23yo...My financial outlook..how does this look? + some 401k help...

[DrSues02]

Hey,

I've been thinking alot about my finances lately and have gone through and put together a plan. I was hoping you guys could offer any suggestions or advice.

My situation:
-23yo
-Renting a 1 br apartment
-Working at my first job after college (sales for software company)
-base salary of 40k although I should make anywhere from 75k to 100k with commission
-40k a year from poker

Finances:

Monthly Expenses: ~2.2k a month

checking (for misc. expenses) - $2k

5% savings account - 20k
----4 to 6 months livings expenses as well as money set aside to pay taxes on poker winnings

6mo., 1 yr, 2 yr CD's - 22k
----I just purchased a new car. I took out a loan on the car to build up better credit but I have the money set aside to pay the car off early in rolling CD's

Brokerage Account - 25k
----Value investing by holding 6-10 individual stocks priced at least 30% discount to intrinsic value

Roth IRA -5k
----Invested in Vanguard Target Retirement 2050 Fund. Will stay in here until I have ~20-25k to diversify myself

401k - 1k
----Just became eligible to contribute this month...not the best options but currently set to 50% RERCX, 25% RGACX, and 25% RWICX..

Goals:

--Max out Roth IRA each year (5k from now till the future)

--Max out 401k each year (15.5k each year is current limit)

--35k additional - 1/2 goes into brokerage account to continue building value portfolio..other half into index funds


So what do you guys think? especially with the 401k plan??

I think I need the most help with my 401k asset allocation. It does not seem like my company has the best selection of choices (and they dont match contributions, yet) so I could definitely use some advice there..

Here are the funds we have available:

American Funds EuroPacific Growth Fund (RERCX)
American Bond Fund of America (RBFCX)
American US Government Sec (RGVCX)
American Growth Fund of America (RGACX)
American Funds Amcap R (RAFCX)
American Investment Co. Of America (RICCX)
American Funds Balanced (RLBCX)
American US Treasury (RUCXX)
American Capital Income Builder R (RIRCX)
American Capital World Growth Bond (RCWCX)
American Capital World Growth & Income (RWICX)
American Fundamental Investors (RFNCX)
American High Income Trust (RITCX)
American New Economy (RNGCX)
American SmallCap World (RSLCX)
American Funds The Bond Fund of America (RBFCX)
American Funds The Growth Fund of America (RGACX)
American Funds The Investment Company of America (RICCX)
American Funds US Treasury Money Fund of AmericaR3 (RUCXX)

Any other comments or suggestions would be appreciated.

[investormcgee]

I would switch the G&I with New Economy and SmallCap World but that's just me.

Plus be careful about your Roth goal, $95k income a year starts to reduce the benefits off a Roth IRA. $110k is the complete cut-off.

[DrSues02]

These income limits for the roth...are they before or after deductions??

Obviously this would seriously hurt poker players if I am understanding the tax laws correctly? Since you have to add up all the winning days as gross income before you deduct out the losing days?

Thanks for the suggestion on the 401k...do the percentages look alright?

[kyleb]

[ QUOTE ]
I would switch the G&I with New Economy and SmallCap World but that's just me.

[/ QUOTE ]

Agreed.

OP,

Good to see you are starting early. The fact that you have a plan and are committed to saving/investing is really 90% of what matters; a lot of the questions you have are just details. Don't sweat them too much.

[lozen]

From a 42 year old Dont change a thing. You are so far ahead of the typical 23 year old. Have some fun spend a bit.

Full Time job and poker What amount of time is spent on poker? Take more risk at such a young age is all I would suggest

[DrSues02]

I spend maybe 10-15 hours a week on poker. I don't do anything at all on weeknights because of work in the morning so usually play from 8-11.

Play a good chunk on sunday. I'm out partying every Friday/Saturday night.

[Yobz]

75k to 100k...i need to switch into selling this stuff.

[prohornblower]

[ QUOTE ]

----I just purchased a new car. I took out a loan on the car to build up better credit but I have the money set aside to pay the car off early in rolling CD's

[/ QUOTE ]

Just pay the thing off. Buying a car and staying in debt to "build credit" is insane, imo. Especially when you are earning 115-140K per year at age 23. Who needs credit!? lol.

You know what combats having a limited "credit" history? Being 23 and earning 100K+ per year and saving much of it.
What is your rate at on your car?

[johndenver]

75-100+K for selling software is pretty sick

you make more money than the people with years of experience that design and build the software

nh op

[prohornblower]

lol I thought it was a given that salespeople in pretty much all industries make more than researchers/designers of the product. lol.

My brother sells firetrucks part-time and earns close to $100K for doing so.