60 Minute Finance
CPA and Financial Counselor
Born and raised in Virginia, John passed the CPA exam before graduating from Virginia Commonwealth University and beginning his career at a “Big-8” accounting firm in 1987.
After two years in public accounting, he accepted employment with a client and rose through the ranks in private industry. Desiring to work in a more diversified environment, John started his own accounting practice in 2000 and added personal financial coaching services in 2013.
John resides in Hanover County, Virginia with his wife and children. He is active in his church, enjoys finishing a good run or workout at the gym, and leads personal finance classes in the community.
In addition to 60 Minute Finance, John is also the owner and president of Riverpine Services, Inc. Riverpine Services, Inc., provides freelance accounting services to a select number of small businesses throughout the region. In 2016, John moved to a part-time roll with Riverpine to focus his attention and energy on his personal financial education efforts.
BS, Accounting, Virginia Commonwealth University
The recommendations provided are educational in nature and not intended to be specific recommendations for any particular individual. The goal is to educate and inform readers of available options, with the ultimate decision being theirs. Please consult the appropriate tax, investment, insurance or financial planning expert before making any final decisions.
Congratulations for already thinking about your future at such an early age! Following through on your plans will set you up for a great financial future.
Fortunately, it doesn't require earning an MBA to learn how to invest! Too often we overcomplicate the process or worry that some better option exists. Fear and greed are powerful emotions are best left out of the investing process.
Since you're new to investing, I'd recommend focusing on building a diversified, low-cost mutual fund (or ETF) portfolio. Picking stocks is incredibly difficult to do consistently. Index funds outperform the vast majority of professional, active managers. Any hope that you or I could do better is probably unrealistic.
Instead of having a complicated investment strategy, follow a few simple investing fundamentals like:
- Get yourself ready to invest by first building an emergency fund.
- Stay tax efficient. Since you'll be working, invest using a Roth IRA.
- Understand your personal risk tolerance. Your age will allow you to take a lot of risk. But don't take more than you can handle in a down market!
- Keep costs low. The lower the fees, the more of your portfolio you get to keep, especially over the many decades you'll be investing.
- Re-balance periodically. Once a year is fine.
- Stay the course! Don't bail out of the market when prices drop!
History shows us that regular investments, diversified across the equity markets and re-balanced periodically outperform other more "professional" investing strategies.
Get started as soon as you get your first paycheck! And good luck!
Since you already have a little over $1,000 in an emergency fund, I would recommend paying as much as you can toward your credit card debt. Eliminating debt as quickly as possible is a great way to improve your monthly cash flow and really begin to build wealth. Once you have the credit card balances (and any other non-mortgage debt) paid off, I’d recommend increasing your emergency fund to three to six months of your essential expenses.
If you’re unsure about whether to pay off the credit card debt versus increasing your savings, reverse the situation and ask yourself what you would do. If you had no credit card debt and only $1,000 in savings, would you take a cash advance of $15,000 from your credit cards to add to your savings account? Certainly most people would say, “No.” If you would as well, you have your answer about whether you should save more now or pay off the credit cards.
Great question and best of luck on your journey to being debt-free!
If (or really, when) the equity markets decline, the best place for your investments is the equity market! Once it's dropped, stocks are on sale so buy them! Long-term investors - which you should be if you're investing in the stock market - stay invested (at their risk tolerance), even in the face of a market correction or bear market. Re-balancing into the market is a great way to "buy low" and "sell high"!
Your questions leads me to think, perhaps incorrectly, that you're nervous about your current holdings. If that's true, I'd encourage you to determine whether your investment allocation reflects your risk tolerance, especially in light of the dramatic increase in the markets over the last 15 months. If your allocation matches your tolerance for risk, sit tight and re-balance periodically to either capture gains (if the market increases) or buy shares on sale (if the market declines). If your current allocation is too risky for your risk tolerance, re-balance to the proper allocation today. I recommend this not because you or I can predict the future market moves, but because your portfolio doesn't match your profile.
Trying to time the market is a losers game. Just don't play! Find the right portfolio mix for you and stay the course!
Sorry to read about your current difficult situation. I know it can be a scary and uncertain time.
My first piece of advice would be to reduce your expenses as much as you can during this time of transition. I would continue to make your debt payments, but do not pay any extra. Cash is king in your current situation! Your first goal should be to stretch the available cash (severance) as long as possible until you start working again.
If your new job starts and still have severance cash available (or they are still paying you if the severance is collected over time), I'd recommend using the excess cash or cash flow to: (1) build an emergency fund (if you don't have one already) and then (2) eliminate some of your debts. Specifically, the credit card debt, student loans and car obligations should be eliminated. Don't spend those extra funds on new consumption; use them to change your long-term financial health by eliminating debt.
Please don't touch the retirement accounts unless you absolutely have to. If necessary, hopefully you'll be 59.5 years old so you won't also owe a 10% penalty. Using those funds early will severely undermine your retirement income later in life.
Best of luck to you! I hope a job opens up soon!
The best low-risk returns I know of are through on-line, FDIC-insured banks. The FDIC-insured money market account I use is currently paying 1.75%, which is pretty high in this low-interest rate environment. It should continue to rise as interest rates are hiked over the next year or two. Seeking out better returns will require taking on more risk as well, which she may not want at this stage of life.
Thanks for your question!