all the money you contribute. Family and friends may even contribute, but may or may not receive a deduction depending on the state of the plan and where they reside.
You're on the right path and have the right idea. But, for something like this please consult a professional.
Yes, your oldest credit account is one of the largest factors in calculating your credit score.
If you do not pay an annual fee on your old credit cards, DO NOT cancel either of them. Your credit score likes to see those old accounts, AND also the more credit you have available to you the better (assuming you are not carrying a balance).
So, scenario 1: No annual fees, then keep them both open. It's not costing you anything to have them and they are helping your credit score, so why cancel? Just CUT THEM UP!
Scenario 2: You do have annual fees. Here I understand that it really makes no sense to be paying to maintain a card you do not use. So, request a credit report from one of the reporting agencies (Equifax, Experian, TransUnion). There you will be able to see all the accounts affecting your credit score. Maybe you have an older account than the 1997 card. If so, canceling both is acceptable. If the 1997 card is your oldest account by a long shot, then there is a trade-off between the credit score effect and that annual fee you must keep paying. So the next logical questions are, do you anticipate taking any big loans in the near future (house, car, student loan refinance etc.)? How high is the annual fee? All necessary information to have before deciding to cancel. Reducing your oldest account by 20 years will have a major effect. Reducing it by 1-5years not so major.
Sorry, there is not a perfect formula. Also, the credit companys don't really care about the interest rates on the cards. But I should say that 19% is very high and you shouldn't use it any scenario if you can help it.
First, allow me to say kudos for you for not carrying any debt and being able to save and increase your net worth all on your own. There are a few things to cover here.
1. Contribute to your 401(k) at work, if they offer a match. Contribute up to the match at the very minimum. Your company is essentially paying you extra. Let them! Realize that a 401k is a great retirement savings vehicle, and very similar to a Traditional IRA. If they don't offer a match consult multiple financial advisors to decide if it is more advantageous to contribute to an IRA or your 401k. Most of the time the answer is the IRA with an investment advisor.
2. Yes. Fund an IRA if you can, in addition to a 401k if you can afford it. As you are middle-aged, you need to begin planning for retirement, and the IRS gives you a tax-break on IRA accounts to incentives this. So take advantage of it! Both you and your wife!
3. IRAs have a $5,500 annual contribution limit. Start to contribute your extra income towards that. And, if you don't contribute up to the limit, I advise tapping into your other accounts to maximize this benefit. An advisor would need more information to decide what source of money to pull from. Just realize that if you decide to sell your stock you will incur taxes on the realized capital gains.
4. Absolutely consult a financial advisor. Or a few of them. See what they have to say and what their differing value propositions are. Make sure they are fiduciaries, and if possible, fee-only advisors. Hiring an advisor is an investment itself. You have highly consequential decisions to make and an advisor can not only give you counsel but peace of mind and a resource through retirement.
There are a few talking points worth mentioning here and hopefully, after going over the formula on how a credit score is calculated, you will be able to get an idea of how different actions affect a credit score. Also, it is worth noting that this is not a perfect formula and different rating agencies weight factors differently, so you will not be able to know precisely how many points your credit score will adjust by.
Credit Agencies look at several things, the main ones being:
1. Age of Oldest Account. 2. % Of Credit Used 3. % Of Payments Made on Time 4. Inquiries Made in the Past 2 Years 5. Total Available Credit 6. Accounts Opened in the Past 2 Years
By consolidating your credit cards with a new loan you will be affecting a number of factors. Some for the better some for the worse. You will receive benefit by adding to your total available credit (assuming you don't cancel your credit cards, and just leave them with a 0$ balance. I highly recommend this if they do not have an annual fee. You will also receive a boost because your total % of credit used will decrease (Your total available credit will increase, while your balance will stay the same). However, you will see a negative effect for opening a new credit account and making a new inquiry.
All in all, to the credit agencies you aren't really changing your credit situation, just opening a new account and moving the balance around. I would anticipate that transferring your balances to a personal loan would have little effect on your credit score, and may possibly even reduce your score.
It still may be in your best interest to transfer your credit card balance to a lower interest personal loan. Realize, however, that this often comes with balance transfer fees and other consequences.
Leave open your credit cards that don't charge an annual fee, and for the ones that do, consider closing them, unless one represents your oldest account then carefully make a consideration about the tradeoff of canceling that card, but incurring a negative credit score consequence for reducing the age of your oldest account. Also, closing a credit card account will affect your credit score, because you are reducing your total available credit, but you will be offsetting this is you open up a new personal loan.
Hope this helps!